Minority critical of Slater and Gordon hedge funds deal Shareholders split
SLATER and Gordon shareholders have lashed out at the struggling law firm after it won approval for a salvage deal that hands control of the company to hedge funds.
Small- scale investors say their shares are now barely worth “peanut shells” after most shareholders backed the rescue plan at the group’s annual meeting yesterday.
Under the recapitalisation deal, hedge funds led by New York- based Anchorage Capital Group are seizing a 95 per cent stake in the law firm.
The other 5 per cent will owned by existing shareholders, including longsuffering investors who have witnessed a dramatic slump in the price of Slater and Gordon shares over the past two years.
Shares in the group were trading above $ 7.80 before it made a disastrous acquisition in Britain two years ago.
According to a KPMG report commissioned by Slater and Gordon and released in October, the “implied value” of the shares after the recapitalisation is between 0.3c and 1.1c each.
Slater and Gordon chairman John Skippen told investors at the meeting in Melbourne that without the deal, the firm could not avoid insolvency and shareholders could lose everything.
As of June 30, the company owed $ 761.6 million to senior lenders. About $ 375 million of that sum related to its $ 1.2 billion deal to buy the professional services division of British firm Quindell in 2015.
One furious shareholder yesterday argued vainly against the rescue deal, saying existing investors would be left with “a very small bag of peanut shells”. Another shareholder, who asked be called Simon, told Business to Daily his shares were now worth “less than peanut shells, maybe just the bag they come in”.
Mr Skippen said the board “understands that the outcome is disappointing for shareholders”, but it was better than the alternatives.
“In the event the recapitalisation is not implemented, Slater and Gordon will become insolvent and shareholders will most likely receive nothing,” he said.
That was because the law firm’s assets “are not sufficient to fully satisfy its secured debt obligations, let alone creditors or the interests of shareholders”, Mr Skippen said.
“The recapitalisation provides the only opportunity to secure the future of the firm and its workforce and also provides the potential for some value recovery for shareholders.”
Among shareholders to vote on the rescue deal, 77.81 per cent supported the plan to issue new shares to the funds led by Anchorage Capital Group and other debt holders, with 22.19 per cent voting against.
Investors asked Merrick Howes – an Anchorage nominee who was elected to the Slater and Gordon board – how he would represent minority shareholders.
Mr Howes said he would be representing the interests of Anchorage on the board.
Shareholders also handed Slater and Gordon its second consecutive executive pay “strike”, with 28.85 per cent voting against its remuneration report.
That followed a 43.15 per cent “no” vote against the adoption of the group’s remuneration report last year.
Under Australian corporate law, if a company suffers pay strikes – with “no” votes of more than 25 per cent – in consecutive years, investors can then vote for a spill of the board.
The spill motion only attracted 24.11 per cent of the vote yesterday, failing to achieve the 50 per cent needed to force a meeting for a spill of the board.