The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I am hearing that the options have now come down to this....
A deal is reached between Coltrane, Lenders & BoD today. Coltrane are "paid off" (outside of the deleveraging deal) to vote the deal through.
A deal is reached between Coltrane, Lenders & BoD today. Coltrane accept a deal between 7.5% and 10% (for existing) shareholders. The deleveraging vote is postponed tomorrow and the new deal re-scheduled for two weeks time.
A deal cannot be reached between Coltrane, Lenders & BoD. Coltrane will abstain from the vote and enter litigation with Interserve.
The BoD want a consensual deal. The Lenders do not want Pre-pack Administration as it affects some existing Projects. Coltrane can abstain (whilst retaining some value) and still go legal.
DYOR
Toplink,
I agree with you, there should be no charge for voting.
I think most existing shareholders would be prepared to wait years now to recover as much as their losses as possible. The 7.5% deal in my view, would give some opportunity of long term recovery to existing holders.
GL
At last the BoD are putting themselves on the right side of the deal and the right side of normal shareholders.
By trying to get Lenders to move to a 7.5% deal, they will now receive the much needed support of Private Investors in my view.
Also if they get the 7.5% deal through and Coltrane turn it down, I believe sentiment will change towards Coltrane. Up until now it has appeared that the Lenders were being unreasonable, but at 7.5% (for existing shareholders) they are finally being fair.
If the BoD can get this through and avoid administration then they will have done a good job imo.
And despite all the negative comments they have received and probably will still receive, in reality they will have achieved a far better deal than the vast majority of people will have ever expected.
I will no doubt be criticised for this, but I say well done to the Board for trying - a lot of Directors would just have dug their heals in and defended their position. The BoD appear to be putting Interserve and existing shareholders (many of whom are their own Employees) ahead of their own ego''s. This deserves respect.
Let's hope the Lenders can agree to this to. If Coltrane then say no, they will isolate themselves. I see Farringdon as a more moderate objector to the 5% deal and would be very surprised if they reject a 7.5% offer.
The 7.5% deal would pass the vote on Friday and a consensual deleveraging would be achieved.
https://uk.reuters.com/article/uk-interserve-debt/interserve-set-for-pre-pack-administration-if-debt-deal-fails-source-idUKKBN1QQ0MZ
Note the sequence : Interserve companies sold off first, then administration
Easy - be assured as part of the Supply Chain you will not be affected.
This is not a liquidation like Carrillion was.
Llucan
You have described Administration not the Pre Pack Administration that has been planned.
ALL THE PARTS OF THE BUSINESS WILL BE SOLD TO THE LENDERS (FOR DEBT) AS GOING CONCERNS BEFORE THE PLC GOES INTO ADMINISTRATION.
Then the PLC Group company (that everyone has shares in) will placed into administration.
Interserve Construction, FM, RMDK etc.. are not put into administration. They continue as before but owned by a new Company set up by the Lenders.
This is what has been long planned and IT WILL NOT AFFECT THE SUPPLY CHAIN.
Llucan,
You could not be more wrong and unduly concerning suppliers to Interserve.
Please re-read my previous post on how the pre-pack administration has been planned.
Look carefully at the sequence of events that I have described. The sequence is the important part.
Only the group plc company will be put into administration. All the other parts of the business will be sold to the lenders as going concerns. These parts are not in administration. Their debts still get paid to suppliers and subcontractors.
Only the shareholders will be left with nothing.
You should not be posting scare stories that unduly worry the supply chain.
The pre pack administration has been very well planned not to affect the supply chain.
There are a number of other issues in disolving the Group company.
How are previous liabilities, eg. Defects, dealt with
What happens with current bonds that are in place
What happens to Parent company guarantees
What happens to the Group pension schemes
What happens to Employee long service
What happens to Employee bonuses
I guess that the Bod are just hoping for the best as it sounds easy disolving the Group company on the Friday and continuing as nothing has happened on the Monday. In reality I expect it is not that straightforward.
Easy 1604,
I agree with Kenj, the vote could go either way and the Pre Pack Administration is now a real possibility unfortunately.
Communication from the Company to the Supply Chain and Clients has been poor imo. They have not clearly explained what the Pre Pack Administration would mean for them. Hence your question.
If Pre Pack Admin happens then firstly as a Shareholder you lose everything. Your shares are worthless.
How it will work is this....
On the Friday if the vote is lost. The Interserve Group company will sell off Construction, FM, RMDK and all other parts of the Business to the Lenders (for the price of the debt). The Lenders may call the new Company (which owns all the old parts of Interserve) as InterserveB or whatever, they decide change the name to.
The group company PLC will then be put into Administration and no longer exist.
The Board Directors of Interserve will (as part of the pre agreed deal) become the BoD of the new "InterserveB".
On Monday morning all Interserve's current work will continue as usual but carried out by the new company. Subcontractors and Suppliers will get paid as before and Clients will receive the service they are paying for.
So as part of the supply chain you will be fine.
But the big losers will be .....
Firstly the existing shareholders who receive nothing - just an explanation from the new Company saying it was necessary.
Interserve brand reputation will be massively damaged and at some point the Company name will have to be changed.
Employees may be unsettled and churn rate could increase.
There will be costs associated with the Administration and setting up the new company that Interserve could well do without.
The new company may well be de-listed as will be a private company owned solely by the Lenders and some of the BoD maybe as a payoff for promoting the Lenders deal.
So a final note to existing shareholders consider the current risks. This may not end well, so consider this time next week your shares could be worthless and make your own decision on what to do.
No one knows which way the vote will go. Not even the Bod.
That the fact that this deal has not been ruled out last night or yet today bodes well. They must be giving it serious consideration.
Or maybe they are waiting until the SP hits 25p, until they rule it out, so they can crush everyone's hope... and smash the Share to bits again?
Incidentally, I wonder if the BoD would partake in Coltrane's offer ?
Meta,
Gosh, we are in agreement for once - 25p a real possibility (by tomorrow imo)
I wonder if this level of support for the Coltrane deal is sending any kind of message to the BoD.....
Meta,
Without searching back through posts - I think you will find I said buy first thing tomorrow. The SP was circa £1 and it peaked at £1.13 before dropping back - it is all about timing!
Anyway no one on here want's to hear about our tiffs.
If the RNS comes out and the BoD offer a vote on the Coltrane deal what is your prediction for the SP.
I suggest it could rise to circa 25p.
Meta,
On all occasions I suggested buy, it went up.....did it not.
I hope you haven't been sitting there waiting for me to tell you to sell as well ......
Anyway my dear friend, get behind Interserve (and not with a knife), you will enjoy it more.
Get in before the RNS comes out - but I won't tell you when to sell that has to be your choice.
GL
Meta,
I think this deal may get through or a variation of it. The Lenders don't have to inject any more money and have a clear way of exiting making a profit.
You can't have it both ways ....saying its a crazy deal for Coltrane, it must then be a decent deal for the Lenders!
When the RNS comes out stating this deal will be voted on, I would suggest you need to be holding this share!
GLA
KingArthur,
I totally agree, the more I look at this deal....the more it stacks up for everyone.
The Lenders get every penny back, forget swapping 9/10 equity for debt as the BoD's deal - just a cynical gesture!
Putting to one-side those on here, who have always wanted this Business to fail....everyone who looks at the deal in depth will see that it has been thought through and logical.
Coltrane believe in the Business, the BoD now need to start believing in it as well.
As you say this is really a NO BRAINER, lets see how the BoD try and get out of this one..........
or will they finally "DO THE RIGHT THING"
The current Coltrane deal may or may not be accepted, but suggest there will be a counter-offer now from Lenders and BoD.
We are saved!
A worldwide expert on Pre-pack Administration has joined the forum.
Hold on though; lets put the corks back in the champagne, I have a few concerns...
The fact you know so much about administration is a concern in itself.
You appear to know very little about Interserve
You appear to be basing all of your "help" on your experience with Mouchel
Your statements "The lenders are already being over generous to shareholders
. Some of you want a free ride." are ill informed.
Existing shareholders will make their own decisions on how to vote (on the current deal or a different deal) for their own reasons and should not be pressured one way or another.
The major shareholders Coltrane & Farringdon will most likely be determining factor on which way the vote goes, hence the BoD need to start negotiating with them.
Bill,
I totally agree with you about the effects of Administration. To suggest every Pre-pack administraion ends up like Mouchel is just simply flawed.
I see to other massive issues for Interserve - work winning for the Construction division will be even more difficult than it has been and I foresee a large outflow of their Employees, most through choice. I think administration will be the "last straw" for many.
The BoD appear to be gambling with a once great Business. How the founders of this company must be turning over in their graves........
It may be the only deal, but it won't get through if Coltrane & Farringdon oppose it.
Rather than the BoD going around telling everyone its the only deal, they need to get on with talking to Coltrane & Farringdon & the Lenders (all inside the same room) and come up with a deal that will get through.
It's a bit like Teresa May " its the only deal available", oh until it's voted down.
A pre-pack Admin is Interserve's equivalent to a no deal Brexit. No one wants it, but its looking likely and will destroy Interserve.
Irresponsible if the BoD just sit back with their fingers crossed. Time to negotiate again, but this time not just with the Lenders!
.
If the lenders end up holding 81% of the shares, they will to a certain extent be able to control the price of the SP even if there was a poor trading update in the future. Over time they would recover all their investment and a profit.
The only problem being is that banks don't like holding shares in private companies, as it can affect trading with other Businesses (possible competitors)in the same sectors.
The lenders could take up 65% of the RI as you state = £48.75m which equals 243.75M share.
The lenders average is then :
243.75M @ 20p
and
975M @ 44.7p
Lenders Average = 39.8p versus 38.5p (post DfE SP), so yes the Lenders would initially be down by 1.3p × 1219M =£15.8
The post DfE valuation is just the value applied to the shares at the point of DfE - £436m (lenders shares) + £67M (ex. Shareholders) + £75M ( RI).
Agree it would be the Lenders who would be cutting off their nose .......if they reject this deal!