Billabong Raising Cash to Combat Crashing Sales and Earnings

Billabong International Ltd., Australia’s largest surf-wear maker, plans to raise Aus $225 million ($229 million) selling new stock at a discount to repay debt after cutting its earnings target.    

Investors can buy six shares for every seven they already own at Aus $1.02 apiece, 44 percent less than yesterday’s closing price, Gold Coast, Australia-based Billabong said in a filing today. Earnings before interest, tax, depreciation and amortization will be as low as Aus $130 million in the year ending this month, down from its previous target of Aus $157 million.    

The maker of Kustom shoes and Billabong clothing is raising cash four months after spurning a takeover approach from TPG Capital and selling control of its Nixon watches and accessories unit to cut debt. The company last month named Launa Inman as chief executive officer to replace Derek O’Neill as it seeks to turn around falling sales and earnings.    

“The company has generally continued to face challenging trading conditions, in particular in Europe, Australia and Canada,” it said in the statement.    

Billabong plans to close as many as 150 of its 677 retail outlets and cut 400 jobs. As of today, 45 shops have been shut.     The company’s shares closed yesterday at Aus $1.83 and have slumped 70 percent in the past year. The stock was halted from trading today.    

TPG indicated it was prepared to pay as much as A$3.30 a share for Billabong, the company said in February.    

A letter to the board from lawyers representing founder and biggest shareholder Gordon Merchant as well as fellow director Colette Paull said both would oppose steps to let TPG conduct due diligence even with an offer of A$4 a share, the retailer said in February.

Bloomberg