The Slater & Gordon Limited (ASX: SGH) share price is down 4 per cent to 5.4 cents today and down 21 per cent just this week after the company warned shareholders to accept a private equity restructure or have their holdings wiped out.
Long suffering shareholders who may have ridden the stock all the way down from highs around $8 per share in 2015 to 5 cents today are now being asked to approve a Scheme of Arrangement that will see the group's private equity creditors being given ownership of 95% of the company.
In other words the shares changing hands for 5 cents today would be worth around 0.25 cents if the dilutory impact of the deal saw the private equity owners' stake theoretically listed on the share market.
As at June 30 2017 the lawyers reportedly owed the bankers and other creditors $119.2 million and £379.8 million, with the debt largely accrued due to the need to pay for the firm's diabolical $1.3 billion acquisition of Quindell Plc.
Still in exchange for the dilution much of the company's crippling debt pile will be wiped out and a second Scheme of Arrangement requires approval that will absolve the new legal entity from liability vis-a-vis the multiple shareholder class actions against the business.
It looks like Slater & Gordon shareholders are in a private-equity-backed full nelson, with the upcoming AGM likely to be a feisty affair.
Still if much of the company's debt is effectively written off the firm could continue as a going concern with a small hope of recovery.
