King & Wood Mallesons (KWM) has agreed to improve security around its borrowings from key lender Barclays Bank, giving the bank a debenture over its assets.
New documents filed on Companies House reveal that KWM’s European and Middle East (EUME) branch signed a debenture with the bank on 27 July.
A debenture creates a series of fixed and floating charges over a company’s assets to give the lender – in this case Barclays – greater security.
The news comes after KWM extended its overdraft facility with Barclays from £20m to £25m in July.
The agreement means that Barclays has security over all of the firm’s assets, including its revenue stream.
The document says: “By executing this debenture you charge to us with full title guarantee with the payment or discharge of all secured sums.” This includes: “all your securities…all your goodwill and uncalled share capital for the time being…all your intellectual property…all trade debts now or in the future owing to you”.
The agreement stands until all the debt has been repaid “regardless of any settlement of account or any other matter whatever, and shall be without prejudice and in addition to every other right, remedy or security which we may have now or in the future in respect of any of the assets for the payment of any secured sums”.
Barclays has also imposed a negative pledge and other restrictions and KWM is required to gain Barclay’s “prior written consent” before it can “sell, assign, lease, license or sub-license, or grant any interest in, your intellectual property rights”.
The debenture also states that the bank can appoint an administrator if KWM fails to meet its financial responsibilities.
In a statement, a KWM spokesperson said: “The debenture is part of the funding arrangements of the firm in EUME. We have no further comment to make on what is the confidential business of the firm.”
Tina Williams, chair of corporate firm Fox Williams, explained that a debenture “gives the bank priority in the event something untoward happens”. She added: “Ultimately, the bank would get priority in the event of an insolvent liquidation.”
In late July, the firm voted through a recapitalisation plan, when 98% of partners agreed to commit in excess of £14m, a move described by the firm as the third stage of its “strategic plan to strengthen its EUME business”.
The firm has also asked salaried partners to contribute capital for the first time. Former partners told Legal Week that salaried partners had been asked to contribute around £60,000 each.
Legal Week understands that the firm is yet to receive this capital from equity and salaried partners.
KWM has also held off on paying out profit distributions to its partners once again, a decision made due in part to its tax bill.
In a statement last week, the firm said: “King & Wood Mallesons confirms that no partner profit distribution was made in July. This should be viewed in the context of the recent announcement made with regards to the recapitalisation of the firm and a tax bill, which was payable at the end of July.”