Whitcoulls owner extends debt, working capital facilities

Private-equity-owned book retailer REDgroup, which in turn owns the Whitcoulls and Borders chains, has rejigged its senior debt facilities as the restructuring of its operations continues.

In an announcement to the NZDX debt market, where its bonds are trading at a steep discount to face value, the company said it had extended its current senior debt and working capital facilities with Bank of Scotland International and Germany's WestLB AG for another year until December 31, 2010.

The company's NZDX-listed bonds - which mature on December 15, 2010 - yesterday changed hands at a yield of 27.9 per cent. A spokeswoman for the company, which is owned by private equity firm Pacific Equity Partners (PEP), yesterday said turnover in the bonds, largely held by retail investors, was low and the small amount changing hands was affecting the price "fairly significantly".

Beyond that the company had no understanding of why the price was at current levels.

One local fixed interest specialist at a large fund manager told the Business Herald listed debt securities issued by private-equity-owned businesses were often "challenging" for investors because of a lack of information.

"Even though they are subject to continuous disclosure, really you find the level of information that some of those private equity transactions want to provide is a bare minimum.

"The problem for investors is really you're trading in a void between the six-monthly announcements when they have to release their results.

"It's just impossible to trade things with any great degree of confidence, every time there's a seller you tend to think someone must know more than what you do. That is the one big problem with private equity transactions and probably why as an institutional investor we prefer not to do those kind of deals."

Pacific Equity Partners purchased Whitcoulls from British bookseller WH Smith in 2004. It paid $135 million to buy Whitcoulls and Australian chain Angus & Robertson - forming the A&R Whitcoulls group.

It subsequently added Australian newsagency chain Supanews for an undisclosed sum and then last year acquired 30 Borders stores in New Zealand, Australia and Singapore in a deal worth as much as A$110 million ($137 million).

Formerly known as AR Whitcoulls, the company rebranded itself as REDgroup last year.

Last week in the wake of a number of closures of prominent Dymocks outlets, the Business Herald reported book industry sources saying job losses were inevitable at REDgroup as the company announced it planned to merge the support structure for its Australian and New Zealand businesses.