Jamie Salter-led Authentic Brands Group (ABG) may be on the verge of landing another big fish for its portfolio of brands. Recent developments suggest Oaktree Capital-controlled Boardriders is on the verge of selling its portfolio of largely surf-focused brands, led by Quiksilver and Billabong, and ABG appears in a position to be the winning bidder after months of speculation on who might acquire the company.
This week, Moody’s assigned a B1 rating to ABG Intermediate Holdings senior secured credit facilities, including an extended $240 million revolver, a $1.525 billion term loan and a $600 million delayed draw term with all loans due in 2028. In its statement, the credit ratings agency said ABG intends to use proceeds from the new term facility to refinance its existing senior term credit facility with the proceeds from the delayed draw term earmarked to finance a potential acquisition of Boardriders, Inc.
Eleven months ago, Moody’s downgraded Boardriders debt ratings related to cash outflows created by the company’s investments in the business, weak credit metrics, and near-term debt maturities, but changed its outlook to stable from negative.
“Since the acquisition of Billabong in 2018 (for a reported $155 million) in 2018, the company has generally underperformed its targets and generated meaningful negative free cash flow driven by restructuring and working capital investments,” the credit ratings service wrote at the time, citing Boardriders’ adjusted debt/Ebitda of slightly under 8x on Jan. 31, 2022, but also suggesting improving financial metrics as 2022 progressed due to recovering consumer demand, price increases and foreign exchange hedges.
Since that report, Boardriders has restructured its organization to simplify operations and reduce costs. The efforts, which may have been seen as necessary to make the company more attractive to potential suitors, have included the elimination of 170 positions worldwide in mid-November and lowered brand spending throughout the year as the company dealt with overhanging headwinds from the pandemic and global economic downturn. Boardriders, whose portfolio also includes the RVCA, Element and VonZipper brands, reportedly generated $1.7 billion in annual sales for the 12 months that ended Oct. 31, 2022.
If Oaktree Capital does indeed unload Boardriders to ABG or someone else, it will end the investment firm’s decade-long ties to the brands in its portfolio. In 2013, Oaktree received a 19 percent stake in Billabong after it provided a rescue financing package to the company. Two years later, the investment firm gained control of Boardriders’ predecessor, Quiksilver, in a restructuring of the bankrupt company that also included the Roxy and DC Shoes businesses. And in Jan. 2018, Oaktree brought the two powerhouse surf brands together with its acquisition of the remaining 80 percent of Billabong Intl. Ltd. for a reported enterprise value of A$380 million ($259.3m) or 7.4x Billabong’s 2017 EBITDA.
ABG re-emerged as Boardriders’ primary suitor earlier this month when an exclusivity period for Bluestar Alliance, parent of the Hurley brand, expired without a deal following extensive due diligence. While it’s a leading global licensing company with more than 40 brands in its stable and more than $950 million in annual revenues, ABG will have some obstacles to overcome if it reels in Boardriders. The largest problem will likely be what to do with Boardriders’ global network of retail leases, which were at 630 across 28 countries in April 2018.
