Quiksilver Inc. President Greg Healy is getting one more set of hands to help him navigate the Huntington Beach-based footwear and apparel company through a newly approved Chapter 11 bankruptcy exit plan.
Stephen Coulombe of FTI Consulting Inc. in Boston joined Healey’s team this month as chief restructuring officer.
Duties
He’s tasked with leading “efforts to implement both short-term and long-term liquidity generation and profit improvement,” according to documents filed last week with the U.S. Bankruptcy Court for the District of Delaware.
Coulombe, along with 10 other FTI staff members, will help Quiksilver identify and execute short-term cash management procedures; develop accounting and operating procedures to segregate pre- and post-bankruptcy transactions; help with implementation of court orders and communication to key stakeholders, including customers and suppliers; and assist with identification of contracts and unexpired leases and performing cost/benefit evaluations for possible elimination of some.
He will likely stick around at least until Jan. 22, when Quiksilver’s reorganization plan is scheduled to take effect. The court approved $175 million in debtor-in-possession financing on Oct. 15—$115 million from existing creditor Oaktree Capital Management LP’s affiliates to help fund operations while the company restructures, and $60 million from Bank of America NA, allowing Quiksilver to repay the debt it owed to the bank prior to the bankruptcy filing.
The financing plan is an update of the original version Quiksilver presented in September. Oaktree agreed to drop a $20 million breakup fee, making it easier for Quiksilver to continue to shop for a better deal. The Los Angeles-based private equity firm also narrowed its proposed lien to just the company’s domestic subsidiaries, excluding European and Asia-Pacific affiliates that aren’t part of the filing.
The “pledge of the foreign subsidiary stock,” presented in the original version of the plan, would have expired upon Quiksilver’s emergence from bankruptcy, according to the court documents.
Competing Offer
The committee representing unsecured creditors had introduced a competing financing offer from Brigade Capital Management LP in New York that likely prompted Oaktree to match some of its components.
The deal will enable Quiksilver to shed about $500 million in debt, including $279 million in senior notes, of which Oaktree owns a majority and plans to exchange for an equity share in the reorganized company. Unsecured creditors will split about $7.5 million and forgo more than $200 million Quiksilver owes them.
Brigade’s offer promised similar terms but would likely have led to the sale of Quiksilver’s assets instead of a “balance-sheet restructuring.” It didn’t, among other things, include an alternative backer for a “Boardriders Waiver”—Quiksilver’s guarantees on about $224 million worth of European unsecured notes, which Deutsche Bank AG issued to Quiksilver affiliate Boardriders SA in Luxembourg. Without it, “euro notes would be in default,” and its “European operations would be threatened with liquidation.”
“The committee fails to present a workable alternative deal and suggests that the debtors and their estates would be somehow benefitted by abandoning the proverbial bird in hand in favor of a naked sale process with no stalking horse bidder,” Quiksilver said in a filing with the court.
The company also labeled as a “red herring” the committee’s complaints about the lack of efforts to pursue strategic options other than a deal with Oaktree.
“While the debtors have invited the full participation of the committee in the marketing process, the committee’s advisors have elected to remain on the sidelines and attack the process for strategic litigation purposes. If the committee has suggestions regarding improvements to the process, the debtors are all ears.”
Subsidiaries
Oaktree’s plan calls for dissolution of operational subsidiaries DC Direct Inc., Fidra Inc., Mt. Waimea Inc., Q.S. Optics Inc., Quiksilver Entertainment Inc. and Quiksilver Wetsuits Inc.
Quiksilver stock, currently trading on the OTC Pink marketplace under the symbol “ZQKSQ,” in late January will “cease to be registered under the Securities Act or listed on a national securities exchange,” essentially bringing the company’s domestic assets under private ownership.
The terms of current Quiksilver board of directors members will also expire, and they will be replaced by a new board appointed by Oaktree. Bernd Beetz, chief executive of St. John Knits Inc. in Irvine, resigned from the board in September.
