The Financial Times said that civil servants had monitored Interserve since a profit warning in September due to concerns over its financial health, citing government advisers and officials.
The Financial Times reported that British ministers were "very worried" about the construction and support services firm whose stock price dropped more than 70 percent in 2017. The company insists it won't go bankrupt like its competitor Carillion.
Following the liquidation of construction giant, Carillion, Qdos Contractor has urged the Government and the parties involved to protect the countless independent contractors working on projects for the UK's second largest construction firm.
We have created a task force to continue to support and monitor the impact on small businesses and employees who have been affected by Carillion's insolvency.
Interserve shares fell as much as 15 percent but recouped most of the losses after the government's statement and were down 3.8 percent by 1015 GMT. "We are in regular discussions with all these companies regarding their financial position", a spokeswoman said.
Prime Minister Theresa May defended the decision to carry on using Carillion after the profit warnings in parliament on Wednesday.
"We are keeping the Cabinet Office closely apprised of our progress as would be expected". Brent expects Interserve to seek between 185 million pounds ($255 million) and 340 million pounds from investors. The company said in October it may not meet debt covenants after a further revenue slowdown, though the shares surged last week when Interserve forecast 2018 earnings ahead of market expectations.
Unlike Carillion which had a myriad issues impinging its business, Interserve's main problem has been its Energy from Waste division, which has caused significant outflows of cash.
Carillion said in November it had expected full-year average net borrowing in 2017 to be between 875 million pounds and 925 million pounds, but its total debt and pensions liabilities have been estimated as at least 2.2 billion pounds.
"We believe Interserve is very different from Carillion", Liberum analyst Joe Brent wrote in a note.