The struggling construction and support services firm Interserve, a major government contractor, has struck a refinancing deal with its banks.
The news pushed its shares up nearly 26% to 87.9p.
The Cabinet Office insisted in January that the firm, which supplies a range of services to the government in areas spanning health, education and defence, was not in a similar position to the collapsed construction company Carillion.
Outsourcing companies such as Interserve and Capita have been under heightened scrutiny since Carillion entered liquidation on 15 January with just £29m cash in the bank, putting 43,000 jobs at risk.
Interserve said it had agreed commercial terms in principle with its lenders which would give it total borrowing facilities of £834m.
In December, it secured short-term financing of £180m and postponed the test date for its loan covenants for three months. This has now been extended to the end of April to ensure all the necessary paperwork can be completed for the refinancing.
The Reading-based company had warned in October that it may breach covenants after worsening trading, and last month it was forced to deny reports that it was struggling to secure a refinancing deal after Carillion’s collapse spooked its lenders.
Interserve, which employs 80,000 people worldwide including 25,000 in the UK, issued profit warnings in September and October last year. It blamed its problems on a number of waste-to-energy contracts that deal with generating energy in the form of electricity and/or heat from the primary treatment of waste. It had net debts of about £513m at the end of 2017.
However, since then trading has improved and the company said in an update on 10 January that it expected operating profit in 2018 to be better than City analysts were forecasting.
Debbie White, its chief executive, said on Wednesday: “Today’s announcement is a significant milestone for Interserve and a major step in securing a firm financial platform to underpin the group’s future.
“We are encouraged by the support from our lenders in respect of these new facilities, which will allow the new management team to execute our business plan, focused on delivering a great service for customers, driving growth and restoring value.”
As part of the agreement, Interserve will issue warrants to its banks to buy shares at 10p a share. If exercised, this would give them a 20% stake in the company.
The firm said it had agreed the refinancing deal with the trustee of its pension scheme. The proposals still need to be approved by all lenders.