The ABS set up by Direct Line and now-defunct Parabis, DLG Legal Services, is continuing operations after the insurer paid Parabis £1 for its nominal share of the business and took on 150 ex-Parabis lawyers.
As part of the agreement reached between the two parties DLG received a net payment of £3.9m from Parabis LLP, which included a £4m payment in order to settle the £6.72m of debt owned to the business, according to a report filed by Parabis’s administrators AlixPartners at Companies House at the end of December.
In addition to the £1 for Parabis’s nominal share in the ABS, DLG also paid its joint venture partner £265,000 in respect of the profit share due to Parabis under the terms of its original joint venture agreement.
The AlixPartners report also revealed that Parabis owed its creditors £121m when it collapsed in November last year.
The DLG ABS was the first of several joint ventures between Parabis and insurance firms. It launched in 2013 when Direct Line applied for an ABS licence to offer legal advice to its customers.
The remaining two joint ventures were with insurance giant RSA and Saga. Following Parabis’ administration RSA received a final settlement of £2.5m while agreeing to extend “certain key contracts by a further two years”.
RSA Law Limited was set up in March 2015 but following the collapse RSA has chosen instead to strike a new joint venture deal with Carpenters. The North West firm was one of the key parties involved in purchasing other arms of Parabis’ business, having acquired part of its claimant service line Cogent Law.
The remaining Parabis joint venture saw the firm partner with over-50s insurer Saga to form Saga Law. During the fire sale Saga Law was acquired by Lyons Davidson, which also purchased the remaining chunk of Cogent.
Lyons Davidson also received a payment of £500,000 from Parabis for a renewal of a contract to use a claimant case management IT system. Lyons initially requested payment of £3m but accepted the reduced figure along with the agreement that the Saga contracts would be sold to the firm.
When Parabis finally called in the administrators the firm owed its secured creditors a total of £73.4m. Following the administration proceedings these creditors are only likely to receive a return of £32.5m.
The secured creditor syndicate includes Lloyds Banking Group and Royal Bank of Scotland, which are owed £16.7m and £8.8m respectively.
Unsecured creditors are expected to receive much less than the group’s secured creditors. At the time the administrators were called in the LLP’s unsecured creditors were owed £31.5m but are only expected to receive a return of 1.91 per cent of their return.
The group’s limited company arm had £16.1m of unsecured debt and the lenders are set to receive a return of 1.98 per cent.
During the sell off Parabis’ legal arm Plexus Law was acquired by its existing management team. According to the administration report the private individuals, led by Andrew McDougall and Tim Roberts, paid a £2.25m initial consideration for the business with £6.5m deferred consideration.
The Saga deal is not Lyons Davidson’s first foray into the joint venture market as the firm also has relationships with Admiral and Saga sister company the AA. Earlier this week Lyons Davidson also formed its fourth joint venture with insurer LV=.
The ABS is LV=’s first offering into the legal sector market and will now offer fixed-fee advice for wills, power of attorney, probate, conveyancing, personal injury and employment law. It will trade as LV= Legal Services.