Oaktree Capital Management LP and Centerbridge Partners LP revised a debt refinancing proposal to Billabong International Ltd. two days after a rival group led by Altamont Capital Partners sweetened its own offer.
The latest proposal would deliver the Australian surfwear company about A$150 million ($135 million) in cash, compared to about A$67 million under the Altamont plan, and save it as much as A$143 million in interest over five years, Oaktree and Centerbridge said in a statement deeming the offer “superior”. The group, which had owned A$289 million of Billabong’s loans, would get a 39.7 percent stake in the company in return.
Billabong said Aug. 21 it had agreed to a revised $294 million refinancing deal with the rival Altamont-led group that altered terms the two parties had agreed in July. Oaktree and Centerbridge were last month rebuffed in a refinancing offer to Australia’s largest surfwear company and complained to the country’s takeovers regulator.
The company’s board is considering the Oaktree and Centerbridge proposal and has met with the consortium, it said today in a separate statement. It will study any plan that will benefit shareholders and is consistent with its intention to “complete its long-term financing package as soon as practical and to focus on rebuilding the business.”
Billabong, founded by Gordon Merchant in 1973, has breached terms on its debt, fired employees, and shuttered stores as it struggled to control its debt amid a sales slump. The Gold Coast, Australia-based company’s shares have dropped almost 70 percent since Launa Inman became chief executive officer last May, and it’s fielded takeover and recapitalization plans for all but five weeks of that period.
Inman stepped down last month and the company appointed Peter Myers as acting CEO until discussions about Scott Olivet assuming the role are finalized. Oaktree and Centerbridge had other CEO candidates if Olivet was unable to assume the position, the consortium said today.
Billabong’s shares closed 6.8 percent higher in Sydney at
58.75 Australian cents.
The two distressed-debt investors’ revised proposal includes a A$135 million equity placement to the consortium at A$0.35 per share and a A$32.5 million rights issue to existing shareholders at A$0.30 per share, cutting Billabong’s debt to A$157.5 million, the group said today. It also offered to refinance a current A$325 million bridge loan at 12 percent interest.
Under the agreement made with Altamont and Blackstone Group LP entities last month, Billabong paid off the A$289 million of loans bought by Oaktree and Centerbridge by selling its DaKine brand to the consortium for A$70 million and taking a $294 million bridging loan. The Altamont group will end up with 36 percent to 40 percent of the company under that plan, Billabong said last month.
Billabong said this week it may take two to three weeks to study the revised Altamont proposal, and the agreement would be subject to an independent expert finding it fair and reasonable and in the absence of a superior proposal.
While Oaktree and Centerbridge had already approached the company before Billabong made the deal with Altamont announced July 16, there hadn’t been enough detail for the board to make a decision and their proposal wasn’t “capable of acceptance”, Billabong Chairman Ian Pollard said July 18.
Oaktree and Centerbridge’s previous proposal would have seen A$189 million of loans canceled in exchange for a 61 percent stake in Billabong, with the balance of A$100 million repaid using a six-year loan with an interest rate of 8 percent. The Australian company would retain its DaKine brand and the funds would seek a majority of board seats.
Billabong’s market value peaked at A$3.84 billion in June 2007 before falling to as little as A$62 million June 24 amid uncertainty about its future, after it ended takeover talks with Sycamore Partners LP and said it was discussing refinancing deals with Sycamore and Altamont.