We reported in edition 191 of BC Disease News that Slater and Gordon (S&G) was planning to sell 95% of its equity to secondary debt buyers led by New York hedge fund, Anchorage Capital as part of a solvent restructure.
The restructure means that S&G’s new lenders will write off most of the company’s debt in return for 95% of the firm’s equity with the remaining 5% going to already existing shareholders.
Last week S&G announced an ‘amended recapitalisation agreement’ to the Australian Stock Exchange (ASX). This amended agreement involves, amongst other things, breaking off S&G’s UK operations and UK subsidiaries so that they are held under a new UK holding company, separate from the listed Australian entity. The new company, which will be wholly owned by senior lenders will be called ‘UK HoldCo’.
The announcement states that:
‘The Company believes the separation of the UK operations provides the best option to enable both the Australian and UK operations to succeed in their own right and will enable the Company to focus its management’s time and resources on the Australian business’.
The agreement will need to be agreed by the shareholders at an investor meeting in November, but it is thought that this will be a perfunctory process.[i]
This week, it has emerged that BLM has held discussions with Slater and Gordon, with a view to acquiring its business legal services arm, comprising of 43 lawyers.[ii]
This announcement comes alongside the publishing of S&G’s annual accounts which show that the costs of restructuring have increased by 41% in 2016/17 from the previous year, totalling almost £30m.
It also coincides with reports that losses for the Group were almost halved to £335m for the 2016/17 year with the rate of loss slowing in the second half of that year. This compared to losses of more than £585m in 2015/16.
The UK arm of S&G, Slater and Gordon Solutions (SGS), which was established in 2015 and replaced the professional services division of Quindell which was notoriously purchased by S&G, has seen an improved performance in the period 2016/17. The UK entity has reported earnings before interest, tax, depreciation and changes in ‘work in progress’ of £10.2m.[iii] The report states that:
‘The improvement on FY16 performance was due mainly to improved performance in the noise induced hearing loss practice’.
However, the net loss of SGS before tax and finance costs was still £205.7m.
The full announcement to the Australian Stock Exchange can be accessed here.
The annual accounts of S&G can be accessed here.
[i] Ben Butler, ‘Hedge Funds Swoop On Slater & Gordon’ (The Australian 31 August 2017) <http://www.theaustralian.com.au/business/hedge-funds-swoop-on-slater-gordon/news-story/5476a8a2c6b1e70c9575f2451baaae64> accessed 1 September 2017.
[ii] John Hyde, ‘Slater and Gordon sell-off in prospect as BLM link emerges’ (6 September 2017 Law Society Gazette) <https://www.lawgazette.co.uk/practice/slater-and-gordon-sell-off-in-prospect-as-blm-link-emerges/5062672.article> accessed 6 September 2017.
[iii] John Hyde, ‘Slater and Gordon Splits Off UK Operation’ (The Law Society Gazette 30 August 2017)< https://www.lawgazette.co.uk/practice/slater-and-gordon-splits-off-uk-operation-/5062589.article> accessed 1 September 2017.