Billabong’s agreement with the Altamont consortium is reviewed and approved

By

Olivier Guyot

Published
Aug 26, 2013

After the announcement of an agreement between Billabong and the Altamont consortium which would have enabled the group of boardsports brands to refinance its debt, an application was filed with the Australian takeover authorities on July 18 by Oaktree Capital Management and Centerbridge Partners, which had offered another proposal.

The Australian authorities who review corporate takeovers announced that they “declined to make a declaration of unacceptable circumstances” regarding the agreement, which was therefore approved.

However, the panel that reviewed the Billabong-Altamont case pointed out that it gave the go-ahead based in part on the fact that certain provisions initially in the agreement had been removed.

In its press release the Australian government explained that it considered the initial terms of the agreement unacceptable. These called, for example, for a termination fee of 20% of the principal amount provided by Altamont in the event of a change of control of Billabong before January 15, 2014. Additionally, the interest rate on the loan financing would have risen from 12 to 35% if the shareholders failed to agree to certain strategic arrangements. And finally, if the group changed hands, the long-term financing provided by the Altamont consortium would have had to be repaid within two years with a 10% make-whole premium. The Australian authorities deemed these provisions a serious deterrent to rival takeover proposals.

To allay the government's concerns, the terms of the agreement were revised to remove the offending clauses.