Sept. 21--Billabong International has yet another financial backer and its second would-be CEO in two months -- three, if you count the acting CEO.
On Wednesday, the struggling Australian surfwear retailer dropped a refinancing agreement it had agreed to in July. Now it's going with a $360 million deal with the C/O Consortium, a rival group of investors from Centerbridge Partners and Oaktree Capital Management.
Billabong paid an approximately $5.67 million "break fee" to the original investors, private-equity firm Altamont Capital Partners and GSO Capital Partners.
In August, the C/O Consortium returned to Billabong's board with an improved version of a previous offer: a loan amount increase from $303 million to $360 million; a reduced annual interest rate, from 13.5 percent to 11.9 percent; an additional year (six total) to make repayment; plus a range of factors favorable to existing shareholders. The agreement also repays in full an existing $294 million bridge loan from Altamont.
In a statement, Billabong deemed the deal "superior," and Chairman Ian Pollard said the board determined the 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 new arrangement replaces CEO-elect Scott Olivet, the ex-boss of Oakley, with Neil Fiske, former CEO of Washington-based outdoor retailer Eddie Bauer. Although Fiske is new to the action-sports industry, he has a track record of improving companies' fortunes. He grew Bath and Body Works from $1.8 billion to $2.5 billion in sales from 2003 through mid-2007. Following that, he transformed Eddie Bauer into a profitable brand under private-equity ownership, before leaving in March 2012.
The process to refinance Billabong has dragged on for two years. After months of takeover bids, the company struck the deal with Altamont and tapped Olivet to replace Launa Inman, who took the role of CEO in May 2012. Billabong recently appointed CFO Peter Myers to fill in as interim CEO.
"I think Oaktree fought so hard because (Billabong) has the potential to be a profitable company that can return significant amounts to people who are investing at values today that are 1/20th what they were three years ago," said Frank Kaufman of accounting firm Moss Adams, which worked with surf brand RVCA during its 2010 sale to Billabong.
"Billabong gobbled up brands and got tremendously overleveraged, and in Australia, there's no Chapter 11 process." In Australia, there's more opportunity for parties to submit -- and withdraw -- numerous bids.
The 40-year-old company, whose U.S. headquarters is in Irvine, recently posted annual losses of $772 million and wrote down the value of several brands, including its core Billabong label, to zero. It was once valued at more than $3.5 billion on the Australian stock exchange, but plunged to $110 million over the summer.
Billabong has closed 158 stores over the past year and cut supplier relationships by more than 75 percent.
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