Slater’s shake-out
SLATER and Gordon chief Andrew Grech will part ways with the stricken law firm after 17 years at the helm under a recapitalisation plan that will transfer control to its lenders.
Mr Grech has quit his post with immediate effect but will stay on the board until a replacement is found.
His fellow directors will resign “in due course” under a boardroom shake-out aimed at reinvigorating the Melbourne-based company.
Long-suffering retail shareholders also appear set to pay a price for their company to remain solvent, with the value of their stakes likely to be heavily diluted under the new scheme.
Under the agreement, announced to the Australian share market operator yesterday, lenders headed by New York hedge fund Anchorage Capital will swap about $700 million in Slater debt for 95 per cent of the company’s equity. The other 5 per cent of the equity will be left to existing shareholders.
That slice will be trimmed to 4 per cent upon the issue of unlisted warrants to participating senior lenders – effectively granting them the right to take up new shares over a three-year period.
In return, those lenders are stumping up $5 million, which will be added to $30 million in fresh debt to keep Slater afloat.
Slater, which has been in restructuring talks for months, said in a statement to the ASX yesterday the deal provided a “stable platform for its future operations in both Australia and the UK”.
Anchorage, which is not affiliated with the similarly named Australian private equity firm behind the ill-fated float of electronics retailer Dick Smith, will hold more than half of Slater’s equity under the arrangement.
The deal requires the approval of Slater’s shareholders but already has the support of its directors, who have agreed not to vest any incentive rights to its executives without consulting the new management. It will also allow Anchorage to nominate four of the firm’s new sevenmember board.
Among conditions for approval of the scheme, an independent expert must deem the law firm will be solvent and that the recapitalisation is either “fair and reasonable” or “not fair but reasonable” to shareholders.
The rescue plan marks another chapter in a rolling saga for the law firm, which is battling to recover from a disastrous foray into Britain two years ago.
The expansion strategy has shredded Slater’s market value, which was just $31 million yesterday after sitting at $2.8 billion in April 2015.
Shares in the group yesterday fell 4.4 per cent to 8.8¢.
A bailout was always on the cards after Anchorage bought Citigroup’s debt in the law firm last November.
Those plans crystallised further in March when Slater’s big bank lenders, Westpac and National Australia Bank, also sold their debt to Anchorage.
Analysts yesterday said the group had few options other than to accept the debtfor-equity swap or tumble into administration.