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Money woes hit Kier and Interserve

Two major construction firms involved in the waste sector are in financial difficulty this week.

MRW’s sister title Construction News has reported that Kier, which has ended a number of local authority collection contracts early and appears to be leaving the market, said in an unexpected trading update that its debt at the end of 2018 was £50m more than thought.

Most of this related to accounting for property development held for resale.

The new disclosures left Kier’s net debt at £180.5m compared with the £130m originally forecast.

Executive chairman Philip Cox has told analysts that the company still expected to be in a net cash position when its financial year ends on 30 June.

CN also reported problems at Interserve, which builds energy-from-waste (EfW) plants but is not involved in collection. It said the company’s largest shareholder has threatened to sue its executives for their handling of Interserve’s refinancing.

Hedge fund Coltrane Asset Management has told Interserve’s directors it is prepared to take legal action over allegedly failing to disclose information and for favouring lenders over shareholders.

Its 28% holding in Interserve would be diluted to less than 2% under a plan proposed by the board, which would see £480m of debt wiped out in exchange for Interserve’s lenders receiving 95% of newly issued shares.

Interserve has said it wants to exit the EfW market and is working only on finishing some contracts. It warned in 2017 that the costs of problem EfW deals would “significantly exceed” £160m.

Interserve’s results for 2018 highlighted problems with incinerator contracts at Glasgow and Derby. It said Viridor had terminated Interserve’s contact to build the Glasgow facility in 2016 and the two had disagreed on the final terms for liabilities.

Viridor has sought £64m but had increased this to £71m, a claim Interserve said had “no technical merit”.

Derby City Council and Derbyshire County Council have withheld £25m each towards an incinerator being built by Interserve at Sinfin for a special purpose joint venture of itself and waste firm Renewi, and have said delays meant they were considering ending their long-term contract with it.

Interserve’s results noted that the project had been completed but delayed by operational tests.

It said: “The directors believe Renewi requires Interserve’s consent as shareholder of the [special purpose vehicle] to terminate Interserve’s construction contract.”

Interserve was originally a construction firm called Tilbury Douglas, but renamed itself in 2001 and branched into service areas including catering, healthcare, probation work and facilities management.

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