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Slater and Gordon Strikes Deal with Lenders

Slater and Gordon Strikes Deal with Lenders
Management considers this support from its lending group as positive endorsement of the company’s performance improvement and reorganisation strategies.
May 02, 2016 By Kaivalya Kandarpa Tags: SGH

Slater and Gordon Limited (ASX:SGH) announced that following discussions with its lenders, the law firm has successfully established amendments to the terms of its current Syndicate Facility Agreement.

Management considers the support from its lending group as a positive endorsement of the company’s performance improvement and reorganisation strategies.

Slater and Gordon Group Managing Director, Mr Andrew Grech commented on the agreement: “We are both very pleased and grateful for the strong level of support that we have received from our lending group. We remain focused as a management team, on executing our performance improvement program across the business to improve profitability and cash flow, and reduce debt. We are confident that the amendments we have entered into today with our lending group provide us with the flexibility and time to execute and continue our performance improvement program.”

Facility Structure Supports SGH’s Improvement Program

Slater and Gordon has to pay $480 million by FY18 and $360 million by FY19. This maturity profile provides a conducive environment for the company to execute the performance improvement program, enhance profitability and cash flow and decrease debt.

With the earliest repayment not due before May 2018, management beleives that this provides the company with sufficient time to reap the benefits of the improvement program.

Key Terms of the Facility

While the key terms have substantially remained unchanged, the company has, however, agreed to certain changes to the facility with the lenders. These amendments include increased frequency of reporting to lenders, the facilities are now structured as term loans, with semi-annual debt amortisation to begin from June 2017. The company has also agreed not to declare any dividends until the repayment of the loan.

While the amendment fees are payable with respect to the facility, lenders may also accept warrants on behalf of such fee, reducing the overall cash cost of the company.

The maximum number of shares issued as part of these warrants has been agreed to remain under 15% of total number of issued shares in the company. Slater and Gordon anticipates that more than 55% of the lending group will opt for the amendment fee in cash, therefore the maximum dilutive impact is expected to be between 6%-7%.

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Kaivalya Kandarpa Author: Kaivalya Kandarpa May 02, 2016

Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.

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