Britain's Interserve slashes debt through share issue

(Reuters) - Interserve Plc, which is working to avert a Carillion-style collapse, said on Wednesday it had reached a deal with creditors that would cut its debt to about 275 million pounds by issuing new shares worth 97.5 percent of its share capital.

The company, which has struggled with a weak construction market and more than 600 million pounds ($776.34 million) in debt, said the deal would issue a total of 480 million pounds of new equity and had the support of its stakeholders and the government.

It also includes loading 350 million pounds of debt onto Interserve's profitable building materials business RMDK, the company said in a statement.

Carillion's collapse in a mass of debt and pensions dues in January last year forced the government to step in to guarantee services ranging from roadworks to school meals and led to a parliamentary inquiry into the extent to which private companies should be running essential services.

RMDK, which Interserve decided in 2016 to keep because it brought it more international exposure, has been valued by analysts at up to 300 million pounds.

Reading-based Interserve, which has thousands of UK government contracts to clean hospitals and serve school meals, said in a separate statement that Coltrane Master Fund, L.P, which holds a more than five percent stake, had called for eight of the company's directors to be removed.

However, Coltrane continues to support Chief Executive Debbie White and has not called for her to step down, it added.

($1 = 0.7729 pounds)

(Reporting by Noor Zainab Hussain and Arathy S Nair in Bengaluru; Editing by Arun Koyyur and Patrick Graham)