After 18 months of back-and-forth with various private equity players, Australian surf-wear retailer Billabong has finally entered into agreements to refinance its debt with GSO Capital Partners and a consortium led by Altamont Capital Partners, according to a company statement.
GSO, the credit arm of global private equity giant The Blackstone Group, and the Altamont consortium have said they will offer a A$325 million (€228.5 million; $294 million) bridge loan facility expected on 22 July and will last until 31 December 2013. The loan will allow Billabong to immediately pay off all existing syndicated debt facilities.
Altamont has also acquired one of Billabong’s assets, outdoor apparel business DaKine, in an A$70 million deal, conditional on the completion of the bridge financing.
Billabong has also secured a long-term financing package from the Altamont consortium and GE Capital, which is intended to provide the business with a flexible capital structure to allow it to stabilise the business, address its cost structure and pursue a growth strategy going forward, according to the firm.
The long-term financing includes a $254 million term loan from Altamont, which is to be used to refinance the bridge loan. In addition, Billabong will issue a $40 million convertible note to the Altamont consortium, which can be converted into redeemable preference shares and has an interest rate of 12 percent per annum. GE Capital has said it will provide an
We saw what happened with channel Nine, and how the private equity groups effectively transferred their debt into equity and wiped out the equity holders. There is a risk if you are a current [Billabong] shareholder that you could get wiped out in any of this restructuring if Billabong continues to deteriorate.
Tim Montague-Jones, senior equity analyst, Morningstar
asset-based multi-currency revolving credit facility of up to $160 million.
Billabong will also see changes on the board and at senior management level. Altamont founders Jesse Rogers and Keoni Schwartz will sit on Billabong’s board as directors.
The company’s chief executive and director Launa Inman has also stepped down from her position and will be replaced by former Oakley chairman and chief executive Scott Olivet. He will also purchase 11 million ordinary shares at a price per share of A$0.23.
“The board believes that the Altamont consortium’s refinancing, and the changes being announced today, provide the company with a stable platform and the necessary working capital to continue to address the challenges it faces.”
“We had highlighted the company's debt issues previously and it was imperative to deliver a refinancing that retained an opportunity for shareholders to participate in the future of the company. The Altamont consortium presented the best available, certain and executable opportunity in these challenging circumstances,” Billabong chairman Ian Pollard said in a statement.
The deal is now subject to shareholder approval. If accepted, it will end an almost 18 month-long search for a suitable investor.
Subsequently, the business lost the interest of some private equity firms, with Bain Capital and TPG both walking away from the company after rounds of due diligence. Discussions with a Sycamore Capital Partners consortium and Altamont during the
Billabong chief Launa Inman will be replaced
first quarter of 2013 over buyout offers worth between A$250 million and A$300 million also deteriorated, with the consortia entering refinancing discussions instead.
However, shareholders could be in danger if Billabong fails to improve its revenues and the senior lenders convert their debt into equity.
In October last year, CVC Capital Partners ceded control of Australian media group Nine Entertainment to senior lenders Apollo Global Management and Oaktree Capital Management as part of a $3.4bn debt-for-equity swap, representing the Asia-Pacific region’s biggest ever private equity write-off.
“We saw what happened with Nine, and how the private equity groups effectively transferred their debt into equity and wiped out the equity holders. There is a risk if you are a current [Billabong] shareholder that you could get wiped out in any of this restructuring if Billabong continues to deteriorate. I’m sure there will be some clauses or options to convert the debt into equity,” senior equity analyst Tim Montague-Jones told Private Equity International earlier.