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The Deal: Centerbridge, Oaktree Win Billabong Debt Deal

NEW YORK ( TheStreet) -- Centerbridge Partners and Oaktree Capital Management Thursday, Sept. 19, emerged as victors in a refinancing tussle at board sports clothing and equipment group Billabong International, elbowing out Altamont Capital Partners and Blackstone Group's (BX - Get Report) GSO Capital with a deal which will eventually land the successful investors up to 41% of the equity.

The partners, which hold most of Gold Coast, Australia-based Billabong's senior debt, forged a binding deal with Billabong, having sweetened the terms of a previous July proposal. Their victory follows a long series of abortive takeover attempts at Billabong, starting with a February 2012 proposal by TPG Capital. As bidders came and went, series of profit warnings undermined Billabong's negotiating position. Earlier this year Billabong started work on refinancing its debt instead and in July it struck a deal-in-principle with Altamont, a one-time late-stage bidder, and GSO Capital, initially snubbing a late approach from Centerbridge and Oaktree.
[Read: <a target="blank" data-add-tracking="true" href=""><em>US Airways/American Workers' Merger Blitz Is Unique, Expert Says</em></a>]

Billabong Chairman Ian Pollard said the Centerbridge/Oaktree package is "in the best interests of the Company, its shareholders, its employees and other key Billabong stakeholders, on both economic terms and in providing near term certainty."

"The proposal was significantly improved compared to the C/O Consortium's previously announced proposal and offered lower financial leverage and cheaper cost of funds with lower equity dilution than the Altamont proposal plus the ability for existing shareholders to participate alongside the C/O Consortium via the rights offering," he added in a statement.

Billabong shares closed up in Sydney A$0.025, or 5.6%, at A$47.50.
[Read: <a target="blank" data-add-tracking="true" href=""><em>JPMorgan Whale Fines for Dummies: An Explainer</em></a>]

The package includes an enlarged $360 million secured term loan priced at 11.9%, down from the 13.5% rate Centerbridge and Oaktree had previously proposed, with a six-year maturity instead of five years. It also includes a A$135 million ($128.2 million) equity issue to the partners at A$0.41 per Billabong share, alongside an expanded A$50 million rights issue to other Billabong shareholders priced at A$0.28. (Centerbridge and Oaktree will pay more per-share for their equity, while the rights issue stock will be priced lower, than in the investors' original proposal). The final element of the deal is the issue of 29.6 million options to Centerbridge and Oaktree to buy shares at A$0.50 apiece.
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