Billabong International has entered a refinancing agreement with a consortium of lenders led by Altamont Capital. The deal will allow the company to repay its existing syndicated debt facilities, the company announced in a statement Tuesday.
Altamont Capital and GSO Capital Partners will provide the Australian clothing company a A$325 million (€228.3 million; $299.7 million) bridge loan facility committed through 31 December. The facility has a 12 percent annual interest rate. In addition to the bridge loan, Billabong also will sell its DaKine brand to Altamont for A$70 million (€49.2 million; $64.6 million), according to the statement.
“The Board believes that the Altamont consortium’s refinancing, and the changes being announced today, provide the company with a stable platform and the necessary working capital to continue to address the challenges it faces. We had highlighted the company's debt issues previously and it was imperative to deliver a refinancing that retained an opportunity for shareholders to participate in the future of the company,” Billabong chairman Ian Pollard said in a statement.
Billabong has struggled in recent years, posting a $536 million loss after taxes during the latter half of last year, according to a company report. The company had closed 119 stores as of February, with plans to close an additional 40 by June. Billabong had $152.2 million in net debt as of 31 December, according to a half year report. The company classified $269.8 million of borrowings as current liabilities in the same report.
In addition to the bridge loan agreement, the consortium has also agreed to provide long term financing for repayment of the short term bridge facility. That term loan will comprise a $254 million term loan made up of a base commitment of $200 million with an upsize commitment of $54 million. Billabong will pay a 12 percent annual interest on the base commitment and a 10 percent rate on the upsize commitment, according to a statement from the company.
Billabong also will issue a $40 million convertible note to the consortium that can be converted into redeemable preference shares. The note carries a 12 percent interest rate, of which at least 7 percent must be paid in cash and up to 5 percent may be paid in kind However, the note carries a 35 percent annual interest rate until the company gains shareholder approval for the arrangement. As such, the company will seek approval as soon as possible.
The refinancing agreement comes on the heels of an aborted take-private that had been discussed by Billabong, Altamont and Sycamore Partners. Sycamore had offered to acquire all of the company’s shares for A$1.10 (€0.89; $1.15) cash per share, though that reportedly fell to just A$0.60 per share. A rival group led by Altamont had matched the bid but eventually decreased its offer to just $0.50 per share.
Billabong shares were trading at A$0.25 per share as of Monday. A trading halt was issued by the Australian Securities Exchange in anticipation of the refinancing announcement.
Scott Olivet, formerly the chairman and chief executive officer of Oakley, will replace Laura Inman as Billabong’s CEO. Altamont will add two representatives to Billabong’s board to reflect their investment in the company.