Banks order advisory firm to look at Slater and Gordon books

Financiers for Slater & Gordon have sent in accountants to examine the beleaguered law firm’s books.

Andrew Grech, managing director of Slater and Gordon.

Slater & Gordon’s lead financiers, the National Australia Bank and Westpac, have installed McGrathNicol as investigating accountants to take a forensic look at the law firm’s books.

The move comes after a disastrous year for the company (SGH), during which debt increased by $623 million to help fund the purchase of UK firm Quindell’s professional services division.

The listed firm’s stock price fell 2.6 per cent today to 73 cents a share compared with the November low of 59 cents and a high last April of $8.07 a share.

While the appointment of an investigating accountant often precedes the appointment of liquidator, this is not expected with Slater & Gordon because of the strength of its existing franchise.

The appointment is being made just to give the banks a clearer idea of the company’s financial position.

Both NAB and Westpac declined to comment on client confidentiality grounds, while McGrathNicol said it did not comment on rumours or speculation.

Slater & Gordon shares have suffered a sharp sell-off since a poorly received financial update late last year.

The stock plunged 51 per cent on just one day in November after a UK crackdown on personal injury claims from traffic accidents.

The company later abandoned a longstanding earnings guidance, leading to the threat of a class-action lawsuit from fellow plaintiff law firm Maurice Blackburn.

Despite the news and share price crash, the company’s financiers — which also include Macquarie and Citi — appeared to remain comfortable with cashflow and earnings prospects.

Sources close to the banks had pointed out short-term costs associated with hearing loss cases acquired as part of a $1.23bn deal with Quindell had been “well flagged”.