BILLABONG DEAL SLAMMED AS ‘COERCIVE’

Written on the 22 July 2013

BILLABONG DEAL SLAMMED AS ‘COERCIVE’

BILLABONG’S financial lifeline from Altamont Capital Partners has hit a rogue wave with two hedge-fund managers complaining to the authorities that the deal is “anti-competitive” and coercive” in nature.

Oaktree Capital Management and Centerbridge Partners, the hedge funds that have offered an alternative refinancing package for Billabong, have lodged an application with the Takeovers Panel seeking interim orders to prevent Billabong from drawing down on Altamont’s $294 million bridging loan and for a stay on the $70 million sale of Billabong’s DaKine business.

The drawdown and sale were both expected to take place on July 22.

Under the refinancing proposal, Altamont – which is working with hedge fund group Blackstone to secure the funding – has effectively stymied Billabong from pursuing alternative refinancing proposals due to an onerous break fee of about $65 million over a five-month exclusivity period.

The pressure is also on Billabong shareholders to approve the Altamont deal which involves Billabong issuing Altamont a $44 million convertible note carrying a 35 per cent interest rate.

That interest rate drops to 12 per cent only if shareholder approval is granted.

Oaktree and Centerbridge have described the break fee and the 35 per cent interest rate as “lock-up devices that are anti-competitive and coercive”, according to the Takeovers Panel.

“The applicants also submit that there has been no disclosure of the terms of the exclusivity arrangements or the details of the circumstances in which the termination fee may be payable,” says the Takeovers Panel.

“The applicants seek interim orders, including that drawdown of the bridge facility and completion of the DaKine sale be delayed until the panel makes its determination.

“The applicants seek final orders, including that clauses relating to the termination fee and the convertible note increased coupon be removed.”

The Takeovers Panel says a sitting panel has not been appointed “at this stage” and that “no decision has been made whether to conduct proceedings”.

Billabong yesterday confirmed that it had received a proposal from the Centerbridge/Oaktree consortium, but that this was received after the Altamont deal had been reached.

Billabong also says the Centerbridge/Oaktree offer is “not an offer that is capable of acceptance” due to conditions that are “incapable of satisfaction”.

Billabong’s shares continue to rise in the wake of the Altamont deal, and despite the prospect that shareholders could see a dilution of up to 40 per cent of their interest in Billabong should the deal proceed in full.

The shares were trading around 40c each at noon, up 9.5 per cent on the previous day’s close.


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