Billabong investors back $135m share issue Billabong shareholders approved the $135m share issue at an EGM on Thursday. US hedge funds Oaktree Capital and Centerbidge Partners are set to take control of 40 per cent of surf and skate wear retailer Billabong International after shareholders overwhelmingly approved a $135 million share issue. At an extraordinary general meeting on Thursday, shareholders approved the issue of 329 million shares at 41¢ a piece to Oaktree and Centerbridge, which emerged the victors in an 18-month auction for the company after offering a $386 million debt and equity rescue package last September. About 90 per cent of the shares and proxies voted were in favour of the issue, a Billabong spokesman said. Billabong chairman Ian Pollard told shareholders the share issue and a subsequent rights issue would give the retailer the financial structure it needed to complete a turnaround "in a manner and speed which will benefit all shareholders." However, he left shareholders in little doubt about the challenges ahead for the company, which lost $859.5 million last financial year after writing off the value of brands by over $600 million. "We still face a number of hurdles in our reported profitability and expect this year's results to include more significant costs associated with reinvesting in and restructuring the business," Mr Pollard said. The trading environment remained challenging and the first-half profit results would reflect that, he said. While the performance of the Australasian and European businesses had improved slightly, trading in the Americas remained weak. "There remains much work to be done and few of the elements of the turnaround are as yet impacting on the company's financial performance," Mr Pollard said. "Support of today's resolutions is critical in providing our new executive leadership team with the financial flexibility to turn around our business operations," he said. Shareholders also gave the green light for the issue of up to 178 million shares at 28¢ each through a $50 million rights issue and the issue of 29.6 million free options with an exercise price of 50¢ each. The proceeds of the share placement and rights issue will be used to repay $185 million of the $386 million financing package negotiated with Oaktree and Centerbridge. That new debt was used in part to repay a $350 million loan from the Altamont consortium, a failed bidder for Billabong. Shareholders approved the equity issues even though an independent expert's report in December found they were unfair for existing shareholders. The issues would allow Billabong to lower its gearing and financial risk, improve its profitability and free cash flow and provide "breathing space" for Billabong to stabilise and rebuild the business, the report said. The $50 million rights issue, expected to kick off on February 21, will enable existing shareholders to buy shares at a big discount to the entry price paid by Oaktree and Centerbridge. Nevertheless, existing shareholders will be significantly diluted. If the rights issue raises the full $50 million, Centerbridge and Oaktree's stake will be reduced from 40.8 per cent to 33.9 per cent, as they will not be participating in the rights issue. Billabong shares are now trading at 61¢ compared with the 41¢ a share that Oaktree and Centerbridge will pay for their stake.