An increasingly bitter battle for control of Billabong has spilled over to the Takeovers Panel after two US hedge funds pushing a rival deal to resuscitate the retailer claimed anti-competitive and coercive behaviour by the successful bidder, private equity firm Altamont Partners.
In a last-minute dash to derail Altamont and struggling surfwear company Billabong's refinancing deal to save the youth fashion brand, Oaktree Capital Management and Centrebridge Partners have requested the Takeovers Panel delay the corporate marriage.
The Panel said after the market had closed on Friday it would decline to make interim orders to halt aspects of the refinancing deal going ahead on Monday. This means Altamont Partners can push ahead with its restructure plans for Billabong, but the Panel will still convene a committee of members to hear Oaktree and Centrebridge's grievances.
At the heart of their complaint is Altamont's proposal to refinance Billabong, which includes a hefty interest rate of 35 per cent a year on a $US40 million ($43.6 million) convertible note until Billabong shareholders back the deal. There is also a $65 million break fee if the deal comes undone.
If the deal with Altamont is sealed, Billabong shareholders will be heavily diluted. Under the terms, if the options are exercised and the redeemable preference shares are converted, the US firm will emerge with between 36.25 per cent and 40.49 per cent of the company.
"The applicants [Oaktree and Centrebridge] submit that the convertible note increased coupon and termination fee amount to lock-up devices that are anti-competitive and coercive," the partners say in their application to the panel.
"The applicants also submit that there has been no disclosure of the terms of the exclusivity arrangements or the details of the circumstances in which the termination fee may be payable."
This week Altamont Partners agreed to resuscitate Billabong as the fashion retailer trembled under hundreds of millions of dollars in debt. As part of the restructure and refinancing, Billabong will sell its DaKine brand to Altamont for $70 million and draw down a $325 million bridging loan, to be replaced at the end of the year by a $281 million loan facility plus a $44 million convertible note.
As the agreement was struck, Oaktree and Centrebridge offered their own proposal. But Billabong chairman Ian Pollard rejected it, saying the plan was not fully formed.
Oaktree and Centrebridge are seeking interim orders, including that the drawdown of the bridging facility and completion of the DaKine sale be delayed until the panel makes its determination.
They are also seeking final orders, including that clauses relating to the termination fee and the convertible note increased coupon be removed.
The Takeovers Panel draws members from corporate Australia and is the primary forum for resolving disputes about a takeover bid.