The Billabong saga continues, as the surfwear giant back-tracks in an effort to get ahead.
The company, which recently entered into a bridge loan facility from the Altamont Consortium in July, has now revoked this arrangement in favor of previous suitor and new saviour Centerbridge-Oaktree consortium C/O Consortium).
The C/O Consortium, made up of Centerbridge Partners, L.P. and Oaktree Capital Management, L.P, was initially snubbed by Billabong, shortly after it had inked a deal with the Altamont Consortium. However, the C/O Consortium now seems to be back in favour and Billabong has confirmed that it has entered into binding agreements with the group in relation to a long term financing to recapitalise the company.
The arrangement will “provide Billabong with a stronger balance sheet and capital structure to allow it to stabilise the business, address its cost structure, and pursue a strategy to grow the business.
Billabong said the agreements will enable Billabong to repay in full its existing US$294 million (A$315 million) bridge loan facility from the Altamont Consortium, which was entered into on July 16, 2013.
As part of the tie-up, Billabong has also appointed Neil Fiske as its new CEO and managing director of Billabong.
The company also confirmed that as a result of the changes, Scott Olivet has decided that he would not proceed as CEO-elect under an alternative funding arrangement not involving the Altamont Consortium.
In order to adequately reflect the C/O Consortium’s significant investment in the company, the C/O Consortium will be permitted to nominate representatives to the board of Billabong. Initially there will be three representatives, Jason Mozingo, Matt Wilson and a third director to be appointed in due course.
Explaining the reasons behind its decision to side with the C/O Consortium, Billabong also provided a list of factors to its shareholders as to why the C/O Consortium was deemed superior.
These factors are outlined below:
- Lower cost of debt: The interest rate on the New Term Debt has reduced to 11.9 per cent per annum from 13.5 per cent per annum, with correspondingly lower prepayment premiums
- Additional upfront liquidity: The New Term Debt quantum has increased to up to US$360 million (A$386 million) from US$303 million (A$325 million), with US$60 million delayed at the company’s option
- Longer dated debt facility: The New Term Debt maturity has increased to six years from five years
- Greater shareholder participation: Existing shareholders are allowed greater participation, with the Rights Issue amount increased to A$50 million from A$32.5 million
- Greater Rights Issue discount given to existing shareholders: The buy in price under the Rights Issue has reduced to A$0.28 per share from A$0.30 per share
- Greater Placement premium paid by the C/O Consortium: The placement buy in price for the C/O Consortium has increased to A$0.41 per share from A$0.35 per share
- Lower overall dilution for existing shareholders: The C/O Consortium will now own between 33.9 per cent and 40.8 per cent of the fully diluted share capital (depending on existing shareholder take up of the Rights Issue), down from 39.7 per cent to 44.3 per cent respectively
In addition, the company divulged that “the board of Billabong decided that the immediate need for certainty was critical for the business and therefore it was in the best interests of shareholders and all of the company’s stakeholders to conclude a long term financing as soon as possible.
Going forward, Billabong is seeking to have the resolutions which are subject of the Coastal Capital International, Ltd. request put to the 2013 annual general meeting, rather than have a separate meeting.
In addition, Billabong said it intends to propose resolutions at this year's annual general meeting to be held in November to approve the placement, and to approve the issue of Billabong shares on exercise of the options, to the C/O Consortium and to approve the issue to Neil Fiske of equity securities under his employment contract.
The Altamont Consortium continues to hold the 42,259,790 options that it has been issued. Those options expire on July 16, 2020.