New York Lender Acquires Stake in Quiksilver
Quiksilver has made a bold move by exchanging $140 million in debt with a New York–based lender for a large share of the clothing maker.
On Aug. 9, Quiksilver announced that the debt swap with Rhone Group LLC now makes Rhone the owner of nearly one-third of the company.
Rhone was given 31.1 million shares of Quiksilver common stock at an exchange rate of $4.50 a share. Shareholders approved the exchange in an Aug. 6 meeting, Quiksilver said in an announcement.
The debt reduction will immediately help Quiksilver’s earnings because the loan carried a hefty 15 percent interest rate. But the Huntington Beach, Calif.–based surfwear company—whose labels include Roxy, DC, Lib Tech and Hawk—still owes Rhone another $25 million, which it will pay off when it reworks its credit lines.
“We’re delighted to complete this debt-for-equity exchange as another important step toward further deleveraging our balance sheet. The transaction provides us with additional operating and financial flexibility,” said Bob McKnight, Quiksilver’s chairman, chief executive and president. “Since extending the original term loans to us a year ago, Rhone has become a major presence in our boardroom.”
Rhone will keep its two designated members on Quiksilver’s board of directors.
Quiksilver amassed a huge amount of debt after it paid $560 million in 2005 for French ski and apparel maker Rossignol. That purchase never became very profitable, and Quiksilver shed Rossignol in 2008 after Chartreuse & Mont Blanc purchased it for a mere $50 million. Quiksilver was left with about $1 billion in short- and long-term debt from the deal and operation of the ski maker.—Deborah Belgum
