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SYDNEY — The Billabong saga drags on, with the embattled surfwear manufacturer posting a record full-year loss that is more than triple its market capitalization, its core brand now valued at zero — and its board forced to consider a last-minute alternative refinancing deal.
On Tuesday morning, Billabong’s shares plunged as much as 15 percent after the company reported a net loss after tax of 859.5 million Australian dollars, or $776 million at current exchange, in the 12 months to June 30, a sharp decline from the 275.6 million Australian dollars, or $287 million, loss in fiscal 2012, after writing off 867.2 million Australian dollars, or $783 million, from the value of its brands and goodwill.
Excluding the writedowns, profits fell to 7.7 million Australian dollars, or $7 million, from 33.5 million Australian dollars, or $30.3 million, from 2011-12.
Revenues were down 12.6 percent in constant currency terms to 1.35 billion Australian dollars, or $1.22 billion, driven by poor sales across the Australasian, European and Americas divisions and the closure of 158 underperforming stores.
Chairman Ian Pollard said, “Financial stability is critical to rebuilding Billabong. Liquidity has been secured and we are within weeks of finalizing our long-term funding arrangements.”
However, a question mark remains over those arrangements.
A 325 million Australian dollar, or $293 million, refinancing deal struck with Altamont Capital Partners and the Blackstone Group’s credit arm, GSO Capital Partners, that was first announced on July 16 and which stood to ultimately deliver the Altamont Consortium a 40.49 percent stake under a long-term refinancing package — a bridge loan facility of which has already been completed — was due to be tabled before Billabong shareholders by the end of October.
On Aug. 21, the Australian Takeovers Panel forced revisions to the deal terms, after a complaint by Billabong’s former U.S. hedge fund lenders Centerbridge Partners and Oaktree Capital Management — whose debt-for-equity swap proposal had been rejected by Billabong in July.
On Friday, Centerbridge and Oaktree released a media statement outlining a new, rival 325 million Australian dollar proposal that they had pitched to Billabong’s board, which they claim offers far superior terms and is capable of execution within as little as one week.
Oaktree/Centerbridge are offering a lower interest rate on Billabong’s debt that, it’s claimed, will result in interest savings of up to 119 million to 143 million Australian dollars, or $107 million to $129 million, over five years and an 81 percent premium paid to the Altamont Consortium (36 cents versus 20 cents a share) for an approximately equivalent equity stake (39.7 percent).
The funds claim that under the Altamont proposal, Billabong could be left with a much higher level of debt — 276 million Australian dollars, or $249 million, compared to 158 million Australian dollars, or $143 million, under the Oaktree/Centerbridge plan.
Over the weekend, the Australian Shareholders Association urged Billabong to make more information about the Centerbridge/Oaktree offer available to shareholders.
Billabong has stated that it is considering the Centerbridge/Oaktree proposal “having regard to the best interest of shareholders.”
“Centerbridge and Oaktree is probably better [of the two], because it’s a cheaper deal” said IG Markets strategist Evan Lucas. “My take is that there is a now real possibility that Billabong is going to have to privatize. That number today is just horrible and the company doesn’t have any money to get on with rebuilding itself. That’s why you will need a private distressed fund to buy it out, so that it can completely redevelop itself, strip out all the rubbish that it doesn’t need and go from there”.
Billabong’s shares on Tuesday closed down 5.3 percent at 53.5 Australian cents, or 48.3 cents.