Infrastructure and services firm Interserve has seen its stock market value plummet after announcing a recovery plan that would seek to pay its debts by issuing new shares.
The firm, which manages contracts in roads and rail as well as other key public services, was known to have problems after it refinanced its debt in the spring.
A statement issued over the weekend outlined a 'deleveraging plan' designed to 'deliver a strong balance sheet with Interserve targeting leverage of approximately 1.5x net debt/EBITDA'.
This strategy would be likely to involve 'a conversion of a substantial proportion of the Group’s external borrowings into new equity' - that is swapping debts for shares.
The company's statement conceded that this 'could result in material dilution for current Interserve shareholders'.
This predicted drop in share value alone saw shares fall to 6.5p, down 70% from Friday's level, the BBC reports. The shares were worth 100p a year ago.
Interserve is the latest victim of what appears to be a crisis in capital in the infrastructure sector following the Carillion collapse.
Last week, Kier announced a rights issue aimed at raising approximately £264m as it seeks to clear its debt in the face of market reluctance to lend to the construction sector.
Interserve intends to announce its finalised deleveraging plan, which would be subject to shareholder approval, in early 2019. It said it continues to trade well and in line with its expectations for the year ending 31 December 2018.
Debbie White, CEO of Interserve, said: 'We are making good progress on our deleveraging plan which we expect to announce early in 2019. Our lenders are supportive of the deleveraging plan, which will underpin the long-term future of Interserve. Our refinancing in April of this year contemplated the development of a deleveraging plan in consultation with our stakeholders and the liquidity injected at that point also gave us the funding to execute our business plan.
'Our discussions with our lenders are a positive step in the process that was agreed as part of the April refinancing. The Cabinet Office has also expressed full support for the work we are doing to implement our long-term recovery plan.
'The fundamentals of our business remain strong. The deleveraging plan will give Interserve a strong long term capital structure and provide a solid foundation on which to build the future success of the Group.'
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