Bankers desert troubled Billabong

NAB follows Westpac and Commbank out the door

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 3, 2013 11:03 am AEST

Beleaguered surf wear maker Billabong International (ASX:BBG) keeps losing friends, and doesn't appear to have many left.

This time it was National Australia Bank (ASX:NAB) that jumped ship, offloading its debt to Bank of America Merrill Lynch, according to the Australian Financial Review (AFR). Westpac Banking Corporation (ASX:WBC) and Commonwealth Bank of Australia (ASX:CBA) had previously offloaded their debt, apparently after receiving a report from insolvency specialist McGrathNicol.

That leaves just ANZ Bank (ASX:ANZ) as the last big four holding debt in Billabong. Judging by news reports ANZ may be about to head out the door sooner than later.

At the same time, New York hedge fund Centrebridge Partners is building an increasingly larger stake in the troubled company. Centrebridge has already bought $80 million in debt from Westpac and HSBC, according to the AFR.

It's not just the banks deserting Billabong either.

Last week, its biggest institutional shareholder, Perennial Value Management sold its entire stake in the company, after more than a year of uncertainty. Billabong has been the subject of several takeover offers, at steadily declining prices. The latest offer at 60 cents a share was abandoned, and now the company is in talks with its previous suitors regarding proposals for alternative refinancing and asset sales.

As yet, Billabong hasn't announced any details, apart from advising the market that talks were continuing, although it did confirm that it was looking to sell its Canadian retail chain West 49. With more than $200 million of borrowings, and substantial lease liabilities, Billabong desperately needs to finds a way to refinance its debt, if it is to continue trading.

There's still no certainty that the company will be able to come to a deal over its debt refinancing, which could see the company end up in administration.

Foolish takeaway

The vultures are circling and Billabong's future could lie in the hands of opportunistic hedge funds and its remaining bankers. Shareholders will be hoping that a deal emerges which allows the company to trade out of its issues.

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Motley Fool writer/analyst Mike King owns shares in Billabong.

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