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A Blue Star no vote likely to result in receivership: CEO

Blue Star Group's bankers are certain to put the company into receivership if bondholders reject the revised restructuring proposal next week, says chief executive Chris Mitchell.

Thursday, August 4th 2011, 12:24AM 1 Comment

by Jenny Ruth

"I think there's a perception that we've been using this notion of receivership as a threat," Mitchell told DepositRates. “We believe strongly that the banks will appoint receivers if there's a 'no' vote," he says.

The banks appointed insolvency specialist firm KordaMentha to advise them some months ago, Mitchell says.

Mitchell, who is a Blue Star shareholder and who joined the company in July 2008, says the company was badly hurt by the global financial crisis and the downturn in the printing industry.

However, under his leadership, the company has invested in the parts of the business likely to be successful and has won a number of contracts including printing ACP Media magazines.

On the general print side of the business, about $30 million of annual costs have been removed, including about 20% of the workforce having been laid off and factories in Sydney, Canberra and Auckland closed.

The company has adopted new technology and is now focusing on providing customers with shorter print runs and faster turn-arounds.

Mitchell says the company's forecasts, which include earnings before interest, tax, depreciation and amortisation (EBITDA) rising 26.5% from $42.4 million in the year ended June this year to $53.6 million next year are “solid. The results are just starting to hit the bottom line.”

The last annual profit Blue Star reported was $7.1 million for the year ended June 2007. Between then and June 30 this year (the latest year's result is shown as an estimate in the prospectus), the company has lost a total of $199.1 million.

Independent expert accounting firm KPMG concluded it could provide no assurance the forecasts will be achieved, including EBITDA rising to $63 million in the year ending June 2015.

Mitchell says KPMG was “very conservative. We're going to get most of the way to that number this year,” he says.

Director Tom Sturgess and Australian private equity firm CHAMP own 93.7% of Blue Star.

Bondholders are to vote on the restructuring proposal on August 10.

Financial adviser Michael Warrington at Chris Lee & Partners, who owns $150,000 face value of Blue Star bonds (he says his average entry price was lower) and has a number of clients who are bondholders, welcomed the concessions CHAMP has offered.

"I'm pleased bondholders are being heard.” However, “at face value, for me personally, I don't think it's (the proposal) changed enough.”

« Blue Star bosses bow to bond holder angerHeartland considers corporate bond issue »

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Comments from our readers

On 4 August 2011 at 8:07 am Ron Palmer said:
It is pleasing that the Directors and management of BSG have listened to Bond holders but they have not listened enough. It's not good enough to delegate bondholders behind shareholders. The Directors and Management must think Bondholders still believe in Santa Claus and just love the Aussie cons
Commenting is closed



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