Interserve considers handing off building materials unit to lenders in debt-for-equity swap

Interserve is tomorrow expected to break its silence on rumours it may sell off its £250m building materials unit, RMD Kwikform, to the holders of its debt.

The public sector outsourcing giant, which builds schools and hospitals, is reportedly considering the sale in order to secure its future as it risks drowning in a £650m debt pile.

The plan is said to be in its fledgling stages, but could help solve the company’s immediate headaches and allow directors to focus their attentions on its support services business.

“It would make the rest of the company – if it stayed listed – a much cleaner story for stock market investors,” one City source told Sky News this weekend.

Interserve refused to comment on the possible spin-off today, but City A.M. understands the company’s directors will make an announcement on the matter today.

The board considered selling the RMD Kwikform, which makes molds for concrete foundations, two years ago. But after an eight-month strategic review they opted to hold on to it.

RMD Kwikform’s precise value in a spin-off to lenders is unclear, but analysts believe the subsidiary is worth between £250m and £300m.

Interserve chief executive Debbie White’s announcement of a debt-to-equity rescue deal last weekend has raised eyebrows among its suppliers, many of whom have privately raised concerns they will not receive payments from the struggling outsourcer.

But government sources have insisted they have no doubts about the company’s long-term ability to deliver large public sector contracts.

Most of Interserve’s worries are said to stem from a disastrous foray into building waste-to-energy plants two years ago, most of which it has now sold off. One government source told City A.M. waste-to-energy was a “ring fenced” issue for the company, which would soon be resolved.

The source added there was no question of temporarily banning Interserve from bidding for public sector contracts, as the Labour party demanded last week.

Interserve’s market value slowly nudged back to 13.43p last week after plummeting to lows of 6p on the announcement of the rescue plan. But it remains nearly 90 per cent down on a 52-week high of 125p