Troubled Australian firm Slater and Gordon is talking to banks about a deal which would lead to its restructuring by a new tier of bank lenders. An announcement to the Australian Stock Exchange this morning admitted that 94% of the company's debt had been sold to 'secondary debt buyers' which 'intend to implement a solvent restructure of the company'.
This would involve a 'debt for equity lender scheme of arrangements' which the announcement said 'is in the best interests of all stakeholders'.
The intention 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,' the statement said.
The announcement seemed to have an immediate effect on the company's share price, which increased by 46% to 13 Cents. Two years ago the company was trading at around A$8.
The Australian media response to Slater and Gordon's statement was mixed: the Herald Sun said banks had 'abandoned' the firm and quoted one analyst who warned the deal had the potential to leave shares 'virtually worthless'. The Australian Financial Review quoted debt market sources saying this was a 'clear statement of intent' the business will be stabilised and avoid entering administration.
The scale of the task facing Slater and Gordon was outlined last month when the firm posted half-year losses of £262m and wrote off UK business worth £216m. Slater and Gordon’s board said it had presented recapitalisation options to lenders and added it had ‘reason to believe that a successful outcome will be concluded in the coming months’, although a majority of lenders by value had to agree to a satisfactory recapitalisation plan by 26 May.
The firm has struggled since admitting accounting errors and completing the ill-fated deal to buy the Professional Services Divison of Quindell.
Breaking: Slater and Gordon surrenders control to new lenders
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