Interserve to file for administration

Interserve has many cleaning and maintenance contracts

Interserve has many cleaning and maintenance contracts

Investors in Interserve - which holds crucial Government contracts for a range of services in prisons, schools and hospitals - voted against its proposal at a meeting on Friday.

Interserve, which employs 45,000 in the United Kingdom, has failed to secure investor backing for a rescue plan and is set to fall into administration - with lenders seizing control of the outsourcer.

It says since the collapse previous year of another Government contractor, Carillion, it is been warning that similar corporate collapses were inevitable without government action.

Interserve said: 'The board of directors of the company is convening an urgent board meeting to consider its options.

The firm has sought to reassure workers that as far as possible it will be business as usual as the director and lenders spend the weekend completing their plan B created to allow the business to continue to operate as normal for customers and suppliers. An expected pre-pack arrangement managed by EY would keep public services running smoothly for the immediate future, meaning jobs will not be lost.

Lenders such as RBS, HSBC and BNP Paribas - together with Emerald Asset Management and Davidson Kempner Capital - are expected to seize control once the process is complete.

The rejected rescue plan would have handed Interserve's lenders, which include banks and hedge funds, 95 percent ownership of the company in exchange for cancelling 485 million pounds ($641.95 million) of its debts, with existing investors' holdings diluted to 5 percent.

Existing shareholders would have been left with just 5pc of the group.

USA hedge fund Coltrane Asset Management, which holds a 27.7% stake in Interserve, was among those opposed to the deal.

The construction, cleaning and catering contractor's ill-fated move into creating energy from waste resulted in hefty losses and contributed to a net debt of £630mln.

Barker had warned against rejecting the rescue plan and forcing the firm into administration, arguing it would be "more disruptive to the company, significantly more costly and would deprive shareholders of any value whatsoever".

Kevin Brandstatter, GMB national officer, said: 'Ministers have learnt absolutely nothing from the Carillion fiasco and are hell-bent on outsourcing public-sector contracts.

Interserve is one of the government's largest contractors. It adds it is in close contact with the company and is "confident a positive way forward will be found".