But the plan to stitch together a debt for equity swap saw Interserve shares tank 65% on the news to just 8.5p, valuing the firm at under £13m.
Shares slumped because the proposed plan would see major banks write off loans for shares and would virtually wipe out existing shareholders and leave existing banks and debt holders taking a heavy hit.
In a statement issued on Sunday, Interserve said it was engaged in constructive discussions regarding the agreement.
Debt reduction plan
The contractor, which employs 75,000 worldwide, hopes a deal would cut its debt to 1.5 times core earnings.
The board also aims to renegotiate current financing deals, including extending repayment dates.
The form of the deleveraging plan remains to be finalised, although it is likely to involve converting much of Interserve’s external borrowings into new equity, part of which could be sold to existing shareholders and potentially other investors.
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.”