Blue Star sale set to hit bondholders

Last updated 16:40 25/07/2012

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Bonds in troubled Blue Star Group worth $67.5 million appear likely to be completely wiped out by the impending sale of the business.

In a statement to the NZX this afternoon, the company's board said: "In light of the sale process, the Board is unsure whether any value will attach to the Group's NZDX listed bonds."

The statement confirmed Goldman Sachs in New Zealand had been appointed to manage the sales process and director Roger France had resigned, effective from August 1.

Blue Star said it was in the process of preparing its financial statements to June 30 and told investors to expect bad news.

"The Group financial performance remains well below the forecast profitability signalled in the Capital Bond Amendment document," the statement said.

According to interim accounts for the six months to December, Blue Star owes - in addition to bondholders - $245m to its secured bank creditors and to its major shareholder, Champ Private Equity.

The Australian Financial Review said a sale of the Group was likely to fetch no more than A$150m ($196m) which led to questions over what would be left for bondholders who rank behind the secured creditors.

The company sold its successful labels business, Rapid Labels, last month and won the support of its bondholders last year to roll over debt on better terms after freezing payments.

Bondholders, under threat of a complete loss, voted in favour of a complex deal to refinance Blue Star's senior debts and extend maturities to 2015.

The group made an operating loss of $24.8m in the year to June 2011 and an $84.m net loss on the back of a $60m write-down of goodwill assets.

In the half year to December, Blue Star reported an operating loss of $15.6m on another $72.6m write-down but showed an improved bottom line of $12.5m after bondholders agreed to forgive interest.

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