Suggestions have started to surface that Slater & Gordon is back in play as sources close to the company play down talk that it may be sailing close to the wind with its debt covenants.
The listed law firm that oversees class action and compensation cases had booked a $7.5m loss at December.
It said the directors had assessed forecasts of the group’s trading and cash flows and the potential impact of the pandemic on the group’s operations and potential cash flows had been considered.
It added that various mitigation strategies were able to be deployed to manage cash to appropriate levels in the event an unfavourable outcome occurred.
Its market value is now $83m, less than the $102.1m of net debt the company had at December.
Some believe at least one party has been sniffing around the firm given its situation.
Shares in the business have fallen from about $1.50 before the pandemic to 59c, with the price falling only 0.8 per cent on Tuesday amid a heavy market sell-off.
While Slater & Gordon risked breaching its debt covenants, sources say there have been no breaches and that the company is stable.
The numbers may not look great for Slater & Gordon, but sources say its saving grace is that law firm business is booming.
Major legal houses are busy catching up on work for clients that was not able to happen during the pandemic, to the point that many cannot find enough junior staff for the workload.
Slater & Gordon fell into the hands of Anchorage Capital in 2017 as it faced the prospect of a collapse, with the special situations group winding up with a 53 per cent holding in the company as part of a recapitalisation deal. Its debt, which had a $750m face value, was swapped for 95 per cent of Slater & Gordon’s equity.
The law firm’s downfall was its acquisition in 2015 of an allegedly fraudulent division of British company Quindell, sending its share price into free fall and triggering a staff exodus. Funds including Anchorage paid less than 30c in the dollar for the debt that was purchased from Westpac and NAB.
Class actions that Slater & Gordon is currently working on include those for investors in companies including A2 Milk, Beach Energy, Brambles and Star Entertainment.
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