Bluestar Group (BLU020)

[Germaine]

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]

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.

[Newman]

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]

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]

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]

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]

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]

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]

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]

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.