Funds 'tried to bully' Billabong into accepting offer
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, placed their competing proposal to the company on Thursday 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, former US Billabong executive Paul Naude and private equity firm Sycamore Partners. "They didn't even chase Billabong up the aisle. They knocked on the honeymoon suite," a Billabong source said.
The hedge funds were understood 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 company 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 consult Billabong's lawyers over 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 named 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," Mr Olivet said at 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, rolled out by Ms Inman last year. But the former Oakley executive said the new arrangement, which would give the consortium about 40 per cent ownership, would provide 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. "We retain our view that uncertainty surrounding the future value of Billabong remains extreme and as such do not publish a fair value estimate for the company," they said. "We advise investors to look at other companies which can offer more predictable and sustainable returns."
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Billabong accepted a $294 million refinancing deal led by the Altamont Consortium, while US hedge funds Oaktree Capital Management and Centerbridge Partners — who bought a portion of Billabong's debt at about a 10% discount — put forward a competing proposal. There was also interest from former US Billabong executive Paul Naude working with private equity firm Sycamore Partners.
Oaktree and Centerbridge purchased part of Billabong's senior debt and then submitted a competing proposal. Insiders said their plan was pressed hard on the company and viewed as inferior to the Altamont offer; Billabong's chairman described the hedge funds' approach as highly conditional and said the company had no formal paper with numbers to evaluate.
The Altamont Consortium arranged a $294 million refinancing deal that would give the consortium about 40% ownership under the new arrangement. Investors reacted positively, sending Billabong shares up 9% to 36.5 cents after a prior 34% jump the day before.
Scott Olivet, a former Oakley executive, was named incoming chief executive as part of the Altamont deal. He said Billabong needs to move from a balance-sheet focus to brand transformation and continuous business improvement. He didn’t rule out further job cuts or store closures but said most cost savings would come from the supply‑chain side.
Ian Pollard said the Oaktree and Centerbridge proposal carried a 'high level of conditionality' that the company could not entertain and that the hedge funds had not provided a formal paper with numbers. He also said he would consult Billabong's lawyers about the board’s responsibilities to shareholders if the pair put forward another plan.
Morningstar analysts said there is still extreme uncertainty about Billabong's future value despite the refinancing. They stated they would not publish a fair value estimate for the company and advised investors to consider other companies offering more predictable and sustainable returns.
According to the article, senior debt holders were believed to have threatened to cut off Billabong's access to debt unless it signed a deal that included a $40 million upfront payment. That illustrates how holders of a company’s debt can exert pressure during takeover and refinancing negotiations.
Under the new arrangement, Billabong indicated it would focus on supply‑chain cost reductions as the main source of savings. The incoming CEO did not rule out further job cuts or store closures, but emphasized most of the cost cutting would come from improving the supply chain.
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