Bluestar Group (BLU020)

[trevorbee]

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

[Enumerate]

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

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

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

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

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

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

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

[Enumerate]

Industry comment on the restructure:

http://www.print21online.com/news-ar...e-green-light/

http://www.proprint.com.au/News/2663...rove-deal.aspx

http://www.i-grafix.com/index.php/ne...tar-alive.html

[bondholder007]

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

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

There are two issues/principles here:

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

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

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


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

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

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

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

[bondholder007]

Industry comment on the restructure:

http://www.print21online.com/news-ar...e-green-light/

http://www.proprint.com.au/News/2663...rove-deal.aspx

http://www.i-grafix.com/index.php/ne...tar-alive.html

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

It must have been similar to the "bomb around the neck" saga at mosman! Porr investors I feel sorry for them Report
Reply
0 replies · active 5 hours ago


+4 Vote up Vote down
nqprinter 91p · 5 hours ago


"Improved performance is the key to Bondholders receiving some or all of their investment back."?? Realistic prices will work even better!!

[Enumerate]

There are two issues/principles here:

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

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

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

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

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

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

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

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

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

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

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

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

[trevorbee]

Well, Blue Star has won the day – just.

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

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

[Enumerate]

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

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

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

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

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

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

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

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

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

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

[bondholder007]

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.

[Enumerate]

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?