Quiksilver, Inc. Vice President Bruce Thomas confirmed that the previously announced sale of the Rossignol Group is expected to close in early November.


The company indicated that key conditions which were required to close the transaction have largely been met after the buyer secured committed financing and the parties agreed to recast the terms of the sale due to the recent challenges in the global credit markets.

 

The revised transaction reduces the cash payment to Quiksilver upon closing from $98 million to $39 million and reduces the seller’s note from $32.6 million to $13.1 million. The transaction also allows Quiksilver to continue to distribute Rossignol apparel through the 2008/2009 winter season.

 

The parties may also extend the Rossignol apparel license and distribution arrangement upon mutual agreement. Together, these revisions to the transaction will cause a corresponding increase to the loss that Quiksilver expects to recognize upon the sale of Rossignol.

With committed financing in place, the completion of the sale transaction is only subject to final workers council advice and other customary closing conditions.


Rossignol’s workers council has already reviewed the originally proposed transaction and provided its requisite advice consistent with French law. Quiksilver expects that the workers council will complete its process in a timely manner, thus allowing for the close of the transaction in early November.

Quiksilver also announced that it had secured an amendment to its $91 million line of credit in Europe due to mature on October 31. Under terms of the amendment, Quiksilver will reimburse its European bank group $19.5 million on Oct. 31 and the remaining $71.8 million will be extended until March 14, 2009.


Quiksilver also stated that it expects to have approximately $100 million of available liquidity after the close of the Rossignol sale, net of payments due upon close of the transaction and net of other debt obligations due in fiscal 2008.

As previously disclosed, the company continues to evaluate potential financing alternatives and plans to seek additional financing. Potential sources of alternative funding include Quiksilver’s existing lenders, whether for short or long term financing, and the broader capital markets. In light of the current turmoil in the global capital markets, the company has expanded its review to include private equity investment capital and other strategic alternatives. Quiksilver has retained Morgan Stanley as its financial advisor to assist in this process.


The company noted that for accounting purposes it will perform its regular annual assessment of the value of its intangible assets as of Oct. 31, 2008 and that current market conditions and valuation metrics could cause an impairment in goodwill or other long-term intangible assets.


Any resulting impairment charge would be recorded as a non-cash expense in Quiksilver’s financial statements for the quarter and for the fiscal year ending Oct. 31, 2008 and would not affect its operations, cash flows or covenants associated with the company’s debt.

Quiksilver is scheduled to report financial results for its fourth quarter and fiscal year ending Oct. 31, 2008 on Dec. 18, 2008. Based on information currently available, the company also disclosed that it expects to achieve the consensus estimate of analysts tracked by Thomson First Call for income from continuing operations of 87 cents per share for fiscal 2008, excluding potential charges such as those mentioned above.