Reacting to media reports about the sale of its debt, the troubled law firm confirmed to the ASX on Friday that it had been notified that more than 94% of its debt facility has traded from its original lenders to secondary debt buyers.
Westpac, National Australia Bank, Barclays, and Royal Bank of Scotland on-sold their holdings sometime Wednesday last week, the Sydney Morning Herald reported. Both the publication and the Australian Financial Review said the debt was purchased by hedge funds. The banks had acceded to losses of up to 80%, the AFR said.
The buyers are reportedly keen on a debt-for-equity swap, which will enable the ASX-listed firm to restructure but will significantly dilute other shareholders, SMH said. It said that a restructure of the firm couldn’t be agreed upon because Westpac and NAB were unwilling to take major stakes in the firm.
New York hedge fund Anchorage Capital will become the largest stakeholder in Slater & Gordon when the planned swap is completed, AFR said.
The firm and its new senior lenders believe a restructure via scheme “is in the best interest of all stakeholders.” Slater & Gordon was in danger of being put in administration over the weekend if a deal on its debt was not reached.
Last month, the firm reported a A$425.1m net loss after tax, due largely to a further A$350m writedown in the first half of fiscal year 2017. Debts were about A$740m, A$126m more than assets.
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Banks that owned a majority of Slater & Gordon’s debts have unloaded at a massive loss, recovering as little as 20 cents on the dollar.