Shareholders are between the hammer and the anvil
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Slater and Gordon shareholders have to choose the lesser of two evils.
As the firm confirmed a timeline for the separation of its UK business in an update to the ASX, it also warned of possible further trouble the firm and its shareholders could get into should a recapitalisation plan not pass a shareholder vote.
The firm said that the timeframe that is “reasonably practical” for the UK operations to be separated is up to 18 months following the implementation date of its recapitalisation plan. The company is in the midst of finalising the plan, which shareholders will vote on in the annual general meeting in Melbourne on 6 December.
If they vote yes to the plan, shareholders take a massive cut to their remaining shareholding. If they vote no, however, the company could be further hurt because of parent guarantees for material contracts in the UK.
If the recapitalisation plan is implemented, the firm’s UK operations and subsidiaries will be separated from its Australian parent. The parent will also seek to be released from guarantees it is under. The firm said its main exposure under the guarantees are leases for the offices used by the UK business, “primarily the Manchester premises.”
“If, during the transition period, the UK operations default on the UK leases and/or other material contracts the subject of the parent guarantees, and those parent guarantees have not yet been released, the company may be liable for any unpaid amounts under those contracts at the time of default,” the firm said. “Any contingent liability has the potential to be material in the event that the UK operations were in default and the parent guarantees were called upon and the company was unable to take steps that are typically commercially available to mitigate its loss, such as sub-leasing.”
While the parent guarantees will not be released effective from the implementation date of the recapitalisation, the Australian business and its subsidiaries will be released from their obligation to pay, guarantee, or secure payment of any secured debt related to the UK operations from that date.
The Australian business and subsidiaries will also be released from their obligations to pay or guarantee all amounts drawn by the UK business from debt facilities, reducing the Australian business’ secured debt by $636.6mn. The firm calculates its total secured debt to be currently $761.6mn.
Office closures
Slater and Gordon has also confirmed it plans to close four offices in the UK in the next 12 months.
The firm plans to shutter its outposts in Chester, Wrexham, and Milton Keynes. One of its offices in Preston will also close, the Law Society Gazette said.
“We have assessed our geographic footprint with a view to bringing it in line with our vision of delivering our services from strategic centres of excellence. Following this review, we are considering a plan to consolidate a number of our smaller offices into our larger regional hubs, where colleagues can share their outstanding knowledge and expertise across a range of legal fields,” the firm said.
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Embattled firm’s Australia, UK separation updated
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As the firm confirmed a timeline for the separation of its UK business in an update to the ASX, it also warned of possible further trouble the firm and its shareholders could get into should a recapitalisation plan not pass a shareholder vote.
The firm said that the timeframe that is “reasonably practical” for the UK operations to be separated is up to 18 months following the implementation date of its recapitalisation plan. The company is in the midst of finalising the plan, which shareholders will vote on in the annual general meeting in Melbourne on 6 December.
If they vote yes to the plan, shareholders take a massive cut to their remaining shareholding. If they vote no, however, the company could be further hurt because of parent guarantees for material contracts in the UK.
If the recapitalisation plan is implemented, the firm’s UK operations and subsidiaries will be separated from its Australian parent. The parent will also seek to be released from guarantees it is under. The firm said its main exposure under the guarantees are leases for the offices used by the UK business, “primarily the Manchester premises.”
“If, during the transition period, the UK operations default on the UK leases and/or other material contracts the subject of the parent guarantees, and those parent guarantees have not yet been released, the company may be liable for any unpaid amounts under those contracts at the time of default,” the firm said. “Any contingent liability has the potential to be material in the event that the UK operations were in default and the parent guarantees were called upon and the company was unable to take steps that are typically commercially available to mitigate its loss, such as sub-leasing.”
While the parent guarantees will not be released effective from the implementation date of the recapitalisation, the Australian business and its subsidiaries will be released from their obligation to pay, guarantee, or secure payment of any secured debt related to the UK operations from that date.
The Australian business and subsidiaries will also be released from their obligations to pay or guarantee all amounts drawn by the UK business from debt facilities, reducing the Australian business’ secured debt by $636.6mn. The firm calculates its total secured debt to be currently $761.6mn.
Office closures
Slater and Gordon has also confirmed it plans to close four offices in the UK in the next 12 months.
The firm plans to shutter its outposts in Chester, Wrexham, and Milton Keynes. One of its offices in Preston will also close, the Law Society Gazette said.
“We have assessed our geographic footprint with a view to bringing it in line with our vision of delivering our services from strategic centres of excellence. Following this review, we are considering a plan to consolidate a number of our smaller offices into our larger regional hubs, where colleagues can share their outstanding knowledge and expertise across a range of legal fields,” the firm said.
Related stories:
Embattled firm’s Australia, UK separation updated
National firm promotes three more in NSW