Billabong's senior debt holders are believed to have threatened to pull the surfwear company under unless it signed a deal that would involve a $40 million upfront payment.
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."