Billabong International Limited (ASX:BBG)’s new lenders, the U.S. hedge funds, have hired global investment bank Moelis & Co as an advisor, according to The Wall Street Journal.
The U.S. hedge funds Centerbridge Partners and Oaktree Capital Management have taken control of the entire surfwear retailer Billabong International loans.
At the end of last week, Bruce Greenwald, the founding director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, sat down for a Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital as part of the 13th Columbia China Business Conference. The chat spanned many different topics, Read More
Gillian Tan in the blog at The Wall Street Journal notes Oaktree Capital Management and Centerbridge Partners have bought at least $280 million Australian Dollars (US$256 million) of senior loans from the surfwear retailer’s syndicate of banks, at a discount of 10 percent or more.
Leading Australian Banks Sold Out Their Positions
Billabong International Limited (ASX:BBG)’s original seven lenders, including Australia and New Zealand Banking Group (ASX:ANZ), National Australia Bank Ltd. (ASX:NAB), Westpac Banking Corp (ADR) (NYSE:WBK) (ASX:WBC), Commonwealth Bank of Australia (ASX:CBA), HSBC Holdings plc (LON:HSBA) (NYSE:HBC) sold out their positions after the lenders received a report from insolvency specialist McGrathNicol on the surfwear retailer.
Centerbridge Partners has bought $80 million worth of debt from two of the Australian banks Westpac and HSBC Holdings plc (LON:HSBA) (NYSE:HBC).
A report quoting sources indicated it is likely to be an opportunistic purchase for the hedge fund, Centerbridge Partners.
One of the largest Australian banks, Westpac Banking Corp (ADR) (NYSE:WBK) (ASX:WBC), is said to be the second major bank to sell out its loan to Billabong, after the Commonwealth Bank of Australia (ASX:CBA) sold its $65 million worth of surfwear retailer’s loan.
Billabong Fate Appear To Rest With Hedge Funds
The fate of the troubled surfwear retailer appears to rest with the U.S. hedge funds, according to Australian Financial Review.
It is felt both the hedge funds are hoping to convert their debt into equity that would help strengthen their control over the surfwear retailer.
According to The Wall Street Journal blog, in the event of surfwear retailer defaulting its debt obligations, the U.S. hedge funds might push for a debt-to-equity swap.
Some analysts draw parallel of the hedge funds’ actions in Billabong International Limited (ASX:BBG) and Nine Entertainment. Earlier, the U.S. hedge fund Oaktree wrested a major chunk of television network owner, Nine Entertainment Co, after starting out as a lender. The hedge fund capitalized its ‘loan-to-own’ profile to become shareholder in Nine Entertainment and utility Alinta Energy Group.
Stephen Bartholomeuz of Business Spectator feels Billabong International Limited (ASX:BBG) is still in discussion with Altamont Capital and Sycamore Partners, for a potential refinancing of its debt, injections of equity and asset sales. If Billabong succeeds in negotiating a deal with Altamont Capital or Sycamore Partners for repaying the exposures at 100c in the dollar, the U.S. hedge funds could pocket $40 million to $50 million ‘turn’ for a couple of months’ work.