Oaktree, Centerbridge make renewed Billabong refinancing offer

The consortium had been forced to restructure an agreement made with Billabong a month earlier after Oaktree and Centerbridge - which own around A$300 million of Billabong’s debt - filed a complaint with Australia's Takeovers Panel.

Oaktree and Centerbridge put forward their own recapitalization proposal with Billabong just after it had committed to the Altamont deal. According to The Australian, they claim their latest offer will save the company up to A$143 million.

In its original offer Altamont proposed to refinance A$325 million of debt, acquire the DaKine adventure sports brand for A$70 million, and subscribe for options and preference shares that, if exercised, would have given it up to 41% of Billabong’s capital.

The consortium also provided a $40 million convertible note bridge facility in advance of the long-term funding package.

However, the Takeovers Panel decided that, while refinancing is usually a matter for the company board, "these arrangements are interlinked with the acquisition of a controlling interest in Billabong."

The panel had three principal objections. First, the 20% termination fee on the bridge facility – should there be a change of control before January 15 next year – amounted to a lock-up with the effect of deterring rival proposers.

Second, the 35% interest rate on the $40 million tranche – should shareholders not approve the equity elements of the deal – was likely to coerce shareholders into approving the acquisition.

And third, the condition that the long-term funding had to be repaid in the event of a change of control with a "make whole" premium of 10% should the loan be repaid within two years, was unacceptable.

After the panel indicated that it would make a declaration of unacceptable circumstance, the Altamont-consortium removed the poison pill elements from the deal. The termination fee has been replaced by a A$6 million break fee, the $40 million convertible note has been scrapped. Altamont will instead subscribe to a A$66 million security with a zero coupon.

Oaktree and Centerbridge are now offering an interim loan to refinance the A$325 million bridge loan the company currently has with Altamont, at a 12% interest rate. After it matures in March 2014, it would be replaced by a five-year term loan of the same size with a fixed rate of 13.5%.

Under the deal, Billabong would sell A$135 million worth of shares to Centerbridge and Oaktree at $0.36 apiece - an 80% premium to what Altamont has agreed to pay - with a further A$32.5 million worth of stock to be offered to existing shareholders.

The proceeds would be used to reduce the outstanding debt to A$157.5 million. The consortium claims the new deal would save Billabong between A$119m and A$143million over five years.

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• Topics
• Australasia
• Financing
• Restructuring
• Australia
• Oaktree Capital
• Centerbridge Capital Partners
• Altamont Capital
• Structured finance