Following its 6 February 2019 announcement, the Interserve Board has provided details of its proposed Deleveraging Plan, which it states has been agreed with all of the company’s lenders, bonding providers and the Pension Trustee.
The key elements of the Deleveraging Plan are as follows:
Fully underwritten Placing and Open Offer
- Placing and Open Offer of New Ordinary Shares at 15.3 pence per New Ordinary Share to raise approximately £435.2 million;
- 19 New Ordinary Shares for every 1 Existing Ordinary Share;
- The New Ordinary Shares will be provisionally placed with the Senior Cash Facility Lenders, subject to clawback in full to satisfy valid applications by Qualifying Shareholders under the Open Offer;
- Any cash proceeds from the Placing and Open Offer will be used to repay the Senior Cash Facilities;
- Any New Ordinary Shares issued to Senior Cash Facility Lenders pursuant to their underwriting obligations will be subscribed for in consideration for the release of debt under the Senior Cash Facilities;
- For every nine pounds worth of New Ordinary Shares that the Senior Cash Facility Lenders or their designated allottees subscribe for (calculated at the Issue Price), the amount of debt under the Senior Cash Facilities that will be released will be ten pounds, such that the Senior Cash Facility Lenders release a higher par value of debt than will be paid by Qualifying Shareholders who subscribe for New Ordinary Shares at the Issue Price pursuant to the Open Offer. For every nine pounds worth of New Ordinary Shares the Qualifying Shareholders subscribe for (calculated at the Issue Price), which proceeds will be used to repay the debt payable by the Company, one additional pound of debt payable by the Company will be released;
- The participations under the Senior Cash Facilities that will be exchanged for New Ordinary Shares or prepaid from the proceeds of the Placing and Open Offer will, in aggregate, be equal to approximately £485 million;
- The New Ordinary Shares issued through the Placing and Open Offer will account for 95 per cent. of the ordinary share capital of Interserve as enlarged by the Placing and Open Offer (assuming that, other than the New Ordinary Shares, no further Ordinary Shares are issued by the Company between the release of this announcement and Admission);
Net debt position
- RMDK will be ring-fenced within the consolidated Group and, as part of the Deleveraging Plan, £350 million of existing debt will be allocated to RMDK, of which £168.3 million will be cash-pay (the “RMDK FinCo Facility”) and £181.7 million will be converted into a subordinated non-cash pay debt instrument (the “IHL Facility”). The debt allocated to RMDK will be non-recourse to the rest of the Group and have its maturities extended to 2023;
- Net cash-pay leverage of the Group (excluding the RMDK non-cash pay debt instrument) will be reduced to less than 1x EBITDA and total net leverage (including the RMDK non-cash pay debt instrument) reduced to approximately 2x EBITDA;
New debt facilities
- The Lenders will provide an additional £110 million of new liquidity through the provision of a new debt facility with a maturity of 2022 (the “New Super Senior Facility”); and
- The Bonding Providers will provide additional bonding facilities to Interserve as required by Interserve’s business plan.
The Placing and Open Offer and the implementation of the Deleveraging Plan are conditional on, among other things, the approval by the Company’s shareholders at a general meeting which will take place on 15 March 2019 at 11 a.m.
Interserve rejected an outline proposal from one of its major shareholders Coltrane Asset Management, calling for only 65 per cent of the company to be given to creditors in exchange for £436 million of debt, providing shareholders with 10 per cent of the share capital and the opportunity to participate in a 25 per cent rights issue worth £75 million.
Debbie White, CEO of Interserve, said: “The agreement of Deleveraging Plan terms with our lenders, bonding providers and Pension Trustee represents a significant milestone for Interserve. Implementation of the Deleveraging Plan is in the best interest of all our stakeholders. The plan provides new liquidity and creates a strong balance sheet, which, alongside our Fit-for-Growth programme, will provide us with a competitive financial structure to continue to improve the business and deliver on our long term strategy.”
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