In edition 175, we reported on the release of Slater and Gordon (S&G) interim results which announced £262million half-year loss which equated to net losses of £22.5m, meaning that the firm is now in negative equity. Following this, S&G have today, made an announcement to the Australian Stock Exchange that 94% of the company’s debt has been sold to secondary debt buyers, these anonymous buyers are now S&G’s new lenders.[i]

The announcement made clear that the new lenders intend to implement a solvent restructure of the company with a ‘debt for equity lender scheme of arrangements’ said to be in the best interests of the company. The announcement stated:

‘The Company has been informed by the New Senior Lenders that they fully intend to implement a solvent restructure of the Company (‘Restructure’) and to work cooperatively with the Company to enter into binding agreements to reset its debt structure to ensure that the company has a sustainable level of debt and a stable platform for its future operations both in Australia and the UK. The Company and New Senior Lenders believe a Restructure by a debt for equity Lender Scheme of Arrangement is in the best interests of all stakeholders’.

A debt for equity swap is where debt is exchanged for a predetermined amount of equity (or stock). The value of the swap is determined usually at current market rates, but management may offer higher exchange values to entice share and debt holders to participate in the swap. 

The company say the intention of this restructure is ‘to enter into binding agreements to reset its debt structure to ensure that the company has a sustainable level of debt and a stable platform for its future operations both in Australia and the UK’.

However, it has been suggested that this is merely indicative of S&G’s primary lenders offloading their debts in order to distance themselves from the troubled law firm. It has been reported that banks including Westpac, National Australia Bank, Royal Bank of Scotland and Barclays have all accepted losses of between 70-80% on their loans.[ii]

Following the news of the restructure S&G shares have risen overnight from $0.09 AUD to $0.13 AUD.

The company’s full announcement can be accessed here.

 

[i] Law Society Gazette, ‘New Lenders In Control At Slater and Gordon Plan “Solvent Restructure”’ (The Law Society Gazette 17 March 2017)< https://www.lawgazette.co.uk/new-lenders-in-control-at-slater-and-gordon-plan-solvent-restructure-/5060300.article> accessed 17 March 2017.

[ii] Jamie Smyth, ‘Banks Take Big Loss On Slater & Gordon Investment’ (Financial Times 17 March 2017)< https://www.ft.com/content/cdbe2a9a-0aa7-11e7-97d1-5e720a26771b> accessed 17 March 2017.