Danny McCance 15 Mar 2019 05:06pm

EY appointed as Interserve administrators

The construction services company, which holds a number of government contracts, has entered into administration and will hand its assets over to lenders

The board applied for administration after a plan to deleverage was not approved by shareholders in an extraordinary general meeting earlier today.

Newly appointed administrators EY sold Interserve in a “pre-pack” deal to a new company called Montana 1 Limited,which is soon to be renamed Interserve Group Limited, controlled by existing lenders.

Hunter Kelly, a partner at the firm and Alan Hudson, head of UK&I restructuring, have been appointed as joint administrators.

The deal means that the business will be able to continue trading as usual under the new holding company.

"Our evaluation of other options showed that there would have been greater loss to the creditors under the alternative options available," said Kelly.

"We therefore sold Interserve Plc’s business and substantially all of its assets to Montana 1 Limited as that company has access to the required additional £110m of liquidity and could implement the debt for equity proposal," he added.

“Here we go again,” said Peter Kubik, partner and licensed insolvency practitioner at UHY Hacker Young. “As Interserve collapses into administration, there is likely to be very little left in the pot for creditors.”

He suggested that – with lenders and trade creditors being owed £775m as of the end of December – the “prescribed £600,000 will be spread extremely thinly”, while many smaller companies would also have been unable to secure trade insurance, due to the “flurry of recent profit warns from Interserve”.

In May, Deloitte was brought in by the government to monitor Interserve and to advise on public sector contracts.

The Cabinet Office had previously set up a team to keep an eye on the company in the wake of the Carillion collapse and following a turbulent 2017 in which shares plummeted after a profit warning in September.

Interserve have been audited by Grant Thornton for the past five years and prior to that by Deloitte.