Billabong International Ltd., the Australian surfwear company seeking to refinance debt after takeover talks ended, lost HSBC Holdings Plc as a syndicated lender after the bank sold a portion of a loan to a specialized investment firm, according to a person familiar with the matter.
HSBC sold about $20 million of multicurrency debt at a discount of about 20 percent to par to SC Lowy Financial HK Ltd., the person said, asking not to be identified because the details are private. The person wouldn’t say whether Hong Kong-based SC Lowy, which focuses on illiquid assets, bought the loan for its proprietary account or on behalf of a client.
The Gold Coast, Australia-based retailer, which has breached debt payment terms, said earlier this month it was holding refinancing and asset sale discussions with Sycamore Partners Management and Altamont Capital Partners after takeover talks with the two suitors ended. The discussions are “well advanced with both parties” and proceeds would be used to repay Billabong’s existing syndicated debt facilities in full, the company said in a statement to the Australian stock exchange today.
Shares in Billabong, whose market value touched A$3.84 billion ($3.5 billion) in May 2007, soared 46 percent to 19 Australian cents in Sydney today, the most since February 2012. The shares fell as low as 13 cents on June 21.
Cutting Board Shorts
Chris Fogarty, a spokesman for Billabong, said he couldn’t comment when asked about the sale by HSBC to SC Lowy. Kate Epworth, HSBC’s Sydney-based spokeswoman, declined to comment.
Besides HSBC, Billabong counts Australia & New Zealand Banking Group Ltd., Bank of America Corp., Commonwealth Bank of Australia, Societe Generale SA, and Westpac Banking Corp. as lenders, according to data compiled by Bloomberg.
Those banks participated in a $384.5 million syndicated loan signed in July 2008 and due next year, the data show. As at the end of December 2012, net debt was A$152.2 million, down A$8.7 million from June 2012, the company said in its half year results filed Feb. 22.
Billabong was founded by Gordon Merchant in 1973 when he started cutting board shorts in his kitchen and selling them to Gold Coast surf shops, according to the company’s website. As the sport gained popularity, Billabong’s sales and earnings soared.
Its fortunes turned as major stores introduced their own surf brands and the financial crisis cut consumer spending. After raising capital, selling assets and rejecting at least two takeover bids in less than two years, the retailer cut its earnings forecast again on June 4 and said it may sell Canadian retail chain West 49 to repay debt.
Exclusive talks over a 60 cents-a-share offer from a group including Sycamore and Paul Naude, the company’s Americas director, ended May 8. Billabong had entered separate takeover discussions with Altamont in January.
Billabong said in February the company will post 80 percent of its assets and 85 percent of its earnings as security to its lenders after writedowns put it in breach of terms on its debt.
Earnings before interest, taxes, depreciation and amortization for the 12 months ending June 30 will range from A$67 million to A$74 million after Australian trading missed expectations and Europe remained “weak,” the company said on June 4. That compares with a previous forecast of A$74 million to A$81 million.