Andrew Grech to depart Slater & Gordon as lenders take control

Slater & Gordon chief Andrew Grech has quit under a restructure that will put the law firm under hedge fund control.

Andrew Grech has resigned as managing director of the embattled law firm Slater & Gordon.

Hedge fund giant Anchorage Capital Group is to gain control of debt-stricken listed law firm Slater & Gordon as part of deal under which managing director Andrew Grech steps down, the board is cleaned out and existing shareholdings are smashed.

Anchorage and a clutch of other hedge funds are to swap debt they snapped up at a steep discount to its $750m face value for 95 per cent of Slater & Gordon’s equity.

Existing shareholders may be further diluted, to just 4 per cent of the company (SGH), if the lenders exercise warrants issued as part of the deal.

The hedge funds have also put a foot on any proceeds from a lawsuit over the disastrous deal that sent Slater & Gordon’s stock into free fall and the company into a debt crisis — the 2015 purchase of a division of allegedly fraudulent UK company Quindell.

If the restructure succeeds, it may help Slater & Gordon stem an outflow of talented staff and refocus on its core businesses of workers’ compensation, personal injury and class action claims.

The hedge funds mostly paid less than 30c in the dollar in May when they bought Slater & Gordon’s debt from Australian lenders led by Westpac and NAB, who had little appetite for owning a law firm that frequently acts against the big end of town.

Under the new structure Anchorage will emerge with around 50 per cent of Slater & Gordon, while Davidson Kempner, out of Hong Kong, and US funds York Capital Management, Taconic Capital and River Birch Capital will also have substantial shareholdings.

Two of the original lenders, Merrill Lynch and Deutsche Bank, are believed to have retained small stakes.

Under the deal, Mr Grech will step aside, effective immediately, although he will remain a director of the law firm until it can find another lawyer to head the company.

Australia CEO Hayden Stephens and UK CEO Ken Fowlie will continue to lead the businesses in Australia and the UK respectively.

The board has further agreed to undertake a renewal process which will enable the group of lenders to elect new directors. All existing directors will resign in due course as new directors are appointed.

Slater & Gordon told the ASX that secured lenders led by Anchorage will swap about $700m they are owed for 95 per cent of Slater & Gordon’s equity and convertible notes worth up to £250m.

The notes carry an entitlement to the proceeds of Slater & Gordon’s lawsuit against Watchstone, the group with which it entered into the disastrous deal to buy park of Quindell.

The lender group will also establish a new $35m loan facility.

The deal is conditional on settling a class action against the group brought by rival plaintiff law firm Maurice Blackburn over Slater & Gordon’s basement-dwelling share price.

with AAP