Billabong not safe yet

Billabong directors, mindful of their fiduciary duty, had no choice but swap sides. But the company is still deeply troubled.

In the end, the Billabong (BBG) board had no choice.

Faced with an obviously superior bid by the Centrebridge Oaktree consortium, and a refusal by its preferred rescuer Altamont to match it, Billabong directors took the only path available and switched allegiances.

But the company is far from safe. Altamont Capital, after providing bridging finance until the end of this year, refused to lift its offer because of what it perceived as a continued deterioration in Billabong's financial position and because of a steady stream of senior executives leaving the group, something that has yet to be broadcast to the market.

While the Centrebridge Oaktree agreement provides a level of comfort for the struggling business, it has yet to be ratified by shareholders. And therein lies another problem.

Approval for the debt restructure and its associated capital raising and placement will be held in conjunction with the group's annual general meeting. On top of that, however, the recent requisition by third party Coastal Capital to spill the board will be held at the same meeting.

Given there is little institutional involvement on Billabong's share register, which is now dominated by speculators and hot money, the idea of holding three meetings in one creates the opportunity for further destabilisation.

Voting participation by retail shareholders is notoriously low, even in contentious circumstances.

Long believed to be a stalking horse for Centrebridge Oaktree, the New York based Coastal Capital this morning congratulated itself on forcing the Billabong board to see sense.

Perhaps now Coastal Capital can concentrate on its other main Australian investment, Redbank Energy (AEJ), which has faced financing problems of its own this year.

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