Limping surfwear company Billabong announced that it has entered into agreements with hedge funds Centerbridge Partners and Oaktree Capital Management for the purposes of cementing a long term refinancing program. Billabong is reportedly prepared to relinquish as much as a 40 percent ownership stake in the company.
These have been dark days for the once healthy retailer. The company recently reported a $776 million loss for the year ending in June, a considerable leap from last year’s $247 million loss.
As a result of the losses and the widespread anticipation of more to come, Billabong’s business costs now outstretch its incoming revenue. At the conclusion of June, the company is estimated to be worth approximately $81 million. At the end of 2011 it was valued at $550 million.
According to Michael Simotas, an analyst at Deutsche Bank AG, Billabong has suffered from “continued difficult trading conditions, particularly in Europe” and has struggled with the fact that “consumer sentiment continued to weaken and warm weather weighed in on winter apparel sales.”
Billabong’s new financial arrangement allows it to repay a $294 million loan from Altamont Consortium, breathing some sliver of life into an otherwise wheezing business. The deal includes a secured loan of $360 million, a $127 million equity placement with the two new investors and a $47 million rights issue available to all other shareholders.