Embattled ASX listed law-firm Slater & Gordon has reached an agreement with its bankers, avoiding bankruptcy.
In a statement to the stock exchange, the company said it had agreed to amendments to the terms of its existing facility agreement that ensures loans do not have to be repaid until May 2018.
This was a “clear sign of endorsement” for the company’s “improvement program”, the statement said.
Managing director Andrew Grech said management was focused on “improving profitability and cash flow, and to reduce debt.”
Under the new agreement, Slater & Gordon is due to repay $480 million of debt in the 2018 financial year and $360 million in 2019, which are now in the form of “term loans”.
Slater & Gordon has agreed to new financial convenants, more-frequent reporting to lenders, and said it had agreed not to declare or pay any dividends.
As part of the agreement Slater & Gordon has agreed to pay an an “amendment fee” to its banks either in the form of cash, or performance “warrants.”
The warrants are structured to give lenders “upside” in any gain in the market capitalisation of the firm, ahead of a refinancing or maturity, through the placement of shares.
More than 55 per cent of the lending group will take the payment in the form of cash, which S&G said would result in a maximum dilution of the share-register by 6 to 7 per cent.
Slater & Gordon said it did not require shareholder approval to issue the warrants.
The law firm had previously said it had until May to negotiate new terms with its lenders, led by National Australia Bank and Westpac, or be forced to repay the debt within 12 months, tipping it into an inevitable default.
The once, high-flying personal injury firm has had a tumultuous year after it agreed to pay $1.3 billion to acquire the professional services division of Quindell, a London listed firm. That acquisition was funded with $890 million of new equity, with the remainder paid with bank loans.
Slater & Gordon’s shares closed on Friday at 29.5¢ valuing the law firm at just over $100 million.
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