Slater & Gordon (SGH) has been given another, small, $72 million bailout by its lenders to enable it to remain solvent while debt restructuring talks are concluded and some odds and sods are tied up.
The company announced on Friday that it reached agreements with its lenders for new debt facilities with its senior lenders.
The announcement comes a fortnight after it was revealed that debt in the troubled group was sold at 20 cents in the dollar.
Slater and Gordon said on Friday that an agreement was reached with an unnamed member of the mystery suite of lenders that will offer a new $40 million facility to support Slater & Gordon’s plan to improve performance. The lenders also agreed to the capitalisation of interest of $32 million due for payment on June 28.
The $72 million involved in the two moves is well in excess of the company’s market value of just over $45 million at the close last Friday. The shares closed unchanged on 13 cents after jumping to 13.8 cents (a rise of 6%).
“This provides the company with confidence its current discussions with the new senior lenders will result in the provision of the ongoing support required for the company to execute its plan to restore financial and operating stability,” the law firm said.
Slater & Gordon is at the mercy of its lenders given bank debt exceeds the group’s current enterprise value. It is in the process of working through a recapitalisation plan to keep the group in operation and expects a deal to be reached in April.
“The support of the new senior lenders continues to be fundamental,” Slater & Gordon said.
“The company expects that discussions with the new senior lenders will be successfully concluded in the next few weeks, at which time a further announcement to the market will be made.”
And in a separate move the company has struck agreement with the lenders to spend $250,000 buyback staff shares as the final step in killing off the employee ownership plan.
"The EOP was introduced in 2007 and the last allocation to employees was made in 2012. Staggered vesting based on performance hurdles and sale restrictions applied over a six year period from allocation. The buy back price set in accordance with the terms of the EOP will be applied against outstanding EOP loan amounts.
"The cash impact of the buy back is less than $250,000. No Key Management Personnel will benefit from the buy back. Following the buy back the EOP will be discontinued as it has ceased to fulfill its intended purpose.”
