ILH wins another reprieve on loans

LATE yesterday ILH filed a notice with the ASX that means it will not be forced to immediately repay $12.6m in bank loans.

THE nation’s third listed law firm, Integrated Legal Holdings, has survived to fight another day. Late yesterday ILH filed a notice with the ASX that means it will not be forced to immediately repay $12.6 million in bank loans.

It has signed a new lending covenant that has given the company desperately needed breathing space. Had that deal not been signed by today, there was a real risk the bank would have come looking for its money.

That would have raised doubts about the future of the company that operates law firms in Perth and Sydney under the brand Rockwell Olivier, and has a 49 per cent interest in the Melbourne firm that uses that brand. ILH also operates the Pacific Legal Network — a string of fifteen law offices across the Pacific.

The risk of being forced to repay $12.6m emerged after the company had a shocker of a year, making an after-tax loss of $8.9m and breaching the covenant covering its bank lending interest cover ratio.

Managing director Graeme Fowler said yesterday ILH had a lot more work to do, but the new agreement with the bank was a milestone.

The statement to the ASX says the board and management are confident that as a result of initiatives implemented over the last several months and those still under way that the revised and additional conditions can be achieved.

The new deal has given ILH a revised target for its interest cover ratio and has maintained its existing schedule of loan repayments — but with one very large addition.

By March 15 next year, the company will need to repay $2m — that’s in addition to its existing commitment to repay $250,000 per quarter from December, and $300,000 per quarter from December next year.

The bank has also required ILH to change the deferred consideration for the purchase of its loss-making consulting and advisory business so the vendors receive shares instead of cash.

Next March — when $2m must be repaid — now looms as the key date in Fowler’s calendar. But his statement to the ASX says management is advanced on a number of appropriate measures.

The bottom line is that this new deal with the bank gives Fowler a chance to test the restructuring and management changes that were put in place after last year’s big losses. Those changes have resulted in $2.4m in annualised savings.

ILH now has a management structure and strategy that, for national law firms, is much closer to orthodox. It also has a strong point of distinction in the Pacific Legal Network — a footprint that is unmatched.

It would have been a great shame if one horrendous year would have meant curtains for this company just when it looks to be getting its act together.