Bluestar Group (BLU020)

[Newman]

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]

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]

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]

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]

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]

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?

[Interested]

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]

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]

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]

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.