New Boardriders Financing Sparks Lawsuit
Boardriders has received a round of new financing which has led to a lawsuit brought by some of its previous creditors.
To help it navigate the pandemic, the owner of Billabong, Quiksilver and RVCA received the fresh capital that now has priority over all other debt, according to news reports.
We are told the $150 million, including debt and equity, came from several sources including owner Oaktree Capital Management, French banks and the French government, and a handful of its previous lenders.
However, previous lenders that were not included in the new round are upset that the new debt has top-ranking collateral rights upon the old debt, which totaled approximately $450 million.
As a result, some of the original lenders filed a lawsuit Friday against Boardriders in the Supreme Court of New York.
The suit and the financing deal that sparked it is garnering a lot of attention in financial and legal circles because it is one of a small number of recent agreements that are rewriting the rules of the leveraged loan market, according to Bloomberg.
Bloomberg cited a controversial financing deal by Serta Simmons Bedding earlier this year. The company got $200 million of fresh capital from existing lenders. Those lenders jumped to the front of the line to be repaid if the company fell on hard times, pushing Serta Simmons’ other lenders further back, in a process known as priming, according to Bloomberg.
According to the story, a lot of lenders bargained away their rights over the past few years because they were desperate to generate higher returns during a decade of very low interest rates. Now they find themselves with little protection for their investments just as the pandemic is hurting many companies’ results.
“This is leaving them vulnerable to the kinds of hyper-aggressive moves witnessed over the past few months,” the story said.
Some believe a precedent has been set because a New York judge in the Serta case allowed the deal to go through despite the objection of other lenders.
SES reached out to Boardriders for comment, and they provided the following statement:
“Boardriders, Inc. has consummated a comprehensive recapitalization transaction with support from our revolving lender partners, a substantial majority of our term lenders, a syndicate of European banks and our equity sponsor. The recapitalization transactions meaningfully improves the Company’s liquidity and ability to weather the pandemic and return to pre-pandemic performance levels. The recapitalization transactions were permitted under all of our existing credit facilities and governing equity.”