Now bottom feeders circle Billabong
In other words the vultures are preying on the vultures. And Billabong, which has just reported a debilitating loss of $860 million, sits on the middle trying to referee the fight over its own spoils.
The latest curve ball comes in the shape of New York-based investment group Coastal Capital. It is seeking to hold a shareholder meeting to toss out the board - other than founding shareholders, Gordon Merchant and Colette Paul.
This secretive bunch is the equivalent of scavengers in the corporate food chain. If it is looking to pick up a piece of the Billabong carcass, it has yet to tell the market which part it wants.
Its leverage to extract some gain out of the Billabong mess is debatable but its intervention could delay Billabong's attempts to orchestrate a restructure to stem the crippling financial and management bleed.
Financiers Vlad Artamonov and Todd Plutsky are behind Coastal Capital, which describes itself as an investment management firm and an active investor in Australian infrastructure businesses that deals in "special situations".
The only infrastructure assets and special situation on the public record to date was a buy-in to the rescue/restructuring of Alinta Energy. It bought into Alinta on the brink of a shareholder meeting called to vote on a debt for equity restructure led by private equity group TPG.
Coastal Capital finished up with a stake in a vehicle that contains the rump of Alinta, renamed Redback. It holds an ageing Hunter Valley coal power plant - presumably the infrastructure asset to which its corporate blurb refers. Artamonov and Plutsky sit on the Redback board, which is a long way from a blueblood energy firm.
Redback's shares were suspended on Monday after it failed to supply the ASX with audited results for 2013. But there's more. It is experiencing its own debt crisis and in recent months its "bank support" agreement expired. Meanwhile, it has been in a legal dispute with Ausgrid over the plant's power outages, and others have attempted to spill directors from the board.
Artamonov and Plutsky are using the same kind of modus operandi in Billabong employed at Alinta - build some shareholder muscle and threaten to blow up the rescue process. Coastal Capital has bought 5 per cent of the surfwear group and has demanded a shareholder meeting to vote on a change to the company's constitution to allow shareholders to approve debt restructurings. Billabong has 21 days to call a meeting and has to hold it within two months.
If Coastal Capital could garner some support from other Billabong shareholders, the latest restructuring proposals - one from the Altamont-Blackstone consortium and the other from Oaktree-Centerbridge - are at risk.
When it staged the Alinta coup it found other like-minded investors.
But if the destabilisation duo is counting on cosying up to its largest equity holder, Gordon Merchant, it could be disappointed. Word has it he is not about to support the interlopers, who need a 50 per cent vote in their favour to ditch any members of the incumbent board.
The pecking fight between the two existing consortiums is already complicated enough. Billabong chose Altamont as its partner last month, in a move that appeared to end the chapter of instability for the troubled surfwear group. Altamont immediately organised Billabong with a bridging loan and a timetable to replace this with long-term finance. The second leg of the Altamont proposal was to engineer a structure whereby it would swap debt for a controlling equity stake. It enlisted a highly rated chief executive, Scott Olivet, and set to work on a five-year plan.
This is the deal the Billabong board prefers and initially embraced. But a last-minute counter-proposal by Oaktree-Centerbridge forced the company back to the drawing board to mull over the two competing options.
It comes as no surprise that speculation has emerged that Coastal Capital could be in league with vulture underdog Oaktree-Centerbridge, but there are no desirable links between the two groups.
If Coastal Capital's real agenda is to inject life into Billabong's share price by introducing the prospect of a better deal then it can boast some success - the shares were up 15 per cent on Monday.
Billabong has to be close to entering the record books for all the wrong reasons. For almost two years a series of private equity firms have done due diligence on the surf, skate and ski wear brand conglomerate. Conditional offers were made only to be withdrawn as the company's finances became increasingly precarious.
In normal bidding wars the price of the target goes up. In Billabong's case each offer was less than the previous one.
But the emergence of Coastal Capital suggests the real bottom dwellers have emerged.
The firm is locked in a battle with PaperlinX where it is one of the largest holders of hybrid securities and resisting attempts to convert the stake into equity.
Frequently Asked Questions about this Article…
Billabong has reported a crippling $860 million loss and is in the middle of competing rescue and refinancing proposals. A new investor, New York–based Coastal Capital, has bought a 5% stake and demanded a shareholder meeting, adding uncertainty to the board’s preferred restructuring plan. That combination of heavy losses, activist intervention and competing bids makes the stock volatile and important for everyday investors to watch.
Coastal Capital is a New York–based investment group run by financiers Vlad Artamonov and Todd Plutsky that describes itself as an active investor in Australian infrastructure and 'special situations.' By buying 5% of Billabong and demanding a shareholder meeting, Coastal is trying to change the company constitution to allow shareholders to approve debt restructurings and to remove board members (other than founders Gordon Merchant and Colette Paul). That level of activism can delay or disrupt management-led rescue plans.
Coastal’s push for a shareholder vote and for the right for shareholders to approve debt restructurings could stall or upend the deals already under consideration. If Coastal secures support from other shareholders, it could jeopardise the Altamont-Blackstone and Oaktree-Centerbridge proposals or force renegotiation, potentially delaying any definitive rescue or refinancing.
Two main proposals were on the table: the Altamont-Blackstone consortium, which the board initially preferred and which provided a bridging loan with a plan to swap debt for a controlling equity stake (bringing in CEO Scott Olivet and a five‑year plan), and a counter-proposal from Oaktree-Centerbridge that forced Billabong to reconsider its options.
Coastal previously bought into the rescue/restructure of Alinta Energy and ended up with a stake in the remnant vehicle renamed Redback. Redback has faced its own problems—shares suspended for failing to supply audited 2013 results, a debt crisis, an expired bank support agreement and legal disputes—while Artamonov and Plutsky sit on the Redback board. That history shows Coastal’s willingness to push hard in restructurings, but also that its past targets have had serious challenges.
Under the demand, Billabong has 21 days to call a shareholder meeting and must hold that meeting within two months. That creates a near‑term timeline during which the company and its investors will learn whether Coastal can gather support.
Following Coastal’s move, Billabong shares jumped about 15% on the Monday mentioned in the article, suggesting the market priced in the prospect of a better deal or takeover dynamics. For everyday investors, this highlights short‑term volatility driven by activist activity and deal speculation—outcomes can swing both ways depending on whether a stabilising rescue is completed or the process is further disrupted.
Coastal is also locked in a battle with PaperlinX, where it is reported to be one of the largest holders of hybrid securities and is resisting attempts to convert that stake into equity. This underscores Coastal’s pattern of using shareholder rights and contesting capital-structure moves in situations it views as 'special situations.'
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