Much blame is going to be placed at the door of vulture investor Coltrane and hedge fund Farringdon for pushing Interserve into administration.
Certainly, minority and private investors who are being wiped out will feel embittered that secretive and unaccountable shareholders sealed the contractor’s fate.
Interserve is the author of its own demise. Instead of focusing on careful management of public outsourcing and construction projects, it developed grandiose ambitions and headed off in all directions.
Interserve is the author of its own demise, says Alex Brummer
Fatally, among other things, it invested in an energy-from-waste business which gobbled up hundreds of millions of pounds.
In 2017 the group parted company with chief executive Adrian Ringrose, who took home more than £6million in his last five years.
This period largely was overseen by then chairman Lord Blackwell, who stepped down in 2016.
It might have been thought that after all of this turmoil new chief executive Debbie White would have had the good sense to show some prudence. Instead, she collected £525,900 for four months’ work in 2017, including a 125 per cent bonus. Audit firms EY and Deloitte, brought in at different times to advise, failed to stem the rot.
For a long time under the Blair-Brown governments, outsourcing looked like a licence to print money. But when the Tory-led coalition clamped down on spending after the 2008/09 financial crisis, profit margins on new contracts were squeezed.
In a repeat of the Carillion experience, Interserve had little choice but to take on ever more contracts to support cash flow. If one didn’t know better, one might unkindly suggest this amounted to no more than a Ponzi scheme.
With existing shareholders locked out as a result of Friday’s extraordinary general meeting, the bankers HSBC and RBS, and hedge fund Angelo Gordon, now seize control. Interserve has informed the 68,000 employees (45,000 in the UK) that it will be ‘business as usual’.
But that assumes the bankers and hedge funds won’t seek to cut costs, offload uneconomic contracts and carve the enterprise up as soon as possible. Banks and hedge funds are not by nature long-term investors.
For the country to lose one outsourcer might have been an accident, but losing two is careless. The least the Government should do is set up an independent inquiry into an imploding sector.
Pain from the collapse of an outsourcer is shared by shareholders and taxpayers alike.
When the US sinks its teeth into overseas companies the pain never ends, as BP could testify. In taking on Volkswagen, the US has found an easy target.
So far, the diesel scandal has cost the car maker an estimated $25billion (£19.2billion) in fines and compensation. Now the Securities & Exchange Commission is charging VW and former chief executive Martin Winterkorn with a ‘massive fraud’ over the issue of bonds in 2014/15 valued at $13billion.
Now the Securities & Exchange Commission is charging VW and former chief executive Martin Winterkorn with a ‘massive fraud’ over the issue of bonds in 2014/15
It is alleged that VW knew that more than half a million cars on American roads exceeded emission limits when it issued the bonds, but covered it up.
Reputational damage to Volkswagen won’t be helped by careless language from current chief executive Herbert Diess. He evoked the car maker’s Nazi history by using a unfortunate German phrase, very similar to that posted over the iron gates to Auschwitz.
VW wants to become a pioneer in electric cars and is promising 70 electric models by 2028. But there are still questions as to how ‘green’ electric cars will prove. Their batteries rely on precious metals and, if sold in sufficient numbers, they could put pressure on power grids burning fossil fuels.
In the Brexit debate, politicians have treated whingeing motor manufacturers poisoning the air with diesel as industrial royalty. There has been no serious attempt to challenge them over pollution. Feeble.
Pity the poor bosses at Britain’s most global bank, HSBC. As recently as 2016 these devoted bankers could look forward to a retirement cushioned by a payment of 50 per cent of base salary in lieu of pension contributions. This was slashed to a mere 30 per cent after investors objected. Governance is being tightened again and the pensions allowance slashed to 10 per cent.
No such hardship for Antonio Horta- Osorio at Lloyds. His cash in lieu of pension is still too high at 33 per cent after a haircut from 46 per cent. That won’t please dissenting investors.