Posted on 26th March 2019 at 15:01
.As Interserve entered administration on 15 March 2019, an urgent question was raised by Shadow Cabinet Office Minister, Christian Matheson, who sked the Government to make a statement on one of its contractors going into administration…..
In response to the urgent question, The Parliamentary Secretary for the Cabinet Office, Oliver Dowden, responded as follows:
"...the Government are not responsible for decisions taken by companies in the private sector. What the Government are responsible for is the continued delivery of public services, and I assure the House that has happened in this case. Schools continue to be cleaned, roads continue to be repaired and improved, and services in Government buildings continue to run as normal.
I reassure hon. Members that nothing in Interserve’s refinancing will affect the delivery of public services. No staff have lost jobs and no pensions have been affected. The company has executed a contingency plan that it had prudently developed in case shareholders rejected the proposed refinancing deal. This was a pre-agreed transaction, known as a “pre-pack” administration. Hundreds of pre-pack administrations are performed every year, including by well-known companies. It is a well-established and normal process, typically used when a shareholder is blocking a business’s restructuring."
Christian Matheson response to this statement was as follows:
"The slow-motion car crash that is the Interserve crisis seems finally to have come to a dreadful conclusion. Let us first remember the company’s 45,000 employees and hundreds of small subcontractors living with uncertainty today. In June 2018 the Cabinet Office gave Interserve a red rating, which indicates:
“Significant material concerns for Cabinet Office Commercial Relationships Board to consider High Risk designation.”
The above was only after warnings over the profits of Interserve for preceding year. This leaves questions as to why Interserve were still awarded new contacts from the public sector when question over the durability of Interserve should have been considered. If substantial contracts, worth millions of pounds were awarded during these financial troubles, what if any consideration had been given to the future proofing of these contracts should Interserve not have been able to fulfil them?
As aside to the questions over the retrospective position of Interserve, Oliver Dowden has further commented that:
“Interserve’s position has strengthened considerably. It has £100m more on the balance sheet and it has reduced its debts considerably. I can reassure every one of the employees that their jobs and pensions are not at risk as a result of the restructuring.”
There has been much talk of the similarity in failures with Interserve and the widely publicised events of the Carillion Administration last year. Oliver Dowden stated the following in this respect:
“The situation with Carillion was very different. It had problems across all its contract base and issues with its management.”
It will be interesting to see what unfolds in the coming weeks and what restructuring takes place within the business.
Cenkos analyst Kevin Cammack said: “There is not much value [for the new owners] to be had in the short term, so they will have to play a slightly longer game.
here is likely to be some level of downsizing of the business which will be determined by what level of business the banks think are viable in the future.”
Does this statement sit at odds with Dowdens comments on employee security? Only time will tell.
Tagged as: Recent Insolvency News
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