Law firm bolsters liquidity with new revolving credit facility

Andrew Leaitherland

Manchester-based law firm DWF has boosted its liquidity position, it revealed this morning.

The firm, which became the first main market premium listed legal business when it floated on the London Stock Exchange in March last year, said it has secured an in principle agreement to increase its committed revolving credit facilities and a relaxation of certain covenants with its lenders.

The agreement will result in a secondary RCF of £15m, in addition to the group’s existing RCF of £80m.

The secondary facility, which will operate under the same terms as the group’s existing RCF, will remain in place for up to 18 months.

While the group does not anticipate an immediate need to use this additional facility, it said it will provide greater liquidity at a time when the normally high level of seasonal cash collections could be impacted by COVID-19.

As a result of this additional facility, the group will have access to working capital facilities of £122m, including the benefits of all of its funding arrangements.

The agreement will also result in a relaxation of the group’s 1.5x leverage covenants for the next four testing dates.

The relaxation will allow for leverage of 2x EBITDA in April and July 2020 and 1.75x EBITDA in October 2020 and January 2021.

This will provide the group with the appropriate headroom to deal with any COVID-19 headwinds throughout the coming year.

The combination of the additional financing, together with the operating cost mitigation measures, is expected to give the group significant liquidity to see it through an extended lock-down.

The board said it is confident that the group can navigate the COVID-19 crisis and deliver its strategy over the longer term as the trading environment normalises.

Group chief executive, Andrew Leaitherland, said: “Today’s announcement demonstrates DWF’s strong relationship with its lenders and we are pleased with their continued support.

“These actions will help to ensure we retain strong liquidity to navigate the challenges presented by COVID-19.

“We are well placed to deal with the current economic pressures through our resilient, counter-cyclical business model.

“While activity levels in some areas of our business have reduced due to COVID-19, we are beginning to see an increase in activity and revenue opportunities in other areas, including insurance.

“We continue to win new appointments, including to BT’s new legal panel, which will provide access to more complex work in addition to our managed services contract.”

He added: “We are also seeing a growing interest in our managed services offering, as clients take cost out of their business at this critical time.

“In addition, we have implemented our cost saving programmes which are anticipated to deliver a material benefit in FY21.”

DWF said it intends to release a trading update in the second half of May for its financial year ending April 30, 2020.