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Slater & Gordon's lenders are set to take control of the troubled law firm as part of a recapitalisation deal under which managing director Andrew Grech will step down.

The lenders, which collectively own three-quarters of theAustralian companys secured debt and are led by New York-based hedge fund Anchorage Capital, will be issued with 95 per cent of its equity. The group will also provide a AU$40m (30.7m) working capital facility.

Existing shareholders will hold the remainder although this could be diluted to 4 per cent if the lenders exercise warrants issued as part of the deal.

As part of the restructuring, Andrew Grech will step down from his position as group managing director immediately but will remain as a non-executive director in the short term. Hayden Stephens and Ken Fowlie will remain as chief executive in Australia and the UK respectively.

A statement by Slater & Gordon said: "The recapitalisation is intended to provide the company with a sustainable level of senior secured debt and a stable platform for its future operations in both Australia and the UK."

The recapitalisation follows a turbulent few years for the listed law firm after its acquisition of Quindell's Liverpool-based professional services division for 637m in 2015. Following the deal, the Financial Conduct Authority launched an investigation into an overstatement of Quindell's 2014 profits.

Since then, Slater & Gordon has served a claim againstQuindell, now known asWatchstone Group, and is seeking up to 637m in damages.

In August 2016, the firm revealed that annual losses after tax topped the A$1bn (570m) mark. The results followed a 450.3m impairment charge on its UK operations.

Slater & Gordon has offices across the UK including in Birmingham, Cambridge, Cardiff, Leeds, Liverpool, Manchester, Milton Keynes, Newcastle, Sheffield and Wrexham.

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Lenders to take control of Slater & Gordon - Insider Media