Bluestar Group (BLU020)

[Newman]

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]

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.

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]

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]

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]

[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]

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]

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]

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]

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]

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-st...table-mn-97765

It seems that bond holders include all sorts of people.