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Quiksilver and private equity firm Rhone are proposing a debt for equity swap that could lead to Rhone owning 30% of Quiksilver’s outstanding shares.
Rhone came to the rescue of cash-strapped Quiksilver last year by loaning the company $150 million at a steep 15% interest rate.
At the time, Rhone also acquired warrants to buy some Quiksilver stock at roughly $1.86 per share.
Here’s a summary of the deal proposed Tuesday, which requires stockholder approval:
Rhone will exchange $75 million of the outstanding loan for 16.7 million shares of stock at the exchange rate of $4.50.
Quiksilver has the option to require Rhone to exchange an additional $65 million of the loan balance for additional shares at the same price within 60 days of the first deal being signed. Quiksilver said it will pursue other equity financing options during the period to consumate this option.
If the exchange proposed today is approved, Rhone will own 24.2% of outstanding shares, in addition to the warrants it previously acquired. If Quiksilver is able to exercise its option and exchange more shares to pay down the additional $65 million, Rhone will own 30%.
If approved by shareholders, the exchanges are expected to close by the end of Quiksilver’s fiscal year, Oct. 31.
All told, the deal could decrease Quiksilver’s debt by $140 million. Quiksilver reported net debt of $733 million at the quarter ended April 30.
On Page 2: The press release.