Interserve to file for administration after rescue plan rejected

Interserve has many cleaning and maintenance contracts

Interserve has many cleaning and maintenance contracts

Interserve, which employs 45,000 people and holds crucial Government contracts for a range of services in prisons, schools and hospitals, will be immediately sold to its lenders after the administration in a process known as a pre-pack.

While shareholders will be wiped out, with ownership falling to the lenders, the nature of a pre-pack administration means the company, which employs 45,000 people in the United Kingdom, can continue trading.

However, it would mean the company could continue trading and avoid the same fate as rival Carillion, which collapsed early previous year with a massive debt pile.

An Interserve spokesman told Reuters the company's lenders had already set up a company with a shadow board ready to buy Interserve's assets.

"The alternative transaction will be implemented very quickly and via a carefully-managed process and the administration and sale is expected to be completed this evening, ensuring that the business will continue to operate as normal for customers and suppliers".

Interserve investors include RBS, HSBC and BNP Paribas - together with Emerald Asset Management and Davidson Kempner Capital.

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The move would effectively wipe out Interserve's shareholders, who were voting on a proposed debt for equity swap that would have left lenders with 95% of the business and the shareholders' stake diluted down to 5%.

The public sector outsourcing giant has been embroiled in a power struggle in recent weeks with its lead shareholder, U.S. hedge fund Coltrane Asset Management, over the terms of the emergency deal.

The collapse has sparked anger from the unions.

The Cabinet Office, which awards government contracts to firms like Interserve for the delivery of public services and is the company's largest client, is understood to have been in regular contact with the firm in recent months.

Meanwhile, Unite has demanded an immediate meeting with the firm's administrators.

'Shambolic mismanagement is putting jobs on the line and services in jeopardy. It is unclear how civil servants at the Cabinet Office, which was in regular contact with the firm as it drew up the original rescue deal over Christmas, would feel about a USA hedge fund overseeing British public services.

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