Billabong International Ltd. announced plans to raise A$225 million ($229 million) selling new stock at a discount to repay debt while also lowering its earnings forecasts. The Australian-based surf giant also revealed that Chairman Ted Kunkel plans to retire.
"The board and management have taken prudent action to restore the balance sheet and add financial flexibility," said recently appointed Chief Executive Launa Inman. "With the right focus and execution, Billabong will once again become a growing, profitable business."
The company's brands include: Billabong, Element, Von Zipper, Honolua Surf Company, Kustom, Palmers Surf, Xcel, Tigerlily, Sector 9, DaKine and RVCA.
Under the program, investors can buy six shares for every seven they already own at A$1.02 apiece, 44 percent less than Wednesday's closing price, Billabong said in a filing. The entitlement offer is fully underwritten by Goldman Sachs and Deutsche Bank AG.
Billabong said that on completion of the offer, forecast net debt would fall to around A$100 million at June 30 from A$325 million. Billabong has also renegotiated its banking covenants. The company said its founder and largest shareholder, Gordon Merchant, had indicated he would plow A$30 million into the capital raising, taking up 85 percent of his entitlement.
Inman told reporters the company was confident that what it was raising would be sufficient for its needs even if trading conditions remain tough.
"We did debate it at length and we are confident that we have got a buffer," she said.
Earlier this year the company sold just over half of its interest in the Nixon brand for US$285 million to firm up its balance sheet. Billabong considered selling the rest of Nixon before choosing the capital raising
Billabong also said it expects earnings before interest, tax, depreciation and amortization for fiscal 2012 to be in the range of A$130 million to A$135 million, down from the pre-Nixon sale expected EBITDA of slightly above A$157 million. It said it also expects current soft trading conditions to continue into fiscal 2013 with EBITDA expected to be more than A$83 million-A$88 million and did not expect to pay dividends in the second half of fiscal 2012 or the first half of fiscal 2013.
“The company has generally continued to face challenging trading conditions, in particular in Europe, Australia and Canada,” Billabong said in the statement. “The board expects the current softness in trading conditions to continue.”
The Americas was said to be meeting expectations.
Billabong last month named Launa Inman as chief executive officer to replace Derek O’Neill to help steer the company's turnaround. Billabong plans to close as many as 150 of its 677 retail outlets and cut 400 jobs. As of today, 45 locations have been closed. The debt restructuring comes after Billabong spurned an offer in February from TPG Capital to acquire the firm much as A$3.30 a share.
Kunkel plans to retire between October and February of next year. Allan McDonald, chairman of Billabong's audit committee will also leave, exiting in October.