afr articles, page-2

Billabong lenders said to be in the driving seat

EDITED BY SARAH THOMPSON, ANTHONY MACDONALD AND GRETCHEN FRIEMANN
Billabong International chief executive Launa Inman’s appointment of specialist corporate advisory 333 Management, a division of KordaMentha, was ominous. But the latest developments even more so.

While the 333 appointment was made some time ago, there are concerns this role may take on a much wider remit at the behest of the lender. These moves are typical of a company under financial pressure from lenders who are increasingly concerned about multiple earnings downgrades.

It is not uncommon in Australia for an insolvency specialist to be brought in at the same time a company’s financial performance deteriorates rapidly. This makes a conclusion to the protracted sale process for Billabong critical for both the embattled retailer and its lenders.

The revised proposal from Sycamore Partner currently in front of Billabong’s board is still regarded as the most likely outcome although exclusivity ends this afternoon,

One option is that the debt stack could appoint an independent account. The role of an IA could range from getting management to accept a bid to considering performance improvement matters to making sure debt obligations can be met. But there are other options for lenders. It should also be noted that the appointment of specialist advisors and investigating accountants raises interesting corporate governance issues.

The question shareholders will want to ask is who is actually driving the decision-making at Billabong.

If it’s the banks then that will raise concerns among equity holders who come last in the pecking order in a restructure.