Slater & Gordon Ltd.’s shares plunged21% on October 31, 2017 following the news that the distressed shareholders might see almost a total wipe out as per the group’s rescue plan. The group had filed shareholder claimant and senior lender scheme explanatory statements on October 30, 2017 and has indicated for the ill fate of the shareholders with bringing down the value of its shares.Primarily, the shareholders will now be holding only 5% of the company’s shares while the group’s senior lenders led by America’s Anchorage Capital Group will hold the other 95%. It has been said that the shares will now be valued at between 0.3 cents and 1.1 cents each.

On the other hand, the rescue plan on recapitalisation to help support the troubled business will prevent any insolvency being anticipated for the past couple of years.As per the group, recapitalisation has been identified to be required to avoid insolvency, and is intended to provide a sustainable level of senior secured debt and a stable platform for its future operations.As of 30 June 2017, Slater & Gordon owed a total of $761.6 million to its Senior Lenders under the Syndicated Facility Agreement, which is the primary source of Slater & Gordon indebtedness. A large portion of this debt (approximately $375 million) was drawn to partially fund the acquisition of Quindell Plc’s Professional Services Division in 2015, which led the group sunk to low levels. In the absence of recapitalisation, Slater & Gordon will not be in a position to repay any amounts due under the Syndicated Facility Agreement when they become payable. Accordingly, the Directors consider that, without implementation of the recapitalisation, Slater & Gordon will become insolvent.

Further, the group’s balance sheet which has been under heavy loads of debt is said to be saved through the issuance of about 6.5 billion shares to the hedge funds holding Slater & Gordon’s $1 billion-plus debt pile. Also, the shares will be consolidated on 1 for 100 -basis.

As earlier anticipated, the interests of the existing shareholders have been diluted significantly under the deal highlighted by the group. Nonetheless, many experts view this to be a better option than falling into administration.

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