The debt-stricken firm revealed late on Wednesday that it had agreed commercial terms in principle with its main banks for extra cash facilities of £197m and fresh bonding up to £95m.

The deal would extend cash borrowing facilities to £834m, but crucially does not pay down debt, expected to rise to £600m this half.

This raises the prospect of Interserve still needing a rights issue or debt for equity swap at a later stage to repair its balance sheet.

As part of the proposed new deal, Interserve’s banks have options to buy new shares, presently worth 88p, for 10p per share, which if exercised, would give them a 20% stake in the group.

These commercial terms still need to be rubber stamped by all Interserve’s lenders.

Debbie White, Interserve’s chief executive, said: “Today’s announcement is a significant milestone for Interserve and a major step in securing a firm financial platform to underpin the group’s future. 

“We are encouraged by the support from our lenders in respect of these new facilities, which will allow the new management team to execute our business plan, focused on delivering a great service for customers, driving growth and restoring value.”

Interserve’s banks have also agreed to extend a looming covenant test to the end of April to allow documentation to be finalised for the refinancing.

The new facilities will mature in September 2021.  

Emergency borrowings of £45m agreed last December will be repaid out of the new facilities, once these are in place.

Pricing on both the new facilities, and the existing debt and bonding facilities have been renegotiated as part of the refinancing.

In 2018, Interserve’s total cost of borrowing will rise to £56m of which £34m will be cash interest. The increased cost of bonding instruments already issued will be £3.2m.