Billabong International (ASX:BBG) has received another financing offer from its former lenders, US private equity firms Centrebridge Partners and Oaktree Capital.
According to media reports, Centrebridge and Oaktree say the new deal would save Billabong up to $143 million compared to the deal the surfwear maker signed with their rival Altamont.
The Centrebridge consortium are offering to provide and interim bridging loan to replace the $325 million loan Billabong currently has with Altamont, which would eventually be replaced with a new five-year loan of the same size at a fixed rate of 13.5%.
In return, the consortium wants Billabong to sell it $135 million worth of shares at 36 cents a share, with a further $32.5 million share placement to existing shareholders, to be used to reduce the debt down to $157.5 million.
The consortium says the deal will save Billabong between $119 million and $143 million over 5 years, while the share sale would be priced at an 80% premium to what Altamont has agreed to pay for Billabong stock. Billabong has signed a deal with Altamont, under which Altamont has been granted millions of options over Billabong shares for just 1 cent each.
Centrebridge and Oaktree complained to the Takeovers Panel over the original agreement signed between Billabong and Altamont, because of a $65 million break fee, plus onerous interest rates that would have to be paid on some portion of the debt. The Takeovers Panel agreed with them, and the break fee and other penalties were slashed, opening the door for the Centrebridge consortium to make a bid for the troubled surfwear manufacturer and retailer.
Billabong has yet to respond to the offer, after the Centrebridge consortium made it public. The company appears to be in the grip of its financiers, and doesn't have many options if it wants to continue trading.
Foolish takeaway
Billabong shares are up 4.6% to 57.5 cents in mid-afternoon trading compared to the S&P / ASX 200 Index's (Index:^AXJO) (ASX:XJO) rise of 1%, suggesting investors expect a better counter-offer may come from Altamont and a financing bidding war may break out. Bu investors might want to take note of the price the consortium wants Billabong to sell it shares at – well below the current price.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
