Surfwear icon Billabong expected to announce asset sales

The Billabong surf wear shop on Queen Street, Auckland. Photo / Natalie Slade

Beleaguered surfwear icon Billabong is expected to announce asset sales and new loans within days as it fights to overcome weak revenues and oversized debt.

Billabong shares went into a trading halt on Tuesday, pending an announcement by the company, due by Thursday.

In a statement to the Australian Securities Exchange, the company said it would make an announcement in the coming days regarding alternative refinancing and asset sale transactions.

The move comes after failed talks with two private equity groups, Sycamore Partners and another including Altamont Capital Partners regarding a possible takeover.

In a statement in June, Billabong said it was in talks with both groups regarding possible refinancing and asset sales.

IG market strategist Evan Lucas said the company desperately needed to clear debt from its books.

The company has a debt facility of $400 million due by July 2014, which needs to be refinanced.

"They are going to have to restructure that and they are going to have to get some sort of loans on the book and some debt to help them go through," he said.

Mr Lucas said the company is likely to part with some of its assets, with Canadian retailer West 49 expected to be first cab off the rank.

"West 49 is pretty much guaranteed to be in the gun," he said.

"They are going to make a huge loss on that but their balance sheet is so far out of whack that they just have to do this."

Mr Lucas said Billabong may also need to part with some of its brands, such as US label Von Zipper.

But he said Billabong's real problem was that its revenues were simply too low, with pre-tax earnings for the 2012/2013 financial year expected to be somewhere around $70 million.

"That is just too small for the amount of money they currently have on their balance sheet," he said.

Billabong CEO Laura Inman recently said trading conditions have turned a corner for the company's US operations, but Mr Lucas said the real problem was Europe, where it was struggling to keep up with the likes of Zara, H&M and Topshop.

The iconic surfwear brand has suffered a humiliating fall from grace in recent years, as investors watched its share price fall from a high of around $14 in 2007 to as low as 12.5 cents last month.

In the past 18 months the company has been the subject of six takeover offers, all of which have fallen through.

Billabong shares were trading at 25 cents when the company went into a trading halt on Tuesday.

- AAP