The shares, which have been languishing below 30c for the past two months after the company reported an interim net loss of nearly $1 billion, hit a high of 68c in early trading.
They settled around 57c in late morning trading with more than 23 million shares changing hands as investors were buoyed by news that Slater & Gordon had reached agreement with its banks, and avoiding the threat of them calling in their loans by as early as March next year.
After reaching agreement to amend their existing syndicated debt facility, the banks have given the Melbourne-based company breathing room to deliver on its business plan, rattled last year by problems plaguing its recently acquired UK operations.
Slater & Gordon had net debt of $741 million at the end of December 2015.
Its latest half-year result was hit hard by an $876 million impairment on goodwill in the UK. Further writedowns in its Australian business pushed the legal group to a net loss of $958.3 million in the first half of FY16, putting further pressure on the company's share price.
Under the new agreement with lenders, Slater & Gordon has been able to keep its existing facility intact at $840 million, with $480 million now set to mature in 2018 and the balance in 2019.
Slater & Gordon says the support from its lenders is a 'positive and clear endorsement of the company's performance improvement program'.
It says the amended debt facility offers a 'clear runway to execute and realise the full benefits from the performance improvement program ahead of its nearest maturity and refinancing in May 2018'.
A relieved Andrew Grech, the Slater & Gordon managing director, says he is both 'very pleased and grateful for the strong level of support' offered by the company's lending group.
"We remain focused, as a management team, on executing our performance improvement program across the business to improve profitability and cashflow, and reduce debt," he says.
"We are confident that the amendments we have entered into today with our lending group provide us with the flexibility and time to execute and continue our performance improvement program."
Among the amendments agreed to by the banks is a resetting of financial covenants which have been seriously affected this past year by the decimation of Slater & Gordon's share price. They also call for greater frequency of reporting by the company to its lenders.
The bad news for shareholders is that there is unlikely to be any dividend paid to them in the near term as any surplus cash will be applied to debt reduction.
The bankers also have a chance to share in any upside potential from Slater & Gordon's shares through amendment fees they are owed as part of the new debt deal.
The lenders may acquire Slater & Gordon warrants in lieu of this fee, which provides for a placement of shares in the company on refinancing or maturity of a facility of up to 15 per cent of any 'substantial' uplift in the market capitalisation.
Slater & Gordon says it expects more than half of its lending group to take up the amendment fee in cash.
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