Shares in RBG Holdings PLC (AIM:RBGP) tumbled 25% after the law firm suspended its dividend, said it was exiting the litigation finance space and wrote down investments in conditional fee arrangements to zero.
The parent of firms Rosenblatt and Memery Crystal said it was focused on reducing debt and said it had the backing of “a number of major shareholders” to accelerate this process.
Directors intend to reinstate a dividend when the group has achieved a level of net debt that is “more sustainable”.
An outstanding term loan of £6.5mln is the short-term priority, while the process of refinancing a £15mln revolving credit facility set for renewal in April 2024 was said to be already underway.
Chief executive Jon Divers, who was promoted from operations chief in March, said that since the new senior management team was assembled earlier this year there had been a “detailed review of the business to stabilise our earnings and to achieve greater visibility” and that “tough decisions” had to be made.
This included a review of the previous management's strategy to invest in a number of CFAs and damages based agreements, but with 13 investments over the past six year now at a lower carrying value, the bulk of which accounted for by ‘Project Shango’, which is now expected to be unsuccessful, the decision was taken to write down the value of all remaining cases on the balance sheet to zero.
He said exiting litigation finance would “ensure that our time and resources are focused on our core strengths”, with the focus on reducing debt and investing in growing the legal services businesses.