Bluestar Group (BLU020)

[Enumerate]

The problem is, there has been no information released:

We do not even have the accounts for the LAST financial year, let alone the first half of this year.

We do not know what the bros Selig + PE paid for Australia.

We do not know what Sturgess + PE paid for NZ.

We were not even formally informed of the trigger event (the sale of the Australian assets) under the Trust Deed.

However, what we do know is:

There is plenty of scope for "moral hazard" - Goldman Sachs selling to a Goldman Sachs director, no appointment of an Independent Director to oversee the process (not even Roger France - a "quasi-independent" Director - still on the board)

Our Trustee does not seem overly concerned with the various breaches of the Trust Deed and of the Prospectus obligations.

So, what do I think:

Recent deal flow (multiples of EBITDA in excess of 6) and an assumption that combined AUS/NZ EBITDA is about $50m would imply there should be something left for bondholders.

If there is nothing in the cupboard (as Directors have stated as recently as 30 November), then I will be very surprised.

However, the silence and the timing of the announcements (to minimise exposure) makes me nervous. The apparent lack of engagement by the Trustee makes me nervous. I will confess that I thought the most likely outcome was a restructure of the debt (bondholder debt to equity conversion) once the aussie assets went; the sale of the NZ assets in terms that could court a "moral hazard" makes me very nervous. After all, what do Champ care if there is a possible partial return to bondholders; it is simply easier for them to sell out fast and cheap (their return is the same).

However, I prefer to wait for confirmation of the loss crystallised loss before I consider the content of my letter of complaint to the FMA ...

At least the jobs are safe ... the suppliers will get paid ... the customers will have access to established services ...

I certainly believe that the bondholders deserve to be treated fairly.

[bondholder007]

I have not had much to say about Blue Star since the vote on the amended bonds. I voted NO as most people on this forum said they would. Made no difference which suggests that this forum is used mainly by small punters rather than big money folk. Interesting to see that "Enumerate" is still on track. I thought that he/she might be away at the Mayan End of the World event but his quick response to the moment of truth (sale of the NZ business) suggests he is still with us. Like him I am drafting a letter to the FMA. Any further thoughts folks?

[Investor 54]

Enumerate (and probably many others) have allowed this company to trade on their fear and hope. I think Enumerate knows his money is gone. They say it again today http://print21.com.au/

It is similar to the Hanover deal. 'Take this paper capital, agree to not hold directors accountable, (or second yourselves behind them) or else total loss of your investment.' ... then they whisper ' you might get your money back'.

I'm sure its in a text book somewhere right beside the legal book that ensures that they cant be successfully sued.

Its actually all about human mindset and virtually nothing to do with the numbers. That mindset has been demonstrated completely by Enumerate with almost every posting he has made. If he turned 1% of his vast analytical energy into alternate agendas he would have seen through the whole facade years ago.

[Enumerate]

Financial statements are up on the Companies Office web site ...

[Enumerate]

Key facts are:

EBITDA went from 2011 $42m down to 2012 $35m (prospectus forecast ~$53m)

The Tiri sale was for $21m

Net realisation from the Australian sale is $17.6m !?!? (Not sure what senior debt paydown "Net" includes, assuming there is some proporitioning). Proceeds were used to pay down debt.

Net realisation from the NZ sales is held to be $18m !?!? (Again, not sure what senior debt paydown "Net" includes). If there any proceeds avaible to bondholders ... it will be this amount, I assume.

I am assuming that senior debt was all convenanted over the operating assets. I assume that the holding company would be left with no senior debt since it has no assets other than the operating companies it holds.

Seems maximum theoretical value is $18m - 28cents on the dollar for a capital bond. Though, there are many factors that could cause this to go lower and there are a number of assumptions that could go horribly wrong in this calculation.

The accounts, prepared on a realisation basis, are the reason for the 30 November announcement of "no value to the bondholders".

The only faint hope is that the $18m Net, from the NZ sale, is "free and clear". (Not a solid assumption).

[Investor 54]

Good one Enumerate!

There is no payment for bondholders. Refer page 13 and page 31 and page 53 and page 56. Page 68 tells you what they have done with the 17.6 mil and the 18mil. (paid out to bank).

The senior bank debt has only been part paid down with proceeds from sales. Refer page 2.

The actual position is 291 mil worse than the numbers forecast.

Have a look at the management pay rates on page 84!

The remaining company will be placed in the hands of liquidators working for the banks.

Accumulated losses 407 million.

The goodwill and assets are writen down by some 285 mil. So much for valuing "excellent assets".

I see no multiples quoted for the sale but I suggest my previous prediction of 2.5 to 3 looks very optimistic. The multiple means nothing anyway. You have to have something to multiply it against!

[Enumerate]

The published accounts were prepared on a realisation basis. This of course means that intangibles like goodwill have been written down to zero. Balancing this is that some realisation assumptions have been made and the sale value of the assets, as a going concern, should reflect some premium approximating (hopefully) the written down intangibles.

For me, the most insightful part of the financial report is the Statement of Cashflows (prospectus vs actual) on page 76. This section tells us how the business battle was being fought.

The Blue Star team, in the 2012 fy:

- squeezed more cash out of operating activities
- spent massively less on financing activities
- actually invested more
- actually increased the cash balance over the forecast cash deficit

Bower and team proved that the Bondholder confidence placed in them was not misplaced. Well done!

To anyone who thinks a Bank lead liquidation was a preferred option needs to understand the team was capable of performing beyond expectation. Bondholder sacrifice to save the jobs, the suppliers and maintain the services was the best path.

[Enumerate]

In preparing the accounts on a realisation basis, in the balance sheet, the accountants have rated the value of the participating bonds at zero. The amended capital bonds are valued at $30m.

Group Interest bearing liabilities are $280m
Parent Interest bearing liabilities are $45.6m

We can expect all the senior bank debts (SSCFA - working capital and bank loans) to be coventanted over the operational assets.

Further I expect that the Senior Shareholder Loan notes are also covenanted ovef the operational assets.

This leaves Amended Capital Bonds, Existing Shareholder Loans and the Bank overdrafts as parent liabilities.

Subsequent to balance date:

The Existing Shareholder Loans were converted to equity.

Rapid Labels sale: "Net sale proceeds of $21.0m were used principally to pay down prior-ranking bank debt"

Australian Operations: "Net sale proceeds of $17.6m were used principally to pay down prior-ranking debts"

New Zealand Operations: "Estimated net sale proceeds of $18m will be used for repayment of prior-ranking debts"

So, ...

The phrase "Net sale proceeds" is not explained. However, I assume this means that SSCFA bank loans and finance leases (coventanted and guaranteed) were paid off, otherwise there would be no positive "Net sale proceeds".

This is my best guess:

The $20.7m SSCFA working capital facilities were paid back with the Rapid Labels sale ("pay down prior-ranking bank debt")

The net proceeds from the Australian sale were applied (hopefully) to pay back the Senior Shareholder Loan Notes ("pay down prior-ranking debts")

This leaves the proceeds from the NZ sale, which are yet to be collected, to be applied to Bank overdrafts ...

Hopefully, this means about $18m to be distributed to the Amended Capital Bondholders.

This also means that the Banks have been repaid in full. The risk capital Champ put up, has been repaid in full.

Some guesses in all of this ... I will talk to the Trustee sometime next week and see if this scenario is supportable.

It may be premature, but I think Tom Sturgess may have done Bondholders a great favour (timely Rapid Labels purchase and top price for the NZ assets - net realisations higher than the larger Aussie sale).

If we do get a return of about 25cents on the dollar for the capital notes ... I will be toasting Tom and his increasingly lusterous reputation.

[Enumerate]

... and I will remember that the Banks cost the Bondholders at least 10cents on the dollar by forcing the Korda-Mentha review on the company.

[Investor 54]

Hahaha ... Tell me which one of the following is true:

1.You are a comedian and this is your comedy show (your posts are funny, thats why Im posting)?
2.You are a charity which protects poor performing people from losing their jobs?
3.You are a BS manager who also won lotto?
4.You are a fool?

Speaking of insightful, Bower and team Blue Star:

Missed sales by 76 mil
Missed gross profit from 18% to under 16%. (aimed super low then missed that target)
Paid 400 staff over 100k (now that is smart of them)
converted leases to finance agreements (looks like they invested more)
Improved on financing activities (largely thanks to Enumuerate and his buddies)
Consolidated losses of over 400 mil (considerably worse than when bondholders agreed to let them continue)
Reduced the equity position to negative 215 million
liqudated non trading companies with trading companies 'expected to be liquidated soon'
Grabbed bondholder money (and never gave them a minute of further consideration).
Allowed conflicts of interest everywhere you look with the buy back.

Of course in the face of all that Enumerate believes that the bondholders made the right decision and that Bower and team should take a bow. Perhaps a whip round for a bonus payment would be appropriate. Well done indeed! While we are at it we should also be congratulating Ross, Petrvic, Briers and what about that guy who was going to take over sky casino?

[Enumerate]

"In many cases, variances between the PFI and actual financial position are distorted by impacts of adjustments arising from the preparation of the financial statements on a realisation basis". (page 70)

Upon detailed investigation, it looks like this might even be true of the EBITDA numbers. Looks like performance was broadly on par with 2011. Hopefully there was some recovery in the first quarters of 2013 and this was the EBITDA basis used in the sale process.

Investor 54, if you have nothing to add to the debate ... why not stop posting. Your drivel contains no real analysed information; you have no real stake in the process going forward since you do not hold any bonds; and, your insults make you appear as someone with a vendetta against the company or as a person with marginal character.

[Royalwolff]

We could ask the opinion of the independent director, oops that never happen either.

More reading for watchers.

http://www.proprint.com.au/News/328497,blue-stars-final-year-big-losses-bigger-debts-bargain-selling-price.aspx

[Enumerate]

The journo make the following surprising claim: "The report also shows that the sale of Blue Star netted less than 20% of the NZ$385 million CHAMP paid in 2006."

Breathtaking financial illiteracy ...

Fortunately, this is not a concern for the Bondholders. We are left to wait for the washup ...

[Investor 54]

Well I'm not sorry if I have offended you. I find your drivel offensive. You have been wrong at every turn. Reread the thread!

Oh and it's too late for a detailed financial analysis. A quick 'squiz' at this report is all that is required.

I will help you with one clarification though. Net proceeds for sale means the buyer is paying suppliers and staff for the previous period (before ownership). Ie: the buyer may have had to pay 30 mil which includes creditor payments. 18 mil is net of that.

There will be no payment to bond holders.

The only vendetta I have with blue star is take they have financially screwed so many people with this bond (some of which I know).

[Enumerate]

Investor 54, your definition of "Net" cannot be correct.

The bank debt is covenanted and guaranteed by the operating units. There is no way the units can be sold as a going concern with bank liabilities hanging over them.

The same is also probably true of the finance leases. (The Senior Secured loan document is at the Companies Office web site - however, none of the finance lease documents are publicly available, as far as I know).

However, we should not have long to wait for some authoritative statement:

http://www.proprint.com.au/News/328041,tom-sturgess-buys-blue-star-nz.aspx



Former Blue Star controlling shareholder Tom Sturgess and Australian private equity firm Mercury Capital took control of Blue Star NZ from Champ Private Equity on 1 January ahead of a settlement on 11 January.


Settlement was supposed to be today. It shouldn't take them very long to announce the results of the wash-up.

[Investor 54]

The buyers probably made staff and supplier payments a condition of sale. Ie: they bought those debts.

[Enumerate]

... it all boils down to the meaning of "net" ...

How difficult would it have been to provide a definition, or even provide the absolute figures ...

Instead, we get $17.6m and $18m above "net" which, in effect says nothing.

No announcement following final settlement. It must be at the "bad news" end of the scale ... the banks obviously decided to "take what they could get" rather than trade on as per the intention of 2011 prospectus.

Settlement details must have been known for at least a few weeks before takeover of the NZ assets on the 1st of Jan. No wash-up news is bad news, as far as I can see.

The only thing left is the FMA letter.

[Enumerate]

Something in the NBR:

What does this mean ...

"The New Zealand business, comprising Print New Zealand and Webstar New Zealand, fetched a net $18 million, but the actual sale price is believed to have been higher".


http://www.nbr.co.nz/article/blue-star-looks-forward-horror-accounts-bd-134481

[Investor 54]

The new owners released a statement saying the buyout is good news for suppliers and staff. They wouldn't say that if they weren't getting paid.

If you count the money required to pay them, you could say the full price paid was 18 mil plus the creditors plus the staff entitlements. Hence the 18 mil is net of the total agreed and hence the requirement for a wash up (as these numbers are probably not known exactly yet).

May have been worth writing that letter if you hadn't voted to reduce your bond holder rights.

[Enumerate]

May have been worth writing that letter if you hadn't voted to reduce your bond holder rights.

Exactly the opposite is true ...

[Investor 54]

Hahaha. Yes of course it is. Are you related to Basil Fawlty?

[Germaine]

Enumerate you truly are a numskull, and its taken a lot of ridiculous posts by you over the last 12 months for me to call you that in public. Your logic defies reason and you have been incorrect at every step of the way (as evidenced by this thread if you read it back). What will it take for you to ever admit you were wrong?

And now, laughably, you want to complain to the FMA...about what exactly? Unfortunately the FMA is not there to protect investors like you from your own stupidity, otherwise they could have done you a huge favour and taken away your cheque book years ago...

[Eisenheim]

It would be interesting if comments were more germane and less blame.

[Investor 54]

http://print21.com.au/private-equitys-role-in-blue-star-break-up-andy-mccourts-reverb/55589

[Investor 54]

http://www.proprint.com.au/News/329158,blue-star-nzs-new-owner-rejects-bondholder-criticism.aspx

A couple of excerpts that confirm my view:

Tom Sturgess: "Bondholders are not going to get any money back, so you can draw your own conclusions," he told ProPrint.


"It should be noted that [Sturgess] was part of the management team from the very beginning and sold the initial bonds to the bondholders, and that the management team that is likely to continue to run Blue Star were in key positions to influence this outcome."


"It's turned out exactly how I expected it would turn out – zilch for the bondholders and a good deal for some of the people that got them into the mess in the first place," said Hawkins.

[Investor 54]

From Proprint:

"Sturgess also defended his decision not to contribute to the bailout: "I don't make minority investments, and at the time it didn't look like an attractive proposition."
He also said any contribution would have been pointless as only a massive injection of cash could have turned around Blue Star."

So heres some questions for Tom Sturgess following these reported comments:

1."Why did you and the senior management recomend that bondholders vote "yes" if you knew then, that the business could not be saved without a massive injection of cash?
2. Was it so you could get your alternative bid together when the inevitable happened?

[Germaine]

A deafening silence from Enumerate?

[Newman]

A deafening silence from Enumerate?


I would think Enumerate is busy in preparing a letter to FMA or starting legal actions against Blue Star board.

[Enumerate]

Warrington and Hawkins were clear in 2011 that turning down the reorganisation deal was the way to go. Though they haven't stated this, I can only assume that their reasoning was to play "hardball" with Champ and the Banks, to hold out for a better deal for Bondholders (receivership would have crystalised so many intangible liabilities, made a sale process impossible)).

Frankly, I believe that we would have had was a "take what you can get" slow motion bank driven "administration" that would have seen much more pain in the staff/supplier domain.

At least we got the $14.8m shareholder notes subordinated to our interests. At least the jobs are now secure. At least the suppliers can breathe easy.

The key irritation for me is that we have had no formal statement from either ex-BSGH (new company name) Directors, our Trustee (Foundation Corporate Trustee Services (new name for Perpetual Corp Trustee)) or CHAMP (dominant shareholder, calling all the shots) detailing:

- Exactly what price did they get for Rapid Labels and how were the realised funds apportioned between the debtors?
- Exactly what price did they get for the Australian assets and how were the realised funds apportioned between the debtors?
- Exactly what price did they get for the NZ assets and how were the realised funds apportioned between the debtors?

How difficult would it be to provide a balance sheet updated to after the key realisations showing what cash is available and who is going to get what in the subordination list:

- Exactly how much are the banks losing on the senior loans, guaranteed by the operational assets reported on a regional breakdown? Did we lose the bondholder money in Australia? Did we lose it in both regions?
- There are a number of Champ and senior management debt liabilities. Have these actually been paid off? If so, what inspection process is in place to make sure Bondholder subordination rights are not abused?
The only person, that could have demanded some answers is:

http://www.foundationcorporatetrust.co.nz/contact/

Chris Lithgow Regional Manager – Northern
Phone (09) 927 9408
C.Lithgow@foundationcorporatetrust.co.nz
Level 17, AMP Centre
29 Customs Street West
Auckland

[Enumerate]

Company (ex-BSGH Limited) went into recievership on the 17th of Janurary and liquidation by shareholder resolution on the 18th.

Staiassny and Gibson of KordaMentha have been appointed Receivers.

Grenfell and Black of McGrath Nicol have been appointed Liquidators.

So, we are now unsecured creditors.

It looks like Nicholas Frank GREINER, our director, went down with the ship.

Joel Chase THICKINS and Nathaniel CHILDRES bailed out the day before the recievership.

Phillip Michael BOWER went the day the NZ assets were released to Sturgess.

Of course, it does not appear that any of these gentlemen thought it fit and proper to release any statement to our Trustee, it seems.

[Enumerate]

Reporting obligations have now passed to the Receiver (and the Liquidator).

Our Trustee will declare the Bondholder interest ... about $105m in unsecured debt.

The "Deed of Amendement and Restatement (relating to a Capital Bonds Trust Deed)" is on the Companies Office Web site:

http://www.business.govt.nz/companies/app/ui/pages/companies/1893712/documents?backurl=%2Fcompanies%2Fapp%2Fui%2Fpages% 2Fcompanies%2Fsearch%3Fmode%3Dstandard%26type%3Den tities%26q%3Dex-Bsgh

I am aware that the ex-BSGH Directors did not advise the Trustee of a number of material breaches of the trust deed. (Failure to report financial results, failure to notify of breach, (potentially) an acceleration of senior debt default event, etc.):



The Trustee will only be bound to take steps to ascertain whether or not the Issuer has committed any breach of the provisions of this deed or any of the Capital Bonds and cease to be entitled to assume without enquiry that no such breach is occurring or has occurred upon:
(a) the Trustee receiving specific advice that a breach has, or appears to have, occurred or threatens to occur, from the Directors of the Issuer or the Auditors; or
(b) the Trustee receives actual notice of a Liquidation or statutory management of the Issuer.


So, now in liquidation, the Trustee has an obligation to investigate.

I suggest that anyone interested in writing a letter to the FMA should:

1) Write the Trustee and ask them to identify and investigate any breaches of the Trust Deed.

2) Write to the FMA requesting investigation. Note in the FMA letter that the Blue Star bonds were widely held by the NZ public and hence the matter is of concern to public confidence in NZ financial markets.

3) Note in the FMA letter that there appears to be a number of material breaches, uninvestigated by the Trustee:

The major one is:



11.1 The Issuer coventants with the Trustee that it shall, for so long as any Capital Bonds or Participating Bonds are outstanding:
(c) Disposal or acquisition of assets: not enter into any transaction or series of linked or related transactions to acquire, sell, lease, exchange or (other than by way of charge) otherwise dispose of assets of the Group or assets to be held by the Group:
(i) which would change the essential nature of the business of the Group; or
(ii) in respect of which the gross value is more than half of the value of the assets of the Consolidated Group before the acquisition or disposition (for purposes of which the expression "assets" includes property of any kind, whether tangible or intangible),
without the approval of the Trustee in each case;


With the following additional issues:

13.1(a)
13.1(d)
13.1(e)
13.1(f) with regard to Australia and NZ sale prices

14.7(d)


4) In the FMA letter note the Prospectus issue: failure to appoint an independent director

5) In the FMA letter note the "moral hazard" issues: sale of assets to shareholders - Australian assets to Selig (a shareholder) and NZ assets to Sturgess (a shareholder) noting that the not even Trustee oversight of this process was achieved. Note that the sale process was conducted by Goldman Sachs with sale of assets to a Goldman Sachs former Director (Sturgess).

At the very least, if the FMA can review the full facts (and potentially involve other parties for investigation) then we at least know that someone with a "public interest" perspective has reviewed things. At this time, we have nothing ... not even a status letter from the Trustee or the Directors.

We can expect the formal Recievership report in due course. I would suggest that people let the Reciever know that a creditors meeting would be good idea!

If there is nothing left, which would appear to be the case; any civil action to gain compenstation would benefit from the FMA review.

[Enumerate]

FMA complaints can be submitted online:

http://www.fma.govt.nz/about-us/contact-us/contact-form/

Given that it is possible to attach documents ... I might make my supporting document available to anyone else who is considering a submission. If there is any interest ... let me know.

[Dubdee]

Enumerate,

I would be keen to submit so would be very interested in your submission. I am particular interested in the positions of directors who wind up collecting the business for a song. Seems a bit of a conflict there to me.

[Germaine]

Enumerate, its all very well trying to distract people with the prospect legal action. But the bottom line is that you completely misread the situation commercially, despite the rubbish that your detailed 'analysis' produced time and time and time again on this thread. Can you not admit this? No doubt you will rationalise your mistakes as you being misled by the company is some way, but given the various other bloggers who read the tea leaves 100% accurately with exactly the same information set, frankly this would be very low of you.

Furthermore, you went one step further and actually facilitated this outcome by actively encouraging investors to vote the deal through and waive their rights. Again, a complete mis-read.

The only single way that investors were ever going to get any money back here (and I said this at the time, so this is not just with the benefit of hindsight) was to say no and hope for a better deal. End of story.

[bondholder007]

I have been bemused by ENUMERATE's varying stance on our bonds. However he now seems to be using his analytical skills to suggest a way forward.

He quoted the following item in the trust agreement:

11.1 The Issuercoventants with the Trustee that it shall, for so long as any Capital Bonds orParticipating Bonds are outstanding:
(c) Disposal or acquisition of assets: not enter into any transaction or seriesof linked or related transactions to acquire, sell, lease, exchange or (otherthan by way of charge) otherwise dispose of assets of the Group or assets to beheld by the Group:
(i) which would change the essential nature of the business of the Group; or
(ii) in respect of which the gross value is more than half of the value of theassets of the Consolidated Group before the acquisition or disposition (forpurposes of which the expression "assets" includes property of anykind, whether tangible or intangible),
without the approval of the Trustee in each case;

My reading of this is that BSGH could/should not sell their assets without Trustee approval. Is there a countervailing clause in the agreement or have the former Perpetual Trustees (now Corporate Trust) been their usual supine self?

BSGH who provided the above guarantee are apparently in liquidation

Moving on, I plan to write to FMA and will do my own research into the trust deed.

I am certainly interested in exchanging information as suggested by ENUMERATE. Probably the easiest way forward is for people on this forum to say whether they want to participate and then arrange an exchange of real email addresses.

Cheers and have a glass of wine while you think about this. Some of us may not be able to afford the glass. I recall that the list of bondholders at the time of the abortive bond restructuring included large sums from individuals and charitable organisations. My loss is a mere $10,000 but I have no doubt that we have been rorted - that's an OZ word for being screwed.

[Enumerate]

The first liquidators report is up on the companies office web site:

http://www.business.govt.nz/companies/app/service/services/documents/B69D9BBC50F3DE9AA7EE204C69C0533C

It shows net equity of about $60m.

Clearly, for GREINER to write a letter telling us that the company is bust ... he must know that the the value of the secured loan guarantees is higher than the realised price by over $60million.

(In the 2012 end of year accounts: Correcting the EBITDA for some of the realisation based costs ... the company was doing over $40m in EBITDA. Looks like they planned to get about $120m + cost of sale. Seems they got about $160m ... which still puts the banks in a hole for a huge amount).

It clearly looks like the 2011 Prospectus was a complete sham.

We need to hear from the Receivers ...

[Enumerate]

For those of you doing an FMA letter, you might like to reference the following table of date:



Initial Offer of $105m of 9.1% Capital Bonds – with Blue Star Group Ltd as Issuer and Guarantor
http://www.business.govt.nz/companies/app/service/services/documents/F0D49389A887E9B08C98861F19F0AAEE

9 Nov 2005



Acquired by CHAMP Private Equity

2007



Issue of Prospectus – with Blue Star Group Holdings Ltd as Issuer
http://www.business.govt.nz/companies/app/service/services/documents/877F7338DDB1297F2AF3EDB301173606

14 July 2011



Appointment of a Receiver (ex-BSGH and ex-BSG)

17 Jan 2013



Appointment of a Liquidator (ex-BSGH and ex-BSG)

18 Jan 2013

[Enumerate]

I have completed my background material in support of an FMA submission.

I have put it up on Kim Dotcom's Mega site: www.mega.co.nz

Looks like I have to list email addresses to grant access control. Anyone who want to review the material ... send me a gmail address.

[bondholder007]

I have just received my latest Computershare statement. The entry for BLU has been reduced to zero and listed as a "redemption" Not funny

On Chris Lee's website, Warrington says that the NZ Shareholders Association are looking at legal action on behalf of bondholders. Does anyone on this forum belong to NZSA. Could be useful to join but it is not clear what they will actually do

[Enumerate]

On the back of a successful FMA, Securities Commission, SFO or Companies Office (NEU) prosecution; the following type of outcome can be reached:

http://www.nbr.co.nz/article/settlement-credit-sails-failure-ja-134116

[Dubdee]

Enumerate very keen to read your submission to FMA but this mega site required me to upgrade my browser to read it. In my case than means a new o/s!

Any cahnce you could just email it to dubdee50@gmail.com?

thanks

Dubdee

[bondholder007]

Enumerate very keen to read your submission to FMA but this mega site required me to upgrade my browser to read it. In my case than means a new o/s!

Any cahnce you could just email it to dubdee50@gmail.com?

thanks

Dubdee

I have had the same problem but I think it is due to teething problems with MEGA rather than my own system. However I have now received ENUMERATE's paper by direct gmail for which many thanks. This is very comprehensive and highlights the various BSGH faults.

I will use these points in my FMA letter and also have a crack at the trustees who seem to have been useless. They are already under FMA investigation on another matter. I emailed them last week asking if BSGH had sought their permission to sell assets and also asking if it was normal for them (the trustees) to be large shareholders of the company they monitor. No reply yet.

Incindetally, we first invested in Blue Star bonds on 7.11.01. At that time the bonds paid 10.75% and matured on 15.10.08 but Blue Star redeemed them early on 12.12.05 offering new bonds maturing 15.09.12. We rolled our investment over. In hindsight this would have been when Sturgess was getting ready to deal with CHAMP. Anyway it is worth having a shot at an FMA review. Fingers crossed.

[Investor 54]

http://www.proprint.com.au/News/331085,blue-star-bondholders-mull-legal-challenge-over-80m-loss.aspx

[bondholder007]

I have been in touch with the trustee about their lack of action. They have replied:

"The clause of the trust deed that you state (11.1(c)) is only binding on the Issuer – Blue Star Group Holdings Ltd. Therefore the trustee approval is only required when the disposing party is the Issuer. This was pointed out to investors when voting on the restructuring as a negative in the proposal (please refer to the statement in the first paragraph of page 8 of the Investment Statement).

In regards to the sales of the Australian and New Zealand businesses, the disposing party was Blue Star Group Pty Ltd and Blue Star Group Ltd – both subsidiaries of the Issuer but not the Issuer. Therefore we consider that the Issuer do not need to seek the Trustee’s approval."

Seems a bit lame and begs the question of whether a trustee only acts in response to a "trigger event" or has a wider duty to look after bondholders

[Germaine]

I'm still waiting for Enumerate to admit he was so very, very wrong in the hundreds of posts he made on this subject. He got up on his high horse and lectured us in the face of the blindingly obvious and now doesn't even have the good grace to apologise.

[Eisenheim]

I'm still waiting for you to talk about Blue Star and not the contributors to this thread.

[Enumerate]

Germaine, it is quite clear that I got it wrong in my estimate on the ability of Blue Star to repay its debt load.

However, the facts used to support my position were supplied by the Directors and Auditors. The state of the covenants relied on the diligence of the Trustee. I thought that the bank influence over the outcome was defined in the relevant agreements with information shared by the associated financial reporting obligations.

I view the 2011 Prospectus as a kind of "promise". We were asked to support the company to trade and achieve the benefits of the various reorganisation and investment initiatives - the alternative was explicitly presented as recievership.

If Directors promise to achieve certain finanacial outcomes and establish fully independent governance; the engaged audit/advisor professionals promise to report accurately on progress; and, the Trustee promises to maintain a watchful eye over all factors impacting bondholder interests - when the alternative is to destory the business; the Banks agree to support the process on defined terms - I really have no choice but to believe them.

However, when the promises are not kept ... I will not be easily distracted from remembering what promises were made.

It is now the time to fully understand the origins of this debacle:

Did the CHAMP purshase of McMillans (and others) destroy the possibility for Blue Star Group to pay it's debts? Why then, did BSG Directors approve the massive expansion of Blue Star Group Holdings debt?

Were there material events (such as prior knowledge of the loss of the ACP contract in Australia) that should have been reported to the Trustee? Was this information presented to the banks who proceeded to force a sale process as a kind of "zombie liquidation" of Blue Star - to the disadvantage of the bondholders?

According to the Liquidators report ex-BSGH has about $60m of cash! This is about to be claimed by the banks under their guarantee (I assume). However, is there cause to overturn the bank guarantee because of the position the banks chose, to force the "zombie liquidation"?

The Trustee ... well, their response to Bondholder007 says it all ... did they have an obligation to explore events material to their administration and enforcement of the Trust Deed?

These and many other questions deserve answers.

[bondholder007]

If you read Chris Lee's website his "Taking Stock" for 7 Feb has a spot on summary of the Blue Star debacle.

He also notes that the former owners of McMillan Print (whom BS bought) are looking at legal action. The shareholder register for BSGH includes 57,051,318 shares held by "McMillan Printing Unit Custodian Pty Ltd" so it appears that McMillan were paid largely in now worthless shares. Also it appears that the NZSA are looking at joining this action. All this is good news but legal action takes time and makes lawyers wealthier.

I suggest that those of us who are sufficiently motivated carry on with complaints to the FMA. Recently NZ authorities such as the FMA, SFO and Commerce Commission have been doing good work in pinning down errant directors and management and this may be quicker although FMA seem to be amassing quite a case load already.

I am posting my FMA letter today. I delayed this for a week in order to seek comment from our trustees (see above). I conclude they are almost as culpable as Champ/Blue Star and have included them in my letter.

I suggest we dont hold our breath awaiting results. I am well into retirement but it would be nice see some recompense before I shuffle off.
At least retirement allows time to harass financial wrongdoers. Cheers

[Romulus]

Hi BH007,

Rather than reinvent the wheel I would be keen to look at the letter you intend to forward to FMA. I would also be happy to forward a letter to FMA as well.

[bondholder007]

I am happy to send a copy of my letter if you provide an email address. Send this as a private message if you prefer. I did suggest a week or two back that those who want to combine to take joint action exchange real names and addresses but it seems folk on this forum are not keen in this approach.

[Enumerate]

At this point in time, bondholders have a number of resources to consult with:

The Reciever: We are all now unsecured creditors of ex-BSGH (in recievership). This company has cash (see the liquidators report) to pursue litigation - however, we need to understand the attitude of the reciever. Given that the company directors went to great effort to hand pick both reciever and liquidator (court opinion sought to appoint the conflicted liquidator) - this might be the first battleground.

The Regulators: The FMA seems to be the best gateway for gaining regulator review of various problems and complaints. This ranges from the Fair Trading Act (Commerce), the Companies Act (Companies Office), criminal aspects (SFO), Prospectus and Financial Reporting Issues (FMA/Companies), Trust Deed administration (FMA). If we can get some investigations underway ... this will help our cause in civil litigation terms.

Others: Some of the shareholders (McMillans) seem to be interested in exploring events through the Sydney Insolvency firm PMF Legal http://www.pmflegal.com. Apparently the Shareholders Association http://www.nzshareholders.co.nz/ is interested in the matter.

There are many avenues for inquiry ... we need a plan ... we need clear leadership.

[Eisenheim]

When are we going to hear something from the FMA?

[Enumerate]

I think that "no news" may be "good news". If they were going to reject investigation, it is likely we would have heard by now.

The Reciever has not reported ... or at least has reported privately to whoever appointed them ... the banks, probably.

The Liquidator seems to be waiting for the Reciever to report ... all part of the reason the banks are probably pleased with the appointment of McGrath Nicol.

[Enumerate]

The first Reciever's report is up on the Companies Office web site.

Looks like the Banking syndicate is underwater to the extent of about $122m!?

No wonder the bros Selig and Sturgess are likely to be delighted with their purchases - they collectively got a quarter of a billion as a discount!

This quantum of shortfall is the most direct evidence that the August 2011 prospectus was a fraud.

[Enumerate]

Apparently, we hear from the FMA this week.

[Eisenheim]

Let's hope they crucify the bastards.

Was supposed to hear something this week, but I guess they are too busy making the crosses!

2 more weeks and not a peep! It's a case of no news could mean good news.

Puff-piece about Sturgess:
http://www.stuff.co.nz/business/industries/8537483/Ex-marine-keeps-firms-afloat

His part in the sale needs to be examined. A conflict of interest to put it mildly.

[Enumerate]

Someone is in a major PR offensive ...

In light of Justice Heath's comments:

http://www.stuff.co.nz/business/industries/8561652/Directors-must-turn-their-brains-on

I wonder if:

Goldman-Sachs had their brains on when they issued the prospectus?

The Bond Holder Trustee had their brains on when they reviewed the issue of the prospectus and managed events before and after?

The Directors had their brains on when they signed off the prospectus, prior and subsequent financial reporting, events and reporting to the Trustee?

I wonder if the Auditor had his brains on when he reviewed the accounts and considered his resposibilities to the Trustee in terms of reporting material events?

The Banks clearly had their brains on when they forced terms on the bondholders that substantially diluted the obligations on the company to the bondholders. However, I wonder if the banks really had their brains on in terms of how they used inside information, potentially, to significantly disadvantage bondholders.

All grist for the FMA mill ... which grinds slowly but grinds exceedingly fine.

Maybe we will see some prominent individuals sporting some new ankle jewellery?

[Germaine]

And did you have your brain on when you got up on your pedestal and encouraged everyone to vote in favour of allowing the banks to "substantially dilute the obligations on the company to the bondholders" Enumerate?

Clearly not.

[Enumerate]

And did you have your brain on when you got up on your pedestal and encouraged everyone to vote in favour of allowing the banks to "substantially dilute the obligations on the company to the bondholders" Enumerate?
Clearly not.

You are very close to understanding the situation, Germaine.

If Goldman Sachs present a proposal for the recovery of the company, the auditors sign off, the Directors approve, the Trustee reviews and agrees ... and it turns out to be a massive distortion. The bankers promise continued support of the company if bondholders make concessions. If bondholders accepted this in good faith ... as Directors asked. If there is zero information flow from the Trustee ... if none of the paid professionals fulfil their obligations to the bondholders, under the trust deed ... If the company, within weeks, declares the forecasts defunct and in less than one year liquidates ... the strategy of working out the restructure benefits is turned on its head.

Does this mean that the Bondholders got it wrong?

Or, does it mean there is an obligation for the various paid professionals to account for what appears to be a vastly misleading exercise?

If you read Justice Heath, Germaine, you may just inch closer to enlightenment on this ...

[Eisenheim]

... or he may not.

Vindication will come if the FMA do something, otherwise we'll just be rorted all over again.

[Enumerate]

I think the FMA might be seriously interested in the Blue Star case. Consider this from a number of perspectives:

The Banking consortium clearly had an "insider" view of the state of Blue Star. They had engaged McGrath Nicol (I believe) to do a very extensive "due diligence" prior to the issue of the 2012 prospectus. This cost the company $6million!

While the Bankers were not directly responsible for the prospectus forecasts (that proved to be be so completely in error) they must have been aware of the fantasy world Goldman Sachs and the Directors were "pitching" in the prospectus.

The Banking consortium clearly benefited from the deception enacted on the Bondholders (in terms of the security of the operating assets). Bondholders being duped and bullied into accepting the deal clearly increased the return to the Bankers, as events turned out.

Clearly, Goldman Sachs, the Directors, the Auditors/Advisors and the Trustee should have "engaged their brains"; the prospectus should never have been issued.

Subsequent events (to the issue of the prospectus) do not cover these "professionals" in glory. However, I wonder if there is some culpability with the Banking consortium. They knew the exact state of Blue Star in August 2012 - they knew that terms of of the prospectus were not just simply unfair to the bondholders and probably that the forecast was delusional. I imagine that the Banking consortium forced the Directors to propose the terms that so disadvantaged Bondholders (Roger France, in the meeting, referred to the fact that an agreement had been reached but was changed at the last minute, to the disadvantage of the bondholders - I wonder what the details of this are?).

I wonder if the Banking consortium could be charged with Racketeering?

The fraudulent "service" is the proposal that the flow through benefits of the Blue Star restructure simply needed time to reveal themselves.

The Bankers were part of this deception - they promised to support the company if and only if the Bondholders made very significant concessions.

The benefit to the Bankers was the vastly improved security they gained over the valuable operating assets.

This casts the Trustee, the Directors, Goldman Sachs, other Auditor/Advisors in the role of "patsies". It is a story straight out of Chicago in the 1920's ...

[Enumerate]

Contrast the NZ Regulator's effectivness with the complete inaction and inactivity of ASIC, across the tasman.

Consider the LM case ... with Ponzi allegations being made against some of the elements of the fund:

http://www.nbr.co.nz/article/peter-drakes-life-luxury-and-elusiveness-dw-138952

ASIC has done ... absolutely nothing. Let us hope they are not involved in assessing the Blue Star case.

[Investor 54]

Enumerate; you keep talking about professional advisors and banks 'not engaging their brains' but you are missing the obvious.

You need(ed) to engage your brain in your own best interest. You only see what you want to see and you ignore everything else.

As for Goldmans Sachs and the banks, I bet that they actually did engage their brains (in their own best interest) and because they did they will face no action from the FMA or the ASIC or the bondholders.

Besides you have stated serveral times (after all the revelations) that you still think the bondholders did the right thing at the time and that the alternative was worse. Why are you complaining now and exactly what are you complaining about?

[Enumerate]

Investor 54, let me spell it out in simple words ...

If the bondholders were presented a compelling case to take a certain action ...

... and, this case proved to be defective, misleading and false ...

... and, there were other conditions that were not exposed ...

... and, there was duty of care for actions that were not taken ...

Then, under the various relevant NZ laws, there is culpability.

If, this culpability can be proven ... then damages can be sought.

This is why the FMA investigation is so important (and may extend to Commerce, Companies Office, SFO ...)

The NZ regulators make the Aussie regulator (ASIC) look like a joke. The NZ courts are also up to the task of gaoling those who do not exercise their responsibilities with probity. There are probably a number of people sitting happily in large mansions that could be due a rude awakening based on their assumption that NZ regulators will be as wet as the Aussie ones.

Following this is the civil action for damages. Which, in New Zealand, could be a class action handled by the FMA!

In Australia, if you are screwed over by deception ... you remain screwed over.

In New Zealand, the nature of the deception is carefully examined; and those who deceive are held to account.

Your point "... you have stated serveral times (after all the revelations) that you still think the bondholders did the right thing ..." is false. If you believe any of the principal parties was making full and complete declaration of unfolding events to the bondholders (or even their representatives, the Trustee); then you have it very wrong. There were many and varied potential breaches of the Trust Deed (which I expect the FMA is investigating) ... the issues go back as far as the original prospectus.

NZ and Australia are very different places to invest. This is one of the reasons NZ "number 1" in the least corruption index; Australia ranks "number 7".

[Germaine]

Investor 54 you are exactly right. Enumerate has unfortunately backed himself into a corner on this thread and is desperate to find a reason (other than is own stupidity) justifying voting in favour of a restructure that was so clearly doomed.

Multiple people on this thread warned exactly what would happen if the voted went through (which Enumerate vigorously disputed at the time), and this has been proven correct. The unfortunate thing is that a sufficient number of investors voted out of desperation rather than with any commercial savvy - much like the Allied/Hanover deal really. While its human nature to a certain extent, Enumerate was one of the few that got up on his soap box claiming to be some sort of expert when in fact he is clearly not.

This is what rankles with me, his inflated ego does not allow him to just sit quietly off to the side and eat humble pie - instead he posts more rubbish on this site blaming everyone but himself. Of course the forecast were optimistic, of course the banks acted in their own best interests, and of course Goldmans were as slippery as fish. This is as predictable as the sun coming up tomorrow morning, and yet still he moans and complains.

Its all getting very tiring.

[Eisenheim]

That may be except for the fact that the FMA are looking into it, and have for some time now.

If things were are as transparent as Germaine suggests it is unlikely we would still be awaiting a decision. The FMA might not act, and Germaine et al will feel vindicated, but what if the other happens?

I am puzzled though as to why those without a declared investment interest in this forum should be so vociferous in their attacks on one who does.

[Germaine]

Basically, because I can't stand know-it-alls...especially those who so patently don't have the skill set they are claiming to have, yet who have dragged other investors down with them.

[Enumerate]

Germaine, please explain how recievership in August 2011 was in the best interests of bondholders?

[Germaine]

For about the 10th (and final) time, I did not not believe that receivership was inevitable in the event of a bondholder 'no'. The banks were heavily incentivised to get a 'yes', so in my view they would have sweetened the deal (how much depended on how close the first vote was) and reverted a few months later. I said this at the time if you go back and look at my posts, so please don't try your disingenuous line of reasoning with me now.

[Investor 54]

Some answers;

If the bondholders were presented a compelling case to take a certain action ... The case presented was far from compelling, the directors acknowledged that at the time.

... and, this case proved to be defective, misleading and false ... They missed their projections, big deal, it happens all the time!

... and, there were other conditions that were not exposed ... What conditions were not exposed?

... and, there was duty of care for actions that were not taken ... Which actions were not taken? Are you suggesting they didnt try to make their projections?

Then, under the various relevant NZ laws, there is culpability. The bondholders took a commercial risk after weighing up all the information. They got to vote. They were wrong, happens all the time.

The managers, directors, shareholders, bankers and bondholders were all originally in this together. The Directors, Bankers and Shareholders believed they could convince the bondholders to weaken their position. They believed this because the bondholders are many, they are naive retail investors (mums and dads) and they are fearful. They were right.

The bondholders hardly needed Enumerate (one of their own) also trying to sway them with his nonsense analysis.

[Enumerate]

Nick Greiner obviously disagrees with you ... he told the meeting that in his view recievership was an inevitable consequence of voting 'No' to the restructure proposal.

Given the actual outcome, I doubt very much if the banks would have been back with a "sweeter" deal (since they were obviously in possession of a very detailed view of the financial state of the organisation - which was not communicated to the bondholders).

I asked one of the directors if the forecast EBITDA recovery depended on any external (market) growth factors. I was told the EBITDA did not depend on any such factors (market recovery, as an example) and that the EBITDA recovery was "booked" based on cost saving initiatives already established.

In my view, the deal proposed offer reasonable prospects for recovery (yet completely unfair). Bondholders forgo interest (past and future) and an equal amount of capital to recover 64% of their original capital. Bankers make a full recovery and continue draw interest.

This issue for us, now, is:

Why was the promise to capture the restructure value by trading not kept? Who pulled the plug (the Banks, the Directors, the shareholders)?
This leads the central issues for the FMA:

If the promise was not kept, what are the reasons why? Was there any degree of deception in the Prospectus disclosure or in subsequent events?

Also, at what point did the original prospectus issue become unviable (in repayment terms)? What decisions lead to this and by whom?

So many questions ...

[Enumerate]

If the bondholders were presented a compelling case to take a certain action ... The case presented was far from compelling, the directors acknowledged that at the time.

The choice offered was:

64.5% capital preserved with interest forgone; or
0% capital recovery in recievership

To most fair and reasonable people this is considered a compelling case to take a certain action.

I continue to wonder why people with no position in this situation are so concerned. Also given the fact that Bondholders have had no material bearing on the situation (due, possibly, to deciet and negligence) since August 2011 - why are there so many apologists for the failure of this company?

A promise was made to Bondholders - this promise was not kept. Maybe the Bankers, Directors, Trustee, Advisors/Auditors are feeling some heat when their role in keeping this promise is now being reviewed.

[Germaine]

It's just too tiring arguing with fools.

[Enumerate]

Given, Germaine, your sole focus seems to be re-litigating events of August 2011; and given the focus of holders is on FMA action in April 2013 ... perhaps this is the reason that it is all too tiring.

[Enumerate]

Goldman Sachs NZ fee income up 12%, helped by Fonterra Fund, MRP, Blue Star:

http://www.nbr.co.nz/article/goldman-sachs-nz-fee-income-rose-2012-helped-fonterra-fund-mrp-blue-star-bd-139449

[denke]

Hi, this is the first time I contribute to the thread, but just wanted to mention an Australian law firm specializing in insolvency, who is seeking to have the Blue Star liquidators changed.

They are PMF Legal in Sydney (www.pmflegal.com) and are interested in any support their application might receive from ex-Blue Star bondholders.

If anybody is interested please get in touch with them (contact Alison Feuerstein) or I can forward any
emails I have received from them. Speaking personally, I am keen to help anybody who wants the Blue Star dealings reviewed in court.

[Germaine]

So how are the FMA getting on with this so-called 'open and shut case'? Anyone heard from them?

[Eisenheim]

Only a fool would say a case this complicated was open and shut.

[Germaine]

My point exactly. Note the use of the quotation marks for sarcastic effect.

[Eisenheim]

Informing the public of FMA’s enforcement activities is important as it increases awareness of what we are doing about people who break the law, and also sends a message to market participants about what is expected of them. FMA is however, constrained by the law and the Solicitor General’s Prosecution Guidelines and Media Protocol as to what we can disclose about matters under investigation or before the Courts
.
We are always mindful to avoid comment that might jeopardise a fair trial. FMA is committed to conducting itself as a model litigant and to behave fairly toward those who are the subject of an investigation. The need for confidentiality and the restrictions on us making any public comment becomes stronger the closer a matter gets to prosecution.



http://www.fma.govt.nz/media/1773657/investigations-and-enforcement-report-final.pdf

The need to not comment "becomes stronger the closer a matter gets to prosecution". No sarcasim intended, or required.

[Enumerate]

Goldman-Sachs to be investigated ...

http://www.nbr.co.nz/article/goldman-sachs-probed-over-sale-kiwi-company-db-p-144438

This story is based on the liquidators 6-month report up on the Companies Office:

http://www.business.govt.nz/companies/app/ui/pages/companies/1893712/documents?backurl=%2Fcompanies%2Fapp%2Fui%2Fpages% 2Fcompanies%2Fsearch%3Fmode%3Dstandard%26type%3Den tities%26q%3Dex-bsgh

[Enumerate]

Latest: FMA finds no grounds for investigation!?! Only hope is the investigation being conducted by the Liquidator.

[Eisenheim]

Shafted again. Not surprising, but disappointing.

[Investor 54]

... and there you go! If the Liquidator was going to find anything the FMA would know that by now.

[Germaine]

You did not get 'shafted again' by anyone other than yourself; firstly for buying these bonds in the first place, and then for voting for such a hopeless restructuring proposition. Why do you people always seek to blame others? Man up and take some responsibility for your own decisions!

[Eisenheim]

The restructured deal was a good one if they had kept to the timeline presented. Instead they had no intention of following through, and that is the problem. The prospectus mislead investors who "manned up" and saved the company only to be abandoned almost immediately. Where were the interest payments? They had no intention to pay any interest! Their only intention was to mitigate the bond debt.

What is legal may not be fair, and what is wrong can't always be proven. But that shouldn't stop us demanding better oversight.

[Investor 54]

I agree with you Eisenheim about the companies intentions however, their intentions have been questionable well before the vote. How is it that the bondholders are kept in the dark when the deal is put together, then a gun pointed at their heads at the bondholders meeting.

Your 'bondholders saved the company' is exactly the line they sold you. The bondholders sleepwalk into the careful trap, have a gun put to their heads and then justify it with the belief that they held the moral high ground. The bondholders want to believe that they saved the company because on the whole they are decent people. The Management and ownership know the bondholders are decent people so they use it to (legally) scam them.

Then you get people like Enumerate adding bogus financial musings, while completely ignoring the obvious problems with the forecast numbers. He fully supported the scam.

I wish we could see what would have happened if the vote was no. I believe the bondholders would have had more options and perhaps even a real say in something. I don't believe the equity company and the management would have folded it then, without trying something different.

[Eisenheim]

Everything you say should give weight to an FMA intervention. If it is a scam then they are accountable.

[Investor 54]

What's legal is not always right and what's right is not always legal. You said it.

[Eisenheim]

It's not what I said, but I'll take it that you agree with me.