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Billabong Forced to Revise Sale Terms

In a statement released on Wednesday, the Australian Takeovers Panel said that it had determined several components of the deal to be “unacceptable.”

SYDNEY — The Australian Takeovers Panel has forced Billabong International Ltd. to renegotiate the terms of a refinancing deal that stands to give a consortium led by U.S. private equity firm Altamont Capital Partners a 40.49 percent stake in the company — theoretically putting Billabong back on the table.

This story first appeared in the August 22, 2013 issue of WWD.  Subscribe Today.

Altamont’s already completed rescue package of 395 million Australian dollars, or $364 million at current exchange — comprised of a $294 million bridge loan facility and the sale of the DaKine brand for 70 million Australian dollars, or $65 million — was announced on July 16.

Two days later, a complaint was lodged with the federal government’s takeovers regulator by U.S. hedge funds Oaktree Capital Management and Centerbridge Partners, which had purchased approximately 300 million Australian dollars, or $288 million at June exchange, of Billabong’s distressed debt in June and whose rival refinancing offer had been rejected.

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In a statement released on Wednesday, the Takeovers Panel said that it had determined several components of the deal to be “unacceptable.” Specifically: a 20 percent or $65 million Australian dollar ($59 million U.S.) “break fee” that Billabong would have to pay Altamont if it pulled out of the deal, which was described as “a lock-up device, with the effect of deterring rival proposals;” a 35 percent interest rate payable on a $40 million convertible note if shareholders did not agree to convert the debt into preference shares, which the panel said “amounted to a ‘naked no vote’ break fee, which was likely to coerce Billabong shareholders to approve the issue of a controlling interest in the company,” and a “make whole” premium of 10 percent if the loan was to be repaid within two years.

Advised by the panel of the decision before it was made public, however, Billabong released its own statement to the Australian Securities Exchange Wednesday, announcing several revised transaction documents thereby avoiding the official orders from the panel.

Revisions include the cutting of the 20 percent break fee, which had also been slammed by the Australian Shareholders Association, to 6 million Australian dollars, or $5.5 million; the reduction of the “make whole” premium to 1 percent, and the dropping of the convertible note.

Any rival bidders would need to move quickly.

According to Billabong, the company is currently putting together final documentation for the Altamont deal, a process that is expected to take two to three weeks and a shareholder meeting is scheduled to take place before the end of October to seek approval for the revised deal.

Billabong shares closed at 57 Australian cents on Wednesday.