Blue Star backers front with extra cash

NZ$10m investment from major shareholders and suspension of interest payments on capital bonds keeps trans-Tasman printer on track.

An agreement to reset Blue Star Print Group’s banking covenants, amortization and related pricing structure has significantly strengthened its financial position. The private equity-backed company insists it has not breached any of its financial covenants and that the new arrangements will ensure this remains the case.

In a statement BPSG says the agreement with debt and equity providers will give it the flexibility to continue the multi-year transformation strategy, which has already produced a significant cost reduction and a restructuring of core operations.

As part of the banking arrangements the company is required to suspend cash interest payments under the subordinated capital bonds until interest can be paid in compliance with the Group’s banking covenants. Interest due to bond holders will increase to 13.1 per cent pa from the current coupon of 9.1 per cent pa and will be compounded quarterly on the scheduled interest dates.

“This measure is somewhat similar to decisions by many publicly listed companies, in the current difficult economic environment, to forego or reduce dividend payments,” said Chris Mitchell, group managing director (pictured).
The Company will resume payments as soon as permissible under the senior funding arrangements, including payment of the compounded interest.

“Despite the extremely difficult trading environment experienced since the start of the financial crisis, BSPG continues to generate good cash profits and strong cashflows. As a result of the extra capital, new banking arrangements and the restructuring measures already taken, we are in a strong position to continue with our transformation plan,” said Mitchell.

As part of the transformation and in line with other printing denominated companies such as the Snap franchise, the company will drop Print from its name. In order to better reflect the broadening of the Group’s offerings in the visual communication market, BSPG will be re-named Blue Star Group from September 2009.