In contrast to Oroton, the shares of struggling basket case, Billabong (BBG) jumped by around 8% at one stage yesterday on news that the company has accepted a refinancing proposal from hedge funds and found a new chief executive.
The company told the market that it had now accepted a refinancing proposal from a group including Oaktree Capital Management and Centerbridge Partners, saying it offered better terms than a rival plan from Altamont Capital, to repay debt.
Billabong has rejected two previous attempts to do a deal from Centrebridge and Oaktree.
The news saw the shares rise to a day’s high of 49.5c before easing to end up 5.5% at 47.5c.
BBG YTD – New deal and CEO for Billabong
The new agreement will allow Billabong to pay back a $US294 million bridging loan from Altamont Capital Partners.
The new plan includes a six-year loan of $US360 million from Centrebridge and Oaktree (known as the C/O Consortium), Billabong said.
The new deal also includes a "$135 million equity placement to the C/O Consortium (the “Placement”) and, following the Placement, a A$50 million non-underwritten, renounceable rights issue available only to shareholders other than the C/O Consortium (the “Rights Issue”, and together with the Placement, the “Equity Raising”), the proceeds of which will be used to repay up to US$172 million (A$185 million) of the New Term Debt with no prepayment premium; and 29.6 million options issued to the Consortium exercisable at A$0.50 per share."
"In addition to this financing, Billabong retains the previously announced commitment from GE Capital to provide an asset-based multi-currency revolving credit facility of up to US$140 million (A$150 million) (“Revolving Facility”)," Billabong said in yesterday’s statement.
Billabong named Neil Fiske as its new chief executive and managing director and said Mr Fiske had a proven record of turning around struggling companies.
‘‘Mr Fiske is a proven and industry-respected executive who brings to Billabong a strong combination of world-class strategy and successful execution experience as a CEO (chief executive officer) in retail and the active outdoor category,’’ Billabong said in its statement.
Billabong justified the new deal by saying that the agreement meets the company’s ‘"need for immediate long-term funding certainty and a strong financial base".
"In fully evaluating the competing refinancing proposals, on a range of factors, the Board determined that the ℅ Consortium proposal was in the best interests of the Company, its shareholders, its employees and other key Billabong stakeholders, on both economic terms and in providing near term certainty.
"The proposal was significantly improved compared to the C/O Consortium’s previously announced proposal and offered lower financial leverage and cheaper cost of funds with lower equity dilution than the Altamont proposal plus the ability for existing shareholders to participate alongside the C/O Consortium via the rights offering,” said Billabong Chairman Dr. Ian Pollard.
"As Billabong continues to restructure its operations globally, the need for immediate long-term funding certainty and a strong financial base from which to reinvigorate an iconic group of brands is best met by entering into this agreement now," the company said.
