Slater & Gordon Chairman John Skippen leaves the company’s AGM in Melbourne. Photo by Jesse Marlow. . Slater & Gordon CEO Andrew Grech talks to investors after the company’s AGM in Melbourne. Photo by Jesse Marlow. .
Slater and Gordon’s long-suffering shareholders will be nearly wiped out in the company’s rescue plan and many will be left with parcels of shares so small they cannot be sold on market.
The dire fate of Slater and Gordon’s shareholders was laid bare in more than 1000 pages of documents filed to the Australian Securities Exchange on Monday.
But despite shareholders facing near wipe out, the deal is a better option than placing the company in administration where the shares will be worth zero, according to an independent expert’s report on the deal by KPMG.
The rescue plan will salvage Slater and Gordon’s Australian business.
The recapitalisation comes after two horror years during which the company has teetered on the brink of insolvency after a $1.3 billion deal in the UK blew up.
After the rescue, current shareholders will only hold 5 per cent of the company’s shares.
Slater and Gordon’s senior lenders led by America’s Anchorage Capital Group will hold the other 95 per cent.
The shares that were once worth $2.8 billion were trading at 6.8 cents on Monday equating to a market capitalisation of $24.2 million.
The rescue plan values Slater and Gordon’s shares at between 0.3 cents or 1.1 cents each, meaning the 351.4 million shares currently on issue will be worth between $1.05 million and $3.87 million.
This compares to the $15.5 million in fees Slater and Gordon’s legal and financial advisers will receive for completing the deal.
About 6.5 billion shares will be issued to the hedge funds holding Slater and Gordon’s $1 billion-plus debt pile. Shares will then be consolidated on 1 for 100 basis.
In return, the hedge funds will forgive swathes of Slater and Gordon’s debts. The lighter debt load will free up the company’s balance sheet which is currently weighed down by finance repayments.
Slater and Gordon chairman John Skippen apologised to shareholders over the deal.
“Regrettably the interests of existing shareholders will be significantly diluted and I and the board are sorry for this,” Mr Skippen.
Slater and Gordon’s former managing director, Andrew Grech, and current executives Hayden Stephens and Ken Fowlie will be impacted by the recapitalisation, with all holding shares in the company. Mr Skippen also owns 100,000 shares and will be diluted through the process.
The recapitalisation will mean that many of Slater and Gordon’s existing shareholders will be left with parcels of shares valued at below $500, making them unmarketable.
Slater and Gordon says it may consider a buyback of these unmarketable parcels after the recapitalisation of the company.
The documents also revealed that Slater and Gordon plans to hive off its deeply troubled UK business into a new entity. The separation of the UK and Australian businesses will insulate Slater and Gordon’s middling local results from the earnings losses in the UK.
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