Blue Star fate sits on restructure vote

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Troubled Australasian printer Blue Star, which is majority-owned by Australian private equity company Champ, risks running into receivership if bond holders do not approve a restructuring plan set down for Wednesday.

Blue Star said this week that it had reached agreement with Champ to extend an offer to bondholders to take part in an A$11.7 million ($14.6 million) second secured loan that the company is issuing.

Blue Star said: "The board also notes that if the amendment offer is not accepted by bondholders, they expect senior lenders to quickly move to protect their interests and this is likely to see receivers appointed. In this scenario, it is probable that there would be no value recovery for bondholders."

Blue Star managing director Chris Mitchell denied the company was using scare tactics to influence the outcome of the meeting.

"I think there is a perception that we are trying to be 'doomsday' about all this, but the clear view that the board has got through the discussions with the banks is that if there is a 'no' vote, then the banks will move very quickly to protect their interests and they are at the top of the credit stack, and that is likely to mean receivership," he told the Weekend Herald.

Blue Star said Champ was previously committed to funding the entire A$11.7 million. Under the new proposal, Champ would effectively underwrite the full amount. Should any bondholders take up the offer, the Champ contribution would reduce. The A$11.7 million second secured loan, together with a $10 million funding line from Blue Star's senior lenders, form a key part of a restructuring package.

The package relies on bondholders agreeing to amend the terms of their bonds through a reduction in the face value to 64.7c in the dollar, participating in a pseudo-equity bond for the balance, and writing off accrued interest.

Mitchell said the printing industry was already under pressure when the global financial crisis hit, "punching a hole" out of demand in a short period of time.

Early this year, Blue Star won the ACP publishing contract for all their titles in New Zealand. It built a new factory, sourced some modern equipment from Europe, and started printing most of the titles from last month.

Mitchell said Blue Star had taken about $30 million of costs out of the business over the past year or two, and forecast an improvement in profitability for this financial year.