Billabong's senior debt holders in 'pay up or else' threat to pull plug
The US hedge funds Oaktree Capital Management and Centerbridge Partners, which bought a portion of Billabong's debt from its senior lenders for a 10 per cent discount in the past month, put their competing proposal to the company on Thursday.
This was after the $294 million refinancing deal was signed with Altamont Consortium.
Insiders suggested it was inferior to the Altamont proposal and a plan from another suitor, the former US Billabong executive Paul Naude and the private equity firm Sycamore Partners.
"They didn't even chase Billabong up the aisle, they knocked on the honeymoon suite," a Billabong insider said. The hedge funds were thought to have pressed Billabong to accept their offer or face the possibility of being cut off from accessing debt.
Billabong chairman Ian Pollard said Oaktree and Centerbridge's proposal had a "high level of conditionality" that the firm could not entertain.
"We had no piece of paper that had any numbers on it, let alone a proposal," Mr Pollard said about the hedge funds' earlier advances.
He said he would talk to Billabong's lawyers about what responsibilities the board had to its shareholders if the pair were to submit another plan.
Investors continued to cheer the Altamont deal, sending Billabong stocks 9 per cent higher on Thursday, to 36.5¢, after they soared 34 per cent on Wednesday.
Revelations about the last-minute scramble came as Billabong unveiled its incoming chief executive, Scott Olivet.
Mr Olivet, who was installed in the top job as part of the Altamont deal, said Billabong still had value in its brands. "This has been a balance sheet story for too long," he told a press conference in a Billabong store with Mr Pollard and outgoing chief executive Launa Inman.
"It's time to turn this back to a brand transformation and a brand strength story, and a story of continuous business improvement. So it's time to go on the offence." Mr Olivet was coy about making changes to the company's transformation strategy, which was rolled out by Ms Inman last year.
But the former Oakley executive said the new arrangement, which would see the consortium become about 40 per cent owners, would give Billabong the freedom it had been lacking to push through changes. He did not rule out further job cuts or store closures, but said most of the cost cutting would come from the supply chain side of the business.
Morningstar analysts said there was still too much uncertainty surrounding Billabong despite the refinancing deal.
Frequently Asked Questions about this Article…
Reports said Billabong's senior debt holders threatened to pull the company under unless it signed a deal that included a $40 million upfront payment. The pressure came as US hedge funds and other parties jockeyed to put forward competing proposals after a refinancing process.
Oaktree Capital Management and Centerbridge Partners are US hedge funds that bought a portion of Billabong's debt at about a 10% discount. They submitted a competing proposal to the company, but Billabong's chairman said their offer had a 'high level of conditionality' and lacked clear numbers, and insiders suggested it was inferior to other bids.
Billabong signed a $294 million refinancing deal with the Altamont Consortium. That financing was part of a broader transaction that resulted in the consortium becoming roughly 40% owners under the new arrangement and helped the company secure new leadership tied to the deal.
Investors cheered the Altamont deal: Billabong shares jumped strongly, soaring about 34% one day and then rising a further 9% the next day to trade at 36.5 cents, according to the report.
Scott Olivet, a former Oakley executive, was installed as Billabong's incoming chief executive as part of the Altamont deal. He said Billabong still has brand value and wants to shift the focus from a 'balance sheet story' to brand transformation and continuous business improvement. He did not rule out further job cuts or store closures but indicated most cost savings would come from the supply chain.
Chairman Ian Pollard said the Oaktree and Centerbridge proposal had too much conditionality and that the company 'had no piece of paper that had any numbers on it.' He also said he would consult Billabong's lawyers about the board's responsibilities to shareholders if the hedge funds submit another plan.
Yes. Morningstar analysts warned there was still too much uncertainty surrounding Billabong despite the refinancing and the management changes, so investors should view the situation as not fully resolved.
Investors should watch for any new proposals or formal offers from debt holders or suitors, announcements about the implementation of the Altamont refinancing, statements from the board or legal updates referenced by the chairman, and any operational plans from the new CEO (such as supply‑chain changes, store closures or job cuts). These developments will affect Billabong's refinancing outcome and longer‑term recovery.
Call 1300 880 160
Start a chat
Schedule a call
