The Slater & Gordon Limited (ASX: SGH) share price is down 19 per cent to $1.22 after the embattled law firm announced a $75.6 million capital raising at $1.15 per share.
Anyone who held onto the stock prior to its debt-for-equity swap and effective takeover by 'vulture fund' Anchorage Capital has effectively been all but wiped out anyway given the terms of the restructure involved a painful 1 for 100 share consolidation.
At least the terms of the deal saw a lot of the tort law firm's post-haircuts bank debt wiped out to mean the 5 per cent of the business still traded on the local stock market has better prospects than the effectively bankrupt pre-Anchorage takeover business.
The terms of today's capital raising are also unsurprisingly punishing with shareholders being asked to tip in new funds on a highly dilutory 1 share for 1.0572 basis to mean if you don't participate the value of your holding will nearly half in an instant.
If shareholders do choose to nearly double their holding they'll own a business still with $72 million of net debt on a pro forma net debt to EBITDA ratio of 4.4x.
In other words Slater & Gordon investors are being shaken down badly again in a 'heads I win, tails you lose' type scenario as the alternative could be even worse.
As such I'd suggest this is not a business I'd suggest taking a punt on!
