Blue Star looks to sell up, bonds may be worthless

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Blue Star Group is looking at selling all or parts of its business but has warned its listed bonds may already be worthless.

Monday, July 2nd 2012, 11:11AM

by Jenny Ruth

The bonds last traded on Friday at $2 per $100 face value.

Blue Star says it has already received some unsolicited offers, although clearly at bargain-basement prices.

The sales process has the support its major shareholder, CHAMP Funds, and it has "entered into an agreement with its senior lenders to maintain their support during this process," Blue Star says.

"The board has received an unsolicited conditional proposal to acquire all of the business. For confidentiality reasons, the terms of this offer cannot be disclosed, but it does reflect the well-publicised difficult trading and economic conditions affecting the print industry," the company says.

"The board has also received unsolicited approaches to acquire certain divisions or business units within the group," it says. It expects to enter into a conditional agreement to sell its Rapid Labels division "in the coming days."

Late Monday, Blue Star said it had a conditional agreement to sell the Rapid Labels business to Tiri Group for an undisclosed sum. If the conditions are met, it expects the sale to occur in early July and that the proceeds with be used to reduce bank debt.

The company says there is no guarantee any sale will eventuate or, if one does, what value will accrue to its various stakeholders.

Blue Star reported a worse-than-forecast $15.6 million loss for the six months ended December and warned it was in danger of breaching its banking covenants if its performance didn't improve.

Today, it reiterated previous statements that "trading conditions remain extremely difficult with continued covenant compliance reliant on market conditions and the successful implementation of operational initiatives."

In August last year, Blue Star's bondholders approved a restructuring which included cutting the $137.3 million they were owed to a then net present value of $44 million.

In light of the sales process, "the board is unsure what value, if any, will attach to the group's NZDX-listed bonds," the company now says.

"However, the board wishes to reassure staff, customers and suppliers that the directors intend to continue the business as normal, subject to the continued support of the senior lenders."

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