Hedge funds up Billabong offer

Centerbridge, Oaktree says their recapitalisation offer would save retailer $143m on existing deal with rival Altamont.

Snubbed US hedge funds Centerbridge Partners and Oaktree Capital have put a rival recapitalisation bid to Billabong International (BBG) that they claim would see the retailer up to $143 million better off on the debt-for-equity swap it took with US private equity firm Altamont last month.

Earlier this week, the two hedge funds lost an appeal to the Takeovers Panel over the refinancing deal struck between Altamont and Billabong, but its protest forced the parties to rewrite their deal.

The revised Centerbridge-Oaktree deal would see the funds take a 39.7% stake in Billabong.

Details of the deal were issued in a press release put out on behalf of the funds, with Billabong making no statement to the market. 

They would provide an interim bridge loan to refinance in full the $325 million bridge loan Billabong has negotiated with Altamont, at a 12% interest rate, with a maturity of March 31 next year.

The $325 million loan would be replaced by a senior secured five-year loan of the same value, with an interest rate of 13.5%.  

The funds would require Billabong to sell it $135 million in shares at 35 cents apiece and run a $32.5 million rights issue for all shareholders, at 30 cents a unit, to pay down the loan. 

In a statement, the funds said the lower interest rate they were offering on Billabong’s debt would result in interest savings of up to $119 million to $143 million over five years. 

Under the Altamont deal, finalised last month, the private equity firm would take a stake of up to 40% of Billabong in exchange for $325 million in debt refinancing. Billabong's board has also sold its bag and outerwear business, Dakine, to Altamont for $70 million as part of the deal. 

At 1430 AEST, shares in Billabong were 4.55% higher at 57.5 cents, against a benchmark rise of 1.03%.