Aussie law firm creditors offload debt

Macquarie and Citigroup led an A$890 million capital raising in April 2015 to finance the firm’s Quindell acquisition.

Macquarie Group and Citigroup, the creditors of Australian law firm Slater & Gordon, have reportedly offloaded their debt in the company, according to local media reports.

Earlier this month, Citigroup traded its slice of debt in the company with New York-based private equity firm Anchorage Capital Group at 38 cents in the US dollar. The total size of the transaction was not disclosed. Bank of America Merrill Lynch facilitated the trade.

Quickly following Citigroup’s move, Macquarie Group, another major lender to the law firm, sold its A$20 million ($14.9 million; €14.1 million) exposure in the company at 45 cents in the US dollar last week. Deutsche Bank was reported to be one of the buyers of the debt.

“We have no comments to make in relation to recent media reports on the trading of Slater & Gordon’s debt,” a spokesperson for Slater & Gordon told PDI.

The law firm was left with A$682 million of net debt after its disastrous A$1.3 billion acquisition of Quindell, now known as Watchstone, the AIM-listed UK insurance claims outsourcer, in 2015. Within 12 months of the takeover, A$879 million of value was written off.

A report released by Slater & Gordon’s insolvency firm McGrathNicol states that the fundamental business of the law firm is in fair shape but the capital structure needs to be reset.

“There has been no change to any of the terms, conditions or our obligations in our lending arrangements,” the firm insisted.

Citigroup and Macquarie led the A$890 million capital raising in April 2015 to finance the Quindell acquisition.

In May this year, the troubled law firm secured a refinancing deal – an extension of A$840 million principal and interest repayment, with the support of its four major creditors: Westpac, National Australia Bank, Macquarie Group and Citi.

Local news media also said that both National Australia Bank and Westpac had made significant provisions against their exposures and there is an expectation in the market that a debt-for-equity swap will be needed to recapitalise the operation.

Australia-headquartered Slater & Gordon is a multinational consumer law firm employing 1,330 people in 61 locations across Australia and 3,310 people across 25 locations in the UK. It was the first law firm in the world to go public in 2007.