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Quiksilver files for Chapter 11 bankruptcy

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  • Quiksilver will likely use the bankruptcy process to shutter unprofitable stores - SES file photo

The U.S. subsidiary of Quiksilver filed for Chapter 11 bankruptcy this evening, and held a town hall meeting in Huntington Beach to inform employees about the developments.

The company is planning to reorganize by aligning with a new financial partner and reducing a chunk of its approximately $800 million in debt, decreasing its store count, and shedding undesirable contracts.

Quiksilver is partnering with Oaktree Capital Management, the private equity firm that has a 19.2% stake in Billabong. Oaktree will provide Quiksilver with $175 million in financing in concert with Bank of America to continue operations and restructure during the bankruptcy process.

The company said that money in addition to other existing sources of liquidity will be sufficient to fund its ongoing operations in the U.S. and abroad. The bankruptcy applies only to Quiksilver’s U.S. subsidiaries, the most troubled part of the company. The Asia Pacific and European regions are not part of the bankruptcy filing.

If the bankruptcy court approves the plan, Oaktree will also convert its current Quiksilver debt holdings, which Oaktree bought before the bankruptcy, to become the majority shareholder of the reorganized company. Oaktree currently owns 73% of Quiksilver’s most senior debt.


We are told that the desire is for the reorganized company to be private.

Oaktree Managing Director Matthew Wilson resigned his seat on the Billabong board of directors Monday, citing a possible conflict in Oaktree’s investment portfolio. It is unclear at this point what it will mean if Oaktree owns a large stake in the industry’s two biggest companies.

During the bankruptcy process, Quiksilver could eliminate a lot of its debt, break leases for unprofitable stores, and potentially end licensing agreements, several of which have been unpopular with retailers and damaging to the brands. As a private company with less pressure to meet quarterly sales, Quiksilver could also clean up its distribution and stop doing business with discounters like Costco and Ross Dress for Less.

Quiksilver CEO Pierre Agnes told us that while it was a tough decision for the company to make, he believes it is the best way to right size the Americas business, return it to its roots and create a more profitable, healthy company along the way.

SES learned last week that Quiksilver had stopped severance payments to former employees and has not been paying its vendors. The company also laid off 77 employees in the Americas region on Friday.


In addition to vendors and former employees that were still receiving severance payments, others that could potentially lose a great deal in the bankruptcy are company shareholders, including private equity firm Rhone, which invested $150 million in Quiksilver during an earlier liquidity crisis and owns 29% of outstanding stock.

Quiksilver Chairman Bob McKnight could also lose the value of his 3.3 million shares, which equate to 1.9% of outstanding stock.

The company has faced crisis after crisis over the past several years, ever since the fateful decision to buy declining ski company Rossignol in 2005. Prior to the acquisition, the company recorded growing sales and profits.

The company borrowed $400 million to fund part of the acquisition, which greatly increased its debt load. In 2004, before it bought Rossignol, Quiksilver had $173.5 million in long-term debt, according to its annual report. The following year, it had $691 million.

The company’s financial position became precarious as the acquisition quickly became a bust. A record warm winter led to a 22% percent fall in ski and snowboard sales in 2007. A year or two later, the global recession began impacting the rest of Quiksilver’s business, which Chairman Bob McKnight had once declared “recession proof.”

After acquiring Rossignol for about $320 million, Quiksilver unloaded the brand in 2008 for 40 million Euros to Chartreuse & Mont Blanc.

The once profitable company recorded a net loss in 2007, and the losses have continued every year since then. In 2014, Quiksilver had a net loss of $309.3 million.

Currently, the company’s market cap is $77.4 million – a stunning number given the worldwide recognition of the Quiksilver, Roxy and DC brands and the fact that the company recorded $1.5 billion in revenue in 2014.

Many buyers have looked at acquiring the company and its valuable brands but have walked away - quickly - after studying the balance sheet and the challenging financial position, we are told.

Quiksilver also made a series of bad decisions in the past few years, including licensing the kids business and making too many radical operational changes at the same time, which hurt sales and disrupted deliveries. We are told the new leadership team has been surprised by the inefficiencies in the Americas operation and the questionable distribution choices of the past.

Quiksilver currently has about $820 million in debt. It paid $76 million in interest expense alone in 2014. As sales declined, it became increasingly difficult to invest in the business while making the interest payments, let alone pay down principal.

While Oaktree and Quiksilver have a plan as they head into the court, bankruptcies are often messy and complicated and there are no guarantees what will happen. There are likely to be many potential bargain hunters looking to pick up the company’s brands for cheap.

By offering the company financing during the bankruptcy, Oaktree does get more leverage, and Oaktree has been buying up Quiksilver debt. Oaktree is also a very sophisticated financial firm that knows the ins and outs of acquiring companies during the bankruptcy process.

After the filing, Quiksilver is sending messages to retailers and employees saying that business will continue as usual. The bankruptcy restructuring process is expected to take three to six months.

The question is will core retailers in the U.S., who backed away from the brands during former CEO Andy Mooney’s reign, continue to cut their orders or will they hold out hope that Quiksilver will emerge stronger with cleaner distribution and a realistic business plan in the future.

One factor that may give them confidence is the performance and strong core strategy of the Billabong group of brands since Oaktree became involved in that company.

On the other hand, many are weary of the strategy and management changes and ongoing drama at Quiksilver, and the uncertainty that comes with a bankruptcy filing could lead them to give more space to other brands. The competition, to be sure, will try to use this new development to take Quiksilver’s space in stores just as they did in the unsettled time during Andy Mooney's reign.

However, Quiksilver is telling retailers that with the financing from Oaktree during the bankruptcy process, the company will be able to deliver spring product on time and will continue its marketing plans and event sponsorships.

The company believes that by wiping away its debts and with the new investment, it will return to doing what it used to do best - being the authentic market leader in the action sports space. During the past few years, Quiksilver gave up that title to Vans, which is now industry's biggest company with over $2 billion in sales.

Quiksilver's official press release is below.

Quiksilver U.S. Launches Pre-Arranged Chapter 11 Restructuring With Support Of 73% of U.S. Secured Noteholders

Foreign Subsidiaries Unaffected By Chapter 11 Filing

Announces $175 million DIP financing and Plan Sponsor Agreement with affiliates of Oaktree Capital Management, L.P.

HUNTINGTON BEACH, Calif. (September 8, 2015) – Quiksilver, Inc. (NYSE:ZQK) (the “Company”) today announced that it commenced voluntary proceedings for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) for its U.S. subsidiaries. The chapter 11 filing, which is supported by 73% of the Company’s senior most class of debt, will facilitate Quiksilver’s financial and operational restructuring, which is designed to restore the Company to long-term financial health.

The Company’s European and Asia-Pacific businesses and operations remain strong and are not part of this filing. Additionally, holders of the Company’s Eurobonds sufficient to waive any technical default arising from the filling have agreed to allow the Company to reorganize its U.S. operations in chapter 11.

Following the filing, Quiksilver will continue to operate in the ordinary course of business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court. Contemporaneously with the filing, the Company has requested that the Bankruptcy Court approve $175 million in new debtor-in-possession financing ("DIP") with affiliates of Oaktree Capital Management, L.P. (“Oaktree”) and Bank of America, N.A. The Company anticipates that such financing, in conjunction with other existing sources of liquidity, will be more than sufficient to fund its ongoing operations in the U.S. and abroad. The Company also requested various forms of “first day” relief from the Bankruptcy Court to ease the U.S. subsidiaries’ transition into chapter 11 and protect its stakeholders and customers.

The Plan Sponsor Agreement (“PSA”) with Oaktree provides a comprehensive blueprint for the Company’s emergence from chapter 11 as a going concern pursuant to a plan of reorganization, under which Oaktree has agreed to provide all necessary funding for the chapter 11 process and will convert its substantial debt holdings into a majority of the stock in the reorganized Company on exit. The PSA contains certain conditions, including confirmation of a plan of reorganization by the Bankruptcy Court.

Oaktree is a leader among global investment managers specializing in alternative investments, with over $100 billion in assets under management. The firm, which emphasizes a value-oriented and risk controlled approach to investments, has a proven track record of success assisting companies through the restructuring process and in the action sports industry.

“After careful consideration, we have taken this difficult but necessary step to secure a bright future for Quiksilver,” said Pierre Agnes, Chief Executive Officer of Quiksilver. “With the protections afforded by the Bankruptcy Code and the financing provided by Oaktree, we will not only be able to satisfy our ongoing obligations to customers, vendors and employees, but we will also have the flexibility needed to complete the turnaround of our U.S. operations and re-establish Quiksilver as the leader in the action sports industry. Our fresh capital structure, with a very low level of debt for our industry, will enable us to invest in and reinvigorate our brands and products. We are confident we will emerge a stronger business, better positioned to grow and prosper into the future.”

Agnes continued: “Oaktree’s financial strength and expertise, deep experience working with companies in situations similar to ours, and successful history operating in our industry make them an exceptional partner for us going forward. We value our wholesale customers as well as our vendors and suppliers and appreciate their support through this process. In addition, we thank our passionate and dedicated employees and athletes who remain our greatest assets. Quiksilver is, and as a result of this process will continue to be, an iconic leader in the action sports market.”

In connection with the filing, the Company intends to continue its existing store closing program to rationalize its store base in the Americas. As is customary, it is anticipated that the Bankruptcy Court will consider the Company’s request for “first day” relief promptly. The requested relief includes requests for the authority to make wage and salary payments, continue various benefits for employees, and honor certain customer programs, such as gift cards and returns on merchandise purchased prior to the bankruptcy filing.

Skadden, Arps, Slate, Meagher & Flom LLP is serving as the Company's legal advisor, FTI Consulting, Inc. as its restructuring advisor, and Peter J. Solomon Company as its investment banker.

The Company indicated that it expects to provide additional details with respect to the chapter 11 filing as soon as they are available. Court filings and other documents related to the reorganization proceedings are available on a separate website administered by the Company's claims agent, KCC, at, or, the official Bankruptcy Court website.

About Quiksilver:

Quiksilver, Inc., one of the world’s leading outdoor sports lifestyle companies, designs, produces and distributes branded apparel, footwear and accessories. The Company’s apparel and footwear brands, inspired by a passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with its boardriding culture and heritage. The Company’s Quiksilver, Roxy, and DC brands have authentic roots and heritage in surf, snow and skate. The Company’s products are sold in more than 100 countries in a wide range of distribution, including surf shops, skate shops, snow shops, its proprietary Boardriders shops and other Company-owned retail stores, other specialty stores, select department stores and through various e-commerce channels. For additional information, please visit our brand websites at, and









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