Billabong International Limited (“Billabong” or the “Company”) announced that it was in discussions with each of Altamont Capital Partners (“Altamont”) and Sycamore Partners regarding proposals presented to the Company for alternative refinancing and asset sale transactions, the proceeds of which would be used to repay in full the Company’s existing syndicated debt facilities (“Refinancing”). Billabong today provides an update in relation to the proposed Refinancing.
The Company today announces it has entered into agreements with
entities advised by Altamont and entities sub-advised by GSO Capital
Partners1 (the credit arm of the Blackstone Group, and together with
Altamont, the “Altamont Consortium”) which will allow Billabong to
immediately repay in full its existing syndicated debt facilities. The
Company has also entered into commitment letters with the Altamont
Consortium and GE Capital to provide a long term financing package for
The immediate refinancing will be by way of a bridge financing by the
Altamont Consortium of the Company’s existing syndicated debt
facilities and the sale of the DaKine brand. The long term financing
will be by way of an Altamont Consortium term loan and convertible note,
and a revolving credit facility provided by GE Capital. This financing
package is intended to provide Billabong with a flexible capital
structure to allow it to stabilise the business, address its cost
structure, and pursue a strategy to grow the business.
As a condition precedent to this significant investment by the
Altamont Consortium, the Board of Billabong today announces that it
intends to appoint Mr. Scott Olivet as Chief Executive Officer and
Managing Director of Billabong.
In order to further adequately reflect Altamont’s significant
investment in the Company, Altamont will be permitted to nominate two
representatives to the Board of Billabong.
“The Board believes that the Altamont Consortium’s refinancing, and
the changes being announced today, provide the Company with a stable
platform and the necessary working capital to continue to address the
challenges it faces. We had highlighted the Company’s debt issues
previously and it was imperative to deliver a refinancing that retained
an opportunity for shareholders to participate in the future of the
Company. The Altamont Consortium presented the best available, certain
and executable opportunity in these challenging circumstances,” said
Billabong Chairman Ian Pollard. “The transaction reflects the Altamont
Consortium’s confidence in the value of Billabong’s brands and our
Company’s ability to achieve future profitable growth.”
Refinancing of syndicated debt facilities and asset sale Billabong
has entered into binding documentation with the Altamont Consortium in
relation to a US$294m (A$325m) bridge loan facility (“Bridge Facility”).
The Bridge Facility is fully committed and is expected to fund on or
around Monday, 22 July 2013. The facility is committed until 31 December
2013, will incur interest of 12.0% per annum and is intended to be
refinanced by the long term financing described below.
Concurrent with signing the Bridge Facility, the Company has entered
into binding documentation regarding the sale of DaKine to Altamont for a
purchase price of A$70m (“Asset Sale”). The transaction is subject to
conditions precedent which are typical for a transaction of this type.
The sale is also conditional on the completion of the funding under the
Bridge Facility. It is therefore expected that the DaKine transaction
will also complete on or around Monday, 22 July 2013.
Below is a summary of the sources and uses as it relates to the Bridge Facility and Asset Sale transactions.
1 The entities sub-advised by GSO Capital Partners are FS Investment
Corp I and FS Investment Corp II; they are advised by FB Income
2 Transaction sources and uses 2 Sources A$m Uses A$m Bridge Facility
325 Syndicated facility 289 DaKine asset sale 70 Cash for working
capital requirements 106 Total sources A$395m Total uses A$395m
As part of the Bridge Facility and the long term financing described
below, Billabong has agreed to issue 84,519,582 options to the Altamont
Consortium, amounting to 15% of the fully diluted share capital of the
Company (including the options). The options will be exercisable at the
election of the Altamont Consortium at a strike price of A$0.50 per
share. The options will be granted in multiple tranches, with the first
tranche of options (42,259,790) issued today. The balance of the options
are to be issued as part of the long term financing described below.
The options will expire seven years from the date of grant of each
tranche. The commitment letter executed with the Altamont Consortium for
the long term financing is an exclusive commitment. The commitment
letter and the commitments it provides terminate on the earlier of
closing of an alternate financing (which would result in the payout of
the Bridge Facility by parties other than the Altamont Consortium) and
31 December 2013 (the “Termination Date”). The exclusivity period is for
the period until the Termination Date.
During the period of exclusivity, the Company and the Altamont
Consortium must use commercially reasonable efforts to pursue the long
term financing. If the Company does not use such efforts and completes
an alternate financing on or prior to 15 January 2014, any prepayment or
repayment of the Bridge Facility utilising such alternate financing is
subject to a premium equal to 20.0% of the principal amount of the
Bridge Facility. Similarly, if a change of control occurs before 15
January 2014, and as a result the Bridge Facility is repaid on or before
31 December 2013, such repayment will be subject to a premium equal to
20.0% of the principal amount of the Bridge Facility.
Long term financing
As noted above, the intended long term financing is to be by way of
an Altamont Consortium term loan and convertible note, and a revolving
credit facility provided by GE Capital.
Billabong has signed a commitment letter with the Altamont Consortium
for a term loan of US$254m (A$281m) (“Term Loan”), made up of a base
commitment of US$200m (A$221m) and an upsize commitment of US$54m
(A$60m). Proceeds of the Term Loan are to be used to repay the Bridge
Facility referred to above. Interest payable on the US$200m base
commitment will be 12.0% per annum, payable quarterly, of which not less
than 7.0% must be payable in cash and up to 5.0% may be paid in kind
(“PIK”). Interest payable on the US$54m upsize commitment will be 10.0%
per annum, payable quarterly in cash. The Term Loan will have a single
financial covenant (in respect of leverage) which will first be tested
on 31 December 2014. This is intended to give the Company sufficient
flexibility to continue implementing its turnaround strategy.
In addition to the Term Loan, Billabong has also signed a commitment
letter to issue a US$40m (A$44m) convertible note to the Altamont
Consortium (“Convertible Note”). Subject to shareholder approval
(described below), the Convertible Note can convert into Redeemable
Preference Shares (“RPS”). The interest rate applicable to the
Convertible Note will be 12.0% per annum, payable quarterly, of which
not less than 7.0% must be paid in cash and up to 5.0% may be PIK
interest; however initially and until obtaining shareholder approval for
the issue of the RPS and a portion of the options as described below,
the interest rate will be 35.0% per annum, payable quarterly, of which
not less than 10.0% must be paid in cash and up to 25.0% may be PIK
interest. As a result, the Company will seek to obtain shareholder
approval as soon as possible for the issue of the RPS and such portion
of the options.
The RPS will convert to fully paid ordinary shares in the Company at a
strike price of approximately US$0.213 (A$0.235) per share,
representing 25% of the fully diluted shares outstanding (including
options and the RPS). The dividend rate applicable to the RPS will be
12.0% per annum, payable quarterly, of which not less than 9.0% must be
paid in cash and up to 3.0% may be paid in ordinary shares.
2 Excluding fees and expenses.
3 If shareholder approval is obtained before completion of the Term
Loan, at the option of the Company, RPS can be issued in lieu of the
Convertible Note. If shareholder approval is obtained after completion
of the Term Loan, the Convertible Note may be converted to RPS at the
option of the Altamont Consortium. A summary of the key economic terms
of the Convertible Note / RPS is provided in Annexure A.
Billabong has also agreed to issue the balance of the options to the
Altamont Consortium as part of the long term financing. It is expected
that 29,581,854 options will be granted on completion of the Term Loan,
with the balance of 12,677,938 options issued upon obtaining shareholder
The number of options to be granted (and therefore subject to
shareholder approval) will be appropriately adjusted for any primary
issuance of ordinary shares to Mr. Olivet (see further below) to reflect
the same ownership percentages shown in Annexure A.
If the Altamont Consortium exercises the options (for cash proceeds
of A$42.3 million) and converts the RPS into ordinary shares, the
Altamont Consortium’s potential future ownership in Billabong equity
could be between 36.25% and 40.49%3. As a result, the options which
exceed the issue limits under the ASX Listing Rules and all the RPS will
be subject to shareholder approval under the Listing Rules, and the
acquisition of shares upon exercise of those options or conversion of
the RPS will be subject to shareholder approval under takeover rules. It
is intended that Billabong will hold a general meeting to seek such
approvals as soon as practicable, expected to be in the next three
Billabong has also signed a commitment with GE Capital for an
asset-based multicurrency revolving credit facility of up to US$160m
(A$177m) (“Revolving Facility”), subject to holding sufficient eligible
accounts receivable and inventory as collateral.
Management and Board changes
Billabong also announces its intention to appoint Mr. Scott Olivet as
Managing Director and CEO of Billabong. Scott is a highly experienced
and well regarded action sports executive. He was formerly Chairman and
CEO of Oakley, Inc. and prior to that served as the Vice President, Nike
Subsidiaries and New Business Development where he led the portfolio of
non-Nike brands, including Converse and Hurley, both of which reported
to him. While at Oakley, Scott drove 14% compound annual growth in
EBITDA and delivered an annualised return to shareholders of 28% until
its ultimate acquisition by Luxottica. Most recently, he served as
Chairman of Collective Brands where he led the company’s strategic
review and ultimate split/sale of the business. Scott currently serves
on the board of Skullcandy, an action sports based electronics and
lifestyle company. Scott received a Masters in Business Administration
from Stanford University Graduate School of Business and a B.A.,
Government from Pomona College.
As part of his commitment to the Company, Scott has stated that he
intends to purchase 11m ordinary shares in the Company with the option,
at his election, to purchase an additional 4m shares (up to 15m ordinary
shares in total). Such purchases will occur on or before the close of
business on Friday, 26 July 2013 and before the appointment to his role.
Mr. Olivet may satisfy these purchases, at his option, by either
purchasing shares on the open market or by subscribing for newly issued
shares4 from the Company at A$0.23 per share. At $0.23 per share,
Scott’s total obligation to purchase shares would be A$2.53 million.
As a result of the appointment of Scott Olivet, Launa Inman will step
down from her role as Chief Executive Officer and as a director of the
Company. The Company is working with Scott to finalise the terms of
appointment to reflect his global experience and a US private equity
Such terms will be announced with the finalisation of the transition
from Launa to Scott. “The Board wishes to thank Launa for her
contributions to the Company and her resilience during the most
difficult period in the Company’s history,” said Dr. Pollard. “She has
shown foresight and direction in the creation of the transformation
strategy which has already begun to show some 3 36.25% assumes Billabong
pays the RPS dividend in cash. Billabong has the right to elect to pay
25% of the RPS dividend in ordinary shares, in which case the Altamont
Consortium’s potential future ownership in Billabong could be as high as
40.49% after 9.5 years, assuming the Altamont Consortium chooses to
redeem its RPS at the latest possible date and that
Billabong chooses to pay 25% of the RPS dividend in equity in every
period up until the conversion date. The entities advised by Altamont
and GSO Capital Partners will be acting independently with respect to
any securities they respectively acquire in the Company or with respect
to any governance rights conferred on Altamont. Their holdings have been
aggregated in this announcement for ease of communication only.
4 In the event the Company issues shares to Mr. Olivet, the share
counts (excluding those of existing shareholders) within this
announcement would increase accordingly to reflect the same ownership
percentages shown in Annexure A.4 encouraging signs particularly in the
USA. It is also timely to recognise publicly the ongoing efforts of the
Billabong team globally during a period of significant uncertainty,
especially those who have gone above and beyond in the interests of
their colleagues, the Company and shareholders.”
In order to further adequately reflect Altamont’s significant
investment in the Company, Altamont will be permitted to nominate two
representatives to the Board of Billabong. The two representatives are
Jesse Rogers and Keoni Schwartz, each of whom will be appointed as
additional directors by the Board and will be put forward for election
at the next annual general meeting of the Company.
Jesse Rogers is a Co-Founder and Managing Director of Altamont.
Previously, Mr. Rogers cofounded and was Co-Principal Managing Director
of Golden Gate Capital (“GGC”). Prior to cofounding GGC, Mr. Rogers was a
long time partner at Bain & Company, where he founded and served as
the Global Head of Bain’s Private Equity Group. Mr. Rogers is a current
or past member of the Board of Directors of a number of public and
private companies, including: Beringer Wine Estates, Employer’s Direct
Insurance, Endurance Re (observer), Eye Care Centers of America,
Herbalife, Interstate National, Lexicon, Rocket Dog, Ruiz Food
Products, Tactical Holdings, and TauTona. Mr. Rogers received a Masters
in Business Administration from Harvard Business School and a B.A. from
Keoni Schwartz is a Co-Founder and Managing Director of Altamont.
Prior to Altamont, Mr. Schwartz was a Principal at GGC, where he
completed numerous transactions in the consumer and retail, financial
services and technology sectors. In addition, Mr. Schwartz helped to
build and manage the firm’s public equities investing activities,
working extensively on the firm’s public equity investing vehicle, GGC
Public Opportunities. Prior to joining GGC, Mr. Schwartz worked as a
consultant in both the Boston and San Francisco offices of Bain &
Company. Previously, Mr. Schwartz also worked as a consultant for The
Bridgespan Group, a consulting firm. Mr. Schwartz received a B.A. in
History with honors from Princeton University.
As noted above, Billabong intends to convene a meeting of
shareholders to approve the issuance to the Altamont Consortium of the
RPS and relevant options. Further details of this meeting will be
provided as soon as possible, including an information booklet
containing an independent expert report.
It is the intention of all the directors to recommend the proposals
which require shareholder approval and to vote their own shareholdings
in favour of them. Those proposals are: (a) the issue of the options
which exceed the issue limits under the ASX Listing Rules, and the issue
of shares on exercise of those options; (b) the issue of the RPS, and
the issue of shares on conversion of the RPS; (c) the long term
incentive components of Scott Olivet’s remuneration; and (d) the
election of Jesse Rogers and Keoni Schwartz as directors at the next
The directors’ recommendation, and their intention to vote in favour,
is subject to the independent expert opining that the issue is fair and
reasonable to the Company’s shareholders and in the absence of any
At the same time as preparing the materials for the shareholder
meeting, Billabong will be working with the Altamont Consortium and GE
Capital to agree binding documentation for the Term Loan, Convertible
Note and Revolving Facility as soon as possible.
By press release
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