‘Kathmandu has ensured it remains well capitalised through these uncertain times and in a stronger position to recover once market conditions improve. We were proud to put our expertise to work for such an iconic New Zealand brand.’

David Watt, Managing Director, Investment Banking, Jarden

The year 2020 was set to be a watershed in the history of Kiwi retail success story Kathmandu. With the acquisition late last year of Australian sportswear label Rip Curl and US hiking boots brand Oboz, the 33-year-old apparel company was entering a bold new era.

By February, its diversification strategy was already showing promise, with global sales growth across all three brands and significant online retail growth, despite the summer bushfires that had ravaged Australia, a key market.

And then came March, bringing with it a pandemic and among the most challenging conditions the global retail sector has ever faced. With its stores shuttered across the world, online trading restricted and international travel all but halted, the NZX and ASX-listed company decided to take pre-emptive action to fortify its balance sheet and ensure it remained strongly capitalised.

As well as cutting costs, deferring capital spending and negotiating with banks to secure a relaxation on covenants, Kathmandu decided to undertake an equity raise of $207 million in April to deleverage its balance sheet, provide liquidity and fund medium-term operations.

Jarden came on board to advise Kathmandu as joint lead manager and underwriter, recommending a $30 million placement and $177 million accelerated non-renounceable entitlement offer. This type of offer had not previously been used in New Zealand, but it afforded a swifter and more certain completion of the raise for the Kathmandu team and its shareholders.

‘It was unfortunate that the global onset of the COVID-19 pandemic hit Kathmandu so soon after its acquisition of Rip Curl, at a time its debt levels were elevated, stretching financial liquidity as we entered a period of retail store closures around the world,’ says Jarden’s Head of Equity Capital Markets, Henry Chung.

‘A concerted effort was made to achieve “first-mover” advantage by getting to market ahead of other recapitalisation raises, as we were conscious that investors might be somewhat cautious during a period of such uncertainty.’

The chosen structure, which was fully underwritten, provided the company and its stakeholders with certainty of proceeds. Despite Kathmandu’s 16% shareholder Briscoes Group electing not to participate, selective ‘wall crossing’ and engagement with high-quality institutions prior to and on the day of launch brought momentum to the raise, ultimately leading to a large excess of institutional demand. Allocations favoured institutions that had previously been supportive of Kathmandu or were well-respected, long-term holders. This in turn drove positive retail take-up. The equity raise was successfully completed on April 22.

‘This decisive action leaves Kathmandu supported by a strong balance sheet as it mitigates COVID-19 impacts,’ says Henry Chung. ‘With some of the financial pressures alleviated, the group has ensured it remains well capitalised through these uncertain times and in a stronger position to recover once market conditions improve. We were proud to put our expertise to work for such an iconic New Zealand brand.’