All the special resolutions that Billabong needed its shareholders to pass as part of its deal with Centerbridge Partners and Oaktree Capital were approved at a special company meeting Thursday in Australia.
Billabong CEO Neil Fiske told SES via email what this means for Billabong.
“This is a huge step forward for Billabong’s turnaround,” he said. “It strengthens our balance sheet and puts us on a strong footing to execute our seven-part turnaround plan. This deal combined with the upcoming Rights Offer will reduce our company’s net debt from around $300 million to around $100 million. We are excited about where we are going.”
(Editor’s note: SES Executive Edition members can read in detail about Neil’s turnaround plan for the company in our two previous stories – Billabong’s new plan: Fewer, bigger, better and More details about Billabong’s new strategy)
Billabong also provided some more background about the rights and placement measures. Below is a summary of what was passed and why Billabong believes the steps were necessary.
One highlight: With the agreements and the matters passed Thursday, Centerbridge and Oaktree could potentially own about 40% of the company.
We also pulled some excerpts from Chairman Ian Pollard’s comments at the meeting.
Placement and Rights Fact Sheet
Billabong has entered into a major financing agreement with US-based Centerbridge Partners and Oaktree Capital (C/O Consortium). The agreement includes a six-year secured loan facility of up to US$360.0 million, an A$135 million placement to the C/O Consortium and an A$50 million renounceable rights issue.
Why will Billabong undertake an A$50 million renounceable rights issue to existing shareholders?
The renounceable rights issue will reduce debt and enable greater financial capacity during the turnaround phase the business needs to undertake. Centerbridge and Oaktree will not participate in the rights issue.
Subject to regulatory requirements in specific countries outside of Australia, all other shareholders in the ASX entity are eligible to participate in the rights offering at A$0.28 per share.
The Rights Issue is expected to launch with Billabong’s half-year results announcement on February 21.
Why is there an A$135.0 million placement to Centerbridge and Oaktree?
The C/0 Consortium will subscribe for 329,268,294 shares at $A0.41 cents and receive a grant of certain options. The placement will see approximately $185.0 million of debt repaid with no prepayment premium ($A38.0 million).
What level of equity in Billabong will C/O now have given that shareholders have approved the placement?
If there is a 100% take up in the upcoming rights offering, C/O will have approximately 33.9% of the overall shareholding. The maximum amount they could own, including the granting of options, is around 40%.
Billabong Chairman Ian Pollard
At the meeting, Pollard addressed current trading conditions for the Billabong, and cautioned that Billabong is not going to make bold promises about an immediate turnaround, but rather plans to focus on long-term improvement rather than short-term decisions.
Here are few excerpts from his comments.
Ian Pollard: “Shareholders will be kept updated but should not expect us to make bold promises as to either the extent or timing of the financial impacts of our turnaround plan. We must address any legacy issues and prioritize long-term returns over shorter-term financial impacts
“I reminded shareholders that we still face a number of hurdles in our reported profitability and expect this year’s results to include more significant costs associated with reinvesting in and restructuring the business…
“While we have been greatly encouraged by both local and international investor interest shown in the turnaround strategy post the AGM, along with a willingness to be part of it, those financial realities detailed in December remain with us today.
“Our trading environment remains broadly as it was described at the AGM and our results for the half year when announced on February 21st will reflect that. Namely, stable or improving slightly in Australasia and Europe, while trading in the Americas remains weak.
“There remains much work to be done and few of the elements of the turnaround are as yet impacting on the Company’s financial performance.”
