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I think there is a compromise to be had where the debt is still reduced to £350m
But Lenders take slightly less of a cut - Coltrane and the Lenders will both need to be realistic - a bit like the UE and the UK.
No deal suits no-one and just pushes the problems down the road.
The BoD need to be strong with the Lenders and force them to reconsider - at the moment the deal will not pass as too far in their favour.
Most would suggest they should get the "Lions share" but not all of Interserve as they currently get - with little risk. At 8p a share they would double their money in 12 months and still hold £350m debt over Interserve's head.
About time the Board realised they still have a viable profitable underlying business - the Lenders would not be talking to Interserve if this was not the case - they are seeing a big opportunity and the BoD think tey are on the ropes and agreeing to anything the Lenders ask for.
Debbie White needs to take a day off - stand back and look at the Interserve position 12 months from now - if the current deal goes through - the Lenders will laughing at Interserve 12 months from now! EfW will be a distant memory - short term liquidity, does not mean Interserve have hand the Lenders everything and more!
If they are focused on the Employees only and are totally writing off the existing shareholders this is still a bad deal! They could get the debt well below £350m with a bit of backbone!
To add Coltrane can’t simply suggest shareholders keep all the equity as you’ve already said it doesn’t resolve the debt problem, unless Coltrane is going to pay off some of it. However if the lenders agree to say £300m for 50% then that is a really good outcome for all. There has to be some d4e no doubt, but just not at the proposed levels.
Meta-all the scanarios completely plausibility. Option D would be best for all stake holders. Lenders make a profit, employees keep their jobs, IRV remains solvent and shareholders ??
So there are 3 maybe 4 plans all of which have their flaws: Plan A, The Interserve plan, dilute existing shareholders to pay down a huge amount of debt, handover to the lenders in order to continue trading. Pros. Solves the debt problem. Keeps IRV solvent. Cons. Might not get through Plan B, The Interserve back up plan, push through some sort of deal through anyway. Pros. We dont know know because it could just be a bluff. Cons. Could just be a bluff. Plan C The Coltrane/Farringdon Plan, sack the board then see what happens. Pros. Some satisfaction that Board members are removed (maybe with a golden goodbye) Cons. Doesn't solve the debt problem. Irv could end up trading insolvent. Lenders may decide not to continue lending if they don't get their way. Plan D The PI shareholder plan, go ahead with D4E but on a 50/50 basis. Pros. Gets some of the debt down. Doesn't damage PI shareholders as badly. Cons. Lenders may not support a deal to continue lending to a company with junk credit status and the deal falls through. Whatever happens, looks like mid march before anyone makes there next move? With the debt increasing by a rate of £12.5m per month (at least between November and February), the total debt may be somewhere around £767.5m. The debt may build up at such a rate and start running away to the point where nobody on any side can get a deal through.
To follow feileb’s rational is dependant on interest rates remaining at their current levels, the ability of the company to deliver existing contracts on time and on budget, retain existing contracts, win new ones hence I suspect the desire to get the debt sorted in the short as opposed to the long term.
Personally I would suggest that the rational is reasonable albeit very long term. It is also one thing to service debt by paying the interest it is another to reduce the capital amount outstanding.
Foe those already committed allI can say is hang on in there whether Coltrane and co are friends to private investors or are perusing their own agenda remains to be seen.
https://www.businesstelegraph.co.uk/interserve-needs-a-good-plan-b-given-the-rebellion-to-its-current-plan-nils-pratley/
Interesting article.....this is getting more and more like BREXIT every day.
Deal or no deal - is "Plan B" just an empty threat.....
EBITDA at £182m this year - can't see how they would be unable to pay the interest on £755m debt so a "Pre-Pack Asdministration" would not be permitted. As still a viable business.
THe BoD are hopefully re-negotiating will the Lenders at this very moment or it could end up like Teresa May's Brexit deal - lose by massive majority.
The Lenders need to get real as well - and leave the existing Shareholders something
Reason why Interserve have not given more details on the deal (eg. 6bn shares at 8p) is they are now realising it will not get through........and Plan B could just have been a Bluff?
Rizzy- sorry to hear about your loss. It seems these blood suckers have destroyed your plans of retirement. Hopefully things work out better now that the big boys are involved, but not sure how much leverage they will have. I was suckered in by the shareschemes as well as the talk after refinancing l.I’m hoping they will come back with a 60/40 deal by offseting less debt than the proposed 480m and then coming up with a realistic plan on reducing the remaining debt over time. This will work in everyone’s interest.
I think there talk about pushing the deal through regardless might be just scaremongering the PIs, in the hope they will approve the deal as the majority of shareholders in IRV are PIs. Also how many PIs will actually take any legal action? None.
However it’s a different position with Coltrane and Farringdon as surely they have done their research and know the legal position. Otherwise wouldn’t have they just voted for the deal knowing full well it would go ahead anyway and they would have no comeback?
Bill, I feel your pain, I'm invested here to, many years of share schemes and bought in a little more on back of messages from BoD following original financing....Was hoping to have enough to help fund early retirement and an easy move to Australia to live with family. I got a portion out a few months back at a real loss, but left a good chunk in there hoping for a change in fortunes.....
Rizzy- yes looks like it but I’m sure they will want to protect themselves from any law suits further down the line, so will not make a hasty decision. Other than a prepackaged deal, IR liv have not said on what legal basis they can push the deal through. I agree the BOD have been heavily by the lenders to vote this deal through, unfortunately I am heavily invested here so can only hold out for some glimmer of hope.
Fairly certain that IRV fully expected Coltrane and others to reject the deal. They made it really clear in the RNS: "Interserve is also actively preparing alternative plans to ensure the proposed transaction can be implemented in the event that shareholder approval is not forthcoming."
I think they dont care. Deal goes through they get paid, deal gets rejected they implement plan anyway and get paid or IRV goes to administration they blame shareholders for failure.....
Yes I agree with you there Meta. If this was over and done with last year, we wouldn’t have had this uncertainty. We would have been wiped out last year, but most would have accepted they took the risk and didn’t pay off. However from the actions taken last year and false statements about restoring shareholder value let every one up the garden path about the position of the company, which led people to hold their positions or invest more. They gave an impression financing as sorted for at least 3 years and debt would be reduced overtime which was realistic. Not 9 months down the road.
I agree with you to an extent. The right decision would have been to propose a debt for equity a year ago. But I suspect shareholders would have voted it down then as well? And that would have meant no bonuses? Oh dear. Seems to me shareholders just won't have it that they have made a mistake and caught a cold. It will be interesting to see what alternative shareholders come up with, again pure speculation but I think that it will be something along the lines of "we won't accept share dilution because thats not fair and the lenders are being greedy. Lenders, can we borrow some more money from you please?"
Meta-at least it might make the incompetent board reconsider their position, and question whether they made the right decision.
All work and no play...... Irv would appear to be a very leaky ship, now, is that a good thing, or a bad thing?
Farringdon have joined in the war. I bet the BOD are regretting their actions now.
https://www.google.co.uk/amp/s/www.telegraph.co.uk/business/2019/02/12/second-shareholder-comes-against-interserve-rescue-deal/amp/
Feileb- I don’t think they can even get to 20p. That would give it a market cap of 1.3bn which IRV has never been valued at in its entire history, unless they start to seriously increase margins which is unrealistic and unlikely. I’d say the Max for this share is around 17-18p.
I would be interested to know the terms of the claw back, will existing shareholders be given them at 8p, 10p, 12p or the full monty.
Current deal - lenders get 6bn shares @ value of 8p
A more realistic deal should have been
£480m of debt for 4bn shares @ 12p
Total shares would be 4.15bn
Company value would be circa £498m
Ex shareholder value would be 18m ( Coltrane get £4.86m)
Lenders would have £480m in shares (at a reasonable value)
This would have been a fairer deal as shares could recover to a more reasonable level over time say 30p ish giving existing shareholders a little bit back......
With the current deal shares can realistically only get to 20p
Bill
I expect Coltrane are talking with the lenders and company in the background. I would have thought that the last thing the company want or need right now is a challenge to the current deal. If Coltrane are realistic in their aspirations then they may be able to agree a slightly improved deal if the lenders do not want to risk a no deal.
I think any improvement will be small unfortunately, 95% lenders and 5% existing shareholders a realistic possibility.......90% / 10% being best but unlikely. I just cannot see the company retaining any more debt than the £350m as Clients / Supply Chain will still have doubts over their liquidity moving forward.
MrEdwas- for Coltrane to succeed we need them to come up with a better plan to reduce debt than the one proposed. The fact that it will destroy shareholder value is simply not good enough. For IRV to go into administration they need to prove that’s the best option for the company, or better than any alternate options. At the moment d4e is the only proposed option. If Coltrane can come up with another plan which is feasible, then it will be impossible for the BOD to opt for a pre-pack deal. I’m sure Coltrane are drawing something up, but the fact they have still not made contact with the company is a bit mysterious.
At this point I hope Coltrane either succeeds or the company goes bump. It would be a good XU to the banks who want everything but give nowt back, those very same banks that lost billions [gambling] but got bailed out! Who are part owned and ran by the same cronies that run the country...Why is nobody asking where all the money has gone. Sure EFW has lost say £300 mill, what about the other £400...Bank charges and accountancy fees make up a nice chunk.
At this point I`d rather take the full hit [not much]. The only thing I don`t like is the fact many workers would be out of a job.
Interesting article and well worth a read. I have said before and tend to agree that 2.5% of something is better than 100% of nothing. https://www.building.co.uk/focus/interserve-will-its-latest-rescue-plan-save-the-struggling-contractor/5097836.article
Will the last executive turn off the lights!
Please Coltrane let me stay, I want my bonus.
Barker has watched as IRV has died on its arse and done nothing bar pocket massive remuneration. He should be long gone. These parasites sicken me.
Just look at the hypocrisy from Gly Barker. As if he hasn’t destroyed Interserve already. They could have easily done a equity raise around 3 years ago when the sp was £3.
https://www.thetimes.co.uk/article/dont-destroy-us-interserve-chairman-glyn-barker-warns-hedge-fund-coltrane-wrlsq05bj