Billabong: Four unpleasant facts

Billabong has pulled off a cunning deal and avoided a capital raising. But all it buys is time, as James Greenhalgh explains.

Billabong’s deal to sell part of Nixon, its most promising brand, is a clever one. By selling a half-share of its watch brand to private equity firm Trilantic Capital, it will receive about US$285m. All of it will be put to repaying debt, effectively halving net debt from $526m to $259m.

It buys the company the one thing it didn’t have: Time. Without it, banking covenants would have been breached. Although the deal is still dilutive to earnings per share, shareholders have been spared the pain of a capital raising.

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