Bluestar Group (BLU020) [Archive] - Page 2

JBZ

17-07-2011, 07:31 PM

[QUOTE=Balance;351511]http://www.stuff.co.nz/business/industries/5296472/Investors-risk-scalping-in-Blue-Star-deal

Investors risk scalping in Blue Star deal
ROB STOCK Last updated 05:00 17/07/2011

The haircut mum and dad Blue Star bondholders are being offered could turn into a full scalping.

....

No changes are needed to the board, he says, blaming instead the financial crisis and decline in the print market.

"We have worked pretty hard on a strategy," he says. "We just need more time."

-------------
"We have worked pretty hard on a strategy," he says. "We just need more time."

Chris is right in terms of having worked hard, but for whom? Obviously not for bond holders!

He is also right in that "We just need more time" so that CHAMP can exit Blue Star with some cash, leaving nothing to bond holders!

He is wrong saying that "No changes are needed to the board". Indeed, the first thing needed is to change the board and restructure the business. Get rid of the money-losing part of Blue Star! Do not blame global financial crisis any more!

Could not agree more, The destruction of bondholders has gone far enough! They should be higer in the pecking order with regards to repayment of what is owed to them.

marcus_milo

17-07-2011, 11:07 PM

It is a shame that the bondholders were not involved earlier in the process, as I think we could collectively come up with better options. I guess I can understand that management are overwealmed trying to deal with the debt issue and at the same time keep the business ticking at this critical time.

Having now read the documentation, I like the proposal even less, and will definitely be voting against it. There are just way too many concessions being giving by the bond holders, that leave us exposed to underhanded dealings by CHAMP. Particularly the weakening of the Trustee´s powers, in relation to the selling off of operational units.

From what I see the print industry is going through a period of change, and consolidation. Several operations have already gone under, and BS has managed to pick up contracts from that. In my opinion the winner will ultimately be the company with the deepest pockets.

The banks are obviously willing the support the current management initiatives, and give the company 2 years to achieve this. But to do so require that the current bond conditions have to change. Obviously they dont want a default at the end of 2012 when the bonds mature.

Whether we like it or not, the bond holders have to become active investors in the company, if we are to have any hope of recovering any money. Towards that end, we need to make it clear that we are willing to work with the banks and the management, to help the company succeed. I would even personally be prepared to inject more money into the company, at the same terms as they are offering CHAMP for their 15M.

So my counter proposal would be:

a) extend the bond for 2 years, with the exact same conditions, except drop the 13% penalty interest conditions
b) existing interest owed continues to accrue
c) bond holders contribute 7.5M new investment, matched by CHAMP (i.e. they would also only contribute 7.5M instead of 15M) with the same conditions as the current proposed CHAMP loan

Newman

18-07-2011, 09:27 AM

It is a shame that the bondholders were not involved earlier in the process, as I think we could collectively come up with better options. I guess I can understand that management are overwealmed trying to deal with the debt issue and at the same time keep the business ticking at this critical time.

...

Whether we like it or not, the bond holders have to become active investors in the company, if we are to have any hope of recovering any money. Towards that end, we need to make it clear that we are willing to work with the banks and the management, to help the company succeed. I would even personally be prepared to inject more money into the company, at the same terms as they are offering CHAMP for their 15M.

So my counter proposal would be:

a) extend the bond for 2 years, with the exact same conditions, except drop the 13% penalty interest conditions
b) existing interest owed continues to accrue
c) bond holders contribute 7.5M new investment, matched by CHAMP (i.e. they would also only contribute 7.5M instead of 15M) with the same conditions as the current proposed CHAMP loan

For bond holders to become active investors in BS they first have to vote against the amended bond offer. Otherwise they do not have a chance to negotiate.

Your count proposal is sensible. I have further suggestion: convert a part or whole bonds and interest into shares and list the shares on the market so that those who do not want take a responsibility (possibly include CHAMP) could exit BS. T. Sturgess and the management can have a large percentages of the shares if they have confidence in the company.

Newman

18-07-2011, 12:04 PM

Could sharetrader set up a vote survey to allow bond holders to indicate their intention of voting for or against the amended bond offer? It would be even better if the number of bonds could be disclosed when people vote.

Romulus

18-07-2011, 12:23 PM

Great Idea, I hold 240t and going on what I seen and heard, I intend to vote against it. Because we are many and fragmented it is very easy for them to pick us off. I will ask my broker for top 100 shareholder list and see who big holders are. Appreciate those providing rational insight and useful comments- keep up the good work.

Romulus

18-07-2011, 12:42 PM

List of top 100 holders in BLU020 as atCur: 30-Jun-2011 - Nominees & Custodians holders will probably made up of subset of smaller holders for Fin advisers, bank clients etc
Shareholders Shares Held(%)
FNZ CUSTODIANS LIMITED 7230000 6.8857
NATIONAL NOMINEES NEW ZEALAND LIMITED - NZCSD <NNLZ90> 3531000 3.3629
INVESTMENT CUSTODIAL SERVICES LIMITED <A/C C> 2714000 2.5848
ASTERON LIFE LIMITED - NZCSD <NORWMF> 2340000 2.2286
TAPPENDEN HOLDINGS LIMITED 2331000 2.22
FNZ CUSTODIANS LIMITED <DTA NON RESIDENT A/C> 2206000 2.101
FORSYTH BARR CUSTODIANS LIMITED <1-28> 1428000 1.36
CLEARFIELD CONSULTING LIMITED 1128000 1.0743
CUSTODIAL SERVICES LIMITED <A/C 3> 1119000 1.0657
CUSTODIAL SERVICES LIMITED <A/C 2> 1097000 1.0448
TEA CUSTODIANS LIMITED - NZCSD <TEAC40> 1000000 0.9524
CUSTODIAL SERVICES LIMITED <A/C 18> 833000 0.7933
FNZ CUSTODIANS LIMITED <DRP NZ A/C> 686000 0.6533
HSBC NOMINEES (NEW ZEALAND) LIMITED - NZCSD <HKBN90> 606000 0.5771
FREDERICK GARNET ADAMS & ROSENA ELIZABETH ADAMS <FG & RE ADAMS 2004 A/C> 516000 0.4914
NEIL SYDNEY COTTLE & MARILYN FRANCES COTTLE & POLSON HIGGS NOMINEES LIMITED <... 500000 0.4762
LEON ROBERT IDOINE & MARY ALICE IDOINE 500000 0.4762
PRESBYTERIAN SUPPORT SERVICES (SOUTH CANTERBURY) INCORPORATED 500000 0.4762
QUASAR TREASURY LIMITED 450000 0.4286
MICHAEL ANTHONY CONNOR 445000 0.4238
DAVID ALEXANDER BALLANTYNE & ROBYN LOUISE BALLANTYNE <THE CONSTELLATION A/C> 418000 0.3981
CITIBANK NOMINEES (NEW ZEALAND) LIMITED - NZCSD <CNOM90> 416000 0.3962
JBWERE (NZ) NOMINEES LIMITED <A/C 31169> 405000 0.3857
CUSTODIAL SERVICES LIMITED <A/C 4> 335000 0.319
ASB NOMINEES LIMITED <677680 A/C> 311000 0.2962
MANCHESTER UNITY FRIENDLY SOCIETY 300000 0.2857
SOMSMITH NOMINEES LIMITED <17121 A/C> 300000 0.2857
JBWERE (NZ) NOMINEES LIMITED <A/C 43294> 280000 0.2667
JOANNA MARY BROWN 256000 0.2438
ESTATE JOHN IAN SUTHERLAND 250000 0.2381
TRIBAL NEW ZEALAND TRADERS LIMITED 247000 0.2352
HERITAGE FINANCIAL SERVICES LIMITED 220000 0.2095
TIMOTHY PETER ROBINSON & ADRIENNE ELIZABETH ROBINSON & ROBIN MONCREIF OLIVER ... 215000 0.2048
LEVERAGED EQUITIES FINANCE LIMITED <TAX EXEMPT CASH> 213000 0.2029
BARRY COLE & DIANNE COLE 200000 0.1905
CUSTODIAL SERVICES LIMITED <A/C 16> 200000 0.1905
GEOFFREY FRANKLIN HAWKINS & CAROLE ANNE HAWKINS 200000 0.1905
JBWERE (NZ) NOMINEES LIMITED <A/C 31872> 200000 0.1905
JBWERE (NZ) NOMINEES LIMITED <A/C 31873> 200000 0.1905
JBWERE (NZ) NOMINEES LIMITED <51824 A/C> 200000 0.1905
ALISTAIR ROSS JONES & GILLIAN KEVENTER JONES & LLOYD EVANS <ERISKAY A/C> 200000 0.1905
KATHRYN MAY KELLY & DAVID ANDERSON SMITH <KELLY DICKISON A/C> 200000 0.1905
DAVID ANDERSON SMITH & GRAEME ALBERT SMAILL <LOGAN LEITH NO 2 A/C> 200000 0.1905
JOHN ROSS STANBURY & NANCY BERTHA STANBURY 200000 0.1905
SUTHERLAND SELF HELP TRUST NOMINEES LIMITED 200000 0.1905
BRUCE CLARK TAYLOR & LINSEY-ANN TAYLOR <TNT A/C> 200000 0.1905
WAIAPU BOARD OF DIOCESAN TRUSTEES INC 200000 0.1905
ROBERT NIGEL FRASER & JENNY CAROLINE FRASER & JAMES HARRY FRASER <HEATHFIELD ... 197000 0.1876
AORANGI SECURITIES LIMITED (IN STATUTORY MANAGEMENT) 196000 0.1867
MARK WILLIAM STERN 187000 0.1781
JBWERE (NZ) NOMINEES LIMITED <A/C 44106> 180000 0.1714
FORSYTH BARR CUSTODIANS LIMITED <1-33> 171000 0.1629
JUDITH ANN GAMBLE & JOHN ANTHONY GAMBLE 150000 0.1429
JBWERE (NZ) NOMINEES LIMITED <A/C 32000> 150000 0.1429
JBWERE (NZ) NOMINEES LIMITED <A/C 32108> 150000 0.1429
MICHAEL DAVID LYNAM & IRENE MARGARET LYNAM & NAPIER INDEPENDENT TRUSTEES LIMI... 150000 0.1429
PROJECTS RESOURCES LIMITED 150000 0.1429
NANCY LEE RICK 150000 0.1429
SARGOOD BEQUEST NOMINEE LIMITED 150000 0.1429
ANTHONY PAUL SEETO & NICOLA JEAN GREER 150000 0.1429
JAN ELIZABETH STUDHOLME & WILLIAM PAUL STUDHOLME & THOMAS JAMES STUDHOLME <CH... 150000 0.1429
ESTATE BARRY ARTHUR WAITE 150000 0.1429
MICHAEL GRAY WARRINGTON & WENDY MARIE WARRINGTON & SUZANNE GAYE MCPHERSON <WA... 150000 0.1429
YIBING HE 148000 0.141
GRAHAM MICHAEL QUIRKE & ROSALIE ELLEN QUIRKE & WILLIAM DUNCAN MACDONALD <QUIR... 146000 0.139
DAVID SCOTT HUDSON & ANNA ELISABETH PASMAN & MWL TRUSTEE COMPANY LIMITED <HUD... 141000 0.1343
E-MATERIALS LIMITED 140000 0.1333
TECK MING YONG & YUET KENG SEE & HWEI YUIN YONG 140000 0.1333
SOMSMITH NOMINEES LIMITED <15109 A/C> 132000 0.1257
CLEARFIELD KNOWLEDGE SOLUTIONS LIMITED 130000 0.1238
JBWERE (NZ) NOMINEES LIMITED <A/C 31049> 130000 0.1238
JOHN LOCKIE STEWART & MEGHANN PATRICIA STEWART & IAN JAMES STEWART <STEWART F... 128000 0.1219
ALAN RUSSELL HOUNSELL & JILL ALISON ANNE HOUNSELL & ROGER JOHN WYATT <J & A H... 127000 0.121
INVESTMENT CUSTODIAL SERVICES LIMITED <990027419> 125000 0.119
CAROLE LARRAINE HUTCHINSON & JOSEPH PETER BORICH <CAROLE HUTCHINSON FAMILY A/C> 122000 0.1162
PAUL DYSON & PATRICIA DYSON 120000 0.1143
ANTHONY PAUL SEETO 120000 0.1143
CHRISTOPHER DAN WILLIAMS & DONALD JAMES HIGGINS <CLUNY A/C> 120000 0.1143
FORSYTH BARR CUSTODIANS LIMITED <1-30> 118000 0.1124
SOMSMITH NOMINEES LIMITED <A/C 70591> 116000 0.1105
ASB NOMINEES LIMITED <933671 ML A/C> 110000 0.1048
DAVID GORDON WILSON & JOCELYN ETHEL WILSON 110000 0.1048
PRIVATE NOMINEES LIMITED <RESIDENTS A/C> 106000 0.101
BLUE STAR GROUP LIMITED 105000 0.1
DIANE MARGARET RENWICK 105000 0.1
ALDER SERVICES LIMITED 100000 0.0952
CHRISTOPHER HOWARD ALLDRED & SHONA JOAN ALLDRED <A/C ALLDRED EDUCATION> 100000 0.0952
BRIAN LAURANCE ALLEN & PATRICIA FRANCES ALLEN <PRODUCTION MANAGEMENT SYSTEMS ... 100000 0.0952
ASB NOMINEES LIMITED <495891-ML A/C> 100000 0.0952
AREND THEODORUS BANDSMA & ROBIN TOWNSEND BRANDT 100000 0.0952
KEITH IRVINE FORD BARCLAY 100000 0.0952
ALAN REON BLUNDELL & MARIE FRANCES BLUNDELL <HUIA A/C> 100000 0.0952
MICHAEL ROBIN DAVID BRAID 100000 0.0952
CRAIGLYNN STATION LIMITED 100000 0.0952
EDWARD PETER CROPPER & G C TRUSTEE SERVICES LIMITED <EP CROPPER (NO 1) FAMILY... 100000 0.0952
RUTH VIRGINIA CUMMING 100000 0.0952
PETER JOHN DEW 100000 0.0952
JULIE ANNE EDDINGTON & KEVIN EDDINGTON 100000 0.0952
ANN PATRICIA ELLIS 100000 0.0952
RICHARD DAVID GREENFIELD 100000 0.0952

Top 100 total 44746000 42.6152

winner69

18-07-2011, 01:44 PM

Wonder how many of the rich and famous who use the likes of FNZC and Forbar realise they have some these bonds?

PRESBYTERIAN SUPPORT SERVICES (SOUTH CANTERBURY) INCORPORATED 500000 - another thread said that our friend Allan was looking after their investments for them ... ouch

And good to see that our Paraparaumu friends are also involved ... looks like in their own right

Steve

18-07-2011, 09:09 PM

The standard scaremongering ploy of 'accept a reduction in your investment terms or risk losing your investment' always has a chance of success with the financially challanged Mum & Dad investors.

IMO, voting no would be the better choice as it may be better to have a higher ranking of nothing than a lower ranking of not much more...

Newman

18-07-2011, 10:37 PM

In his newsletter today Michael analysed the situation of BSG and made a proposal. I
copy his newsletter below FYI. I would join him in a fight with CHAMP.

____________________________________________

Blue Star Group - where shall I start?! How about a disclosure and disclaimer.

I own a few Blue Star Group (BSG) bonds and along with some clients I have an interest in the state of Blue Star Group financially. BSG has finally released its proposal to restructure their balance sheet, including our bonds.

The following comments are my opinion on the proposal, as a bond investor. All investors should read the offer documents and seek advice specific to their circumstances before voting.

We encourage all bond holders to vote on the proposal to ensure a significant proportion of bondholder views are heard.

Firstly, BSG has made the decision easy for me. Pending a look at the final document when it arrives, I expect to vote NO to their proposal. I can only see a loss of value and frankly no respect is being displayed to the bondholders who rank ahead of the shareholders.

A simplified look at the old balance sheet sees the following order:

Banks - $171m
Retail Bonds - $105m
Shareholder Loan - $12.7m
Shareholders Equity - (nil)

The offer documents imply that there is no value available to anyone except the banks.

If the proposal being put to bondholders is passed a simplified balance sheet will look like this:

Banks - $186m
New Shareholder Loan - $15m at 18.50% maturing 30 June 2015
Retail bonds tranche 1 - $67.5m, 0% interest until 15 July 2013 then 9.10% until 15 September 2015
Old Shareholder Loan - $12.7m calculations imply an interest rate of about 17.25%
Retail bonds tranche 2 - $37.5m, 0% interest, only benefit from 20% of future sale of the business
Shareholders - retaining 80% of the value if the business is ever sold.

The proposal also asks bond holders to cancel the $32.3m of accrued but unpaid interest, agree to the removal of the current guarantee and to accept reduced trustee powers. Although we don’t see that the trustee has been of much value as our advocate.

I am struggling to find anything else the proposal could take away from the bondholders.

So, what we see is a shareholder (CHAMP) who is NOT putting in any new equity to a struggling business. Worse, they are asking to place $15m ahead of bondholders at 18.5% p.a. whilst believing a proposed return of about 4.50% is appropriate for bond holders, who would rank behind them.

They also wish to elevate their old shareholder loan ahead of tranche 2 of bondholder money (to be called Participating Bonds, which is likely to be another misnomer).

This behaviour by the shareholder alone is going to make it very hard to gain bond holder support for the proposal.

A quick back of the envelope calculation shows that BSG wants bondholders to give up on about $58m of value (accrued interest plus the impact of 0% future interest until 2013/2015) and then accept that $31m will be paid out under the new shareholder loan before bondholders receive any principal back.

That is about $89m of value to the benefit of the shareholders before bondholders receive anything! It is quite unbelievable that even the bank syndicate saw this as an appropriate business proposal.

Usually investors ‘receive’ value from offering the use of their capital over time. This proposal asks bondholders to ‘pay’ for time which benefits the shareholders of the business first, not the bondholders.

My only concern is that in my opinion if the proposal is so bad I now wonder whether the owners are trying to encourage me to vote no, and if so why?

Do the management want to blame bondholders for the failure of the business as opposed to poor management?

I hope nobody is trying to force a receivership in an attempt to bid for discounted assets at a later date.

I have been approached by investors who are discussing the notion of gathering together 10% of bond holders to approach the trustee and try to call another meeting and present other motions to be considered. In fact they want better representation than the trustee seems to be offering them too.

If you wish to be contacted as part of this effort please contact us with your name, contact details, Common Shareholder Number (CSN) and volume of bonds held and we will co-ordinate the relationship (initially).

We look forward to the thoughts of the lead managers to the original bond offer; Goldman Sachs (previously Goldman Sachs JB Were) and First NZ Capital.

We understand the bank syndicate includes BNZ, ANZ, Westpac and Credit Suisse. Perhaps they can think of solutions more in keeping with the way other investors should be handled as part of this business?

Maybe they could consider putting the business into receivership, then approach bondholders with a proposal to convert them to shareholders (massively diluting current shareholders CHAMP Funds etc) and ask those bond holders if they would agree to put in the new $15m that is said to be required to stay in business.

Something tells me bondholders would look more favourably on this idea than the proposal they are about to read.

If the banks were able to follow this course they might sweep out many of the current directors and senior management who are poor performers, in a business which has lost huge sums of money.

The banks might also negotiate with staff over the scale of wages being paid. A job with less income is better than no job at all, if the business was to be closed down.

This BSG proposal, and other business failures, lead me to conclude the misnomer that is ‘private equity’ is dead, because these businesses have clearly preferred to use other people’s money. The businesses that operate this way should never again ask for public investment in their projects.

My over-riding impression of ‘private equity’ investors is the destruction of public investor wealth. (or banks wealth in the case of Yellow - Ed).
___________________________________

Beagle

19-07-2011, 11:40 AM

I feel for you guys and thankfully sold a small holding quite some time back. What haircut are the management and staff taking ? My guess, no haircut for them.
If I still held I'd vote NO and send them a message to GET REAL. Good luck Gentlemen.

Newman

21-07-2011, 09:34 AM

I received a copy of Capital Bonds Amendment Offer.

Table 7.1 on page 52 is worth to read. KPMG estimated that a distressed sale following a No Vote would recover 40-62% of senior lenders' money. This suggests that if CHAMP does not offer more after a No Vote the banks would turn to bond holders for a solution. Banks would not put Blue Star on a fire sale and incur 38-60% loss of their money. Instead, banks would approach bond holders for a solution, for example, converting bonds to shares as Michael suggested in his newsletter, which would dramatically dilute CHAMP's shares.

Bond holders can expect that CHAMP provide a better offer or become the controlling share holders of Blue Star. Either is better outcome than accepting the current bond amendment terms.

winner69

21-07-2011, 09:49 AM

Newman - at least that alternative actually recognises that bond holders are investors (like those who have put equity in) in the business and not lenders (like greedy banks etc) and should be treated accordingly

If bondholders need to bail out the company so Shylock can get his pound of flesh sobeit but at least they then have some say in the future

Newman

21-07-2011, 10:10 AM

Mom & pop investors fight back - Blue Star Print Group

The below is link to the the article:

http://www.scoop.co.nz/stories/BU1107/S00601/mom-pop-investors-fight-back-blue-star-print-group.htm

Enumerate

21-07-2011, 11:25 AM

Mom & pop investors fight back - Blue Star Print Group

Wellington (http://www.allvoices.com/New-Zealand/Wellington/Wellington) : New Zealand (http://www.allvoices.com/New-Zealand) | Jul 19, 2011
Source: Scoop

BNZ and advisors Goldman Sachs & First NZ Capital have a fight on their hands following their opportunistic and predatory offer to Kiwi "Mom & Pop" investors. An action group of Bondholders already has significant support to vote down the proposal and demand that Perpetual Trustees Matthew Lancaster... FULL ARTICLE AT Scoop (http://www.scoop.co.nz/stories/BU1107/S00601/mom-pop-investors-fight-back-blue-star-print-group.htm)

Alas, the article seems to have been deleted ... anyone have a secondary reference?

Royalwolff

21-07-2011, 02:26 PM

Mom & pop investors fight back - Blue Star Print Group

Wednesday, 20 July 2011, 11:18 am
Press Release: Mark C Simpson

Mom & pop investors fight back - Blue Star Print Group

Foreign Venture Capitalist owners CHAMP together with their banking syndicate led by BNZ and advisors Goldman Sachs & First NZ Capital have a fight on their hands following their opportunistic and predatory offer to Kiwi "Mom & Pop" investors.
An action group of Bondholders already has significant support to vote down the proposal and demand that Perpetual Trustees Matthew Lancaster call another meeting where bondholders can explore other alternatives to keep the iconic Kiwi company running.
CHAMP have threatened that failure to agree their terms will lead to the receivers being called in. Kapiti Stockbrokers Chris Lee & Partners are compiling a list of bondholders opposed to Blue Stars proposal and who want better representation than the Trustee has given bondholders to date.
Bondholders are encouraged to join the list http://www.chrislee.co.nz/index.php?page=market-news (http://www.chrislee.co.nz/index.php?page=market-news) The action group are highly confident they will easily surpass the 10% necessary to compel Perpetual Trustees to call another meeting.
Bondholders have so far not received the amendment proposal or supporting documents which have apparently been posted to the company website.
We understand from company sources that these are not to be posted until 24th July, giving bondholders little or no time to consider the proposals, seek advice or attend the meeting. Senior management at Blue Star have refused to take any calls from bondholders. Bondholders following the companies instructions to contact Blue Star Print Groups Head of Investor Relations if they have questions, are told that the company does not have one!
Calls to Blue Stars 0800 help line go through to voice mail with responses subsequently coming from advisor Goldman Sachs. Goldman Sachs clearly have some answering to do to their clients to whom they promoted the bond issue as they are now clearly acting as advisors to the company? Is this a conflict of interest?
A number of complaints have already been made to the FMA and more are expected.
ends

Newman

22-07-2011, 09:27 AM

If I tell a young lady that I am going to rape her and further state that this is in her best interest and her refuse to accept my proposal would most likely result in her death I would be in jail soon. CHAMP is now doing exactly the same thing. The bond amendment offer itself, regardless of its merit or disadvantage, is offensive and not acceptable to me.

The worst for bond holders in a No Vote is loss of their capital (ca $30000 on average). For this to happen, the senior lenders would lose half of their money, CHAMP lose all equity (over $100m?) and the senior managers at Blue Star lose their $500K+ jobs. Do you really believe bankers and Blue Star managers would take the risk of failure in their careers just for the purpose of punishing bond holders who vote no? Can CHAMP faces its own investors for a loss of $100m+? I believe they are in weaker position than average bond holders.

I have bought some PMP shares. If CHAMP lets Blue Star fail I would recover a part of my loss from the gain of PMP.

Newman

22-07-2011, 02:51 PM

NBR article - "Expensive vote looming for Blue Star bondholders"

In today's National Business Review Shoeshine wrote that the Capital Bond Amendment Offer costs $13m to Blue Star. He is not sure which way he'd vote if he was a bondholder. This is because whichever medicine bondholders decide to take, it is sure going to taste bitter.

He also mentioned that Perpentual Trust is being approached for an emergency meeting of bondholders.

Contrarian

22-07-2011, 07:15 PM

Gidday

So Champ have had a lemon investment & want Kiwis to "muck in" and soften their losses. Would they have upped the interest from 10% to 13% if things had gone swimmingly well as a gesture of "mucking in"? YEAH RIGHT! Check out http://www.champequity.com.au/about-us/w1/i1001209/ furthermore is any creditor of their investee companies safe from a re-writing of the rules once goods or credit had been supplied.

Also, if they have been buying before & after they telegraphed their serving of a S*#t sandwich they have just erased their debt. The prices paid don't even cover accrued interest.

Newman

27-07-2011, 09:28 AM

David Hargreaves's article on the Dominion Post today is worth reading. He say " Has any offer to investors ever offered as little as that now being put before bond holders in the Blue Star Group?" He further wrote that "Unfortunately there is no question that Blue Star bond holders are going to lose money whatever happens. But do they have to be stripped of their dignity, too?

I think he is right in that bond holders are fighting for dignity, not for money because the money has already bee lost. Yesterday the market valued the bonds at 9 cents each!

Gutenberg

27-07-2011, 09:32 AM

Posted on the NZX a few minutes ago - the company is playing hardball
Blue Star Capital Bonds Restructuring Proposal

On 14 July 2011, Blue Star announced a proposed refinancing proposal to provide Blue Star with the necessary time and funding to realise the benefits from recent initiatives taken to
reposition its business.

The refinancing proposal is set out in a registered Prospectus and Investment Statement describing the Amendment Offer, to be considered at a meeting of Blue Star’s Bondholders at 10:30am on 10 August 2011. Details were included in the Notice of Meeting dispatched to Bondholders, which included the Prospectus and Investment Statement (which Bondholders will have received recently).
Blue Star has become aware that certain market commentators and Bondholders have been advancing a view that, in the event that the Amendment Offer is not approved at the Bondholders’ meeting, a further proposal or offer may be made by Blue Star.

The Board of Blue Star would like to reiterate its belief that “if Bondholders reject the offer, it would likely result in a complete loss of principal for Bondholders” (page 3 of the Prospectus – Snapshot of Key Issues and Proposals). The Board’s expectation is that, following a no vote, Blue Star’s banks will immediately move to protect their interests, likely through the
appointment of a receiver (an outcome neither Blue Star nor the Board can control or materially influence). In this scenario, it is probable that there would be no value recovery for Bondholders (page 37 of the Prospectus – Key Risks: Risks from not Accepting the Offer).

While the Board recognises that the current situation is disappointing for Bondholders and would prefer not to ask Bondholders to make the concessions contained in the Amendment Offer, the Board continues to believe that the Amendment Offer is the best restructuring proposal Blue Star could achieve for Bondholders in the current circumstances (page 3 of the Prospectus – Snapshot of Key Issues and Proposals) and represents the best chance of recovering a material part or possibly all of their original principal, plus the opportunity to create a sustainable capital base to support the Group’s operations. Furthermore, as indicated in the Prospectus, in the view of the Directors, approval of the Amendment Offer will mean
that there is a relatively low likelihood of Blue Star becoming insolvent (page 36 of the Prospectus - Statement of Directors’ Plans).

The Board of Blue Star continues to unanimously recommend that Bondholders vote in favour of the Amendment Offer.

If Bondholders have questions they should call their financial advisor or, they may call Blue Star’s information line – 0800 032 518. Blue Star will ensure that all queries are answered
promptly.

Yours sincerely

The Hon. Nick Greiner
Chairman of the Board
BLUE STAR GROUP

Balance

27-07-2011, 09:51 AM

Note of caution - following Chris Lee is like following Hone Harawira on race relations. There can only be one outcome.

Newman

27-07-2011, 09:56 AM

I noticed that Mr France is the Chancellor of the University of Auckland and a Director of Air NZ.

Being the Chancellor of a top university is an honour that money cannot buy. I suppose it comes with a responsibility as well. I do not know how could Mr France feel comfortable in the development of Blue Star Group's infamous proposal? If the vote on sharetrader forum is a good indication of bond holders' sentiment the proposal would be voted no next month. Thus, it is most likely an unsuccessful proposal as well.

At the next graduation ceremony of University of Auckland if our future business leaders (graduates from its business school) ask Mr France a question "Sir, do you regret your involvement in Blue Star Group? how would Mr France response?

Air NZ is also a reputable organisation, being ranked the number one in business survey weeks ago.

Mr France: do you really think it is worth to remain in the Board of Blue Star Group and let your reputation damaged just for the interest of a private equity? Does the director fee from Blue Star worth more than the honour of being the Chancellor of a top university?

P.S. The announcement to the market this morning immediated reduced the value of Blue Star bonds from 9 to 7.5 cents. The threat from your Chairman The Hon. Nick Greiner was very powerful in further encouraging bond holders to vote against the proposal.

Balance

27-07-2011, 10:21 AM

bondholder007

27-07-2011, 10:31 AM

The BSG Board's unanimous recommendation would be more credible if their oversight of this failing businees had been more diligent and if the proposal did not remove bondholder's rights to allow shareholders to exit with some cash. Perhaps the banks will move to recover what they can in the event of a NO vote but it has been pointed out they will lose as well in this scenario. As "Chalkie" points out in todays "Press" a compromise solution should be possible to allow all parties some recovery of their investment. I'm prepared to bet on it by voting NO.

Newman

27-07-2011, 11:55 AM

So Mr France is automatically wrong, but Mr Chris (I know finance companies very well, put heaps of clients into them but it's not my fault) Lee is right to follow?

The fact is that Mr Chris Lee did not say anything about Blue Star in the past 4 weeks. He is on overseas holiday.

I did not say Mr France was wrong or right. But I do believe it is not worth for his reputation being damaged by CHAMP.

Have you found a business commentator who thinks Blue Star's offer is fair?

To me if I lost my money due to the receivership of Blue Star it is acceptable because any investment carries a risk. But I will not accept CHAMP's attitude and approach towards bold holders for its own interest. Bond holders are not third-class citizens in Blue Star's business. They are ahead of shareholders in priority. As David Hargreaves correctly pointed out, this vote is about dignity. Money has already been lost.

Balance

27-07-2011, 02:05 PM

The fact is that Mr Chris Lee did not say anything about Blue Star in the past 4 weeks. He is on overseas holiday.

I did not say Mr France was wrong or right. But I do believe it is not worth for his reputation being damaged by CHAMP.

Have you found a business commentator who thinks Blue Star's offer is fair?

To me if I lost my money due to the receivership of Blue Star it is acceptable because any investment carries a risk. But I will not accept CHAMP's attitude and approach towards bold holders for its own interest. Bond holders are not third-class citizens in Blue Star's business. They are ahead of shareholders in priority. As David Hargreaves correctly pointed out, this vote is about dignity. Money has already been lost.

Mr Chris Lee has said plenty - for someone who has blown his clients' money out the window big time through investing with finance companies. What is unacceptable about his credentials is that he held himself out as an expert on finance companies (remember his credit rating system and his 'special' relationships with the likes of Hubbard, Hotchin etc) - but when they blew up, he tried to attribute blame to others.

What expertise does Chris Lee (or his sidekick) have when it comes to corporate restructuring? He has a big mouth and is trying to make himself out to be a people's champion from a new generation of clients after blowing the last lot up.

There is new money going into BSG - much more than can be said about any of the finance companies that Chris Lee was busy recommending investors into.

Private equity deals are by defination high risk transactions - they make big and they lose big. It's a mug's game funding them for a fixed return.

Germaine

27-07-2011, 04:43 PM

Are these Chalkie and Hargreaves articles online? Can anyone point me to the link please, i can't seem to find them. Thanks

Royalwolff

27-07-2011, 08:53 PM

Following link should take you to a PDF on Google Docs.

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0BzlOQFmb82acMjc0ZTE3ZmUtZTkxNy00YzIyLTk1OGI tZjkyNjBjN2Y2OTc5&hl=en_GB

trevorbee

27-07-2011, 11:38 PM

Royalwolff

28-07-2011, 09:39 AM

Link to NBR article from last week follows, but the comments at the end of the story are fresh and worth a read.

http://www.nbr.co.nz/article/blue-star-says-no-vote-restructure-would-mean-receivership-inevitable-mn-97765 (http://www.nbr.co.nz/article/blue-star-says-no-vote-restructure-would-mean-receivership-inevitable-mn-97765)

Romulus

28-07-2011, 09:48 AM

Trevorbee, you are pretty much on the mark.
It seems to many of us, that Blue Star is just unlikely to repay the reduced bond amount in 2015 as it is now. So why drag it out? Reasons like;To give the banks who foolishly loaned "other peoples money" (OPM)-not theirs for fees and interest another opportunity to swindle again( they need to be stopped). On what commerical basis could they have ever advanced the debt owed to them. Because the bond holders are many and not in a position to swindle anyone but themselves, Champ & Banks came up with a cunning plan:throw them a flimsy lifeline amd this will give the already overpaid, under preformaning managers a longer period to draw down furthet excessive salaries (good 8 years under their belt already-why stop now), Banks & Champs 3 more years to shift further wealth from bonders to them. Remember that the original entities that form Blue Star group have already recouped their wealth many times over, so why quit now.

Champ and bankers know who the patsy in the room is and what makes it worst, they know the patsy knows and will still act as a patsy.

Voting "NO" now at least allows us to move on and accept we have been had.

Newman

28-07-2011, 09:55 AM

My take on this 'offer' from Blue Star Group.

We are up to our eyes in debt and are desperate to find a way to survive.

Our bankers will not extend their loans to us unless we put the hard word on our Bond Holders. We therefore have to renege on our obligation to pay the outstanding interest which we owe them and we have to seriously reduce our commitment to repay the principal which they invested with us.

Meanwhile, our principal shareholder (CHAMP) sees this as an opportunity to 'improve' their position. Hey, we will sweeten the pot to the tune of 15m @ 18% provided that those Bond Holder suckers will agree to getting behind us in the queue for any payout.

This does not sound like a very attractive proposition for our Bond Holders. So we better put the fear of God into them by telling them that they will lose everything unless they accept this offer. And if they do not see the light, remind them again what a difficult situation they are in.

And, down the track, when we need the public to invest some more money in our printing business we can always do another Bond offer. Yeah, right.

Excellent summary of what the "smart" guys of Blue Star Group might be thinking. They have treated bond holders like idiots for many years.

The best buyer for Blue Star bonds on the market offers 6.5 cents per dollar. If the future of Blue Star is so bright as these "smart" guys descibed in the offer why do not they buy back bonds now for an immediately return of 2000%, being $1.30 (capital +interest)/$0.065?

For any business transaction to occur there must be a benefit to both parties involved. Unfortunately, these "smart" guys do not understand this common sense. Many business commentators have offered them a ladder to come down safely for a negotiation with bond holders. They responsed with a threat, in a way similar to what we could expect from dealing with a KKK member. If they want to stay at cliff to conquer bond holders no body would be able to save these "smart" guys. After losing 94 cents in a dollar, bond holders are already on the ground. Losing the remaining 6 cents in a dollar is like moving from ground level to the basement. It would NOT kill them.

The former politician (the Chairman of Blue Star) seems forgetting the basic survival skill in politics and business - negotiation and compromise! Sad for those who pay him director fee.

Germaine

28-07-2011, 10:11 AM

Thanks so much Royalwolff!

Balance

28-07-2011, 12:59 PM

Voting "NO" now at least allows us to move on and accept we have been had.

An obvious lack of understanding right from day 1 that private equity deals are high risk deals.

POSSUM THE CAT

28-07-2011, 01:12 PM

Wich property trust are they going take down with them in the big specialty building to be leased to Blue Star Print In Henderson

Balance

28-07-2011, 01:31 PM

Wich property trust are they going take down with them in the big specialty building to be leased to Blue Star Print In Henderson

Receivership does not mean close-down and shut-down. Business will continue and they will still need premises.

Newman

28-07-2011, 03:34 PM

CHAMP vs Sturgess:

The real battle would be between CHAMP and Sturgess (the man who sold Blue tar to CHAMP). Receivership would be in Sturgess' best interest because he could buy Blue Star back cheapily, leaving CHAMP penniless. To avoid receivership CHAMP should give bond holders a lollipop rather than repeated threats. What a stupid strategy CHAMP and its managers have taken to force bond holders into the corner for Sturgess' benefit.

Royalwolff

28-07-2011, 03:36 PM

Newman

28-07-2011, 03:44 PM

Apparently Chris Mitchell is conducting roadshows to investors and they are being well received? Anyone here been to one of these roadshows?

Refer following link.

http://www.proprint.com.au/News/264966,blue-star-stresses-receivership-is-likely-if-bondholders-block-restructure.aspx

The roadshow was before announcement on July 14. You can download the roadshow presentation from www.nzx.com. The second slide clearly tells you it was before July 14.

Balance

28-07-2011, 03:59 PM

Newman

28-07-2011, 04:30 PM

So which part of "private equity deal" do bond investors not understand?

Chris Lee has conveniently taken off his archives the articles he wrote on various securities before August 2010. For him to have some must meant that he recommended them, as he did the first ranking fully secured securities of the finance companies (he actually had his own rating system!). Well, Newman may like to find the article as he obviously know Chris Lee very well.

I have never met or spoken to Chris Lee. One e-mail exchange was all I had in communication with him. I got infromation from the public domain, including Internet.

What Chris said about Blue Star is less important than what we bond holders should do now. You cannot rely on his free newsletter for investment advice and then blame him for loss of money. I share your feeling that Chris Lee was often emotional when he discusses companies and individuals. I use his newsletter as an extra source of information or views, not the advice to buy or sell shares/bonds.

I also think that we should limit to the discussion of Blue Star in this thread.

Royalwolff

28-07-2011, 04:47 PM

The roadshow was before announcement on July 14. You can download the roadshow presentation from www.nzx.com (http://www.nzx.com). The second slide clearly tells you it was before July 14.

The linked story is from today and the content states Chris Mitchell as saying.
"Mitchell and chief financial officer Graeme Archer are currently taking part in a roadshow to outline the restructure to investors. "The roadshows are going well. People are starting to understand the rationale and needs behind the restructure," said Mitchell."

Royalwolff

28-07-2011, 04:51 PM

Newman I think you are to something re Tom Sturgess. Chalkie's article yesterday started me on the same path of thinking when Chalkie raised the issue around removing the need for trustee approval in the sale of the company’s operating subsidiaries.

I have never been comfortable with how poor of deal was presented to bondholders, everyone involved would have known it would be a hard sell and then to have management so willing to go public with receivership as the only alternative seems odd. Most public companies would avoid the 'R' word especially if you have public contracts with banks and government departments. To me it has always appeared to be a negotiation tactic you would use if you had a favoured option but also a good plan B, receivership is not a smart plan B for most businessmen. These are smart businessmen.

I think behind the proposed restructure is an Management Buyout and Plan B could be a MBO from the receivers.

Before CHAMP Blue Star was owned by management who for a large part appear to be still involved and cashed up from the initial sale to CHAMP, Tom Sturgess is the biggest but there are others. It is conceivable that these same managers are looking for the opportunity to initiate another MBO.

There would appear to be three separate businesses, the management of these business units will know what they are turning over, they know what the recent investments/contracts will actually contribute to the bottom line, and they know the actual cost burden that CHAMP, a corporate head office structure is putting on their businesses and they know the crippling impact of the current high debt level.

The parts of Blue Star will be worth more than the whole to the right people:

Webstar – we know it has new facilities and new contracts that have not yet delivered full results. It would be attractive to multiple parties (PMP, IPMG) and management.
Blue Star Australian operations. New digital presses and business under contract.
Blue Star New Zealand operations, existing and new contracts, (new government $10million we were just told).

It also goes some way to explaining how management got capexes through in the last few months for new presses and new building fit outs. Normally knowing you were about to post a $85million loss and have to ask investor to take a very public bath would prevent something like this being approved.

Am I right in thinking the following?

If they get a YES vote, management can buy some or all of these business units from Blue Star leaving only an empty shell? The Banks won't mind they'll get their money, Champ won't mind they're better off with a clean exit, management would like it as they are free to negotiate behind closed doors with 'friendly vendors" to buy a businesses with a lot less debt. The bondholders are completely marginalised and potentially left with nothing.

If they get a NO vote and receivership is the result I'm guessing Blue Star is worth more than is being implied. It is of value to the management and parts like Webstar are worth at lot in market. In this scenario The Banks are still safe, bondholders maintain some control, Champ is at risk and management will have to negotiate in a transparent and open market? But plan B - management still gets to buy good businesses with a lot less debt and a lot less overhead.

Balance

28-07-2011, 05:09 PM

I have never met or spoken to Chris Lee. One e-mail exchange was all I had in communication with him. I got infromation from the public domain, including Internet.

What Chris said about Blue Star is less important than what we bond holders should do now. You cannot rely on his free newsletter for investment advice and then blame him for loss of money. I share your feeling that Chris Lee was often emotional when he discusses companies and individuals. I use his newsletter as an extra source of information or views, not the advice to buy or sell shares/bonds.

I also think that we should limit to the discussion of Blue Star in this thread.

Chris Lee is pertinent to the discussion on Blue Star as Chris Lee (the firm) is holding itself up as the people's champion.

So let's go back into his rationale for putting investors into BSG in the first place and assess why and what prompted him to invest in BSG.

Then, let him stand up and admit he was wrong and why his recommendation now is correct.

I just get sick and tired of his kind making bad recommendations and when things go wrong, try to deflect attention to others by blaming everyone else.

trevorbee

28-07-2011, 06:01 PM

[QUOTE=I have never been comfortable with how poor of deal was presented to bondholders, everyone involved would have known it would be a hard sell and then to have management so willing to go public with receivership as the only alternative seems odd. Most public companies would avoid the 'R' word especially if you have public contracts with banks and government departments. To me it has always appeared to be a negotiation tactic you would use if you had a favoured option but also a good plan B, receivership is not a smart plan B for most businessmen. These are smart businessmen.
.[/QUOTE]

This is indeed food for thought. One cannot help but be suspicious that BSG might have made this 'offer' so unpalatable for a reason.

Balance

28-07-2011, 10:45 PM

This is indeed food for thought. One cannot help but be suspicious that BSG might have made this 'offer' so unpalatable for a reason.

BSG's best chance is a continuation of the business until such time as there's strong recovery in the market place.

Negotiation is a process. What we are witnessing here is a few 'holier than thou' purporting to champion bondholders, without offering a solution - but keen to attribute blame.

The genuine ones will be having a real dialogue with BSG and the banks for a compromise.

trevorbee

28-07-2011, 11:42 PM

Dear Bond Holders, please 'forgive' us for not paying you any interest for the use of your money during the past couple of years. But hey, it's only money and money is the root of all evil.

Oh, and by the way, we seem to be a bit short at the moment and may have a bit of a problem returning your principal when it becomes due. But come on, look on the bright side, if you agree to our re-structuring proposal, you may only lose most of your money.

Get real Blue Star Group. We have bills to pay too. But we have not got ourselves up to our eyes in debt. And you guys on the board are supposed to be professionals with salaries to match.

I found out a long time ago that you have to fight arrogant proposals with everything you have got. The fight is on.

trevorbee

29-07-2011, 12:54 AM

Hey, Blue Star Group

If you are listening you will know that you have pee’d off an awful lot of your investors with your re-financing proposal.

Do you care? The impression is ‘no’.

Would you like to get these disenchanted investors on your side? The impression is that you believe that they do not have any choice. They either get on side or lose everything.

Well really, so the money we invested in Blue Star was just peanuts. OK, we will remember that next time around.

We are very aware that you have serious financial problems. It is in our interest to help you out if we can. But we are not going to be the fall go while your major shareholder takes advantage of this situation and screws the bond holders.

The fight is on.

Newman

29-07-2011, 09:16 AM

BSG's best chance is a continuation of the business until such time as there's strong recovery in the market place.

Negotiation is a process. What we are witnessing here is a few 'holier than thou' purporting to champion bondholders, without offering a solution - but keen to attribute blame.

The genuine ones will be having a real dialogue with BSG and the banks for a compromise.

So, do you have the communication channels with the board or banks? Would you like to talk to those "smart" guys to discuss a constructive solution? I would not be surprised if they do not call you back or reply your email. For ordinary bond holders Vote NO is the first step for any possible discussion with Blue Star in the future.

Newman

29-07-2011, 09:24 AM

This is indeed food for thought. One cannot help but be suspicious that BSG might have made this 'offer' so unpalatable for a reason.

These guys are probably not as smart as we thought. In good times many people could be on the board of a company (as long as you have the network to get in). Only at crisis times would their ability be tested. As Warren Buffett once said: you only find out who is swimming naked when the tide goes out.

Those Blue Star guys has no experience in dealing with bond holders who has been abused for loo long. They did not expect bond holders reacted differently this time.

There are many comments on Blue Star offer at National Business Review websites:

http://www.nbr.co.nz/article/blue-star-says-no-vote-restructure-would-mean-receivership-inevitable-mn-97765

It seems that bond holders include all sorts of people.

bondholder007

29-07-2011, 12:13 PM

An obvious lack of understanding right from day 1 that private equity deals are high risk deals.

Bondholders did not buy into a high risk PE deal. I first had Blue Star bonds in 2001 and rolled them over in 2006. At that time it was a viable print business. CHAMP bought in later and screwed both Blue Star and us. If you look at Chalkies graph of their expansion it is clear that this was an attempt to buy market share regardless of the fragile nature of Blue Star's capital structure. I intend to vote NO and if the go into receivership it serves them right.

Germaine

29-07-2011, 12:55 PM

Newman

29-07-2011, 01:40 PM

Hi Romulus. Great research! Do you have the full bond register? i.e. the one with all bondholders, their addresses, and number of bonds? I have a friend who is trying to get hold of it and can't. many thanks

You can get the information from your share broker, though the addresses may be not available.

Newman

29-07-2011, 01:46 PM

My second-hand, unconfirmed information says: the Managing Director of Champ is in NZ.

Royalwolff

29-07-2011, 02:06 PM

Read the comments that follow this ProPrint industry news story. Staff are getting twisted as well and venting.

http://www.proprint.com.au/News/264966,blue-star-stresses-receivership-is-likely-if-bondholders-block-restructure.aspx

trevorbee

29-07-2011, 07:06 PM

It does seem odd, as has been mentioned previously on this forum, that Blue Star Group is so freely and repeatedly saying that they will immediately be put into receivership if we vote down their bond re-structure proposal. Hmm, I wonder how the major shareholder feels about that. More importantly, how do the Blue Star Group employees feel about that? It sounds like bully boy tactics but….

Several contributors to these forums have put up the suggestion that there may be a secret Plan B, involving receivership and a management buyout, lurking behind this proposal. So, receivership may actually be an attractive option to the Blue Star board. It could be another way to shake off the crippling bond debts. Sort of heads we win, tails you lose.

I suspect we are going to find out before too long.

Balance

29-07-2011, 08:32 PM

trevorbee

30-07-2011, 10:54 PM

My wife and I have been through several moratoriums. St Laurence Finance, Strategic Finance, Hanover Finance. They all sent us information packs that said “we just need a bit more time” and if you vote ‘yes’ you could receive up to 100% of your principal back. Well, of course, we voted “yes” and, to date, we have received no more than 20% of our principal back.

Now we have Blue Star offering us a moratorium. But they are not being nearly as optimistic as the finance companies. Vote ‘Yes’ and you ‘might receive some of your principal back’.

So, how much less than 20% is ‘some of your principal back’?

My guess is 0%

No brainer.

Dubdee

31-07-2011, 09:36 AM

I am a significant holder within the top 50. I too bought in when BLU was not a leveraged wonder. I note that two ex or present directors of First NZ Capital appear on the top 50 shareholders as well. Wonder how they feeL?

Whilst I accept that some form of haircut might be inevitable what really rankles is that the shareholder is introducing capital in loan form that ranks in priority to me. I suspect the 18.6% rate attached may fully reflect the current market rate for such subordinated capital, but it raises in my mind what the the bonds should bear if subordinated to this: 18.6% +++++!

Such capital should come in priority after bondholders, and if thats not the deal then forget it. Its not as though CHAMP is short of money. Its a very well funded PE firm. Its just that they want the bondholders to bear the shareholder risk without getting the shareholders returns. Frankly I would prefer to see the bonds default and be converted to equity at that point so that we are running the company not CHAMP.

My only relief is that I hold these on revenue account so the Crown will pick up part of the tab.

Gues which way I intend to vote!

trevorbee

31-07-2011, 11:46 PM

We are now fast approaching the day when we have to vote one way or another on this very unpalatable Blue Star BOND RESTRUCTURING proposal.

If, like me, you have a significant amount invested in these bonds you may also feel, like me, that we have been badly served by Blue Star. We invested in them in good faith. They have squandered our money and are now about to kick us in the teeth.

Financial commentators have told us that the Blue Star proposal is unfair to bond holders. That the bondholders are required to make ALL of the concessions while the banks and shareholders make none.

Surely, all interested parties should be working TOGETHER to agree on a plan to save Blue Star. Well no actually, that should not be necessary as the bond holders have no choice but to vote ‘yes’ to this proposal.

Bond holders are required to ‘forgive’ all of the interest owed to them. . Bugger, that interest owed could have bought me a nice cruise to the Caribbean. Alternatively, it could have meant the difference between ‘comfortable’ and ‘surviving’.

This proposal is totally unacceptable unless Blue Star is prepared to return our principal immediately. Non payment of interest and principle equates to robbery.

It also seems clear that the major shareholder, Champ, is taking advantage of this situation by offering to put in some extra money, at double the bond interest rate, excuse me,buton condition it moves ahead of the bond holders for any payout.

This must be a very serious threat to bond holders receiving anything back at the end of the day.

The proposal also requires bond holders to agree to the split up and sell off of parts of the business without Trustee approval.

Hmmm, is this a recipe for a management buyout?

In the event of a ‘No’ vote will the banks rush into a receivership as Blue Star are telling us? The consensus of opinion appears to be that the banks will also lose out in a receivership.

And, as banks do not like to lose out would it not be in their interests to negotiate for a better outcome?

And what about CHAMP, the major shareholder? It is quite clear from the proposal that CHAMP is very ready to screw the bond holders in their own interests. But their money is on the line too.

Is a Blue Star failure in their interest?

And then there is the Blue Star board. What are they up to? They are responsible for a company which is up to its eyes in debt and so it would be really nice if some of that debt would go away. How about we offer our bond holders a deal which they cannot refuse. i.e. we tell them they will lose everything unless they accept a significant devaluation of the funds which they extended to us.

Is this a company which will never again need to approach the public for funding?

Am I missing anything?

JBZ

01-08-2011, 03:13 PM

Newman

01-08-2011, 04:57 PM

I hope those who are responsible for the loss of my money lose their jobs soon.

Balance

01-08-2011, 05:01 PM

I hope those who are responsible for the loss of my money lose their jobs soon.

Sadly - receivership means that they pick up the company from the banks post-receivership even cheaper, with bondholders losing everything with no hope of upside.

Good outcome for Chris Lee though - he will say that it's not his fault!

bondholder007

02-08-2011, 07:40 AM

Posting our NO vote today. Yesterday got the circular signed by Chairman Nick Greiner, former NSW Premier, who had a spectacular departure from OZ politics and has moved on to high (or low) finance. Also got a call last night from a BSG spokesperson telling me what I already know - that they are desperate to get a YES vote. Come on BSG - you've got a week to come up with something better. If not, it will be interesting to see if the banks really do move quickly. We have already written off this investment but await developments with avid interest.

trevorbee

02-08-2011, 09:10 AM

I just have to have one final rant before I put my proxy voting form in the post. (I would like to attend the meeting but I do not think that my blood pressure would cope with it).

The Blue Star proposal is clearly designed to wipe away a large part of the debt they owe to bondholders, but at the same time it favours the shareholders big time.

You really have to wonder how Blue Star could possibly be hoping to get this proposal voted through. Well, if it gets voted down then the board has nobody to blame but themselves. It will just be another indication of their incompetence.

My wife and I feel we have been robbed by Blue Star. We loaned them a big chunk of our retirement fund. They have not taken good care of it, and now they want us to ‘forgive’ them what they owe us. If this is the way they operate then they do not deserve to be allowed to continue as a going concern.

Government legislation, and the agencies appointed to enforce it, has proved to be totally inadequate to protect us in this situation. My wife and I have lost more than half of our retirement money to New Zealand managed companies during the last few years, even though we invested on the ‘advice’ of a well known and respected Financial Advisor. Blue Star is the final straw. Never again will we entrust a single cent of our money to a Kiwi managed company.

No prizes for guessing which way I am going to vote.

Newman

02-08-2011, 09:44 AM

I just have to have one final rant before I put my proxy voting form in the post. (I would like to attend the meeting but I do not think that my blood pressure would cope with it).

Government legislation, and the agencies appointed to enforce it, has proved to be totally inadequate to protect us in this situation. My wife and I have lost more than half of our retirement money to New Zealand managed companies during the last few years, even though we invested on the ‘advice’ of a well known and respected Financial Advisor. Blue Star is the final straw. Never again will we entrust a single cent of our money to a Kiwi managed company.

No prizes for guessing which way I am going to vote.

The shareholders might be successful in putting Blue Star in receivership and then buy back cheapily. But they would need spend big dollars on lawyers later. Remember the guy who was a director of Contact energy and the failed Feltex carpet? Who was forced to resign from Contact and had a long period of sitting in court.

I think Mr R france would have to leave the board of Air NZ and step down from the Council of University of Auckland. These organisations do not need such a person to damage their reputations.

Balance

02-08-2011, 02:24 PM

The shareholders might be successful in putting Blue Star in receivership and then buy back cheapily. But they would need spend big dollars on lawyers later. Remember the guy who was a director of Contact energy and the failed Feltex carpet? Who was forced to resign from Contact and had a long period of sitting in court.

I think Mr R france would have to leave the board of Air NZ and step down from the Council of University of Auckland. These organisations do not need such a person to damage their reputations.

The Court found in favor of all the directors and awarded them substantial costs.

Grow up, Newman - businesses are about taking risks and things go wrong. Heck, even Steve Jobs got Apple wrong first time round and was kicked out of the company.

Newman

02-08-2011, 03:20 PM

The Court found in favor of all the directors and awarded them substantial costs.

Grow up, Newman - businesses are about taking risks and things go wrong. Heck, even Steve Jobs got Apple wrong first time round and was kicked out of the company.

Doing something with an intention to rob is different from getting wrong. Blue star's intention appeared in middle March when it stopped sending a letter to bondholders to state the amount of unpaid interest. At that time I asked Perpentual Trust if something went wrong. Mr. Chris Lighgow promised to get an answer for me, but he never came back.

If you regard what Blue Star is doing as normal business practice then on what earth did you complain about the free newsletters from Chris Lee? Good luck if you do not have Blue Star bonds, or better if Blue Star employs you as their PR person because you are the only person in public support of Blue Star's "terrible precedent".

Balance

02-08-2011, 03:50 PM

Doing something with an intention to rob is different from getting wrong. Blue star's intention appeared in middle March when it stopped sending a letter to bondholders to state the amount of unpaid interest. At that time I asked Perpentual Trust if something went wrong. Mr. Chris Lighgow promised to get an answer for me, but he never came back.

If you regard what Blue Star is doing as normal business practice then on what earth did you complain about the free newsletters from Chris Lee? Good luck if you do not have Blue Star bonds, or better if Blue Star employs you as their PR person because you are the only person in public support of Blue Star's "terrible precedent".

Surely there is a world of difference between Chris Lee promoting investments in finance companies, based upon his own ratings system (purporting to be an expert) and his 'special' relationships with the likes of Hubbard, getting it all wrong and then, proceeding to badmouth the very same finance companies when they went belly up? Then, shifting gear and promoting the firm as a people's champion with the likes of Blue Star.

If you know anything about corporate restructuring, you will know that the banks have been and are already calling the shots.

trevorbee

02-08-2011, 07:04 PM

Newman

02-08-2011, 08:43 PM

Balance, I think you are probably right and that Blue Star’s hands are tied.

Still, no reason to agree to a proposal that seeks to avoid returning money that is owed, whoever is pulling the strings.

Blue Star has been on a shopping spree for shiny new presses using other people’s money that they now cannot, or do not, want to pay back. That is immoral and should be illegal. It definitely is un-forgiveable.

The letter is available at NSX:

https://www.nzx.com/files/attachments/143503.pdf

It says bondholders would be offered the same terms as shareholders in terms of lending money to Blue Star, and the previous loan ($10m plus interest) would be converted into shares.

It is a welcome step CHAMP has made. However, I think it is not enough and it is probably too late.

jiblet

02-08-2011, 09:17 PM

I am now moving from a no to a yes vote as my primary objections were:
1) Offering senior high yield debt to CHAMP only
2) Relative priority of existing CHAMP loan to participating bonds

I will be letting the company know that their lack of engagement, lack of contrition and arrogance of Greiners communications is completely unacceptable. A letter saying "We underestimated you and are sorry" would go a long way.

A material loss of capital is an inevitability and this seems like a compromise that could work. If there is nothing in this for the CHAMP or management shareholders we will absolutely get nothing.

OldRider

03-08-2011, 06:57 AM

I presume Bluestar Directors have access to the proxy numbers as they arrive, wonder if they are
looking negative and has prompted this latest move?

Newman

03-08-2011, 09:31 AM

Interesting development ....

Blue Star Group Investments Ltd (the owner of Blue Star Group Ltd - the charging group for the BLU020 bonds) has increased its capital, on the 29th of November 2010, by 30million shares. This was achieved by issuing new shares.

So, we know the owner of Blue Star Group Ltd has some spare cash ....

I wonder what they intend using this cash for?

Toot toot ...

Enumerate's post 7 months ago should be read again. He suggested that $30m new equity was injected into Blue Star Investment Ltd.

I think Blue Star's letter yesterday is a small step towards the right direction. However, it did not change the bond amendment offer to any significant degree. Anyway CHAMP cannot recover its existing loan to Blue Star. Converting the loan to shares has no material effect on CHAMP.

It is time for CHAMP to make a committment to Blue Star. You are the major shareholder, and thus you have to make your effort if you wants Blue Star keep going. Making your $30m new equity available to Blue Star and I will support the amendment offer. Without solid committment it is unlikely you can get the support of 75% bondholders.

Germaine

03-08-2011, 09:42 AM

Both the things that Blue Star have changed benefit CHAMP. Firstly, converting their shareholder loan into equity helps with the aesthetics but really tells me there is no chance that loan would ever have been repaid in any event. By implication this means they don't believe the Participating Bonds will ever by repaid either, as these ranked behind the CHAMP loan.

Secondly, CHAMP was putting new money into Blue Star reluctantly anyway - so now they are just passing this risk on to Boldholders. If you are a bondholder and put more money into this thing you need your head read. The industry is in a downward spiral and the business itself is screwed. The banks will have 170m of debt that ranks ahead of your newly injected funds. The interest on the new money is capitalised, which means you need to pay tax on it despite the fact you won't be receiving it...

Furthermore, for you to get even $1 of that new money repaid in due course means the business would need to be sold for more than 4x EBITDA to get repaid. There is no way on earth the business is going to be refinanced, so sale of the operating businesses is the only way. Putting good money after bad into this thing is a mugs game...

For these reasons I see no reason for bondholders to change their vote to yes. Its still a joke - and the latest cynical changes should be seen for what they are.

bondholder007

03-08-2011, 09:58 AM

I dont think the amendment to the offer changes anything. We are being offered a minor slice of the new CHAMP funding. This is too little and too late and avoids this fundamental issue that BSG has a poor capital structure being too reliant on bank and bond funding vs equity. When the print industry had a downturn CHAMP used our unpaid interest to buy market share in the form of takeovers and new plant whereas a prudently managed business would have retrenched. For example we have money in HBY who went through a bad patch and are now up and running as a result of sound management which seems lacking at BSG. There is no guarantee that BSG will survive even if they get a yes vote. Why throw good money after bad?

JBZ

03-08-2011, 10:01 AM

I did receive the latest news from my broker about the changes in the proposal and don't trust them.
I will not change from voting no.
As I see this as a bondholder we still have to forgive all the interest owed and get nothing back , not even in the long term (as there will be no long term). So do we also get the 18.5% accumating interest as on page 74 of the prospectus ? As they cannot pay anything now how could they pay in the (near) future?
Champ might just try to get away without loosing too much and leave the bill to the bondholders.
They just try to get away before the banks step in and management will be blamed for mismanagement.

Germaine

03-08-2011, 10:28 AM

The other downside of bondholders replacing CHAMPS new money injection is that CHAMP then don't give a toss what happens to Blue Star. Their equity will be so far out of the money anyway that they will lose interest in the whole company. At least if they have new money at risk their incentives are more aligned with bondholders...so I see this as a NEGATIVE for bondholders, not a positive like they are trying spin it...

trevorbee

03-08-2011, 11:14 AM

Sounds like we are all singing off the same song sheet. None, or perhaps only one, of us see this amendment to the offer as improving the bondholder’s position in any way.

My NO vote is in and there is no incentive to change it.

Enumerate

03-08-2011, 11:34 AM

I have changed my mind, based on the new offer. I will vote 'yes' at the meeting.

1) It is quite clear that any hope of salvaging interest through capitalisation is at zero probability. There is simply not enough equity in the business to support even payment of the withholding tax.

2) The unpleasant fact about deeply subordinated debt is that it has all the bad features of equity (it goes down in value with the changing fortunes of business). We are witnessing this "dark side" - but at least we have a shot at capital preservation.

I have been over the prospectus - but you need to also read the "Senior Facilities Agreement", on the Companies Office Web site, to understand the senior loan perspective:

http://www.business.govt.nz/companies/app/service/services/documents/49377C5D1B28D6D639352F304D62D150

Section 8.8 page 54 details the senior loan amortisation payments.

30 June 2011 1.5M
30 June 2012 5M
30 June 2013 5M
30 June 2014 7M
28 Feb 2015 - all money due - but, say, 5M payed during the period

Hence, senior debt repayments are part of the agreement - but at modest levels.

My basic attitude is that this business is only worth something as a going concern. I think the banks understand this and are making genuine concessions to keep it pointed in the right direction. To sit dead in the water, with no capex or change, would also be suicide. They are investing in Web Offset (West Auckland), the HP Inkjet (sheet feed efficiencies) - the finance lease component has increased reflecting this.

In summary:

1) Equitising the existing shareholder loan is a significant concession - this gives Capital Bondholders real security and adds to the prospects for participating bond recoveries.

2) Allowing participation in the new shareholder funding is fair - Capital Bondholders can't complain if they are given the same opportunity to participate in the restructure finance.

3) The fact that the senior facilities agreement mandates modest loan amortisation, and this must be built into the forecasts means that this is a "real" restructure; not a "whistle in the dark and hope for the best" restructure

4) The business has a 15% "sweep margin" builtin (per prospectus)

5) I "feel" that the forecast recoveries in Web and Sheet are based on known facts and are not "whistle in the dark" projections.

The business is pointed in the right direction, the engines are working; I think pointing some other direction or stopping the engines would be a mistake. It is an ugly deal - but it is the best prospect for capital preservation, in my view. I will now vote 'yes'.

Germaine

03-08-2011, 12:38 PM

If you agree that "this business is only worth something as a going concern" - then you must accept that after a no vote the banks would be EXTREMELY reluctant to appoint a receiver without exploring alternative options. My view is that this will ultimately manifest itself in a replacement deal for bondholders. Bondholders have a good negotiating position now because of the subordinated guarantees from the operating subsidiaries. Voting yes just throws that leverage way and consigns yoursself to having the business sold out from under bondholders' feet over the next 2-3 years by the banks (and CHAMP who don't give a toss now because they are so far out of the money..)

I'm willing to bet a yes vote results in not a single dollar back for bondholders. At least voting no means there is a chance of a replacement proposal, irrespective of what the Blue Star board are saying (because in their interests to say that...)

Germaine

03-08-2011, 01:33 PM

There is now an NBR thread up for those interested...

http://www.nbr.co.nz/article/blue-star-tweaks-restructure-proposal-db-98319

Enumerate

03-08-2011, 03:06 PM

If you agree that "this business is only worth something as a going concern" - then you must accept that after a no vote the banks would be EXTREMELY reluctant to appoint a receiver without exploring alternative options.

If there were viable plans, before the meeting, to "burn off" CHAMP equity and refloat the business with a portion of the subordinated bonds as contribution to the new equity structure ... then I would vote no.

If there were new prospective equity holders waiting in the wings to pump in about 30M to refloat the business, keep the senior lenders happy ... then I would vote no.

The fact remains that there are no viable alternatives.

I have just been offered, through the new CHAMP deal, another 8.5M security. This is a major concession. It does not make an ugly deal pretty ... but it makes it less ugly.

I think the deal will be voted down at the meeting. This is because there are vastly more bondholders who think CHAMP are "playing chicken". However, if you look at the numbers in the prospectus - it is clear that the last half (to June 2011) has been pretty horrible.

Take a look at this:

http://www.tradingeconomics.com/australia/gdp-growth

Last quarter Australian GDP was minus1.2%. This is worse than Q4 2009 numbers at the height of the global recession. Clearly the business is suffering and clearly CHAMP (and banker) confidence is waning.

Adding 8.5M to bondholder security and presenting the proposition that if you think 18.5% secured over the subordinated bondholders is a good deal and you can buy as much as you want tells me:

1) They have made a real concession to the security of the 64cents per amended bond

2) They have shown that the new shareholder loan is no "sweetheart" deal

I happen to know that the banking consortium negotiates with Blue Star through an agent - KordaMentha. Hence, I am prepared to take the receivership comments at face value.

Now is the time for bondholders to take some serious professional advice as to how they vote. I think Michael Warrington (www.chrislee.co.nz) has done an excellent job in extracting further concessions. He probably controls the destiny of Blue Star because he has traction with large numbers of retail bondholders. I am waiting to see what call he makes ... I will be at the meeting to vote.

trevorbee

03-08-2011, 06:53 PM

It really is a choice between a rock and a hard place isn’t it?

Vote ‘Yes’ and hope to get some money back. But, at the end of the day, it will almost certainly be much less than you were hoping for.

Vote ‘No’ and lose the lot. Unless a rescue deal turns up.

As it stands I am with Germaine.

Enumerate

03-08-2011, 11:09 PM

Yes, I agree. This is a very unpleasant decision.

I just hope that the Aussie GDP disaster, last quarter, was due to the Queensland floods and doesn't indicate the Aussie economy is stalling. I think if the recovery was in full swing - getting new money to invest in this business would be easier.

Michael Warrington has updated the www.chrislee.co.nz commentary. Seems to be softening a bit but is not completely clear if this new proposal is good enough to change to 'yes'. I suppose now is the time to consult with your financial advisor.

Newman

04-08-2011, 09:34 AM

PMP announced to buy back up to 20 million shares (6% of total) on the market. Its annual accounts would be released with 2 weeks. Its bank debts were renewed 6 months ahead of its schedule.

Besides capital structure problem there must be something wrong with Blue Star. The bond amendment offer does not say anything about the problems at Blue Star or any plan to fix them. Blue Star has a much higher staff number/revenue ratio than PMP has.

Giving wealth destroyers more time would only destroy wealth further!

bondholder007

04-08-2011, 04:24 PM

There is much indication that BSG is poorly managed. Further back on this thread was a link to "Proprint" a print trade magazine where printing staff (presumably BSG) say that the vaunted "Agile" software is a dog and machinery is often down. Also the blog following the recent NBR report includes a comment from an OZ competitor of BSG saying they are notorious for underpricing to get the business and often cannot deliver without contracting out the work. This is not rocket science. They are one of the largest printers in Australasia but are not earning enough to make a profit and pay interest on bonds. There is clearly something wrong.

trevorbee

04-08-2011, 06:56 PM

bondholder007

04-08-2011, 07:06 PM

Oh Dear, my wife received a phone call this evening. I was watching TV but could hear all this shouting going on in the kitchen. It turned out the call was from someone representing Blue Star asking if we would be voting Yes, as a result of the changes to the Amendment Offer. Poor chap, he was only doing his job.

Join the club. We've had two calls. The first guy was agressive when I told him we were voting No and tried to argue the toss until I put the phone down. The next call was the following evening and the young lady concerned accepted our answer with good grace. Both calls were before the recent change and perhaps they have now recorded us as a lost cause.

Costa

05-08-2011, 10:43 AM

For what its worth, i’ve read all the information and will be voting yes. Sure it's a crappy situation for us bondholders but to me it's a really simple decision - vote no and get nothing, or vote yes and have a chance of getting some (or maybe even all) your money back – no brainer!

I am not willing to risk that there is another proposal coming. If Korda Mentha are in there then bondholders will get screwed in event of a no vote.

The information suggests that the company has good visibility on earnings improvement. If we vote no, we don’t get the benefit of this, only the banks do.

If you don’t like the proposal, why don’t you sell your bonds in the market and at least get something back for them.

JBZ

05-08-2011, 01:43 PM

After good consideration I am with Germaine. I don't trust / believe what is beiing said/written by Bluestar.
The simple fact that they can only survive by writing off all the owed interest and the approx 35 Mil. from the the downgrade of the money from the bondholders. The socalled increase in equity because of this is just a paper exercise and does not increase the value of the business.
All it does is changing the ratio of debt to equity which in this case will be a totally fabricated situation. They have mismanaged the business and as reported the business is not in a good shape, only some parts of the business have any chance of surviving and they will be sold of as seperate part after the receivership. Only from that can we expect a payout of approx 10 - 15 % at best which is better than the market value of 5 cts in the $ at the moment. There are people actually buying bonds for that price as they hope for a payout of 10 cts in the $.

JBZ

05-08-2011, 04:03 PM

It looks like Warrington has not changed his position, he just recommends that people talk to their own advisor as he cannot give advice to people who are not clients. He still recommends voting NO

Enumerate

05-08-2011, 04:17 PM

This is, in fact, what Warrington recommends, from the www.chrislee.co.nz/takingstock (http://www.chrislee.co.nz/takingstock) web site:

The company directors’ position and the independent experts position is that a ‘No’ vote results in receivership and the likelihood of no value to bondholders. Korda Mentha has already been lined up to administer the business if this happens.

A ‘Yes’ vote offers some hope of recovery for bondholders.

Investors must understand the possible two outcomes from their decision

So, a 'No' vote would mean that KordaMentha would do better, without the proposed funds injection and subordination of the shareholder loan, to get value for the bondholders ... Yeah, right ...

In the market news tab, Michael details what he is doing and why:

What am I doing?

I re-iterate the need for each bondholder to make their own final decision on which way to vote, however, you know that I am a bondholder; you know my feelings about the proposal.

For my bond holding ($150,000) I will be voting ‘No’.

I do so based on my own financial circumstances. My decision also reflects my reaction to a behaviour in capital markets that I find intolerable and less about likelihood of repayment under each scenario, both of which I consider to be very low.

Your vote is up to you.

My position is that I want to optimise my chance for some capital preservation. While I admire the perspective that a 'No' vote punishes bad behaviour in capital markets, I cannot afford to completely write off my investment to stand on a point of principle. Unfortunately, I will follow what I see as the path to the highest return - a 'Yes' vote.

JBZ

05-08-2011, 04:31 PM

This is what Warrington also said in his article:

Quote:
Is it a fair price to give up approximately 68 - 72% of what you are owed in the hope BSG will survive?; and Is it appropriate to give up our guarantee and trustees rights for this price?

If some proportion of the bonds were converted to ordinary shares then the banks demands for removal of the guarantee and diluted trustee position become almost irrelevant (a bit like the trustee - Ed).

I was told by one caller that one of the lead managers said ‘Warrington was now supporting the proposal’. This is either mischievous or dishonest on their part.

I am pleased that the shareholder loans are now being handled more appropriately with respect to the integrity of capital markets.

I have no reason to change my view about the value of the proposal because it has not changed.
"end quote"

I am also a bondholder and my position is the same as yours, but I have also lost quite a bit with previous and now no longer excisting companies. I think the future for this company is too bad to consider any value to be paid out to bondholders (also in a few years) as the economies are not recovering fast enough to achieve that. Therfor I consider the best result for me a splitting up of the company and the banks /receivers beiing able to payout approx 10-15 cts /$, as bondholders we are placed before shareholders.

jiblet

05-08-2011, 05:39 PM

bondholder007

05-08-2011, 07:52 PM

While I'm not very happy with the position that we are in today I think people are overly pessimistic about the possibility of this company returning more value to us. Bluestar is very different to the finance company situations that have plagued New Zealand. Bluestar is a real business that sells real services to companies in the real economy. It creates EBITDA in excess of it's obligations to the senior lenders. Senior debt over the next few years is forecast to be ~$200m. A reasonable EBITDA range of $40-$60m easily cover this interest, with the excess used for capital renewal, debt reduction and payment of interest to bondholders. The company is clearly over geared but on the positive side small positive swings in margin make a massive difference to free cash flow. I'd rather hold an option on this working in our favour than the certainty of a fixed and low capital return in administration.

Jiblet must have been to one of the BSG roadshows. The reality is that BSG has been losing money for 5 years since CHAMP took over. I dont understand how PE's extract value from good businesses but at least our old mate Ron Brierley was honest about his dealings.

The issue is not about numbers but whether you trust these guys who have failed to cover their interest bill and provide any profit in recent years. They have not acheived this so far so why trust their projections.

It has also been suggested that these who dont have faith should sell, At the current price of about 5.5 cents in the dollar, I am willing to wager this against a better outcome from a NO vote.

Please check the parellel debate on "Proprint" an OZ industry magazine. Some of them are amazed that us Kiwis dont understand that a business that does not know how to cost properly is doomed.

Cheers and good luck after next Wed.

jiblet

05-08-2011, 09:38 PM

I haven't been to a BSG meeting but I'm pretty close to the Aus print industry. A few points:
1) This was a bad deal at the peak of the private equity market. So an uphill battle for management since 2008
2) If you look at historical cash flows the company has always been cash flow positive with a net reinvestment in plant as well as significant repayments of loan principle. So BSG had properly valued itself in say 2008 and taken a one off hit to goodwill it would have been slowly moving up hill since then.
3) The company always makes accounting losses and this will happen for some time. Not the main issue as it is mainly driven by goodwill write downs (a sunk cost for us now that they could/should have taken in one hit in 2008)
4) We haven't been paid interest - not because of lack of net cash flow but because a breach of covenants. This isn't good but the company is creating cash and incremental value each year
5) BSG work on thin margins but their market positioning is improving. Those proprint gripes are from SME's they are sending to the wall. And there have been a lot.

Best outcome by a mile is to get a few more years of senior banking support, principal repayment and a chance of a more normal refinancing in a few years. This is not the year to be going into receivership!

trevorbee

05-08-2011, 11:51 PM

It goes without saying that this is a very hard decision for anybody who has money invested in Blue Star bonds. We all have to make our decision depending on our personal situation and the values we hold dear.

As I have mentioned previously on these forums my wife and I have already lost more than half of our life savings in failed finance companies. We therefore do not relish the prospect of a further substantial loss due to a Blue Star failure.

However, my decision to vote ‘no’ to the Blue Star proposal remains firm for the following reasons:

Blue Star is a going concern only it can walk away from the debt it owes to bondholders. Blue Star appears therefore intent on screwing the bondholders in order to survive.

I have no faith in a management team which puts all the blame on difficult operating conditions and requires their investors to bail them out. If I vote ‘yes’ to this proposal I do not have confidence that this management team will work for me as an investor. I believe that, instead, they will do everything possible to preserve their business at my expense.

It used to be that if you owed money, and could not repay it, you got thrown into debtor’s prison. Not these days. Now you just call for a moratorium and demand that your creditors forgive you the debt. And you tell them that they do not have any choice. It does not seem right somehow.

So, sorry Blue Star. You need to up your game and demonstrate that you value your investors if you want my vote. I am prepared to make concessions to help Blue Star survive but I need to be consulted - not dictated to.

Enumerate

06-08-2011, 12:45 AM

In terms of your assumptions:

Blue Star is a going concern only it can walk away from the debt it owes to bondholders. Blue Star appears therefore intent on screwing the bondholders in order to survive.

You have to understand our position on the debt seniority "tree". We are deeply subordinated debt - just above equity. It should not be a surprise that this debt behaves alot like equity - it goes up and down in value. In a situation in which the equity holders have lost about 150M - it would seem 'conventional', in US bond market terms, for the next in line to take a haircut as the price for the equity holders introducing more cash.

I have no faith in a management team which puts all the blame on difficult operating conditions and requires their investors to bail them out. If I vote ‘yes’ to this proposal I do not have confidence that this management team will work for me as an investor. I believe that, instead, they will do everything possible to preserve their business at my expense.

To date they have kept the ship pointed away from the reef and kept the engines running. In my view, they have invested intelligently (Web Offset; Digital/Agile in sheetfeed). They have done this in the best interests of their shareholders. The bankers, have been very efficient at turning off bondholder interest and sweeping all available cash into senior debt repayments. If you were in an equivalent capital bond debt position in GEON; you would be wiped out - that is how efficient the bankers are at protecting their interests.

It used to be that if you owed money, and could not repay it, you got thrown into debtor’s prison. Not these days. Now you just call for a moratorium and demand that your creditors forgive you the debt. And you tell them that they do not have any choice. It does not seem right somehow.

If you do not understand the risks, you should not invest in deeply subordinated debt.

Blue Star is a large manufacturing business ... what business of this type has been unaffected by the recent (current) double recession? The number of businesses that have gone bust is staggering. Our Capital Bonds behave like equity (due to the subordination) and the value has collapsed with the collapse in value of the equity.

Blue Star has the support of it's bankers (some of the same ones that lost badly in GEON) but only if it refloats the balance sheet. Who is queueing up to put money into business? No one. Without money, the bankers will crucify Blue Star just as they have GEON.

As I said, no one likes this present situation. In my view, the proposed deal is a feasible approach to saving the company. There are other feasible approaches - but none have emerged as actual deals. The key reason for this is that the price of introducing new money to the business is very very high, at the present time.

JBZ

06-08-2011, 12:59 PM

If we rank above equity why would I change to equity and get in the same boat as Champ, who when the bondholders accept the new offer , will not have to put in any new money as the amount that the bondholders put in reduces the amount Champ might put in. I am with treverbee in the reasoning that the company has no real future. So only with the bondholders loosing most if not all does the company think !!! that the future looks better. Indeed the fact is just call a moratoium and looking at the letter received just today a bit of blackmail trown in for good measure.
I am quite sure (most) investors know about risk and return calculations.
Yes some new investments like web offset will have a future as a separate business, without the burden of debt!

trevorbee

06-08-2011, 02:45 PM

I accept that my response to the Blue Star proposal is somewhat emotional and lacks objectivity. No one has said that - but I am saying it.

My perception is that the proposal is hostile towards the bondholders. It demands huge concessions but offers nothing but a little hope of some return well into the future. If the proposal is approved, Blue Star will continue to have free use of our money for another two years.

I am incensed by the fact that Blue Star is apparently able to find what must have been a substantial amount of cash to purchase new plant while withholding interest payments on the bonds. I think that it must be a reasonable assumption that they had no intention of ever paying the accrued interest.

If we say ‘yes’ to this offer we surrender our right to a fairer deal. And, if Blue Star does go on to become a successful and profitable company it will have been done at our expense – not the shareholders, not the board, not the management team, and certainly not the banks.

bondholder007

06-08-2011, 07:30 PM

I guess we are using this site to work off our angst. My position as a 10 year bondholder remains that I invested in subordinated bonds of a reasonably secure business. The GFC did not change this - CHAMP did. JIBLET above tells us that he is close to the Aus print industry and thinks we should give BSG time. He relies largely on his reading of their accounts. Cash flow does not create profit. Only sale of product at a margin which covers all costs does this. He states that the Proprint blog includes SMEs who have been destroyed by BSG. OK, if he believes in a dog eat dog industry he is entitled to that view. CHAMP would agree with him. More telling are the comments from print workers whom we can assume work for BSG who tell about internal problems including middle managers who dont have a clue about the print industry.That's what happens when a business expands beyond its competence.

BSG has expanded since the GFC buying new plant and taking over competitors. Who financed this? -we did in part from our unpaid interest.

We are told that preparation and delivery of the amendment proposal cost $13 million. Printing should have been free for obvious reasons. If BSG had been more humble about their deal and sweetened it with say $10 million part payment of bondholder arrears (about a third of what they owe) we would probably all be in line to vote YES.

I rest my case and wont be online again unless someone comes up with a really new insight. Cheers

Interested

06-08-2011, 10:47 PM

Newman

07-08-2011, 10:43 AM

I think one of the things that is missing, is that if it is a No Vote as advocated by a number of people, then all bondholders will lose their money, not just those bondholders who have chosen to vote No. The Senior Debt lenders (banks) really won't care about bondholders. They just want to recover whatever they can for themselves.

Most bond holders are NOT 3-year old children who can be manipulated by nice words or threats. The choice for bondholders is either to die alone or to die together with Blue Star. To me the answer is very simple: those who have abused bondholders so long deserve a loss too.

Interested

07-08-2011, 11:24 AM

Most bond holders are NOT 3-year old children who can be manipulated by nice words or threats. The choice for bondholders is either to die alone or to die together with Blue Star. To me the answer is very simple: those who have abused bondholders so long deserve a loss too.

I don't think I suggested that anyone was a 3 year old. Nor did I try to threaten. I am merely pointing out that if it is a no vote it is unlikely that bondholders will see any money. The reality is as so aptly pointed out by enumerate that the bonds rank behind the senior debt. In reading the prospectus page 34 shows net senior debt and finance leases totaling approximately $196 million. I think under any scenario involving A receiver that it is unlikely more than this would be recovered.

As enumerate also pointed out Blue Star is a large manufacturing business .... What business of this type hasn't been affected. They have still produced more than $40 million EBITDA. To me they simply have to much debt that they can no longer service. I don't agree that bondholders should be the ones penalized but as I've been reading this deal will be being driven by the Senior debt lenders.

I've also seen an article on the front page of the Sunday star times today which is well worth the read.

Contrarian

07-08-2011, 06:03 PM

Gidday
Voted yes, was thinking of abstaining. Remain very annoyed with their ineptitude & arrogance.
However the buck stops with me for buying them in the first place.

trevorbee

07-08-2011, 11:01 PM

In response to Contrarian.

Fair enough. It is a tough decision.

I am sticking to my no vote unless Blue Star is prepared to treat us as partners who can help them come up with a solution to their problems.

I have a lot at stake but will not be brow beaten into a decision which is repugnant to me.

Rgds trevorbee.

Enumerate

07-08-2011, 11:13 PM

I posted the link to the Senior Debt Facilities Agreement (the loan agreement with the bankers), earlier, from the Companies Office web site:

http://www.business.govt.nz/companies/app/service/services/documents/49377C5D1B28D6D639352F304D62D150

It is very interesting reading. I strongly urge everyone to read it before the meeting.

It is clear that the bankers are very much responsible for and in control of the present situation.

1) Did you know that PWC and KordaMentha have been commissioned to write reports? The KordaMentha one is obviously a financial restructuring report, by the reference in the facilities document (thought I have not seen the original report).

2) It is quite probable that even if Blue Star wanted to pay 1cent of interest to the bondholders - the bankers have the power and would halt this payment.

3) Reading between the lines - the concessions demanded of bondholders are concessions demanded by the bankers!!

The unfortunate fact is that the level of lock down the bankers have on Blue Star is complete. The banks do not care a fig for any subordinated debtor - which includes the bondholders.

There are three banks in the "consortium" - BNZ, Bank of Scotland and the CBA. Out of the three, Ralph Norris' CBA are likely to be the worst - based on Babcock & Brown Infrastructure experience. These people really do not care what kind of collateral damage they cause in pursuit of their repayments. Bondholder capital, supplier credit, employee livelyhood, equityholder interests ... all will be sacrificed if CBA et al think their interests are threatened.

Michael Warrington has written off the value of his investment and suggests that a 'No' vote will teach CHAMP a lesson in equity market etiquette. The fact remains, it is not CHAMP that needs to be taught the lesson - it is the banks. A 'No' vote simply increases the bankers stranglehold on the situtation to "complete and total".

Blue Star is a manufacturing company - a very large one, by regional standards. It is in an industry that Kiwi's have traditionally excelled at - printing. The oldest parts of the group are Kiwi.

If a 'Yes' vote was simply a means to "failing later" rather than "failing immediately" - I could understand voting 'No'. In my view, based on validating information in the prospectus (correlating the senior facility agreement projections with the projections in the bond prospectus); I do not believe that the restructure is fragile. I believe it can work and actually believe it will work.

Printing is not a business in which you can shutdown capex when the financial pressure comes on and hope to remain in business. At least the bankers understand this much of the business and have funded the West Auckland expansion for the ACP contract and the Agile rollout, to date. Someone has funded the HP Ink Jet rollout in sheet feed (probably reflecting the operating lease increase). Agile rollout will be completed, in sheetfeed. The business has maintained market share and experienced growth in key parts (web offset).

So, it is likely that even if Blue Star wanted to payout bondholders - this would have been blocked by the bankers. The bankers are also clearly in charge - funding projects on a case by case basis to save costs and achieve growth. This has been successful, to date, and in my view is likely to be successful in the future.

I will be attending the meeting. At this stage, based on my research, I will be voting 'Yes' to the restructure. The reason I will attend the meeting is to hear what other analysis people can offer - I will vote after listening to the debate.

trevorbee

08-08-2011, 12:47 AM

Enumerate, I bow to your obvious knowledge of the finance and investment industry but cannot go along with your apparent condolence of this rip-off of investors in Blue Star Bonds

OK, so they are subordinated - but it is still real money. The interest rate was only a couple of points above what I could have got from a bank term deposit. So, who in their right mind would every again invest in Bonds in a NZ business? Who is going to lose out in the end?

OK, a lot of us have said to Blue Star we do not like your proposal.

So, what would be acceptable to you?

I would like to propose the following for discussion.

I think we have to be prepared to forgive the accrued interest provided that Blue Star is not put into receivership and that we can resume receiving interest on our investment. Rather than lose everything I would we be willing to extend the term at a reduced rate of interest?

Is Blue Star willing and in a position to convert the bonds into an instrument that at least matches what we would receive from a 5-year bank term deposit?

Would Blue Star be willing and able to begin paying interest on the above terms?

Can Blue Star promise us that we will have the opportunity of redeeming our funds at the end of the 5-year term or rolling over the loan?

What do other bondholders think?

Enumerate

08-08-2011, 09:24 AM

I think the key point is that there is no hope of getting interest resumed any earlier than the date proposed.

The bankers are in control. There is no way they will let money out of the company to anyone subordinated to their debt. The budget, as I have posted earlier, includes modest loan amortisation - but this is likely to be at the lower end of the banker comfort zone. There is a "cash sweep" in the facilities agreement - any windfall goes straight to the banks.

It is the bankers bondholders need to be wary of - not CHAMP equity holders.

It would be possible for bondholders to take an equity position. This would be an even more difficult deal to get across the line. The fact remains that most bondholders want to take cash out of the business (interest payments) - converting to equity puts this possibility well beyond the proposed resumption of partial interest in 2013.

Under the current deal, bondholders will get interest on 64% of their capital from 2013. The recent "tweaking" of the deal to convert existing shareholder loans to equity actually improves the prospect of bondholders recovering the capital value of their remaining 36% of bond capital.

It is very unlikely that anyone contributing vital new capital will do so subordinated to the bondholders. This new capital is needed.

Frankly, I believe the "tweaked" deal is likely to be the best deal bondholders can get in the current situation.

I am not trying to "put lip-stick on a pig" (as the Americans say). I hated this deal when I first read the detail. It is only since reading the Senior Facilities agreement that I now see cloven hoof of the bankers all over this proposal. The proposal is put to us by the equity holders - but I expect that the author of the deal is KordaMentha under a terms of reference written by the banking consortium (paid for by Blue Star - to add insult to injury).

I think a 'Yes' vote is the only real option we have for capital preservation.

I would like to think that the meeting will be conducted with goodwill from directors, equity holders and bondholders. I know people are very angry but the equity holders have "done" about 180M of their capital - in the best scenario bondholders will be contributing about 50M in interest payments.

Management have cut about 30M in expenses from the business yet have added the 50M annual revenue from the ACP contract and a number of smaller extras.

Blue Star is the market leader in short run Web Offset/Heatset and in direct digital sheetfeed; the equipment deployed is modern and the most cost effective. This is the "strategic ground" in the printing market - the hard work is behind us, the benefits are ahead of us. All that is needed is a longer "runway" - needed because of the very long GFC induced recessions.

Hopefully, I will see lots of you at the meeting!

Newman

08-08-2011, 09:59 AM

I posted the link to the Senior Debt Facilities Agreement (the loan agreement with the bankers), earlier, from the Companies Office web site:

So, it is likely that even if Blue Star wanted to payout bondholders - this would have been blocked by the bankers. The bankers are also clearly in charge - funding projects on a case by case basis to save costs and achieve growth. This has been successful, to date, and in my view is likely to be successful in the future.

.

You seems always optimistic about the companies in deep trouble, SCFHA and NZF, to name a couple.

The reality for Blue Star is at the end of June the senior debt/EBITADR ratio was close to 4. How could Blue Star want to pay bond holders interest when bank terms say that a ratio of 3 stops any payment to bondholders.

Why did CHAMP waste BLUE Star $13 m to prepare this amendment offer when it should be very clear to them a no vote is the outcome. If CHAMP has no plan B why did not it put Blue Star in receivership straight forward?

Have a good dream might be good for a while. But at the end it does not help at all.

I sold a part of my bonds at 5.6 cents each this morning. For me the sooner I move over this Blue Star nightmare the better.

Enumerate

08-08-2011, 10:25 AM

You seems always optimistic about the companies in deep trouble, SCFHA and NZF, to name a couple.

And this optimism has been rewarded ... Smiths City, Trans Tasman Properties, Nortel, Imagination Technologies, Benitec, Macquarie Fortress ... and hopefully Babcock & Brown.

Sometimes it has not been rewarded ... Viking/Skellerup, SCF

Often the situation is unclear ... NZF, Blue Star

The reality for Blue Star is at the end of June the senior debt/EBITADR ratio was close to 4. How could Blue Star want to pay bond holders interest when bank terms say that a ratio of 3 stops any payment to bondholders.

Which I believe was the point I was making - the banks are in control, expecting to get any cash out of Blue Star unless they agree is a forlorn hope.

Why did CHAMP waste BLUE Star $13 m to prepare this amendment offer when it should be very clear to them a no vote is the outcome. If CHAMP has no plan B why did not it put Blue Star in receivership straight forward?

There have clearly been a number of reports - PwC, KordaMentha and KPMG - paid for by Blue Star. I am completely certain that this analysis was demanded by the banking consortium. I am sure that Blue Star does not seek to have it's managers involved in close and careful bank requested cash flow analysis and budgets. I am sure Blue Star would rather have them do their jobs ... marketing, sales, printing ...

Have a good dream might be good for a while. But at the end it does not help at all.

Maybe I am being too optimistic ... but I do believe the restructure can succeed and is not a fragile, temporary maneuver to compromise bondholder interests. Some parts of the business are truly excellent ... the web offset business. Even the sheetfeed operations show prospects of supporting acceptable profitability (the so called "digital strategy" of which project "Agile" is the key element).

Clearly, the problem area of the business is sheetfeed, in Australia. There is reference to a "Memphis" project, funded by the banks addressing this.

I sold a part of my bonds at 5.6 cents each this morning. For me the sooner I move over this Blue Star nightmare the better.

I am very sorry to hear this. Clearly every investor needs to act according to how they call the situation.

Germaine

08-08-2011, 12:17 PM

On balance I think there will still be a no vote but not by as a great a margin as people think. Its all very well talking tough about voting no but when it comes to the crunch its difficult to wrote that down on the voting form and potentially consign the business to receivership. I can sense this slight shift in attitude even in this blog. People are starting to realise that voting no to prove a point makes no sense - bondholders should only be voting no if you think there will be an alternative proposal forthcoming. But given the last proposal took 6 months to hammer out - what will happen after a no vote? I doubt the banks will wait another 6 months for another deal....something needs to happen quickly!

To get a seat at the table, I think the bondholders need to form a consortium or steering group who can approach the banks/Korda Mentha after the meeting if there is a no vote to negotiate. They should say that if the $10m of the $13m in fees were paid to the bondholders as a principal repayment instead of the banks and advisers then they would vote yes. 10 cents in the dollar is better than nothing, which is what will happen if bondholders sit back and wait for a receiver to be appointed after a no vote. This will be particularly difficult to accept for bondholders who vote yes.

The other thing to do is to try and precipitate some PR damage for the banks, particularly the BNZ who lead the consortium and will be most sensitive to NZ-centric issues. It sounds like there are around 3,000 bondholders who could rain a heap of crap down on the BNZ if they wanted to. The banks are the ones driving this deal, not champ.

Will be very interesting to see what happens either way.

Enumerate

08-08-2011, 01:31 PM

Germaine, I think your three points are right on the money:

1) It is likely a 'No' vote will pass at the meeting (just look at the Poll on the thread); but it is only of potential value if there is action to form a "Committee of Inspection" to assist the Trustee in negotiations beyond the vote (assuming there is actually any scope for this - given the statements concerning likely banker response).

2) Getting the "seat at the table" is vital - it has to be lead by the Trustee but a Trustee can only act in terms of the trust deed - a spokesman group, for bondholders, needs to form as a "Committee of Inspection" to do what the Trustee cannot do. In many ways adjourning the meeting would be preferable to voting down the resolution.

3) I reckon that the BNZ is the bank that is trying the hardest to save Blue Star. They are the ones making payment in "Tranche C & D" (Senior Facilities agreement), whereas Bank of Scotland and CBA contributed nothing. However, your general point is well made ... it is time the bankers realised that when the general public is invested in a subordinate way to their security - they better get out the kid gloves and not the steel capped boots.

I was kind of hoping that these actions were already 'in train' under the Michael Warrington initiatives. However, nothing has been announced ... that I am aware of.

Newman

08-08-2011, 02:41 PM

To get a seat at the table, I think the bondholders need to form a consortium or steering group who can approach the banks/Korda Mentha after the meeting if there is a no vote to negotiate. They should say that if the $10m of the $13m in fees were paid to the bondholders as a principal repayment instead of the banks and advisers then they would vote yes. 10 cents in the dollar is better than nothing, which is what will happen if bondholders sit back and wait for a receiver to be appointed after a no vote. This will be particularly difficult to accept for bondholders who vote yes.

By now, Blue Star should know the number of no votes that has been received. Getting 75% of bond holders to vote yes would be as difficult as changing the minds of banks and CHAMP. If no further announcements come out today or tomorrow I guess the Chairman for the meeting on Wednesday would have little duty to perform.

Germaine

08-08-2011, 03:18 PM

Interested

08-08-2011, 05:54 PM

Maybe, maybe not. If 26% of bondholders vote no i think that it wouldn't require much of a deal-sweetener to get a yes vote next time around. Alternatively if more than 50% of bondholders vote no then it might be all too hard. In that case a receiver might be inevitable.

It's even possible we see a receiver tomorrow. If 25% of bondholders have voted no by proxy already, then Blue Star would know for sure its not even mathematically possible to get a yes vote on Wednesday. The directors might start getting pretty nervous at that point. A day's creditors would be a reasonable sum if they are found to be trading recklessly. If not and its a closer call than that then Wednesday's meeting will be very interesting. Can one of you lot live blog from the meeting into this forum for those of us who can't attend?

The problem with this thinking is that you believe the banks want to deal! The reality is that this is the easiest way for them to get rid of $105 million dollars of debt albeit subordinated. Not champ but the banks. They get control and can cut a deal that only works for them and actually makes the business a more viable "sale" proposition.

Secondly I doubt blue star would actually know as wouldn't it depend on the overall $ value of the proxies received?

trevorbee

08-08-2011, 11:43 PM

This is a bit like a game of poker isn’t it? Who’s bluffing who?

We all seem to be arriving at the same conclusion. It is the banks who are putting the screws on Blue Star and the indications are that they are not bluffing. In all probability the banks are prepared to wear any losses due to a receivership now rather than let things go on.

On the other hand, a receivership equates to failure of all parties involved and in one way or another all parties loose out and are tainted with this failure. If the vote is ‘no’, but there is a willingness to work together to find a solution to this problem, wouldn’t it be in the banks interest to take this into consideration?

We expect to receive a fair interest rate for the use of our money. And we expect the borrower to return our investment when it is due. As we know, Blue Star is not in a position to meet either of these basic requirements. Blue Star has therefore failed us big time and, in my opinion, should not be dictating terms to us.

Having said that, none of us want to lose our money and if there is some way that these bonds could be re-structured which would preserve our capital, even though we lose out on the interest, I think that most of the bondholders would be in favour.

Interested

09-08-2011, 07:35 AM

I understand your sentiments but I think enumerate pointed us to the senior debt facilities agreement. I agree with him that the banks are controlling this entire process. Seems amazing that interest stopped being paid (an event triggered by banks under this agreement) and yet if my reading is correct of the prospectus that in the 18 months to 30 December 2010 nearly $32 million has been "repaid in borrowings". I can only assume this is to those same banks that are driving this process

The banks hold all the cards and I don't think they're bluffing. They will just want to look after themselves. Ironically a NO vote almost hands Blue Star to them on a platter. They cut out all parties including CHAMP who I suspect would lose close to $150+ million in equity. With nothing for the bondholders either.

I still think the best chance to recover something is to vote YES and give it a chance. You would have to think that after all of this they'd realize they need to address some of the issues raised here. The article in the Sunday star times Really brought home for me that they are a manufacturer with 800 employees in nz. It must be worth a chance. Why just hand it to the banks?

Eisenheim

09-08-2011, 09:50 AM

If you want to let go of your fate, vote no. If you want to make money, vote yes.

I would rather take my chances with an opportunity than a death sentence. If you want certainty put it in the bank.

If it passes the shock alone will send the price jumping back up, and these days, with all the money flooding out of the market, it may find a home in a more secure Blue Star with this monkey off its back.

You want out, sell. But you would get more after a passed resolution. If it goes to the banks you will have certainty alright. You'll lose everything.

I vote yes not because I like it, but at least I get something, and if the company prospers I might make even more.

moimoi

09-08-2011, 10:57 AM

So if its the Banks that are controlling the process then remove them....

CHAMP could tip more cash in, and perhaps provide bondholders with an "opportunity" to join them, and repay the Bank debt.

ie: lend us another 50% of the face value of your existing bonds, in return we will pay you the interest we were paying the banks and give you 1st ranking security.

As a shareholder you would wouldn't you?...assuming of course you thought the business had a future...

JBZ

09-08-2011, 02:21 PM

I think that it is a forgone conclusion that Bluestar is a goner with the financial markets in a free fall, the banks will try to get as much out of this as possble. And if we look at Babcock and Brown (better not actually).
Interest rates will only go up if a business needs more money this time so for Bluestar to have any future they would need to pay even more.

trevorbee

09-08-2011, 11:59 PM

A final post from me.

I have voted 'no' for the simple reason that the Blue Star proposal in its present form is not acceptable to me.

If the result is a receivership then so be it. I cannot afford to lose my investment but have not been offered something which I can accept. In this event I do sincerely regret that many employees of the company may lose their jobs. Hopefully, things will work out for them one way or another.

Either way, I have learned a very valuable lesson. Stay well away from any kind of subordinated investment in the future.

slingandarrows

10-08-2011, 10:01 AM

And the count is???

Royalwolff

10-08-2011, 02:31 PM

76.9% support for amendment.

Enumerate

10-08-2011, 02:31 PM

Resolution PASSED

Enumerate

10-08-2011, 03:47 PM

The press has characterised the vote, today, as: "a 'No' vote for principle" and "a 'Yes' vote for hope". For most of the people in the room, this would probably be an accurate summary.

However, if you dig deeper into what was actually said, there was no clear statement of principle for the nay sayers. At best, the position can be expressed in summarised terms: "I vote 'No' because I value certainty and since I believe I have done my cash the certainty of receivership is more attractive than the uncertainty of the company actually clawing its way back".

Shareholders Association chairman John Hawkins is widely quoted as appealing to the 'No' vote as a point of principle. However, I object to the moral cowardice expressed by the Shareholders Association in not even presenting an elementary understanding of the terms of the Trust Deed in justifying their "point of principle". These cowards are afraid of their own shadows - conjuring up some kind of "softening up" argument (that the bondholders are being softened up by the banks as a prelude to asset stripping, or something).

Maybe the Shareholders Association is out of its depth in terms of understanding the nature of subordinated Capital Bonds?

Contemptible cowards! Just whose interest does the Shareholders Association think it is serving by voting their member proxies (I presume) against the resolution without having done even basic research.

The fact is that the "Hope" is actually far more calculated than implied by the phrase. Economics supports a notion that optimal, rational, decisions are always made "at the margin". That is you decide to do something only when the benefits of taking the action exceed the costs. In the Blue Star case the cost of taking this decision is to not collect uncollectable interest ... ie zero cost; the benefit is potentially getting your capital back ... ie massive benefit.

The "wise heads" of the Shareholders Association cannot even understand this simple foundation principle of economics. The only principles they were defending were "cowardice under fire".

Newman

10-08-2011, 04:03 PM

Resolution PASSED

Let's wait and see what happens in October 2013. If Blue Star does pay bondholders interest at that time nobody can complain about it.

Enumerate

10-08-2011, 04:44 PM

If Blue Star does pay bondholders interest at that time nobody can complain about it.

The Bondholders in considering the resolution, at the meeting, were not being asked if they had any complaints. They were not being asked if they regretted investing the Blue Star. They were not being asked whether it was a fair offer compared with senior debtholders.

They were being asked if they wanted to restructure their investment, to potentially save their capital.

They were given the information that the company faced administration unless the restructure was approved. They were given the view of the company chairman that administration was inevitable if the bonds were not restructured. The company, in administration, had no shelf life as all the currently lined up contracts would evaporate. Loss to the bondholders would be complete, the senior debtors would, most certainly, lose a substantial amount.

Is this the moral lesson that the Shareholders Association was so keen on achieving?!? What kind of principle is this ... that the Shareholders Association supports some kind of nihilistic society of masochists?!?

On the other side of the ledger, the meeting was given information that the recovery in profitability, forecast, does not depend on external factors - like the ANZAC economies rebounding in growth. The point was made that the turnaround was based on internal initiatives that, by a large, were already completed or underway. The company was moving from unprofitable business niches to defensible, profitable niches. While the entire industry is in a slow structural decline, accelerated by the GFC, that Blue Star had identified and occupied profitable niches as part of its transformation over the last three years.

What principle does this espouse ... that hardwork and strategic focus should be betrayed at the earliest opportunity by fear and cowardice?!? This is what the Shareholders Association seems to be advocating.

Finally, the NZ CEO, David Jupe spoke. He made the plea on behalf of his staff and suppliers that Blue Star is a business that should be saved. He clearly was speaking "from the heart" when he made the points that in digital and web, Blue Star was market leader, with skilled motivated staff and modern equipment. Apparently, according to Chris Mitchell, some customers offered to attend the meeting to add their voice to the plea to save the company.

Michael Warrington was present. From what I remember about his points was that he was concerned and probed as to how sound were the projections for for future revenues. There was some discussion about the structure of the Board with Roger France indicating that they were seeking to appoint a formal independent director.

Michael Connor made some basic points about the stark reality of the decision facing bondholders and urged a 'Yes' vote.

The final point made was a plea to improve bondholder communications. This point was accepted by Roger France.

The vote proceeded ... they results you know.

The most amazing thing about the meeting, for me, was that the resolution passed.

The second most amazing thing was the attitude of the Shareholders Association chairman John Hawkins - my amazement is summarised in my prior post.

Michael Warrington should be thanked for voicing opposition to the deal. This lead to some important concessions (the capitalisation of the existing shareholder loan) which adds measurably to the security of the bondholders. However, I was hoping for more analysis on exactly what principles were being defended by a 'No' vote. This was left to Hawkins - whose justification for this position was simply irrational.

bondholder007

10-08-2011, 05:27 PM

76.9% support for amendment.

A close run thing as Arthur Wellesley said in 1815. I guess one lesson is that one should not buy subordinated debt even in a good company. Someone might come along and take it over and try to screw too much juice out of the said company. Another lesson is that posters on this forum are not your average investor to judge from how wide of the mark our poll was. Not sure I agree with Enumerate about hope and fear as economic imperatives. I recall reading this when I was studying accountancy in my youth (thankfully I did not become one) but I dont think 99% of the population understand what this means. Not sure I do either. It seems some bondholders had horrifyingly large
holdings (they must have thought BSG was safe then) and their weight influenced the vote. The good news is that the bonds were selling about 5c in the dollar this morning and are not about 10cents/dollar. Perhaps enough to pay for a small holiday in due course.

trevorbee

10-08-2011, 06:47 PM

It is just a pity that we will now never know what would have happened had the deal got voted down. I never quite believed that receivership would be the final outcome.

Enumerate

10-08-2011, 07:25 PM

It is just a pity that we will now never know what would have happened had the deal got voted down. I never quite believed that receivership would be the final outcome.

This is a deal that has been in gestation for quite a few months, now (perhaps even a year). We were told at the meeting that a deal on more favourable terms was negotiated a number of months ago but the weakness of the Aussie sheetfeed market made the bank increasingly reluctant to fund it.

The events of the past few days have further raised fears of a new liquidity crisis. The deal that has been on the table for the last month would be increasingly unlikely to achieve in another month.

My view is that bondholders were correct to grab the existing deal rather than rely on an increasingly weak negotiating position in the face of increasing banker paranoia.

This process has been long and drawn out, in private, as the bankers did their due diligence and a deal was negotiated. Extending this process, in a very public area, would be fatal to the business.

At the meeting, there were very strong hints that a number of new contracts were waiting in the wings pending the result of the restructure. These contracts would evaporate with the bondholder negotiations spilling over into the public domain.

I am not sure if bondholders will ever have their courage in ratifying this deal acknowledged. The bondholders have two more years of pain ahead, without interest, with a continued degree of uncertainty. Those who sneer describe this as 'Hope'; I describe it as 'Confidence'.

Enumerate

10-08-2011, 07:34 PM

bondholder007

10-08-2011, 08:16 PM

It is just a pity that we will now never know what would have happened had the deal got voted down. I never quite believed that receivership would be the final outcome.

Totally agree. Enumerate (who has a lot to say on several threads on this website) criticises John Hawkins for advocating NO "on principle". I am not a member of the Shareholder Assn but think there is a principle here. A lot of NZ money has been lost in finance companies which are no more than a conduit for distributing money.I got out of finance cos during the GFC and my total loss in that field has been $300 at the tail end of Provincial. (apologies for the boast) I now only invest in companies that supply "real" goods and services. BSG was one of these albeit wiith a weak capital structure. During the last 3 years well managed NZ cos have been been consolidating their balance sheets whereas BSG went the other way on the lame excuse that they had to expand to stay alive.

There are two issues/principles here:

1. BSG management had a duty to preserve bondholder capital which was a large part of their funding. Champ had a different view but still lost their capital.

2. The various NZ Trustee companies have been almost universally ineffective in this and similar situations.

In my opinion this is the worst RORT that NZ investors in a formerly sound business have been subjected to in my memory (or perhaps since 1984). The principle is to draw a line in the sand to say this should never happen again. A NO vote could have done this.

There has been a lot of emotional blackmail about this, for example:

What about the workers? - the worst case scenario is that the banks would have sold off the bits of BSG to independant operators who know how to print albeit with perhaps fewer staff.

We read that BSG customers were willing to appear at the meeting to support the deal. No doubt - they are getting a cheap deal at our expense and would have to re-negotiate if the vote went the other way.

Still the market remains the market. I will be watching for my trigger price when the new denominated bonds are listed. Perhaps when I trade my holding will go to one of the BSG boosters. Cheers again

bondholder007

10-08-2011, 08:36 PM

Industry comment on the restructure:

http://www.print21online.com/news-archive/bondholders-give-blue-star-the-green-light/

http://www.proprint.com.au/News/266385,blue-star-bondholders-approve-deal.aspx

http://www.i-grafix.com/index.php/news/new-zealand/bondholder-vote-keeps-blue-star-alive.html

A couple of quotes from the journals listed- obviously from printing staff:

It must have been similar to the "bomb around the neck" saga at mosman! Porr investors I feel sorry for them Report (javascript: showReportBox(181754823))
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"Improved performance is the key to Bondholders receiving some or all of their investment back."?? Realistic prices will work even better!!

Enumerate

10-08-2011, 09:34 PM

There are two issues/principles here:

1. BSG management had a duty to preserve bondholder capital which was a large part of their funding. Champ had a different view but still lost their capital.

2. The various NZ Trustee companies have been almost universally ineffective in this and similar situations.

In my opinion this is the worst RORT that NZ investors in a formerly sound business have been subjected to in my memory (or perhaps since 1984). The principle is to draw a line in the sand to say this should never happen again. A NO vote could have done this.

It is hard to imagine that a worse job (than the John Hawkins attempt) to justify the "noble principles" of sending a perfectly good company to the wall because you want to draw a line in sand ... but this achieves that goal. This reminds me of Admiral Byng - executed in order to "encourage the others".

This does not even reduce to "cutting off your nose to spite your face". This is "cutting off your face to spite your nose".

Your second point in the "principles" is not even factually correct. I understand that the Trustee, who only formally has obligations to do what is in the Trust Deed, actually engaged KPMG to counter some of the views put by PwC and KordaMentha. Even Roger France, in the meeting, acknowledged the active role of the Trustee in bringing the deal to the table.

There has been a lot of emotional blackmail about this, for example:

What about the workers? - the worst case scenario is that the banks would have sold off the bits of BSG to independant operators who know how to print albeit with perhaps fewer staff.

We read that BSG customers were willing to appear at the meeting to support the deal. No doubt - they are getting a cheap deal at our expense and would have to re-negotiate if the vote went the other way.

You can hardly deny that administration of Blue Star would have had profound negative consequences on the Blue Star staff. I am actually proud of the fact that bondholders recognised the welfare of the people now responsible for returning a favour to the bondholders.

I am painfully embarassed by some of the calls at the meeting to force a 20% salary cut. Hearing David Jupe speak, I am convinced that Blue Star does not have the issue PMP has with staff - that they have to be paid a cash bonus "in order to tell the truth".

On the subject of truth - this is mainly what you hear from your customers. If a customer of mine was prepared to stand at a meeting and defend the performance of my company - I would be proud of this fact. In many ways, I wish we had heard from these customers - I am sure it would have increased the vote margin of success.

trevorbee

10-08-2011, 10:39 PM

Well, Blue Star has won the day – just.

Their strategy for reducing debt at one foul swoop, (forgive us) appears to have worked and therefore their strategy for improving profitability could work too.

We are no longer owed any money and our bonds are now worth a lot less but hey, we now have hope (confidence). Who could ask for anything more?

Enumerate

11-08-2011, 08:20 AM

The venerable Kenny Rogers was actually dispensing sage investment advice when he wrote:

He said, "If you're gonna play the game, boy
You gotta learn to play it right

You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
Know when to run

The reality of the situation was that there was no possible accommodation on the interest payments. This money was bust.

The requirement for new cash, in the business, is quite modest. 15M to float a 600M company does not point to a company hemorrhaging cash.

It is likely that the banker contribution of 10M was to fund the elaborate due diligence mandated by the bankers in the first place. I am sure the company would support the view that there were other better opportunities to invest 10M.

Returning to Kenny, any opportunity sharpen the deal beyond the concession CHAMP made on converting the 10M shareholder loan to equity was squandered. Michael Warrington turned up to the meeting with .... nothing. The Shareholders Association turned up to the meeting with bad research and empty rhetoric. The Bankers turned up to the meeting with KordaMentha on a leash.

To vote 'No' to the resolution with these squalid array of future options before us was, clearly, not justified on principle. It is, in fact, the lowest expression of fear, anger or low vengeance.

I am actually proud of the bondholders who voted 'Yes'. The press was useless in helping these people to form a view - I did not read any analysis of the situation that was something other than superficial. The public profile analysts could not offer anything more constructive than empty rhetoric and reference to vague moral principles that they did not define. The Shareholders Association offered breathtaking irrationality.

The nay sayers now have the opportunity to sell their new bonds at market price that is vastly more than the value they were about to set (zero). I hope they do this; and leave Blue Star to the people expressing courage and confidence.

bondholder007

11-08-2011, 11:08 AM

Enumerate

11-08-2011, 11:41 AM

Germaine

11-08-2011, 11:55 AM

I agree bondholder007. It's hard to accept Eunmerate's logic when similar logic must have led him to buy these junk bonds in the first place - even after the fairly obvious credit issues manifested themselves. Its a bit like asking Mark Hotchin's advice on how to run a finance company. Without being at the meeting its hard to know what context the shareholders association comments were in, however my personal opinion in that rather than getting on his high horse Enumerate should put the champagne back in the fridge and wait to get some money back before he celebrates. The chances of the business increasing its EBITDA by 26% in an industry riddled with overcapacity, no barriers to entry, and commoditisation are minimal. A bit like the chances of EBITDA multiples for printing businesses increasing to 5 times - what a joke. In my opinion its only a matter of time before the first profit downgrade occurs (this is all going to be very public given the prospectus forecasts). Then there will be a covenant breach, followed by the sale of a best bits of the business to fund principal repayments to the banks. There will be no external bank funding to complete a refinancing when the remaining bank loans are due, so at that point the banks will screw the scrum again. There is every chance bondholders get zero out of this situation yet.

I also don't agree that voting no was a cop-out. As trevorbee states above, we'll never know what a no vote might have been, but blindly accepting management's view (who lets face it lack a bit of credibility given how many profit downgrades have occurred) that a receiver was inevitable suited their "this way or the highway" strategy nicely. Having said that, given that wise old Enumerate has heard David Jupe speak to save is job must mean he knows the Blue Star management team really, really well now and can therefore guarantee those EBITDA increases...

Meanwhile bondholder007 you can presumably take advantage of Enumerate's optimism and sell him your bonds at more than they are worth when they relist...?

Enumerate

11-08-2011, 12:14 PM

Newman

11-08-2011, 12:16 PM

I see that Enumerate states very early in this thread that he only bought BLU020 after the suspension of interest so his view as a trader is different from mine as a long term investor. His analysis of the present and future situation for BSG begs at least two questions. I am sure he can work out what they are.

I think both the "yes" and "no" sides contributed to the outcome now, which is $12m better for bond holders. Without the effort of those who critised CHAMP and Blue Star board, the $12m would not be available! Without the "Yes" voting of 72.9% bondholders by value, we might have lost 100% of our investment (regardless of what you actually paid for the bonds) or in a position of uncertainty.

We should review the decisons we made when the 1st HY results come out in February 2012. Until bond holders get some money back, nobody is absolutely sure if voting Yes is a right or wrong decision.

I admitted that I did not expect 76.9% votes yes. Probably the recent bad news on financial market incraesed bondholders' fears and thus helped CHAMP (and possibly themselves). Who knows?

Germaine

11-08-2011, 12:24 PM

Enumerate, in response:

- I don't believe the marginal yes vote expresses any confidence, just blind hope and to a certain extent desperation. Only time will tell whether voting yes will be any different to voting no. For the reasons above, I doubt it
- nowhere in my post did I say I want Blue Star to fail - its just my personal belief that they will. Or do you only want to hear opinions that are 'politically correct' on this blog?
- if you want examples of moratoriums where blind hope wasn't enough, I can quote you a list as long as my arm...

Germaine

11-08-2011, 12:30 PM

Newman, I too was surprised at the no vote, i thought it would be close but still a no vote on balance. I had assumed they might have converted a few no's to yes's at the meeting by serving chocolate biscuits rather than the usual vanilla wines? Or am I being too cynical?

Balance

11-08-2011, 12:33 PM

And the debate continues ...

What I continue to find amazing is that:

1) those that claimed to take a principled position - cannot articulate any of the principles they are defending.

2) those that claim an imperative of logic - produce nothing but illogical drivel

Gentlemen, you have been reduced to the role of sneering at the decision of the vast majority of bondholders. Surely, where you see confidence in the future of the company expressed by your fellow bondholders; you could at least be gracious enough to express hope that they are right.

This is an operating company which can ride an upturn (whenever and if it comes) so the majority of bondholders are voting for a chance of recovery. I expect that they will be right.

Problem is that the majority can be hopelessly wrong - as was the case with Hanover and Allied Farmers. That is a case where receivership would have served debenture holders better. But then, Allied Farmers had hopeless management, vested interest and above all, highly questionable property based loans.

bondholder007

11-08-2011, 01:35 PM

I am not a trader. My intention, always, is to buy for a long term hold. It is a classic investor mistake to be swayed in a decision on an investment by what you paid. The only factors of relevance are establishing current value with respect to likely performance. (Our old friend, the foundation principle of economics, that optimal/rational decisions are made "at the margin"). Ignore history, ignore emotion.

It actually puzzles me why, bondholder007, that you seek to cast aspersions on my motives and not to address any of the points made?

I dont cast aspersions on your motives and do no more than disagree with your logic. However it worries me that you portray people like Hawkins and Warrington who have a different view from you as fools and/or knaves. It is only money - not a morality play.

Interested to read that you are a student of history like me. The execution of Admiral Byng was certainly unjust but it did encourage the others as we know from history. Did you know that there is still an active movement in UK to have him pardoned. In 2007 the British MOD refused this request arguing where would we go next - Joan of Arc?
I have tried to think of a parallel with the BSG situation but this stretches even my imagination.

Enumerate

11-08-2011, 03:55 PM

However it worries me that you portray people like Hawkins and Warrington who have a different view from you as fools and/or knaves. It is only money - not a morality play.

Exactly, it is only money, not a morality play.

Hawkins and Warrington were the ones elevating the vote to a matter of high principle. At least Warrington made this point before the meeting - in the meeting he seemed more interest in governance and the soundness of the financial projections. Maybe the gentlemen seated next to him, who spoke with some vehemence against the resolution, was Warrington's proxy - I don't really know.

However, Hawkins, representing the Shareholders Association; deserves to be singled out for condemnation. Roger France delivered a point by point rebuttal of his position. Given the absolute seriousness of the situation and given the obligation for a Shareholders Association representative to be fully and accurately informed in their viewpoint - I remain of the view that the Hawkins comments were an absolute disgrace.

bondholder007

11-08-2011, 05:18 PM

Exactly, it is only money, not a morality play.

Hawkins and Warrington were the ones elevating the vote to a matter of high principle. At least Warrington made this point before the meeting - in the meeting he seemed more interest in governance and the soundness of the financial projections. Maybe the gentlemen seated next to him, who spoke with some vehemence against the resolution, was Warrington's proxy - I don't really know.

However, Hawkins, representing the Shareholders Association; deserves to be singled out for condemnation. Roger France delivered a point by point rebuttal of his position. Given the absolute seriousness of the situation and given the obligation for a Shareholders Association representative to be fully and accurately informed in their viewpoint - I remain of the view that the Hawkins comments were an absolute disgrace.

When I left my last employer many years ago to start my own business, he commented that if I had a fault it was always wanting to have the last word. Therefore we have something in common. Like Chris Mitchell, I am now a bit more humble. I think I have made all my points and leave the floor to you. Cheers.

trevorbee

11-08-2011, 11:23 PM

Nothing much more to be said on this subject now is there? It is just a waiting game to see if Blue Star delivers.

My experience, with finance company moratoriums, was a period of hope followed by a sudden belly-up a year down the track. But at least Blue Star is not dependant upon the fortunes of a load of entrepreneurial property developers.

However, having read all through the blogs, including ProPrint which gives an insight into how the employees and print industry see Blue Star, I have to say I am not confident that the final outcome will be good for the bondholders. OK, you have to take everything with a ‘pinch of salt’ but when you read that they are even in debt to their suppliers you have to wonder how they will survive.

Having said that, I sincerely hope that Blue Star will win through for everybody’s sake.

Balance

12-08-2011, 09:12 AM

Words from Chris Lee re the decision: "Blue Star Group’s failings have conditioned investors to be extremely cynical about the integrity of published accounts, and cynical about corporate behaviour."

He is obviously writing about :

1. His finance companies ratings system.
2. The $350m odd that his clients invested in the finance companies, based upon his recommendations and ratings system.
3. His attempts to distant himself and his firm when most of the finance companies collapsed - it's not his faults but that of the finance companies #1, and the investors themselves #2.

To those of you who quoted Chris lee/Warrington in this thread, you now know the sort of characters that they really are.

BTW - the 219 'No' votes versus 4 'yes' votes show how irrelevant the rantings and ravings by those who professed to have high principles are?

Enumerate

12-08-2011, 09:29 AM

My experience, with finance company moratoriums, was a period of hope followed by a sudden belly-up a year down the track.

The critical point here is that the finance company moratoriums occured AFTER the companies concerned went into receivership.

There is a vast difference with the Blue Star restructure - the company is trading, generating cash (and would be profitable, apart from goodwill writedowns). This is also a restructure that maintains the support of the most significant equity holder - CHAMP. It is still their business, with growth prospects and staff with energy/enthusiasm. This deal is about bully banks withholding loan liquidity to force improved security - Blue Star is a profitable, energetic company; not a pile of toxic property development loans.

Bondholders have actually conceded nothing of particular value - the historical and future interest concessions are bust - there is no rational possibility of making a recovery.

On the other hand - by supporting CHAMP - bondholders support the only entity capable of supporting continued Blue Star growth and development. (Supporting the banks would only lead to a programme of asset realisation - to the disadvantage of the bondholders).

(This is why I think the negotiation strategy of brinkmanship - rejecting the restructure in the hope of a better deal - fails. The banks have already done their asset recovery calculations, they had the ability to put infinite pressure on the equityholders; bondholders supporting the bank position was plainly stupid, bondholders supporting the only people willing to introduce new equity is the only logical negotiation strategy).

Xerof

12-08-2011, 09:58 AM

On the other hand - by supporting CHAMP - bondholders support the only entity capable of supporting continued Blue Star growth and development. (Supporting the banks would only lead to a programme of asset realisation - to the disadvantage of the bondholders).

(This is why I think the negotiation strategy of brinkmanship - rejecting the restructure in the hope of a better deal - fails. The banks have already done their asset recovery calculations, they had the ability to put infinite pressure on the equityholders; bondholders supporting the bank position was plainly stupid, bondholders supporting the only people willing to introduce new equity is the only logical negotiation strategy).

Agree 100% - Enumerate, I'd give you a thumbs up if the facility existed....... oh I found one :t_up:

Enumerate

12-08-2011, 10:10 AM

Agree 100% - Enumerate, I'd give you a thumbs up if the facility existed....... oh I found one :t_up:

OMG - I don't know how I will cope with someone actually agreeing with me. Usually, if 219 are against; 4 are in support - I am one of the 4.

Germaine

12-08-2011, 11:04 AM

You'll probably cope by wasting even more cyberspace lecturing us all on how much you know about various key principles of economics. Or maybe you'll spend the time sitting out by your mailbox waiting for your cheque from Blue Star? (take some warm clothes, you may be there for a while...)

And if you think that a moratorium can occur AFTER a receivership, that probably says it all.

Finally, I will take this opportunity to quote a great figure in the history of economics:

“My view is that the deep discount to face, offered in market, has more to do with the lack of liquidity than a reasonable estimate of counterparty risk”. Post by Enumerate, referring to the Blue Star bonds, 08-03-2010

Newman

12-08-2011, 11:13 AM

No matter how bright the future of Blue Star might be, the buyer of the amended bonds offers only 5 cents whereas the sellers want to get 29 cents.

trevorbee

12-08-2011, 11:16 AM

The critical point here is that the finance company moratoriums occured AFTER the companies concerned went into receivership.

This statement is not correct. The moratoriums came first and were agreed to by the investors. Down the track, the finance companies failed to meet the scheduled payments under the terms of the moratoriums and were therefore put into receivership by the trustees.

Pretty much agree with the rest of your post though.

Enumerate

12-08-2011, 12:11 PM

And if you think that a moratorium can occur AFTER a receivership, that probably says it all.

Yes, you are correct ... I was following Trevorbee's point and assumed he was talking about Hanover, which froze loan repayments and entered into some kind of administration in which a loan restructuring deal was hammered out.

So my point should be more accurately stated as:

"The critical point here is that the finance company debt restructures occured AFTER the companies concerned were in a state of technical default".

... or something like that.

trevorbee

12-08-2011, 10:30 PM

I had decided to call it a day and not post again on this subject. However, there is still something ratting around in my head.

It is those comforting words spoken by Roger France towards the end of the meeting. If I remember rightly it was something like “these bonds are not like debentures, they are unsecured, subordinated instruments which carry risk and, in a situation like this, they are last cab off the rank”.

I know that, at the time, it felt like he was saying “and more fool you for investing in them”. If that is indeed what he meant then I think he was right.

I have now vowed to myself that I will never ever again invest in anything that is not at least as secure as a bank term deposit, no matter how well the issuer appears to be doing. Just been caught too many times. OK, the interest will be a bit less but, short of a major economic catastrophe, I will be able to rest easy that the interest will be paid on time and the principle returned to me in full at maturity.

I have seen other posts where people are taking a similar stance. So, could it be that commerce will find it much harder to raise money from the public in future? If so, great news for the banks and bad news for the financial advisers. Who needs advice to invest in a bank?

Enumerate

13-08-2011, 09:38 AM

I have now vowed to myself that I will never ever again invest in anything that is not at least as secure as a bank term deposit, no matter how well the issuer appears to be doing.

I think you should examine this conclusion.

Every investment carries risk. The compensation for this risk is some kind of reward. Most people tend to be highly risk adverse, especially after period of extended recession - this leads to very high rewards for even moderate or even low risk.

Consider Quayside Holdings Perpetuals - QHLHA. This is a Tauranga Council CCO type organisation holding shares in PoT, whose dividend stream covers the interest payment. If you inspect the trust deed, there even appears to be a Council guarantee on the capital value of the units. Of course, normal commercial risk applies to the interest payments. These have traded as low as 85cents on the dollar (at this price, a 6.5% yield with high capital security; with the prospect of an interest rate reset to much higher levels at the next reset date).

On the other hand consider the recent collapse of the FDY010. These are capital guaranteed bonds, a kind of structured investment in international bonds/treasuries, has a 100% capital guarantee from Westpac and has recently traded at an effective return of 20% (all money payable at maturity, July 2013).

The market throws up some very interesting opportunities, even when capital preservation and modest income are your investment imperatives.

Of course, you always must do you own detailed research or contract for capable advice from a registered advisor.

Balance

13-08-2011, 10:54 AM

Of course, you always must do you own detailed research or contract for capable advice from a registered advisor.

Chris Lee is a registered advisor. Would you recommend him?

Enumerate

13-08-2011, 02:19 PM

Chris Lee is a registered advisor. Would you recommend him?

I couldn't recommend him because I have no experience of his advisory services ... beyond what he puts up on his web site.

trevorbee

13-08-2011, 02:51 PM

I think you should examine this conclusion.

Enumerate – I have no doubt that you are right and that better returns can be got if you know what you are doing and are prepared to take some calculated risks. As we know, people have been doing that for hundreds of years.

In my case I have never really had the time or inclination to become knowledgeable in this area and therefore relied on professional advice to find a home for my savings. I believe that the advice I received was given in good faith but, as it turned out, the portfolio was neither diverse enough nor robust enough to avoid heavy losses in a global financial downturn such as we are still experiencing.

Like many others in a similar situation I have lost a huge chunk of my savings to various debentures, capital notes and bonds and cannot afford any further losses. The extra reward involved certainly did not equate to the risks. Therefore what remains is now firmly ensconced in bank terms deposit where it is earning 5-6% with only minimal risk.

As a result of this experience, I cannot see myself ever taking professional advice again (despite the new rules which appear to me to only provide a modicum of extra protection) or investing in anything else but banks.

Balance

13-08-2011, 05:59 PM

I couldn't recommend him because I have no experience of his advisory services ... beyond what he puts up on his web site.

What about this to help investors make up their mind?

http://www.stuff.co.nz/business/money/2161440/Advice-and-adversity

trevorbee

13-08-2011, 11:54 PM

What about this to help investors make up their mind?

Exactly. Once burned twice shy. My point is that from now on NZ commerce and industry will find it much harder to raise funding by public subscription. Too many of us have learned a hard lesson during the current recession. Blue Star is just the latest in a long line of let downs.

Balance

14-08-2011, 10:55 AM

Exactly. Once burned twice shy. My point is that from now on NZ commerce and industry will find it much harder to raise funding by public subscription. Too many of us have learned a hard lesson during the current recession. Blue Star is just the latest in a long line of let downs.

Wish it is true but history shows that the market and investors have very short memories.

Eisenheim

14-08-2011, 04:54 PM

Greed always wins out in the end.

Contrarian

15-08-2011, 09:42 AM

Gidday

I thought I would just save someone getting confused, BLUFC are quoted in cents per $100, NZX making it clear as mud.
Hence someone is prepared to sell at 20% of face value, not 2000%
Bid 5% of face, Oh them of little faith

Bids
Quantity No. Price
50,000 1 500
100,000 1 100
Asks
Price No. Quantity
2000 1 50,000
2900 1 100,000
3000 1 50,000
Recent Trades
Price Volume Time Cond

Xerof

15-08-2011, 10:57 AM

Yeah, shame it needs someone independent to explain how to interpret their quotes. There is no consistency of pricing on NZDX, and quite frankly it's a disgrace.

Whilst I'm bitching, it's also a disgrace on Brokers' part that they charge so much for fixed interest brokerage. It's hardly worth bothering, especially for short dated securities, when up to 1% of your return is swallowed in transaction costs.

There appears to be a clear gap in the market for one of the on-liners to make a stand and offer online services at much cheaper costs to the investor. If NZX and the Broker fraternity are serious about developing secondary markets for debt instruments in this country, they need to sharpen up their act on these issues

spleen vented for today:mad ;::mad ;:

Newman

15-08-2011, 09:06 PM

Yeah, shame it needs someone independent to explain how to interpret their quotes. There is no consistency of pricing on NZDX, and quite frankly it's a disgrace.

Whilst I'm bitching, it's also a disgrace on Brokers' part that they charge so much for fixed interest brokerage. It's hardly worth bothering, especially for short dated securities, when up to 1% of your return is swallowed in transaction costs.

Direct Broking charges 0.5% for buy or sell transactions. ASB Security charges 0.7%. Does anyone know a broker who charges less? In Australia one broker charges a flat A$15 for transactions

Dubdee

16-08-2011, 11:46 AM

I get 0.375% from Direct but on large single orders of about 300K per shot. 0.5 % for other stuff at Forbar

Newman

18-08-2011, 12:22 PM

Look at the share price of PMP print: it jumps 14% today.

Newman

15-09-2011, 09:14 AM

Who would be blamed next time if Blue Star does not deliver what it promised in August?

getontoit99

15-09-2011, 03:16 PM

14 September 2011

Resignation of Managing Director

The Board of Blue Star Group advises that Managing Director, Mr Chris Mitchell, has resigned from the Group, effective 11 November 2011.

The Board wishes to express its appreciation for the significant contribution Chris has made, both in managing the business during an extremely difficult period and in formulating a new strategic direction for Blue Star.

Following the recent company refinancing and capital bonds restructure, the Group's balance sheet is stronger than at any time since Chris was appointed Managing Director in July 2008 and it has debt arrangements in place until 2015.

A search for a new Managing Director is now underway; meanwhile Mr. Graeme Archer, Group Chief Financial Officer, will be Acting Group CEO. The Board
is not contemplating any change to Blue Star's strategic direction as a consequence of Chris' resignation.

For any inquiries please contact the Chairman, Mr. Nick Greiner 649-477-0400.

bondholder007

03-10-2011, 05:09 PM

I was one of those who voted NO to the bond amendment offer. I was suspicious that the offer was made before release of the FY11 accounts. Have now received these and lo and behold the loss ($84,894m) is substantially larger than forecast in the offer ($72,210m). Doubt whether the deal would have scraped through if the true figures had been known. Chris Mitchell has jumped ship - or was he pushed? Kiss your money goodbuy guys.

Enumerate

08-10-2011, 02:15 PM

Adam Feeley has got to go ...

This, on top of the Bridgecorp champagne theft ... where is the dignity of the SFO? It seems Feeley advocates a culture of "win at all costs". Maybe he has attracted all the ex-IRD staff used to throwing their weight around completely unconcerned with the justice or fairness of their enforcement of statutory obligations.
SFO chief angers Hubbard supporters with 'booby prize' book

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10757465

sleepdog

25-10-2011, 06:45 PM

sounds as if the rats are jumping ship , don't expect any big turn around from this company they have run out of ideas they maybe smart people just not with printing ......

Germaine

23-11-2011, 02:06 PM

Enumerate - you were a firm advocate of the 'yes' vote, even standing up at the meeting to voice your opinion to convince others. Are you still confident of getting your money back?

Enumerate

23-11-2011, 02:51 PM

Yes, I am.

Newman

26-01-2012, 10:40 AM

Yes, I am.

Mr Tom Sturgess resigned from Blue Star board. Do you see it positive or negative for bondholders?

Enumerate

26-01-2012, 04:52 PM

Given that there is no explanation ... given that Sturgess was the driving force behind the consolidation of print companies ... given that he is a significant shareholder .... There are some negative connotations with the development. Hopefully, there will be some information emerging.

In recent news:

IPMG announced they are closing the Craft sheetfeed plant:

http://www.i-grafix.com/index.php/news/australia/ipmg-to-close-craft.html

Clearly, the new Blue Star CEO will be doing a careful review of operations:

http://www.print21online.com/news-archive/bluestar-s-new-ceo-needs-to-turn-on-a-dime-/

Where he says: “I’m really pleased and impressed by the quality of our plant and people,” he said. “The company is in very good shape.”

PMI have revealed success with their aggressive approach to Internet ordering, in the sheetfeed market:

http://www.print21online.com/news-archive/new-world-of-printing-at-pmi-print21-magazine-feature/

This must be further validation of the Agile strategy.

Revenues since the step up with the ACP magazine contract must have been flat. The forecast EBITDA increase was largely booked on known cost saving initiatives. Hence, I would expect their focus to be on productivity gains and cost saving projects.

The half year results to 31 December, must be before the board (in draft, at least).

sleepdog

15-02-2012, 07:14 PM

Newman

15-02-2012, 10:04 PM

seems a little quite on the news front with Blue Star ??????

By looking at PMP print you would be able to guess how Blue Star is doing.

Enumerate

22-02-2012, 09:40 PM

Expansion of the NZ government printing hub contract to include two more agencies:

http://www.print21online.com/news-archive/two-wins-for-blue-star-nz-government-printing-hub/

The NZ market looks to be performing well for Blue Star. Aussie is a different story ... it would be useful to get some data on the business going through the new digital press. I wonder if they picked up any Aussie business around the Pacific Magazines contract?

I suppose the half year results, due soon, will reveal more.

Enumerate

01-03-2012, 10:47 AM

Half year announcement is out:

https://www.nzx.com/companies/BLU/announcements/220202

Tough times in Aussie ... the NZ numbers are looking better.

Germaine

01-03-2012, 02:13 PM

Still think you are getting your money back Enumerate? Surely you are losing confidence in this piece of cr*p company...?

Enumerate

01-03-2012, 07:37 PM

Total interest bearing liabilities went from $336M, at this point last year, to $225M.

Group equity recovered from 4.3M in June to 16.7M in December.

Goodwill has been written down from 174M, at this point last year, to $102M.

They are trading in compliance with the banking covenants.

The December half shows a retreat from the sales revenue of the 2011 last half. The following are the figures from the NZ Statistics printing sales manufacturing data:

2010Q1 413.338M
2010Q2 423.121M
2010Q3 432.926M
2010Q4 452.000M
2011Q1 355.200M
2011Q2 407.500M
2011Q3 418.400M

Clearly, the sector in 2011 is in significant decline compared with 2010. There is reason for some optimism for 2012, given that some form of recovery seems to be underway.

Blue Star is well positioned in terms of manufacturing capability and investments made in service offerings. The market needs to recover (especially in Australia) in both revenue and margin to restore Blue Star's fortunes.

We have already seen excess capacity, in the Aussie market, disappear.

It is likely that recovery will be slower due to global de-leveraging. The Blue Star operational recovery and debt paydown will be a long slog. There may be some downsizing required to restore profitability to the "new" market conditions in Australia.

The patient is close to be being stabilised. The signs are good for the first 2012 quarter. Debt and finance lease paydown is the order of the day ... the positioning and capital investment has been done.

Newman

01-03-2012, 09:40 PM

Enumerate seems more optimistic than the directors of Blue Star. The last paragraph of page 14 of HY report says "Assuming the successful implementation of these intiatives, the Company will have headroom against the key EBITDA covenant measures at 31 March 2012....". The message is very clear!

Employees cost in 1st HY is more than the 1st HY last year. EBITDA was manufactured by including value gains from interest forgiveness and amended bonds!

Newman

02-03-2012, 10:08 AM

I have just sold my BLUFC bonds. Blue star is a nightmare. Goodbye to this thread and good luck to bond holders.

Germaine

07-03-2012, 10:18 AM

Enumerate is desparate to be right, and has lost all sense of reality. Surprise surprise their last 6 months performance was significantly below what they told bondholders to expect. Furthermore, they are in the process of selling their good divisions (like their labels business) under pressure from the banks. This can only be because they anticipate needing their support again very very soon - or alternatively are scrambling around for cash...

Against that backdrop, the printing industry is in terminal decline.

I stick to my prediction that the vast majority (and probably all) of bondholder capital will be wiped out. I guess time will tell who will be right. I don't think we have too long to wait as these directors must be getting very very nervous about reckless trading...

Enumerate

08-03-2012, 09:43 AM

Thanks to bondholder action ... the Blue Star balance sheet is in a reasonable state. The formal equity levels are a bit low - but the supplementary bonds - about $34M - are effective equity, not debt.

The company is also positioned nicely. It has nice packaging and web offset businesses. It is transitioning "sheet feed" to digital and is a market leader in this transformation. Investments have been made in pre-press workflows - the company should be proud of this achievement.

The problem is profit. The reason for this problem is the general decline in business activity. I am confident that at some point in the future general business activity will return to pre-2008 levels. I am confident that current management are engineering an appropriate response to the problems Blue Star faces.

David Henson

16-03-2012, 04:40 PM

I voted NO to the amendment proposal which was approved by a whisker. Possibly Enumerate was sufficiently eloquent at the meeting, which I did not attend, to sway the vote but probably large bondholders do not read Sharetrader and decided to vote yes on the basis that a slim promise was better than nothing.

I have just received the printed version of the accounts. Blue Star continue to make a loss and have a negative cash flow. The purported increase in equity is merely smoke and mirrors stuff based on a write up of the value of the amended bonds. This is meaningless unless BSG actually produce a profit soon to provide interest and eventual repayment of capital.
Note that the bonds were trading at around 7 cents before issue of the HY12.11 accounts and have now dropped to 4 cents.

Also BSG have not yet found an independant director. No wonder. What competent director would sully his/her reputation by drinking from this poisoned chalice?

My original $10,000 investment is now worth $400. I have written this off mentally but will hang on to see what happens.

Royalwolff

22-03-2012, 02:19 PM

I understand the staff have been told the label business (Rapid) is to be sold which will generate Blue Star some much needed cash no doubt for the March 31st test. It also means they have sold one of the few cash cows they had.

The point raised by David re not having appointing an independent director yet does concern me as there has been ample time to find that brave soul and I believe this independent perspective is needed when decisions such as above are being made on our behalf?

There is an interesting parallel to the Blue Star saga happening in Australia right now and it is with one of the larger paper merchants (Paperlinx) so not unrelated with the shareholders and hybrid security holders fighting back against the directors. The following makes for brilliant reading and as a minority investor it drives home the message that we are not powerless, there are powerful tools to fight back with - next time. This battle is already lost unfortunately. http://www.paperlinx-sux.com/

Alan3285

23-03-2012, 08:46 AM

Royalwolff

23-03-2012, 09:21 AM

I understand due diligence is be conducted and there have been a few interested parties. Enough interest to tell the staff and I suspect the BNZ as well, that is if it was not the other way around, the BNZ telling BS to sell it, BNZ will be very keen to see progress before March 31st to avoid breaching covenants, again.

Alan3285

23-03-2012, 09:23 AM

Germaine

03-05-2012, 02:27 PM

This is death by a thousand cuts. Bondholders should have said no and taken their chances. A slow motion train crash is no fun for anyone, although no doubt Enumerate will find some way to put a positive spin on it.

Alan3285

03-05-2012, 06:33 PM

Any news on who the Rapid Labels business has been sold to, and most importantly, for how much?

Enumerate

03-05-2012, 07:02 PM

Of course, everyone is aware of the private equity bid for PMP, the number 1 regional printer ...

http://afr.com/p/blogs/markets_today/pmp_soars_pc_after_takeover_offer_xmkGqE08N6zKQ7D2 9lLYLO

... at a price 150% above last trading price.

Enumerate

07-05-2012, 06:22 PM

It is interesting to note that private equity valued APN Outdoor at about $272 million on sales revenue of about $300m.
Contrast this with PMP valued at about $250m by the private equity ‘mystery bidder’ on revenues of about $1.1 billion.

This shows that some sectors of the print industry (large format, for example) can be quite valuable. It also shows that the large capitalisation heart of print manufacturing is not valued appropriately by the investment punter and that private equity sees deep value here (the 'offer' for PMP still looks cheap - depending on the conditions, of course).

Germaine

08-05-2012, 12:03 PM

Wow those really are rose tinted glasses. I think the more rational explanation is that investors see that the print industry is terminally screwed are are not willing to pay high multiples for companies in that space. The outdoor business of APN is a completely different beast - and i can't see it makes any sense to compare them.

It doesn't surprise me that you have lost a bomb on the financial markets Enumerate, you need to get a bit more critical in you thinking. If you think you know more than private equity investors then you shoudl give up that cushy job as an IT consultant and become a day trader.

Enumerate

08-05-2012, 05:27 PM

$6m print management deal to Blue Star ...

http://www.proprint.com.au/News/298386,blue-star-signs-6m-print-management-deal-to-print-job-guides.aspx

Germaine

28-06-2012, 11:11 AM

More bad news for Blue Star (http://www.interest.co.nz/bonds/59996/commercial-printer-blue-star-serious-talks-its-banks-afr-says-administration-among-optio). Surely you are not still confident Enumerate?

Enumerate

03-07-2012, 10:03 AM

Interesting developments:

Rapid Labels being sold to Tiri Group - interests associated with former director Tom Sturgess.

Tom is also a significant holder of Blue Star equity:

Allocation 3:22509455 shares STURGESS HOLDINGS LIMITED
Level 2, 295 Trafalgar Street, Nelson

Allocation 5:16553404 shares STURGESS EQUITIES LIMITED
Level 2, 295 Trafalgar Street, Nelson

Unsolicited offers for all and parts of the rest of the group. There has been a huge recent revival of M&A activity in the sector (PMP, Salmat and now Blue Star). It looks like there is demand for the best print assets.

If you are a student of the PMI manufacturing index in NZ and Australia, you will see that there is actually manufacturing growth reported in print ... If you are a student of the trends in the US, print manufacturing growth has been going on for a very long time.

Recent long term forecasts are that the recent industry declines over the past six years (say 4% per year) are to be reversed by a sector long term growth forecast of 3% over the next few years. Capacity in the industry has been reduced ... if you are a survivor and have invested in your assets ... the long term future looks bright.

Hence the explosion in industry M&A activity.

One final point, the print industry seems to be incredibly bitchy. You read irrational and nonsensical postings on the various threads (and in the AFR!) ... these are nasty people with axes to grind. This scum prey on those with weak minds and nervous dispositions, for what are likely to be very dubious motives.

Do your own research, investigate the industry and the detailed published accounts before you rush off and sell your BLUFC at 2cents!!

Germaine

03-07-2012, 01:51 PM

Enumerate, I really have to laugh at your continued optimism in the face of disaster. No-one believes that a turnaround in the print industry is imminent. Your money is blown, and if you are lucky people will forget about your postings and comments at the Blue Star meeting encouraging Bondholders to give up their legal rights. As it turns out, this has been a disastrous decision, with the banks now having assumed effective control of the business with no ability for bondholders to intervene.

As a result, the banking consortium has effectively told the company to sell off any divisions that are half decent (i.e. the labels business) before this thing goes into receivership and the final rites are performed. Sure the odd asset will be purchased, but these transactions will all occur at distressed prices. The chances of Bondholders getting anything back are negligible (I think zero actually, as stated at the time of the vote).

If I was you i would start resiling from your previous comments on Blue Star and start investigating whether you can get the sharetrader forum to delete your historical posts on this subject...

Enumerate

03-07-2012, 02:56 PM

No-one believes that a turnaround in the print industry is imminent.

Except for the people making the offers to buy the assets.

... with the banks now having assumed effective control of the business with no ability for bondholders to intervene.

Why does a business trading within its banking covenants have to sell off assets at the dictate of the bankers?

If I was you i would start resiling from your previous comments on Blue Star and start investigating whether you can get the sharetrader forum to delete your historical posts on this subject...

I have a better idea ... why don't you sell me your BLUFC holding at 2cents?

Germaine

03-07-2012, 04:41 PM

You don't need to believe that there is growth in a market to buy associated assets, for example someone might need a specific piece of kit that Blue Star will probably be selling at a rock bottom price. Or alternatively to enable them to takeover one of Blue Star's existing contracts. it doesn't mean you think a sudden hockey stick in revenue is about to occur.

Re debt covenants, you obviously need to read up on reckless trading obligations for directors and how the real world works when you are managing a business that is in a death spiral and are concerned about incurring new obligations.

Re your last question, because I am not silly enough to ever have bought any of these piece of crap bonds in the first place. However I am sure there are plenty of other sellers out there to buy BLUFC bonds from so you can double your already significant losses. That is the definition of throwing good money after bad.

Why don't you just admit it - you were wrong all along! Even if you get your 2 cents back from a receivership you still would have lost a bomb. Worse still, you represented youself as some kind of 'student' of the industry and convinced them to not only invest but also to give up all their rights in a moratorium.

Enumerate

03-07-2012, 06:52 PM

If you don't hold any ... what is your motive for posting?

It is clear that you have not really studied the company or it's market - or if you have, you hide it remarkably well.

You really need to read my .sig ...

Germaine

04-07-2012, 10:21 AM

When something barks as loudly as Blue Star, you don't need to 'study' it to know it's a dog.

My motivation is simple: I hate seeing investors get screwed over and I believe you contributed to that during the time of the vote. You represented yourself as an expert and your know it all attitude in the face of contradictory facts got up my nose.

Time will judge which of us is right. My suspicion is that we won't have to wait much longer...

Newman

04-07-2012, 10:54 AM

bondholder007

04-07-2012, 02:42 PM

The fact that CHAMP has not converted its $10m loan to Blue Star into shares explains everything! If Enumerate sits on the board of Blue Star he/she might have a different view on the company.

I do not have Blue Star bonds any more. But bondholders should explore the possibility of re-couting the votes last year. I suspect the result of 76% of Yes vote was wrong. Less than 2% people voted yes on the view poll on this forum.

I have not taken part in this discussion since the poll last year. I voted against the BSG proposal and was surprised that it squeaked through. The new bond system is now failing because BSG have failed to meet the improved returns forecast by them. I first invested $10,000 in Blue Star bonds in 2000 when they were a medium sized viable NZ outfit. I rolled over the bonds in 2005. In hindsight I might not have done this if I was aware that CHAMP had taken over the original business as a platform for failed expansion. I mentally wrote off my $10,000 prior to the bondholder vote last year so the matter is mainly of academic interest to me now.

I do wonder what planet ENUMERATE lives on. It has been suggested above that he may have spoken at the meeting and been influential in getting the deal passed. Anyway goodbye $10,000 and fare thee well ENUMERATE. I still have bonds with eight other companies but wont list them here so they wont get jinxed

Enumerate

04-07-2012, 06:32 PM

http://nz.news.yahoo.com/a/-/top-stories/14105553/blue-star-wins-at-pride-in-print-awards/

Blue Star New Zealand scooped up a raft of awards at the annual Pride in Print Awards held last Friday.

The specialist print management group, which includes some of New Zealand's leading print businesses including Panprint, Rapid Labels, McCollam's, Format, Printlink, Spectrum and Nicholson Print Solutions, won a total of 14 gold medals and was highly commended in 6 categories, from a total of 30 entries.
This latest haul of awards has put Panprint to the top of the medals list, winning the most gold medals since the awards began, and three other Blue Star companies are in the top 10 list of overall medal winners. In addition, Rapid Labels' Gareth Hilton won the Apprentice of the Year, being one of two out of the five finalists in the category to be from Blue Star New Zealand.
Blue Star New Zealand Managing Director David Jupe said the awards were testament to the fact that the company's people were its greatest asset.
"These awards show that it is the people in our many businesses that continue to make a real difference, delivering outstanding products and services for their customers every day," he said.

bondholder007

04-07-2012, 08:53 PM

Enumerate

04-07-2012, 10:33 PM

There have been numerous anonymous comments from BSG staff both on this website and print industry websites in OZ pointing out that their bosses dont have a clue about the print business.

I believe you will find that these are ex-employees or competitors.

I think if you examine the Blue Star strategies - investment in web offset, digital printing, online workflow - you will find that these initiatives are front and center in current print manufacturing thinking. The winds of technical change are sweeping the industry - Blue Star has been keeping up (and even leading)!

The change and transformation of this business in 2011 has been expensive ($7m in fees for the bank loan rollover, establishing the new Web Star site, the Canberra move, the Panprint move). Hopefully, these costs will drop out, this year.

PMI data shows the print industry has been growing, slowly over the past half year in NZ and Australia. Print manufacturing is one of the best performing elements of the PMI index, over this time.

Capacity has been removed from the industry with closure, bankruptcy and reorganisation.

The implied view that Noteholders were better off tipping the company into receivership back in August is simply idiotic. Ask yourselves, would noteholders be better off with banker's insolvency agents running the company (only interested in the return of the senior money) or the current equity holders (who are subordinate to the noteholders and only see some value if the noteholders get a payout)? CHAMP is unfairly pilloried for lack of "print knowledge" - how much do bank appointed insolvency firms know about print manufacturing?

If you think this is a badly run company - what elements of management do you think could be improved? Strategy? Do you think they engineered the GFC and structural decline of the industry? Did they pay too much for the acquired businesses (given that many of the precursor firms owners left money in the firm and these interests are subordinate to the noteholders interests)?

Clearly, if you paid $1.56 for a current $1 note now apparently worth 1.5 cents ... and you did this because you were building an income portfolio - then you are likely to be disappointed with your investment. It would be a rare investor, with this background, that would not give in to despair. I see plenty of evidence of this, on this thread.

Note this simple fact - the market is pricing BLUFC as if the banks have assumed control and that a firesale liquidation has commenced. If you seriously thought you could buy bits of a company from the bank appointed administrator, why would you buy bits of it from the incumbent shareholders?

I think the most likely scenario is that CHAMP will remain in control and will manage to create cash flow positive businesses from the companies in the Blue Star portfolio through old fashioned cost control, inventory control and sales effort. Coupled with the evident industry capacity reduction, Blue Star modernisation advantages and a bit of luck in terms of market growth ... the Blue Star equity holders may yet see value in their holdings.

However, I am wasting my time on this thread. I grow tired of reading the laments of people who view that certain defeat in 2011 (administration by the banks) is preferable to the current opportunities (given print manufacturing market growth, market capacity reduction and the return of sector M&A activities). I understand the reason for the emotion ... but note that emotion is never the INVESTORS best guide.

Germaine

05-07-2012, 01:07 PM

Enumerate

06-07-2012, 09:29 PM

What you fail to appreciate Enumerate, is the prospect an of alternative offer emerging from a 'no' vote last year. You automatically assume that a no vote meant receivership, when it actually made much more sense for the banks to come back with a sweetened offer (because the value of the business was worth less than the value of their bank debt, therefore a recivership would have been cutting off their nose to spite their face).

If the banks had taken control there would be no offers put to the bondholders ... we would have been put to the sword ... plain and simple. Further, there would have been massive suffering in terms of other stakeholders ... employees made redundant, supplier business gone ...

Would CHAMP step in and sweeten the offer to bondholders to keep the business out of the hands of the banks? This was more a possibility ... but they did make the small concession before the vote to turn their $10m loan to equity. (This is transaction is cannot be repudiated - it is immaterial that the actual share issue hasn't taken place).

My view is that the bondholder transaction was harsh ... but the best option to save the company.

I note the completion of the sale of Rapid Labels to Tiri Group Limited:

https://www.nzx.com/files/attachments/159809.pdf

We will see the terms of the sale in due course.

I wish there was a way I could bet against your view that bondholders will get something out of this...you are quite simply in cuckoo-land.

You are effectively wishing misery on the bondholders, employees, suppliers, customers ... you may maintain the view that your are right, but a person with character would express some regret at the situation, an not seek to profit from it.

Germaine

24-07-2012, 09:50 AM

Don't try and claim the moral highground here Enumerate. While I believe bondholders will receive nothing, that doesn't mean I ever wanted it to happen. On the other hand, you swung the balance of the vote, and helped to cause this problem by getting up on your soapbox (at the meeting and on this blog site) claiming you were some kind of expert on the printing sector. Furthermore, you showed your lack of knowledge of the financial sector to understand that there was always the prospect of al alternative proposal had the first once lost by a narrow margin. This is because the banks would have been cutting off their nose to spite their face by appointing a receiver without trying.

The bottom line is that you couldn't be more wrong, bondholders will receive nothing, and you are at least partially responsible. End of story.

Newman

15-08-2012, 09:52 AM

If the banks had taken control there would be no offers put to the bondholders ... we would have been put to the sword ... plain and simple. Further, there would have been massive suffering in terms of other stakeholders ... employees made redundant, supplier business gone ...

Would CHAMP step in and sweeten the offer to bondholders to keep the business out of the hands of the banks? This was more a possibility ... but they did make the small concession before the vote to turn their $10m loan to equity. (This is transaction is cannot be repudiated - it is immaterial that the actual share issue hasn't taken place).

My view is that the bondholder transaction was harsh ... but the best option to save the company.

I note the completion of the sale of Rapid Labels to Tiri Group Limited:

https://www.nzx.com/files/attachments/159809.pdf

We will see the terms of the sale in due course.

You are effectively wishing misery on the bondholders, employees, suppliers, customers ... you may maintain the view that your are right, but a person with character would express some regret at the situation, an not seek to profit from it.

Unfortunately, good dream did not come true. See today's announcements.

Enumerate

19-08-2012, 10:33 AM

The general market view is that Champ have made an arrangement with their bankers to liquidate Blue Star "as a going concern" rather than face administration and the substantial loss of business value (through lease obligations, contract penalties, etc.) that this would entail.

The general market view is that the assets will be sold under duress and will not achieve a sale price to cover the secured debt.

I maintain a different view.

I think Blue Star assets range from excellent ... to exceptional. In particular, the Web Star (heatset offset) assets are the pick of the bunch. Champ will not, in my view, sell this asset for an unreasonable price. The new Henderson plant, a "mirror" of Silverstream, was a major development to fulfil the ACP contract. The Manroland press was bought in Europe from a liquidation sale ... and the risk of transporting, establishing and optimising the plant is now behind us.

The banks are worried about their secured debt ... but the assets and the business' supporting this debt are first rate. I think we are witnessing a financial restructure (rather than a capitulation), by Champ.

Clearly, there is some deal with the banks to sort out the secured debt. If general market sentiment is right ... this is "bust" for the bondholders. However, there have been no announced covenant breaches and hence no compulsory sale process forced on Champ, by the banks. I think the re-emergence of M&A activity in the print manufacturing market is an opportunity for Champ to test a potential restructure.

The restructure, last year, saw the bondholders take a hit of over 50% on the value of their bond asset (accrued and forward interest + capital value). In my view, the result was a capital structure that enabled Blue Star to survive in the medium term (3-5 years).

The latest notification on the Companies Office site shows that the existing shareholders have now been massively diluted with the conversion of the Champ $14.8 million loan to shares. Champ are now, basically, 95%+ in control of Blue Star.

If the assets are as good as I think they are ... I think there is scope for some kind of restructure rather than a forced liquidation.

If you are a holder, even if you think my restructure scenario has only a 0.1% chance of being right - you would not sell at the current market price of 0.1 cent (a BLUFC unit represents $1 + $0.55 supplementary bond = $1.55; expectation is return x probability = $1.55x0.001 = 0.155 cent > 0.1 cent market).

Surprisingly, I am happy that the decisions are in the hands of a Private Equity firm - Champ. They can be trusted to proceed with mathematical precision in terms of optimising the return from the assets. If there is any room for sentiment, I hope they remember the sacrifice of the bondholders, last year, to bring us this far.

Investor 54

20-08-2012, 10:30 AM

Enumerate, I have recently read this entire thread and make the following comments.

Your position is so biased and so naive I think that you must have very strong motives for your postings (more than just trying to talk up a failed bond).

Only a fool would take the slightest notice of the nonsense you have written. Most of your posts ignore the financial facts. You apply no scrutiny to the press releases of Blue Star management, even when it is blatant spin.

As for others taking your postings as investment advice ... I'm laughing at that. You should stop posting completely, as there may actually be some people who are taken in.

If Germaine is right and you have had an influence on bond holders, you should be ashamed of yourself, not spouting more nonsense.

As you have probably noticed, I haven't rebutted your specific points because quite frankly, 'where would I start?'

Enumerate

20-08-2012, 01:32 PM

Your position is so biased and so naive I think that you must have very strong motives for your postings (more than just trying to talk up a failed bond).

I am attempting to be accurate in my assessment of the realisable asset value of Blue Star business units. Nothing more, nothing less. Naivity is not a tag I am prepared to accept. However, this is a finely balanced, high risk situation. I am aware that I am the only one expressing anything other than the "Blue Star is bust" scenario - but most of the negative commentators have not done even a fraction of the research I have done (practically every journalistic commentary contains serious errors in fact).

Only a fool would take the slightest notice of the nonsense you have written. Most of your posts ignore the financial facts. You apply no scrutiny to the press releases of Blue Star management, even when it is blatant spin.

None of my posts ignore the financial facts ... in fact, on the thread, I am the only to have attempted any kind of financial analysis.

As for others taking your postings as investment advice ... I'm laughing at that. You should stop posting completely, as there may actually be some people who are taken in.

Good, because if you read my .sig I am not offering investment advice ...

If Germaine is right and you have had an influence on bond holders, you should be ashamed of yourself, not spouting more nonsense.

As you have probably noticed, I haven't rebutted your specific points because quite frankly, 'where would I start?'

You and Germaine seem to share a common approach to investing. Clearly, high risk and finely balanced situations do not give you scope to exercise your broad and generalist "intuitions" <- probably a more polite way of saying you are only content to "follow the crowd", over a cliff, if necessary.

Investor 54

20-08-2012, 02:34 PM

OK, here are some facts;

The print industry is in significant recession due to the effects of the GFC, the massive ongoing substitution to the internet, digital print, and over capacity in the market.

Heidelberg received a massive German government bailout and are still in serious red ink. Their latest numbers are getting worse. Kodak are in chapter 11. Google them both. Print companies are going to the wall in massive numbers in every developed economy in the world.

Blue star are massively exposed to the Offset print sector. This is the area that has been most affected. If you need confirmation of this look no further than the paper merchants Paperlinks. Google them. The paper merchants are facing 20% year on year volume reductions for sheet fed offset. They are also selling up assets to support operating liquidity.

Web star are no great saviour. They print phone directories. Now that’s a future proofed revenue stream ... not. The further investment into Auckland was inexplicable. How did they win ACP? Price is the answer. Great business plan. Anyway there are big moves away from mass produced ‘dumb’ print, to more personalized and targeted marketing pieces. Good luck with that one.

Blue Star have a very small engagement with alternative digital print technologies. They have only recently made attempts to enter these markets. Too little too late and at least initially these technologies will eat into their own tradition offset business before it affects the market. Then there is the technology cost. It will add operating costs to the business for at least 3 years until it starts to pay off.

Small digital transactions require very sophisticated transactional software. Where is project Agile when you need it? Funny, there has been no further mention of it.

With revenues north of $500 million BS forecast grow in revenues and earnings. Where would they get that from? Any projections of growth in this market at this time are ridiculous and are not being achieved by anyone let alone the single biggest player in the market! As for the 28% forecast earnings increase to Bondholders? Totally reckless.

M & A activity in the print industry is happening due to the significant distress the industry is in, not because others are wanting to invest in a booming sector. It is a means to an end when trying to stabilize a print business.

Reread the last 2 years of BS press releases with the above in mind.

Enumerate

20-08-2012, 03:30 PM

The print industry is in significant recession due to the effects of the GFC, the massive ongoing substitution to the internet, digital print, and over capacity in the market.

Print is not just one sector. Generally, the industry has been in structural decline over the past few years ... there is great variability in the parts ...

Heidelberg received a massive German government bailout and are still in serious red ink. Their latest numbers are getting worse. Kodak are in chapter 11. Google them both. Print companies are going to the wall in massive numbers in every developed economy in the world.

... Manroland went into administration, Goss is not doing well ... none of these companies does what Blue Star does.

Blue star are massively exposed to the Offset print sector. This is the area that has been most affected. If you need confirmation of this look no further than the paper merchants Paperlinks. Google them. The paper merchants are facing 20% year on year volume reductions for sheet fed offset. They are also selling up assets to support operating liquidity.

Which offset sector ... coldset or heatset? Blue Star is part of the NZ duopoloy in web offset/heatset ... it is also a significant AU player. Magazine and quality catalogue printing is a very nice market to be in.

Your PaperlinX point is not directly relevant. They made a number of badly timed European and North American purchases which are the seat of their troubles ... the fortunes of PaperlinX do not necessarily reflect the wider paper merchant industry. I do not deny the downturn but PaperlinX's problems are not Blue Star's problems.

Web star are no great saviour. They print phone directories. Now that’s a future proofed revenue stream ... not. The further investment into Auckland was inexplicable. How did they win ACP? Price is the answer. Great business plan. Anyway there are big moves away from mass produced ‘dumb’ print, to more personalized and targeted marketing pieces. Good luck with that one.

Phone directories are usually coldset ... they do print them in NZ ... in Masterton ... Web Star is a trans-tasman business based on heatset technology.

Blue Star have a very small engagement with alternative digital print technologies. They have only recently made attempts to enter these markets. Too little too late and at least initially these technologies will eat into their own tradition offset business before it affects the market. Then there is the technology cost. It will add operating costs to the business for at least 3 years until it starts to pay off.

Small digital transactions require very sophisticated transactional software. Where is project Agile when you need it? Funny, there has been no further mention of it.

Blue Star was one of the first to identify the transformation of sheet feed to digital based around online workflow software to "prime the pump". The Australian results have not been up to expectation, I would agree - but the strategy and execution are correct.

With revenues north of $500 million BS forecast grow in revenues and earnings. Where would they get that from? Any projections of growth in this market at this time are ridiculous and are not being achieved by anyone let alone the single biggest player in the market! As for the 28% forecast earnings increase to Bondholders? Totally reckless.

The growth estimates were EBITDA based. It is possible to grow EBITDA with static revenues ...

M & A activity in the print industry is happening due to the significant distress the industry is in, not because others are wanting to invest in a booming sector. It is a means to an end when trying to stabilize a print business.

Reread the last 2 years of BS press releases with the above in mind.

I am not claiming the sector is booming ... I am claiming that due to capacity reduction in the industry reflecting the structural decline in demand, if you have survived (and kept pace with your modernisation programme) you are likely to benefit from stabilisation (or a return to modest growth) of demand.

You have missed out Print Management, Creative/Design and Packaging printing.

Germaine

22-08-2012, 01:26 PM

I must admit I logged on here today expecting to find no further comments from you Enumerate given the recent press announcements, and frankly I'm astounded that you are still posting on this thread in the face of the blindingly obvious. Although Investor 54 is wholly correct, if you can't see it now you never will. It will no doubt we too much to ask for an apology when Blue Star's last rites are performed without paying bondholders a cent or will you change tack and throw out some other excuse for why you are so wrong?

Furthermore, your statement that "[Investor 54] and Germaine seem to share a common approach to investing...you are only content to "follow the crowd", over a cliff, if necessary" astounds me given the losses you have incurred in the last few years. If being a little bit objective about a situation saves me from blowing the hundreds of thousands of dollars you lost on Babcock & Brown, and a heap on Blue Star, then who am I to argue? God knows what other rubbish you invested in, but suspect your wife is not at all pleased with you blowing her retirement savings on situations that everyone with half a brain knows are ridiculous.

Enumerate

22-08-2012, 03:00 PM

I would consider it declasse to respond to your Babcock & Brown attempted "taunt". However, I am very pleased with the small role I played in dismissing the derisory offer to NZ noteholders of 0.1cent on the dollar and in tipping a AU$9 billion company into administration and liquidation. Subsequent events have proven that this was the best path forward for noteholders and the outcome will show a modest return. The return would have been much better if ASIC would prosecute or if the FMA would investigate the obvious NZ law prospectus fraud. I wish my efforts to show a return to noteholders had been more successful.

In terms of Blue Star ... why don't you wait until the 23rd which, according to speculation in the AFR, is the date at which first round bids are due to Goldmans for the Blue Star assets. It would appear that the 23rd is the first opporuntity for your "intuition" on the value of Blue Star assets to be verified. (Clearly directors have some kind of indication that the bondholder debt will not be covered by likely offers; however, I am not aware of any direct compulsion for directors to accept unreasonable offers for companies that, to quote Philip Bower:
"As we've reported, the operating position of our underlying business continues to be profitable and very positive," he said.

http://www.proprint.com.au/News/312485,blue-star-nothing-sinister-in-delisting-underlying-position-positive.aspx

Enumerate

22-08-2012, 08:16 PM

The key difference between us, Germaine, I that I do not pretend to be able to see the future. You appear to have complete certainty, based on your "intuitions". I only have complete uncertainty, based on my research. Your certainty leads you to see things in "black and white"; I see shades of grey.

For example, you write:

I must admit I logged on here today expecting to find no further comments from you Enumerate given the recent press announcements, and frankly I'm astounded that you are still posting on this thread in the face of the blindingly obvious. Although Investor 54 is wholly correct, if you can't see it now you never will. It will no doubt we too much to ask for an apology when Blue Star's last rites are performed without paying bondholders a cent or will you change tack and throw out some other excuse for why you are so wrong?

What the board have said, on two occasions is:

"The listed bonds are now trading effectively at a nominal value, infrequently and on very low volumes. The Board now considers it unlikely that any value will attach to the Group’s NZDX listed bonds."; and

"The Board has also received unsolicited approaches to acquire certain divisions or business units within the Group.
There is no guarantee that any offer or approach will complete or, if it does, what value would accrue to the various stakeholders in the Group.
The Group expects to enter into a conditional agreement to sell its Rapid Labels division in the coming days.
As noted in the quarterly report on 25 May 2012, trading conditions remain extremely difficult with continued covenant compliance reliant upon market conditions and the successful implementation of operational initiatives.
In light of the above process, the Board is unsure what value, if any, will attach to the Group’s NZDX listed bonds (code BLUFC)."

The first statement translates as: "The fair value of the bonds is negligible because the market price is negligible"

The second statement translates as: "We have received a low ball offer which, if accepted, would wipe out the value of the subordinated bonds"

Neither of these is a confirmation that the "banking covenants have been breached", that the "banks are in control" and that "Blue Star will be sold at any price" with bondholders wiped out. If you look at the statements and question the assumptions ... this is anything but a clear situation. If you understand that first round bids for the assets are unlikely to have been received ... this is anything but a clear situation. If you question why Champ would sell good assets at an unreasonable price ... this is anything but a clear situation.

However, this is a very finely balanced situation. This could go very badly for the bondholders ... or it could go well ... or somewhere in between. This is not a situation of complete certainty. It is a mistake to pretend you know the future and it is mistake to act as if the future is predictable with certainty.

I am trying to deal with this uncertain situation by sharing my assumptions about the quality of Blue Star assets, the current levels of secured and finance lease debt vs benchmark deals in the market, and trends in the wider print manufacturing market. I am not in the slightest bit interested in influencing people in their financial decisions ... I am here to share information, to present my assumptions for wider examination and to speculate on likely outcomes.

Germaine and Investor54 have simply convinced me that they are not particularly well informed concerning Blue Star business prospects or financial state. These are ideal qualifications for a career in journalism (Fairfax or interest.co.nz spring to mind) or in financial services on the Kapiti coast.

If you have nothing to add to the adult discussion ... please do not post.

Investor 54

23-08-2012, 11:21 AM

Enumerate, I believe that you are trying to win an argument, and you have painted yourself in to a corner. Either that, or you are extremely naive.

You seem to have based your assumptions on a collection of press statements from Blue Star themselves, or possibly their web site. Hardly critical analysis, (but then critical analysis is not helpful if you are trying to win an argument). Your rebuttal points above are so far off the mark, but so consistent with generic BS spin that I believe you are parroting a promotion piece from the BS website.

For the record, I have never owned a single BS bond and I could not believe the 75 million dollar public offer and subsequently 'fell off my chair' when it was over subscribed by another 30 million. I followed it for this reason.

I know the print industry well. I can see the public announcements for what they are (carefully crafted words to effect or protect a position). I can also see how Champ has used every trick in the book to extract cash, prolong trading and fend off bank and bond holder interests. Almost every step they have taken has been planned for either short term exit for them and latterly for short term survival. Now, exit at any cost so ...

Let me ask this question:

If Champ's exit is now assured, through a sale (and losses realized), what measures wouldn’t they resort, to tip this problem to their favour?

I believe the business has been significantly damaged over the past 4 years and now even in the past 3 months, and that this damage will be realized and factored in by the prospective owners.

As for assets you talk about, well what assets do they have? They are mostly intangible and these intangible assets have been written back massively over the past few years. What does this tell you? If they have the right strategies why is goodwill etc not growing? The trend is not good and it will not stop there, or reverse itself any time soon. Their strategies were wrong.

If the banks are not driving this, why such a short sale process at the worst possible time? In a situation like this everything is 'elastic', even bank covenants and more particularly the timing of their testing. Why were the covenants not tested more frequently? I believe it is because everyone, including the professional advisers wanted some space between the bond holder vote and the inevitable bad trading news.

I feel sorry for you Enumerate, because you have been shafted. What a railroading the bondholders took last year! Does anyone believe the tight time frames for the vote were necessary? The owners and the security lenders made the decisions over who knows how long, then they worked out how to 'position' the bond holders, including you ... and after all of this you defend them.

That answers my original question "who the hell would invest in these bonds"?

getontoit99

23-08-2012, 04:39 PM

Germaine and Investor54 have simply convinced me that they are not particularly well informed concerning Blue Star business prospects or financial state. These are ideal qualifications for a career in journalism (Fairfax or interest.co.nz spring to mind) or in financial services on the Kapiti coast.

Enumerate, thanks for a much-needed chuckle in this thread.

BTW, the Kapiti chap was originally a journo by trade:scared:

Enumerate

23-08-2012, 06:57 PM

I believe that you are trying to win an argument, and you have painted yourself in to a corner. Either that, or you are extremely naive.

I am not trying to win an argument ... I am trying to pick apart a very complex situation for the purpose of making an optimal financial decision.

You seem to have based your assumptions on a collection of press statements from Blue Star themselves, or possibly their web site. Hardly critical analysis, (but then critical analysis is not helpful if you are trying to win an argument). Your rebuttal points above are so far off the mark, but so consistent with generic BS spin that I believe you are parroting a promotion piece from the BS website.

I only have publicly accessible sources of information. The most useful, by a wide margin, is the Companies Office. However, www.statistics.govt.nz (http://www.statistics.govt.nz) and the Australian and New Zealand PMI statistics are very useful. I regularly scan the trade sites, ProPrint, Print21, i-graphix ...

I know the print industry well. I can see the public announcements for what they are (carefully crafted words to effect or protect a position). I can also see how Champ has used every trick in the book to extract cash, prolong trading and fend off bank and bond holder interests. Almost every step they have taken has been planned for either short term exit for them and latterly for short term survival. Now, exit at any cost so ...

These are key assumptions ... I am not sure how Champ have been extracting cash from this business ... as far as I can see, they have been putting cashing in. Every private equity deal is planned with an exit ... I am sure that the Champ exit from Blue Star is well overdue (in their terms) ... however, I think private equity can be trusted to optimise their equity return independent of their original exit strategy.

If Champ's exit is now assured, through a sale (and losses realized), what measures wouldn’t they resort, to tip this problem to their favour?

I expect good governance from Champ, and that, in my mind is what we have seen.

I believe the business has been significantly damaged over the past 4 years and now even in the past 3 months, and that this damage will be realized and factored in by the prospective owners.

There are many people who are disgruntled and bitter because they have been exited from Blue Star in the waves of restructure. There are many competitors stirring up trouble to try and create opportunities for themselves. Consider this:

- do you consider GEON to be in better financial state than Blue Star?
- how would you react to the proposal, at PMP, to pay a bonus to their managers "to tell the truth" - following the revelations that they were binning mail their customers paid to be delivered?

There is a vast amount of hurt and strife in the middle to small end of the market. These AU operators find it very easy to accuse the big players, with a NZ origin especially, of predatory pricing ... this is the easy way to deflect focus from their scale or operational issues and buys them traction and sympathy with naked, ugly Australian parochial nationalism.

As for assets you talk about, well what assets do they have? They are mostly intangible and these intangible assets have been written back massively over the past few years. What does this tell you? If they have the right strategies why is goodwill etc not growing? The trend is not good and it will not stop there, or reverse itself any time soon. Their strategies were wrong.

This is quite wrong ... this business is a high end print manufacturing business and is highly capital intensive. A few years ago PMP spent AU$120 million on Manroland duplex 48pp presses at Moorebank and Wacol. Recently PMP installed a duplex 48pp at Bibra Lake.

WebStar, in Henderson, runs a duplexed 16pp Manroland Rotoman, I believe. The NZ market is, of course, significantly smaller than the Australian market. At Silverwater, I think WebStar has at least three 16pp Rotomans.

Then there is all the finishing equipment ...

Alot of capital is involved here ... with the paydown of finance leases, this represents a real capital accumulation.

If the banks are not driving this, why such a short sale process at the worst possible time? In a situation like this everything is 'elastic', even bank covenants and more particularly the timing of their testing. Why were the covenants not tested more frequently? I believe it is because everyone, including the professional advisers wanted some space between the bond holder vote and the inevitable bad trading news.

I am not sure it is the worst possible time ... M&A activity has only recently picked up, significantly. It is now time to test a restructure.

I feel sorry for you Enumerate, because you have been shafted ...
You should not feel sorry for me ... I deliberately put my capital at risk with the expectation that it is a calculated risk ... emotion is not an investors friend.

That answers my original question "who the hell would invest in these bonds"?

This is not the question ... the real question is: "Why would you sell the bonds you have for absolutely nothing ... unless you knew with absolute certainty that they are worthless?".

I continue to estimate some potential for a return to bondholders ... based on Champ choosing to restructure rather than capitulate.

Enumerate

23-08-2012, 08:52 PM

Enumerate, thanks for a much-needed chuckle in this thread.

:)

This is a difficult situation ... it is time to share as much insight as possible to allow people to make their best, informed, decisions ...

Enumerate

24-08-2012, 10:23 AM

Blue Star (BLUFC) in halt

Just noticed that while delisting was on the 28th, halting will be from the 23rd:

"Trading in BLUFC will be halted from market close Thursday 23 August 2012."

Clearly the AFR was right about first round bids being due by the 23rd ...

Investor 54

24-08-2012, 04:51 PM

Quick answers to your last couple of replies to me as follows:

I referred to 'sheet fed offset' not heatset or coldset.

The paper suppliers and machinery and consumable suppliers are direct evidence of print industry down turn. Paperlinks are down more from soft paper sales than bad investments. Read the latest result. They have lost 1.4 billion in 4 years!

"Blue star were first to identify digital opportunities" ... please! they were one of the last. They are typical of the offset printer who believes nothing will change. You read their web site for that one :)

It is possible to grow EBIDTA without sales growth, … but 28%? ... and in this market? ... and after failing to meet successive forecasts? ... and in 6 months? ... and after they must have already known the first part of the year was down even when presenting the bondholder compromise? ... and after 4 years of cost cutting already?

M & A activity has been constant in print for the past 20 years at least. It hasn't just started.

Champ have extracted value, (may be not cash) by loading the company with debt, selling the machinery, using the public debt market, fleecing the bond holders, selling the best assets etc.

Assets? - they sold the machinery and 'leased' it back some 3 or 4 years a ago. They are not paying down finance.

Restructure? - they have constantly restructured, if there was some other rabbit, it would have been pulled out of the hat by now.

I actually don’t feel sorry for you, I feel angry at the way you and others have been treated and expertly manipulated by this company and their owners, especially as I always believed it would end up like this.

I am glad you have retained your sense of humor, … oh and Im not a disaffected Aussie printer. :sleep:

Enumerate

24-08-2012, 11:26 PM

In the "long run" and "lowest unit cost" end of the market ... web offset remains the technology "sweet spot". Blue Star, with PMP, shares a duopoly status in NZ. In AU, PMP, IPMG (Hannanprint) and Web Star (amongst others) are key market players. In the magazine and catalogue space ... these web offset printers have the most efficient and technically advanced plants. This market segment has maintained its margin better than most in the sector.

In the "short run" sheet fed market ... digital and web technology is also taking over (both in an IT and a printing sense). Blue Star has two HP T300 inkjet webs at Silverwater and a collection of HP Indigos at other sites in NZ and AU. This is where the "Agile" strategy comes into play ... due to the short "make ready" times required to serve the digital market effectively, online job submission to the presses is critical. I think Blue Star had the first T300 in Australia (but I could be wrong about this).

This is a big business ... a capital and technology intensive business. Blue Star has some of the most advanced plants in Australia/New Zealand.

The print sector is taking a beating in newspapers, coldset web offset and sheet fed offset ... on the other end of the scale, large format and high quality packaging seem to be doing very well.

On the financial structure side ... the patterns at Blue Star are typical for private equity. Private equity uses leverage to achieve maximum financial efficiency. Do not expect great gobs of lazy capital lounging about in a private equity controlled vehicle. Of course, this is where your point about the high risk the original subordinated bond holders accepted. Clearly, an "efficient" leveraged structure becomes a burden when it becomes difficult to generate a high rate of return on the capital deployed. However, private equity can be depended on to optimise the value of the business assets through scale increase or reorganisation. This is what private equity does with a mind to exit after the scale or reorganisation has been bedded in. For the subordinated bond holders, the discomfort of "thin" equity is balanced by focused care and attention on optimising the asset values.

This is the situation we find ourselves in ... will the asset values bear up and show a return to the subordinated holders despite heavy senior indebtedness?

Clearly I think the answer is 'yes' - because I like the assets and think they are well positioned strategically and operationally. Clearly, the depressed state of the market will have some bearing on price ... but not on value ... because the current market will not remain depressed forever, I have some hope that price and value will not be too different ( ... I know, probably another controversial viewpoint ... on which I have "singular" views).

Germaine

27-08-2012, 09:15 AM

A fool and his money are easily parted.

Enumerate

27-08-2012, 01:24 PM

The Lioness - Aesop

A CONTROVERSY prevailed among the beasts of the field as to which of the animals deserved the most credit for producing the greatest number of whelps at a birth. They rushed clamorously into the presence of the Lioness and demanded of her the settlement of the dispute. "And you," they said, "how many sons have you at a birth?' The Lioness laughed at them, and said: "Why! I have only one; but that one is altogether a thoroughbred Lion." The value is in the worth, not in the number.

Enumerate

27-08-2012, 03:11 PM

Any BLUFC noteholder should review this deal:

http://www.proprint.com.au/News/313228,salmat-sells-bpo-to-fujifilm-for-375m.aspx

It is unclear if Fujifilm made the initial "unsolicited and conditional approach" (http://www.proprint.com.au/News/302923,salmat-receives-takeover-bid-for-300m-mail-division.aspx) for the Business Process Outsourcing (BPO) division announced on 31 May - a Salmat spokesman would only tell ProPrint that the first approach had triggered a "full sale process" that generated "considerable interest from multiple parties".

In terms of revenue and EBITA:

In its half-year results to 31 December, the BPO division posted an 8% rise in EBITA to $21.5 million from a 1.9% rise in revenue to $158.6m.

So, they achieve an unlevered sale of $375 million (on an initial guidance that they would get $300 million) based on revenue of $316 million and an EBITA that is up 18.4%.

If you were a journalist, in New Zealand, you would value this at about $200 million, max (fortunately, they released the scale of the initial offer, at $300 million, to put the journos in the right financial ball park).

Investor 54

28-08-2012, 09:47 AM

You are now comparing a thoroughbred with a donkey.

Honestly, Enumerate you have no idea.

The 'drivers' behind these businesses could not be more different.

For Example: Salmat grew organically (and massively) through smart business strategy (from a start-up literally in the shed). Not acquisition of disparate sometimes unrelated print businesses that form one giant dumb corporate. Salmat had high speed inkjet (and a business strategy for it) in 1998. Blue Star made their investment last year and you say BS is a leader. The examples are endless.

Enumerate

28-08-2012, 11:02 AM

If you were talking about PMP ... then you would be talking about a donkey.

I do not accept your judgement about the poor condition of Blue Star assets. Nor do I accept your views on the merits of Blue Star's strategic positioning.

The funny thing with good quality assets is that they tend to end up in the hands of the people who value them. We are in the middle of a process to test the resolve of the "five interested parties".

Like Salmat BPO, I would suggest that the future owner of Blue Star assets will be an overseas buyer. To understand sophisticated manufacturing assets and economics takes experience provided only in a sophisticated manufacturing economy.

Enumerate

05-09-2012, 10:38 AM

Interesting development ... Bauer buys ACP for 6x EBITDA

http://boss.afr.com.au/p/business/marketing_media/nine_sells_acp_magazines_to_german_ycelv8KM7axhn1w aTviW8O

Could Bower sell Web Star to Bauer?

Investor 54

06-11-2012, 03:04 PM

http://www.proprint.com.au/News/322029,blue-star-buyout-australian-business-acquired-by-geoff-selig.aspx

Enumerate

06-11-2012, 07:46 PM

Private Equity firm Wolseley Private Equity is involved (prior holder of Stream Solutions during its expansion phase). Implied that negotiations are continuing for the NZ assets - which would explain the silence on transaction price.

http://blogs.wsj.com/dealjournalaustralia/2012/11/06/champ-sells-blue-stars-australian-operations-to-caxtonweb-wolseley/

Royalwolff

06-11-2012, 09:30 PM

Street talk is that Tom Sturgess and David Jupe are buying the NZ assets. Interesting when you consider:

They are two of the few people who have consistently held management positions within Blue Star over the entire life of Blue Star, they have to share some of the responsibility for the consistently poor under performance.

Tom led the initial MBO and instigated the initial public bond offering.

Tom and David both walked away with a tidy profit when the initial management team sold out to Champ

David Jupe stood up in front of the Bond holders last year and passionately pleaded for the Bondholders to say yes and back their restructuring plans!

Tom as been a Director of Blue Star since 2006, He was managing director from 2006 - 2008, he only just stood down from the board in January of this year.

He purchased Rapid Labels from Blue Star through his holding company Tiri Group with no public scrutiny in April of this year.

Tom is a director of Goldman Sachs New Zealand Private Equity Limited, Goldman Sachs is leading the sale process.

Interesting outcome if it proves to be true. It could be perceived that Tom and David have manipulated the bondholders and run the business down to get it into a position that they could buy for the right price - again. They would absolutely have had more information on which to base their purchasing decision than other parties in NZ were allowed.

Enumerate

07-11-2012, 07:25 AM

If Sturgess and Jupe do end up buying the NZ business, I will wish them well! They will have bought very nice assets near the bottom of the business cycle. Smart buying.

My only request is that they pay a reasonable price! Something north of 7.5 x EBITDA would work for me.

Selig and Private Equity interests have taken the Australian business. Nice assets, bought near the bottom of the business cycle. Smart buying.

Without the Bondholders agreeing to the restructuring plan back in August 2011 - we would not be here in November 2012 wondering what kind of multiple on EBITDA informed buyers will be paying on excellent assets.

I do not know Jupe or Sturgess, I heard Jupe speak at the Bondholder meeting and I have read a bit about Sturgess. Both men appear to me to be of high character and I cannot accept the "manipulated the bondholders and run the business down" line.

We are waiting for the numbers to see if the Bondholders can exit with dignity. They certainly deserve some good news after the sacrifices they have made to save the business.

Investor 54

07-11-2012, 12:02 PM

We are waiting for the numbers to see if the Bondholders can exit with dignity. They certainly deserve some good news after the sacrifices they have made to save the business.

Here are the numbers.

Distribution to bond holders: NZ$00.00

This is in line with previous forecasts and has already been factored in by the market (in a dignified way).

Royalwolff

07-11-2012, 11:02 PM

I'm very keen to see the numbers too but I'm predicting a price closer to 4 x EDITDA, or a ratio that comes pretty damn close to the value of just the NZ assets. This number will be considerably less than the $105m initially invested by the bondholders, a fraction of what was realized and banked when the same management sold to Champ.

Yes, a very very good price, for excellent new printing assets in nice new buildings well positioned to thrive and make money for the new (same?) owners in NZ. Unfortunately for us this investment and restructuring was funded on really cheap bondholder money under the management of the very people who are likely to reap the rewards going forward.

If these rumours are true, I don't see a lot of dignity in this.

Investor 54

08-11-2012, 12:18 PM

I will predict a ratio of 3 x EBITDA and I would not be suprised if it were as low as 2.5.

The value of 'heavy metal' print assets has already taken a hammering with massive international availability of low cost second hand kit. Also major advances in substitution technologies continue to errode asset value. It is unlikely that a new investor would consider book value anywhere near real value.

The new owners must also factor in the massive legacy costs of staff entitlement which in many cases will date back to the old award rates and redundancy provisions.

it must be very tempting to let this go in to administration to clear the way for a massive restructure where the right decisions can be made from day one.

Enumerate

08-11-2012, 10:32 PM

Ok Royalwolff and Investor 54 ... do you guys actually own any Blue Star notes? ('54 has already declared he doesn't have any; Wolfie has indicated that he is "unlikely to reinvest")

Does the apparent news of the sale of the the Australian assets (and not to TMA, who probably made the initial "low ball" offer; which can be expected to be in the ball park of their "low ball" offer for PMP; and was the likely basis for the initial "valuation" statements of Blue Star that, on paper, "wiped out" the value of the Notes) cause any ripples of excitement behind the scornful statements of EBITDA multiples less than half what Nine got for a distressed sale of ACP?

Let's permit ourselves some optimism:

Say, Selig and his Private Equity buddies paid 150M for something north of 230M of revenue with an EBITDA of about 25M at a multiple of 6x (the same multiple Bauer paid for a distressed sale of ACP)

Lo and behold, 150M is also about the amount required to clear the Senior Debt and the Finance leases on all the assets!

So we are now sitting with the Noteholders next in line to take whatever they can get for the NZ print assets and the NZ bit of Webstar.

If the NZ deal is not at least as good as the Aussie deal - why sell? Why sell at 2.5x? (or 3x)

Champ would only have the 64.5M Noteholder debt, interest free until 2013; generating an EBITDA of about 25M. By the time the debt is due in 2015, they could pay it off with generated revenue (or find someone prepared to take the assets at a more reasonable 7.5x EBITDA).