Quiksilver files for bankruptcy as part of the deal with new investment firm owner

Californian surfwear retailer Quiksilver Inc. has put its US business into bankruptcy Wednesday as part of the deal with newly announced owner, Oaktree Capital Management.

“After careful consideration, we have taken this difficult but necessary step to secure a bright future for Quiksilver,” said Pierre Agnes, Quiksilver’s chief executive, as reported by the ‘Wall Street Journal’.

In this vein, Quiksilver CFO Andrew Bruenjes said the company has been in an "operational turnaround" since 2013.

Quiksilver´s lack of liquidity promts the deal with Oaktree

Quiksilver has suffered from a lack of liquidity "exacerbated by underperforming retail stores and late deliveries of products to wholesale customers," he said.

The investment firm has acquired the apparel company in a 279 million dollars debt-for-equity swap. In a statement Wednesday, Quiksilver revealed that Oaktree has agreed to sponsor a reorganisation plan, which it intends to file in the near future.

In its statement, Quiksilver added Oaktree and Bank of America have agreed to provide the company with 175 million dollars in debtor-in-possession financing to fund the Chapter 11 process.

In a Wednesday motion seeking permission to enter into the PSA with Oaktree, Quiksilver said the private equity firm and its affiliates hold 73 percent of the company's outstanding US secured notes.

Financing to include 115 million loan to finance debt repayment

As reported in the DIP motion, the financing would include a 115 million dollars term loan led by an Oaktree affiliate and a 60 million dollars asset-based loan led by BofA. The term loan would be priced at 12 percent, or 14 percent on default, and would carry a 2.3 million dollars termination fee.

The DIP financing includes certain milestones, such as requiring Quiksilver to file a plan and disclosure statement within 30 days and win disclosure statement approval within 75 days.

It is worth of remembering that Oaktree currently owns 19 percent of Quicksilver´s competitor Billabong, according to latter’s website.

Secured note holders would receive equity in the reorganised debtor in an amount that would be laid out in the plan. Oaktree also has committed to backstop two rights offerings for common shares of 122.5 million dollars and another 50 million to provide the debtor with additional liquidity.

Meanwhile, unsecured creditors, including note holders, would receive 7.5 million dollars in cash. Holders of guaranty claims based on the debtor's guarantees of its euro note obligations would have their claims reinstated, explained the company Wednesday.

Quiksilver would fund the plan with the rights offerings, a 75 million dollars asset-based exit loan and, potentially, an exit term loan, further stated the company in a note.

In spite of these efforts, the company reported a net loss in the first fiscal quarter of 2015, and as The Deal reported on July 30, the company hired Peter J. Solomon Co. to help evaluate financing alternatives. Those talks ultimately led to the Oaktree deal.