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54.5¢ slater & gordon limited

Just as salient is the fact that there is an awful lot of WIP...

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pomofpoms

60 Posts.

23/03/17

10:57

Post #: 23567088
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Originally posted by elit ↑

Let's be frank anchorage are buying sgh debt to make money and they would sell their grandma if it meant they could make more money.

So if was just ordinary shareholders involved absolutely in no uncertain terms shareholders would be completely wiped out.

But there lies the complication that it is not just ordinary shareholders as for anchorage to make money they need the business to stabalise. And key to this is retaining management and key staff in sgh as that is the base value of its business.

Most of those same management and staff own decent equity holdings in sgh as offer of equity and bonuses paid in shares is typical tool in competitive market for professional talent as retention tool, particularly as the competing model is the partnership model where top legal partners own equity in the law firm via partnership.

So anchorage will be about how can they offer as little as possible to shareholders (read those sgh management and employees who own sgh shares where other shareholders just get the add on benefits of being fortunate those sgh management and staff own shares as otherwise they would be completely screwed), whilst removing the considerable risks they disincentise those same management and staff with what they leave in terms of value of their remaining equity holding post recapitalization.

As if sgh management and staff end up with their shares as worthless, the sgh partners and directors will walk and set up their own law practices or go to other law firms, taking key sgh lawyers and clients with them, leaving anchorage with a worthless business. As that is why considerable equity positions are offered to law partners and directors to stop the risk of this happening.

Bankers versus the lawyers, if I was a shareholder I would be rooting for the lawyers who will be doing everything possible to get the best result for sgh management and staff. A by product of that is retaining sufficient value of key sgh management and staff's equity holding in the company to retain them. Sgh's advisors in negotiating with debt holders would be pushing this very hard in negotiations and anchorage and others should appreciate this is real risk they need to manage. Irony is they should be able to negotiate a deal that leaves something for sgh management and staff in terms of equity value (say 20 to 30%) which would reduce risk of mass walkouts by sgh staff and key management, taking other key staff and clients with them, while still leaving considerable room for debt holders to make a killing on the deal. But I would also not bet against anchorage and other debt holders pushing the envelope too hard as bankers from my experience know very little about managing businesses where key asset is its people and better doing recapitalization deals for capital intensive businesses like mining operations where they don't have to worry about people issues involved is more than bread and butter.

I personally think real risk of anchorage and other debt holders pushing the envelope too hard and end result is sgh key directors and lawyers walking and so taking any value of the business with them, leaving anchorage and other debt holders with nothing, and in either scenario shareholders with nothing. As personally bankers are worst sort of people you want involved in this sort of complex deals where ip is in the companies people as they have little expertise in such matters and over inflated ego's they they can screw those same people and still expect to make a lot of money.

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Just as salient is the fact that there is an awful lot of WIP owing to SGH. The current lawyers are in the best position to collect it in full. If these lawyers jump ship, bankers will be singing for the fees owed.

SGH Price at posting: 11.0¢ Sentiment: Buy Disclosure: Held
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