Herbert Smith net debt grows by £16m in 2010-11

Herbert Smith’s total bank borrowings grew by more than £10m last year, taking total debt back up to near 2008-09 levels, the firm’s LLP accounts have revealed.

Total bank borrowings at Herbert Smith grew from £59.5m to £70.9m in 2010-11. The firm tripled the level of its medium-term (two-to-five year) bank loans, from £10.4m in 2009-10 to £42.4m last year.

The firm’s borrowings include a new £6.7m loan taken out last year while it also increased its overdraft from £7.6m to £18.7m.

In contrast, Herbert Smith has almost entirely reduced the level of long-term lending from £31.9m to £300,000.

Finance director Robert Boardman said the increase in debt was due to movements in the firm’s lockup.

“It depends where you are in the cycle of collecting debt and WIP and we were in a better position the year before,” Boardman said, “but there is no real material increase in debt or our facilities.”

Boardman added that the change in medium-term lending was a function of Herbert Smith’s £30m, five-year ’bullet loan’ it has instead of partner capital having been taken out in 2010.

“In that year it was a five-year loan and now it’s moved into the two-to-five bracket,” Boardman added.

In the firm’s LLP accounts Herbert Smith notes: “In common with other businesses, the current economic conditions mean that demand for services could be impacted in the short term.

“In addition, liquidity pressure on both the group’s clients and suppliers could also have an adverse impact on the business.”

However, the firm adds that it has “considerable financial resources together with a diverse range of clients and suppliers across different geographic locations and sectors”.

As of 30 April 2011 Herbert Smith had £29.6m of cash, according to its LLP accounts.

The highest paid member of Herbert Smith’s LLP received £1.1m last year, slightly down on the previous year’s £1.2m.