When Shareholders Have to Pay for Past Mistakes
Interserve’s shareholders shouldn't expect to be left with much after the British outsourcing giant’s restructuring.
Interserve's headquarters in Twyford.
Photographer: Steve Parsons/PA Images/Getty Images
Investors had been bracing for bad news from Interserve Plc. Monday’s announcement that the U.K. government contractor is considering a debt-for-equity swap was worse than they had feared. The scale of deleveraging required is so great that even assuming the company is repaired, existing shareholders are unlikely to enjoy much of the upside.
Interserve overextended its business and balance sheet venturing into areas beyond its core expertise of construction. Banks and hedge funds had already put a colossal refinancing package in place, but an action plan to cut debt was sure to follow. That moment has come.