Billabong shareholders face debt for equity swap

Beleaguered Billabong shareholders are facing a dilution of their shareholdings at an extraordinary general meeting to be held in Australia on January 30.

The JBay Billabong Pro suffered a wipe out
The JBay Billabong Pro suffered a wipe out

The company took a bail out package of USD 360 million from private equity firms Centerbridge Partners and Oaktree Capital in 2013 and shareholders now have to vote on a proposal to swap debt for shares to the amount of USD 185 million.

Should the proposal be approved, Centerbridge and Oaktree will hold a combined 40.8 per cent stake in Billabong.

The USD 185 million will be used to repay part of the debt owed to the two private equity companies.

An independent expert’s report from corporate advisory firm Grant Samuel has declared the share issue to be unfair to existing shareholders, but was reasonable as it would leave the company in better shape and was unlikely to be trumped by a better offer.

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“While shareholders are obviously going to be diluted down dramatically, they will still get something out of this, and in all the circumstances it was probably the best thing that directors could do,” Mr Curry said. “But the basic premise is that the board allowed things to run on too long.”

Grant Samuel’s report can be read in full here