Slater and Gordon has broken off all ties with its ill-fated UK business after it handed over operations of its UK division to its senior lenders, led by the hedge fund Anchorage Capital Group.
The move has come as part of a second recapitalisation plan for the firm, which will see its lenders provide it with another A$50 million (£30.1 million), on top of its current A$40 million (£24.6 million) debt facility. The money will be partly used to execute a turnaround plan for the firm.
The firm has been in trouble in the UK ever since it bought the legal services division from Quindell, now called Watchstone, in 2015.
In a note to the Australian Stock Exchange, Slater and Gordon said: “The company believes the separation of the UK operations provides the best option to enable both the Australian and UK operations to succeed in their own right and will enable the company to focus its management’s time and resources on the Australian business.”
Existing shareholders will cease to have any interest in the UK division once the separation is complete.
S&G UK will also issue interest-free convertible notes to the senior lenders, which will entitle them to payment of any amounts, up to £250 million, received from new proceeds of Watchstone-related claims above £25 million as well as certain net proceeds of any asset divestments and insurance proceeds.
At the same time, the firm released yet more disastrous annual results, which showed that it had lost A$546.8 million (£335 million) in the year ended 30 June 2017. It said the loss was partly due to an A$361.3 million (£221 million) impairment charge , underperformance across the UK and Australian operations in PI claims and A$47.1 million (£29 million) of restructuring costs in both Australia and the UK.
In August last year the firm posted an A$1 billion profit warning on the Australian Stock Exchange.The bulk of the expected £586 million loss was attributed to the first half of the financial year ended 30 June 2016, during which the firm registered an A$958 million (£552 million) deficit.
Andrew Grech stepped down from his position as group managing director of Slater and Gordon three months ago following the announcement of the first recapitalisation agreement led by Anchorage Capital Group.