This was published 9 years ago
Billabong International shareholder pledges support for chief executive plan
By Sue Mitchell and Gretchen Friemann
US hedge fund Coastal Capital has denied that it sold 20 million shares in Billabong International on Tuesday and says it fully supports chief executive Neil Fiske's turnaround plan.
"We were not a participant in yesterday's large trade in any way shape or form (and) didn't sell a single share yesterday," said Coastal managing director Todd Plutsky in response to a story in Fairfax Media.
Billabong International's turnaround plans are showing early signs of working.Credit: Bloomberg
Mr Plutsky said that while Coastal had made some incremental adjustments to its stake in Billabong over the last several months, buying and selling shares for portfolio management reasons, the fund remained very supportive of Mr Fiske and his turnaround plan and continued to own many shares.
Coastal acquired a 5 per cent take in Billabong in August last year, when the shares were trading around 55¢, and lifted its stake to 7.6 per cent last October, ahead of a shareholder meeting at which it attempted to oust most of the board. Billabong shareholders ultimately voted against Coastal's attempt to throw chairman Ian Pollard and two non-executive directors off the board and rejected the election of two Coastal representatives, Mr Plutsky and Vlad Artamonov.
Coastal's stake dipped below the 5 per cent substantial shareholding threshold last month.
Mr Plutsky said Coastal was encouraged by Billabong's recent earnings presentation, during which Mr Fiske indicated meaningful signs of early progress in his turnaround plan.
Underlying earnings from Billabong's Asia-Pacific business rose 8 per cent in 2014 and losses narrowed in Europe, but earnings in the Americas plunged by half, dragging group earnings before one-off costs down 26 per cent to $52.5 million.
Mr Fiske said there were early signs that key brands were returning to growth in major markets, with forward orders for the Billabong and RVCA brands rising in the Americas.
Since the profit announcement Billabong shares have risen from 56¢ to as high as 68.5¢, triggering renewed interest from investors.
"The entry of new investors . . . at higher share prices is clearly a reflection of that success in our opinion," Mr Plutsky said.
He denied that Coastal was an "opportunist", saying the fund had been a long-term shareholder in Billabong and had done nothing but try to improve the situation for all Billabong shareholders.
He pointed to Coastal's campaign to force the board to drop a $325 million recapitalisation plan from US private equity fund Altamont in favour of a less expensive $298 million refinancing plan from rival US funds Centerbridge and Oaktree.
"Our shareholder advocacy was extremely successful in convincing the Billabong board to switch proposals from a terrible Altamont proposal to a substantially improved Oaktree/Centerbridge transaction," Mr Plutsky said.
"We think the facts of the turnaround's nascent success and the share price rise from the low teens to today's levels validates the wonderful success of Coastal's efforts and the benefits of these efforts to all shareholders who have stuck with the company," he said.