Slater and Gordon shareholders, execs face wipeout in rescue plan
MELBOURNE, AUSTRALIA – JANUARY 20: Lawyer Andrew Grech, Managing Director of legal firm Slater and Gordon poses for a photo on January 20, 2015 in Melbourne, . (Photo by Arsineh Houspian/Fairfax Media) Photo: Arsineh HouspianSlater and Gordon’s top brass who hold shares in the troubled law firm that were once worth more than $150 million are preparing to take a major bath as the company works to push through a deal in the next 12 days to avoid receivership.
Two weeks ago the firm’s advisers at Arnold Bloch Leibler and Moelis put forward a debt-for-equity swap that would see the banks holding more than $700 million in debt exchange all or part of it for new shares in the company.
Advisers were locked in a meeting late last week to thrash out the details of the plan that must be sealed by March 17. A deal could be agreed in principle as early as this week, according to sources.
One of the key sticking points has been the unwillingness of Westpac and NAB to take major equity stakes in the firm. Another lender, Citi, has already sold its debt to distressed debt buyers for 40?? in the dollar.
Sources said Westpac and NAB would be lucky to get more than 30?? in the dollar for their debt.
The recapitalisation deal will be hugely dilutive for existing shareholders and it is expected they will receive no consideration for their shares or, in a best case scenario, less than 5?? a share, sources close to the deal said.
Slater and Gordon chief executive Andrew Grech will be the hardest hit of all staff.
According to Bloomberg data several high ranking members of Slater & Gordon’s management ranks have held substantial holdings in the compay.
Mr Grech owns 7 million shares that were once valued at $56 million, placing him as the second largest shareholder in the stock that has seen a flight of institutional investors in the past 18 months.
Mr Grech and other senior executives at the firm are taking a “sanguine” approach to the wipeout of their wealth, according to sources.
Slater and Gordon UK boss Ken Fowlie, whose 5.6 million shares were once worth $45 million, and the boss of the firm’s n business Hayden Stephens, who owns 4.8 million shares once worth $38 million, will also see their wealth built up over the past 10 years practically evaporate.
Cath Evans, who resigned as the head of personal injury practice last year, has previously owned more than 4 million shares that were once worth $32 million. In October the company’s annual report listed her as holding the shares as at June 30 but she has told Fairfax Media she no longer owns the shares.
Scores of Slater and Gordon lawyers who have accepted their bonus payments in shares over the years will also be impacted.
Those affected will also include regular shareholders, including the day traders who have piled into the stock in recent weeks.
Investors are expected to be given the opportunity to vote on the deal, however a vote against the recapitalisation proposal will likely result in Slater and Gordon entering into administration and in an insolvency shareholders would probably receive nothing.
Slater and Gordon declined to comment.
Correction: A previous version of this story said Cath Evans owned 4 million shares in Slater & Gordon. She does not.