Billabong International Ltd. (ASE: BBG) has entered into an agreement with entities advised by private equity firm Altamont Capital Partners and GSO Capital Partners, the credit arm of New York private equity firm the Blackstone Group (NYSE: BX).
The struggling surf wear retailer expects the plan to allow it to repay existing debt facilities in full.
To repay current debt, the company will get a $294 million bridge loan expected to close on July 22. The loan incurs interest at 12 percent and matures Dec. 31.
In connection with the deal for the bridge loan, Billabong has agreed to sell the DaKine Hawaii Inc. brand to Altamont for about $63.6 million. DaKine, based in Maui, makes backpacks, luggage, gloves, outerwear and other products.
Billabong, based in Queensland, Australia, has also entered into commitment letters with Altamont, GSO and GE Capital for a long-term financing package. The parties will provide a term loan, convertible note, and GE Capital will provide a revolving credit facility. The financing is intended to give Billabong a more flexible capital structure to allow it to stabilize the business and pursue a growth strategy. The financing will also be used to pay off the bridge loan.
As part of the deal, Scott Olivet, formerly the CEO of sportswear company Oakley Inc., based in Foothill Ranch, Calif., will be appointed CEO of Billabong. Altamont will also be allowed to nominate two representatives to Billabong’s board.
In February, Billabong announced a half-year loss of $556.7 million, which it said resulted from difficult trading conditions in Europe. The company also blamed the loss on the disappointing performance of the Nixon watch line, which it bought in 2006. Billabong sold the majority of Nixon in 2012, retaining a 48.5 percent stake.
In June, Billabong opted to sell some units after talks with private equity firms to buy the company as a whole appeared to stall. In addition to DaKine, the company was also looking to sell RVCA and West 49 as a means of raising enough capital to repay its debt facility.
Billabong, known mostly for its sportswear and beach attire, rejected a $903.5 million bid from private equity firm TPG Capital Management in February 2012. The company was also in discussions with private equity firm Sycamore Partners Management, which made a $300 million takeover offer in April. Altamont and retail brand owner VF Corp. (NYSE: VFC) also submitted a $556 million offer for the brand in January.
Altamont, headquartered in Palo Alto, Calif., has about $500 million in capital under management. The firm’s portfolio companies include J.D. Byrider, McLarens Young International and Cascade Windows.
Ropes & Gray LLP acted as legal counsel to the lending consortium.
For the last edition of Turnaround Tuesday, see “RVue Replaces Management, Focuses on Revenue.”
For more struggling companies, see Merger & Acquisitions Distressed Company Watch List.