Listed legal group raises £2.8m to reduce reliance on bank facility

Divers: Looking to resume focus on growth

AIM-listed group RBG Holdings – which encompasses London law firms Rosenblatt and Memery Crystal – raised £2.8m in funding yesterday, slightly more than it had sought.

It is also considering an offer for the corporate finance advisory boutique it owns.

The money will be used for working capital and to reduce use of its borrowing facilities with HSBC.

The fundraise was a combination of a share placing and conditional subscription, and today RBG has announced an offer to existing retail shareholders which aims to bring in an extra £700,000.

The group had a difficult 2023 as it sought to clean up the balance sheet, reduce its risk profile and refocus on its core business activities, including selling its litigation funding arm, LionFish, and writing off all of its contingent work.

In December, the share price cratered after RBG revealed that turnover would be down 16% in 2023. Having started the year on 64p, it closed on just 11.25p. It was at 9.25p yesterday.

The fundraise included a re-investment of £850,000 by Rosenblatt founder Ian Rosenblatt, the group’s executive vice-chair and biggest shareholder, while the next biggest shareholder, Premier Miton Investors, also took part.

The group’s net debt stood at £22.9m at the end of 2023; the HSBC facility is for £24m. “Whilst the directors are confident in the future prospects of the group, they deem it necessary to undertake the fundraising to fund the group’s short-term working capital requirements,” a stock market announcement said.

More specifically, the money would reduce the use of the HSBC facilities, “ease the pressure on the group’s cash management function” and save on interest payments.

Investors were told that the fundraise should provide sufficient liquidity for at least a year and mean RBG would not breach the covenants of its facility with HSBC.

Convex Capital is specialist Manchester-based sell-side corporate finance advisory boutique that the group bought in 2019 for £22m.

RBG said it has been approached by Convex’s leadership team to explore a management buyout. While it was not certain a deal would be struck, such a move would “allow the group to re-focus on and invest in its core legal services business”, and ensure “a more predictable and stable financial profile of the group going forward”.

RBG said the directors were focused on growing profitably and would seek to do so organically rather than through acquisitions, while implementing a new incentive scheme for partners.

It would also focus on higher-margin, more active markets, including international arbitration and public company M&A.

Chief executive Jon Divers said: “I would like to thank our existing shareholders for their support…

“The net proceeds from the fundraising will help to reduce reliance on the group’s facilities with HSBC, which should in turn result in material savings on interest payments as borrowings reduce.

“Coupled with other cost-saving initiatives planned for the year ahead, the board is confident that the company’s balance sheet will strengthen during 2024, allowing management to resume focus on growing the business of the group through its core operations.”

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