Billabong has rejected a buy-out offer from hedge fund investors, saying the proposal was unacceptable.

Hedge fund firms Centerbridge Partners and Oaktree Capital tried to wedge themselves into the Billabong contest, after the company agreed on Tuesday to a refinancing and asset-sale proposal.

Billabong released a statement saying the proposal had been received after an "exhaustive process" culminating in a binding agreement for a bridge loan facility and the sale of various assets.

Upon closer inspection though, Billabong found the agreement to be unconditional and unacceptable. The Centerbridge/Oaktree deal would have seen the two funds complete a debt-for-equity swap, leaving $100 million of debt in the Billabong business. They would have emerged with a 61.2 per cent stake in exchange for $189 million of Billabong debt, preserving the equity value of existing shareholders with an indicative share value of 25c.

Billabong's shares closed up 3c at 36.5c yesterday. The company has not yet given word on its next move forward, saying there would be store closures but remaining silent on the subject of job losses.