Interserve shares lift as danger of breaching debt covenants recedes

Interserve provides facilities management services across sites including train stations - Interserve

Interserve has secured additional short-term funding, coming as a welcome reprieve for the support services and construction company following a turbulent few months.

The group said the additional facilities, totalling £180m, comprise of a revolving credit facility, ancillary facilities and bonding facilities. They expire on March 30.

It managed to obtain the funding by agreeing to close out its cross-currency swaps, which hedge exchange rate exposure of its US private placement loan notes, with proceeds of around £44m going towards repaying its current bank facilities. 

The group added that it was currently in "constructive talks" with its lenders over longer-term funding.

The news comes after Interserve warned in October it was in danger of breaching its financial covenants with lenders, prompting both the group and its lenders to appoint financial advisers.

At the time, Interserve had said it was looking at "options to maximise the short and medium term cash generation from the business”.

This followed a trading update in September in which it said annual profits this year were likely to be half what they were a year earlier, in part due to a £195m provision for an energy-from-waste contract.

However, it had also said its support services division was struggling with dwindling margins, and market conditions were poor in construction. 

The announcement that it has now secured short-term funding, which it said put it on "a firmer footing", sent shares in the group soaring 6.4pc to 711p, though they are still down 79pc in the year to date.

Chief executive Debbie White said: "These short-term committed borrowing facilities, together with the ongoing work to clearly define the strategy and commercial structure for the business going forward, will bring further stability and clarity for our clients, our people and our shareholders.”