Oaktree seizes control of Quiksilver in the US

The distressed debt investor will convert credit holdings into equity and provide the company with DIP financing as part of a pre-pack restructuring plan.

New York-listed Quiksilver has agreed a restructuring deal that will see secured creditor Oaktree Capital Management take control of the company. The outdoor clothing and accessories brand entered chapter 11 bankruptcy after poor performance meant debts of $826 million overwhelmed the firm's $337 million in total assets.

The restructuring only relates to Quiksilver's US business. Its non-US subsidiaries in Europe and Asia-Pacific are unaffected and the company has support from enough holders of the firm's Eurobonds to waive the cross-default clause, the firm said.

The company has sought court approval for a $175 million debtor-in-possession (DIP) financing to be provided by Oaktree and Bank of America.

The DIP financing is part of a plan sponsor agreement reached with Oaktree, the largest holder of Quiksilver's senior secured debt. Under the pre-arranged plan, Oaktree will finance the bankruptcy and convert its debt claims into a majority equity stake.

The chapter 11 filing has support from 73 percent of Quiksilver's senior secured lenders, the company said without revealing how much of that percentage is held by Oaktree. 

“After careful consideration, we have taken this difficult but necessary step to secure a bright future for Quiksilver,” said Pierre Agnes, Quiksilver's chief executive. 

“With the protections afforded by the bankruptcy code and the financing provided by Oaktree, we will not only be able to satisfy our ongoing obligations to customers, vendors and employees, but we will also have the flexibility needed to complete the turnaround of our US operations and re-establish Quiksilver as the leader in the action sports industry.

“Our fresh capital structure, with a very low level of debt for our industry, will enable us to invest in and reinvigorate our brands and products. We are confident we will emerge a stronger business, better positioned to grow and prosper into the future.”

The firm's outstanding debt comprises: $280 million 7.785 percent senior secured notes due 2018; $220 million 8.875 percent senior unsecured notes due 2017; and $223 million 10 percent senior unsecured notes due 2020. The restructuring proposal wipes out around $500 million of debt. 

Quiksilver was struggling with mounting net losses which jumped to $48 million for the six months ending 30 April from $37 million for the same period a year earlier. Following the restructuring, the company plans to continue with an existing plan for store closures and disposals in an attempt to turnaround the decline.

Skadden, Arps, Slate, Meagher & Flom is acting as Quiksilver's legal adviser, while FTI Consulting is its restructuring adviser.

Quiksilver was listed on the Nasdaq in 1986 before listing on the New York Stock Exchange in 1998.

Oaktree has around $100 billion in assets under management and is one of the largest distressed debt investors in the world.