Lenders force SGH to restructure, page-200

I'm not necessarily sure that putting SGH into a form of external administration (receivership or VA) would be the best solution.

Having liquidated a law firm myself it would be a massively value destroying exercise given the vast majority of the value of the business is solicitors processing files and generating fees for doing so. If it happened don't be surprised to see:

• a lot of partners and solicitors leaving to other law firms / establishing new law firms very quickly (and taking their clients with them)

• clients, of their own volition, very quickly seeking to change their file representation to another law firm

• other law firms swooping in and encouraging clients to change lawyers.

The only remaining value left in such circumstances would be getting paid for SGH's portion of the work as the cases close. Good luck getting everything when:

• some matters (such as conveyancing) can be reconstructed from scratch (i.e. no fee recovery)

• your former employees are now acting for another law firm (and know more about the file than an IP possibly could)

• your files get sent off for 'costing' (guaranteed 10% reduction of fees owed) before you are paid anything

• new solicitor overcharging, where recoveries are to be shared from a set money 'pot' and they seek to increase their fee recovery share

• huge professional costs given a large proportion of the creditor base are solicitors and know the Corporations Act better than the IP.

More likely the debt needs to be restructured and banks might need to take a 'haircut' under a quasi 'default' scenario. Possibly you might see the banks converting some of their debt to equity or selling their debts in the secondary market to distressed debt funds (i.e. private equity).

Hopefully management will provide a detailed response on what is happening soon (or at the latest during 1H16 results announcement).