Shares in Interserve sank 50% in value today after it announced a rescue plan that sought to head off a Carillion-style collapse by converting much of its debt into new shares.
The move potentially hands control of the company to its creditors.
The outsourcer, which employs 75,000 worldwide and has thousands of UK government contracts to clean hospitals and serve school meals, said it would seek to cut its debt to 1.5 times core earnings in talks with lenders it hopes to complete early next year.
Chief executive Debbie White said that the company was trading "well", in line with expectations for 2018.
She also said that the company's debt reduction plan, first raised in a refinancing in April, had the support of 10 Downing Street.
But the moves add to the sense of crisis around the company, whose value has slumped from over £1 billion in 2014 to just £9.7m today, as creditors and shareholders bet it is on course to default on its debt.
Interserve's problems follow the collapse of peer Carillion in January and a parliamentary inquiry that has raised questions over whether private companies should be running essential public services.
Carillion was liquidated after contract delays and a slump in business left it swamped by debt and pensions liabilities.
This triggered Britain's biggest corporate failure in a decade and forced the government to step in to guarantee public services from school meals to roadworks.
Interserve's combined credit score, which measures on a scale of 100 to 1 how likely a company is to default on its debts in the next year, was "1", according to Refinitiv Eikon data, indicating it was expected to default.
"While trading is in line we believe that it is hard for Interserve to get credit insurance or win new contacts, given the current environment and its leverage," analysts said.
Interserve, which maintains eight out of 10 of Britain's busiest railway stations and cleans 2,490 London Underground carriages every evening, warned in November that its debt would rise more than expected this year.
It said then that it expected year-end net debt in the range of £625-650m, citing project delays and a weak construction market.
The Guardian reported over the weekend that the opposition Labour Party was calling for a temporary ban on the company bidding for public contracts.
Another peer, Kier Group, which builds and maintains highways, railway tunnels and houses, announced a surprise plan two weeks ago to tap shareholders for some £264m, blaming the reluctance of banks to lend to the construction sector after the collapse of Carillion.
Analysts say shares in Balfour Beatty were hit by that announcement, while Danish support services company ISS today announced its own plan to raise up to 2.5 billion Danish crowns ($381.11m) from selling businesses in a bid to refocus and increase revenue growth.
Shares in Interserve have tumbled by 87.3% this year.
