Business
Polestar cuts debts with further debt-for-equity swap
Polestar has dramatically reduced its remaining debt after securing its second debt-for-equity swap in two years.
Under the terms of the agreement Polestar's owners, which include JPMorgan, Bluebay and Contrarian, will exchange the "majority" of the printer's outstanding debt for equity.
Barry Hibbert, chief executive of Polestar, said: "Polestar has agreed with its lenders and shareholders to dramatically strengthen its balance sheet by swapping the majority of its debt into equity.
"This will allow the business to be in the best possible position to take advantage of the expected industry consolidation, which is likely to speed up as the recession takes its toll."
Polestar, which cut its total debt from £814m to £257m in a £557m debt-for-equity swap in December 2006, declined to comment on the specifics of the latest transaction.
More to follow…
Hibbert: we want to be in the best position possible
Advertisement
Comments
Jon Fennell - 04 December 2008
How do they do it?
The Mighty wind - 04 December 2008
[quote user="Jon Fennell"]
How do they do it?
[/quote]
I would ask why are they doing it? There is obviously a plan about to be rolled out that has convinced the banks etc
Jon Fennell - 04 December 2008
Could be interesting this one with the word consolidation included, can only think of one or two groups who would make a deal attractive enough.
- 04 December 2008
This is one of many repeats since 1998.
More finance people throwing money in without understanding the business world.
When will the finance people understand which sectors and businesses to invest into for a return?
If you require my free research paper presented at the European Business School, Cambridge UK titled;
`INTERNATIONAL BUSINESS MANAGEMENT` UNDERSTANDING GLOBAL BUSINESS FOR ENHANCING ORGANISATIONAL COMPETITIVENESS
email: colin@cavendish-mr.org.uk
Colin Thompson
Cavendish
www.cavendish-mr.org.uk
ian hardman - 04 December 2008
not more than a week ago the union ," unite",posted a artical saying that it would not allow uk based print houses to alter working practices to give then a unfair advantage over over others within the trade , so how has this been allowed !!!!???? £814 million !!!!!!! how many uk jobs must be lost to this company {EDITED] and the unions !!!!!!!!!!
the PM - 04 December 2008
Its late Autumn - just like the leaves fall off the trees Polestar have another re-finance. This must be the 6th one in 7 years.
How do they do it - well they have plenty of practise at it so they know how.
Why do they do - they cant afford to make the payments? If you could generate the cash to meet the interest and other payments then you dont need to re-schedule the debt.
So the banks have taken more equity - well what was their choice - write off the lot? If your choice is nothing or the distant prospect that Polestar will one day pay a dividend then the later is the best option.
What I find amazing is that the management makes these promises regularly to the investors, never comes up with the goods, then gets the same investors to help out , but never pay with their own jobs.
Do they have compromising photos of them or something?
The Mighty wind - 04 December 2008
[quote user="Jon Fennell"]
Could be interesting this one with the word consolidation included, can only think of one or two groups who would make a deal attractive enough.
[/quote]
I think the consolidation mentioned will be internal designed to save costs
Douglas Richardson - 04 December 2008
Many years ago before Polestar was conceived a very able lady named Kathy Woodwood mentioned to me that she had just interviewed someone for a General Manager position at our Milton Keynes factory,who at that time had no knowledge of the printing industry.
She said he was a very special talent who would become a tremendous asset for the Group.
How right you were Kathy.
Have a great Xmas
Doug Richardson
John Graham - 04 December 2008
Interesting analogy on Polestar management! In my book they've done a fantastic job for their customers, suppliers and employees. Though you are right to question their performance with the banks. However, Polestar was conceived in 1997 with BPC and Watmoughs and the banks piled in the debt - this team took over in 2001 so can hardly be blamed for the banks stupidity and have done a fantastic job in getting the debt out and re equipping Polestar. I just hope now that Wyndeham can do the same, and at least bring a little stability back into the market,
The Voice of Reason - 04 December 2008
Mr GrahamYup, they’ve done a superb job of transferring about £800 million pounds of shareholder funds into the pockets of their customers and employees.
John Graham - 04 December 2008
Well as Investcorp and the other banks paid £700m cash in total for BPC and Watmoughs the cash went to the outgoing 10,000 watmoghs shareholders and the Istitutions supporting BPC !
martin whetton - 04 December 2008
'How do they do it?'
Well mighty wind, this should explain how they do it..
I remember once watching a televison interview with a certain Australian businessman by the name of Murdoch, he was asked if the ammount of debt his company had gave him sleepless nights, to quote his answer..
'when you owe the bank manager 1 million pounds, you have sleepless nights, if you owe him 400 million pounds, he has sleepless nights'.
looking on the bright side, at least all the printers who pick up their trade work should be sleeping eisier tonight
Print Spectator - 04 December 2008
I predicted this less than a fortnight ago. Polestar basically doesn't stack up.
It loses money. It refinances again, but it still keeps losing money.
It leased back all its assets for cash because it didn't have any. Now it has no assets at all, its swapping yet more debt for greater bank involvement.
Thank goodness, maybe the banks will insist on doing what polestar should have done years ago, and put up its prices by 20% across the board.
Darrel Crowley - 04 December 2008
I'm glad I'm not a shareholder, I prefer to hold onto my cash. I make 'the PM' right there must be some dodgy photos knocking around! They must have significantly deeper pockets than Mr Madjeski...
John Graham - 04 December 2008
That makes sense - put up their prices by 20 per cent and lose all the work to the competition. I don't get this that a printer can set the prices - at the end of the day its supply and demand. If theres over capacity customers will drive down the prices and printers will gladly accept. Mind you, that changes if you're left with a couple of printers, so maybe the publishers will get the industry they deserve and pay higher prices in the end, as is happening in paper and ink.
Not Colin Thompson - 04 December 2008
It's just possible of course that Polestar is worth more than the banks that own the shares.......
Baryy Hibbert could end up running a bank at this rate!
The Mighty wind - 04 December 2008
quite right john graham supply & perceived demand dictates prices.
Martin whetton I was quoting from jon fennel, murdoch's quote was first used in the seventies by a certain finance minister of Brazil. Interestingly if you read Murdochs biography he had many sleepless nights at the hands of a few banks.
Silver Hammer - 04 December 2008
I agree with John Graham and Doug Richardson - Barry and his team have done a fantastic job in building Polestar into the leading printing company it is today. Not without casualties admittedly. But another question to ask is this. If the numbers didn't stack up, would the major publishers \(IPC, Future, Bauer), retailers \(Tesco) and direct mailers - not to mention the Census 2011 team - still place long term contracts with them? Good luck to them, I say, and to all who sail alongside.
The Voice of Reason - 04 December 2008
Not Colin excellent point Barry will soon be installed as the chief executive of JP Morgan.
John Graham
What tosh you talk Sir.
I seem to remember Investcor handing the whole thing over to the corporate bond holders having written off their £750 million investment. Why did they do that? because they couldn't pay the last lot of loans.
don't worry well all be here next year discussing the 2009 refinancing.
Methinks Sir, you take the Polestar Shilling.
Julie Evens - 04 December 2008
As an industry watcher \(Finance sorry !) I find the Polestar situation quite fascinating. Trying to unbundled the past is difficult and the starting point has to be the huge debt they inherited! If you look at what they are now going forward then you can understand what they are up to.
Virtually no debt, No Pension deficit so now a balance sheet as good as St Ives!
The last stats I saw \(a year ago) UK 90% market share in newspaper supplements, 25% of magazines \(higher 32% if you look at weeklies only) 5 to 8 % direct mail and 15 % of retail That's a pretty strong position to go into a downturn.
I expect the shareholders have gone for a long term Equity play instead of short term debt. It means they are free from crippling debt payments and can build a cash chest for acquisition. I am more interested in what follows rather than how they managed this!!
Print Spectator - 04 December 2008
Some very interesting points here.
But what have the banks now got equity in?
What is Polestar worth? What assets are there?
Julie Evens - 04 December 2008
V of R Why do people not use real names ? \(Strange) your wrong sorry!
JG is spot on, The debt written off over the last few years is the main debt used to buy Polestar back in 97 plus the extortionate rolled up interest levied on the company by investors who did not understand that printing companies have to re-invest free cash on cap-ex and cannot support huge debts. Bondholders did not benefit a £. The beneficiaries have been the 3 or 4 shareholders they have now. This is why they are going for the PE long term game, I bet !!
Julie Evens - 04 December 2008
Print Spectator
When I can get my hands on the new balance sheet I could tell you. Trying to value big printing compaies at the moment is strange. St Ives is a great company with good cash flow and paying a full divi Yet the official market value is only £80m or so for a company with net £35m profit. This is madness when the market cap a few years ago was £400m !!
The Mighty wind - 04 December 2008
[quote user="Print Spectator"]
Some very interesting points here. But what have the banks now got equity in? What is Polestar worth? What assets are there?
[/quote]
I hear that the fish in the fishtank at reception in sheffield are leased
Julie Evens - 04 December 2008
If I was to make a stab I bet this would not be far wrong
2007 Numbers
St Ives £445m TO, £60m EBITDA
Polestar £365m TO, £54M EBITDA
St Ives has a £170m Pension deficit and £30m Debt
Polestar have 0 pension deficit and ? What debt or leasing is left.
So If Polestars debt/leasing is not greater than St Ives pension deficit and they have similar cap-ex then, Polestar value is slightly lower than St Ives. But how you get to a fair value worth for both today in this market is close to impossible.
The Voice of Reason - 04 December 2008
Julie
Did you miss this in the FT last year ?
Polestar's backers face £700m loss after financial restructuring
By Peter Smith
Published: December 13 2006 02:00 | Last updated: December 13 2006 02:00
function floatContent(){var paraNum = "3"
paraNum = paraNum - 1;var tb = document.getElementById('floating-con');var nl = document.getElementById('floating-target');if(tb.getElementsByTagName("div").length> 0){if (nl.getElementsByTagName("p").length>= paraNum){nl.insertBefore(tb,nl.getElementsByTagName("p")[paraNum]);}else {if (nl.getElementsByTagName("p").length == 3){nl.insertBefore(tb,nl.getElementsByTagName("p")[2]);}else {nl.insertBefore(tb,nl.getElementsByTagName("p")[0]);}}}}
Polestar, the over-indebted printing group backed by Investcorp, has completed a financial restructuring that will cut total debt by almost three-quarters but see its backers lose £700m.
Investcorp's investment of about £250m has been wiped out. Instead, BlueBay Asset Management, a specialist debt investor, will be a leading minority shareholder, alongside lenders such as Deutsche Bank, JPMorgan and Royal Bank of Scotland.
It is the latest sign that private equity-backed businesses are starting to struggle with their debt burdens.
Ontex, a Belgian-based hygienic disposable products group backed by Candover, will meet creditors tomorrow to renegotiate terms on its €700m (£472m) of loans.
Ontex may look to reschedule debt repayments and is considering options for owners of €200m of mezzanine debt. The restructuring talks are at a preliminary stage. Michael Teacher, Ontex's new chief executive, will present a new three-year business plan as part of efforts to continue the group's turnround.
The cost of Candover's equity investment in Ontex of €230m was written down by 75 per cent to €58m in June 2004.
TMD Friction, a German-based brake manufacturer, has just completed a debt restructuring that has wiped out most of the equity previously owned by Montagu, the buy-out group.
Meanwhile, in a separate case that is attracting scrutiny in the restructuring world - although it is not private equity owned - Schefenacker, a German maker of rear-view mirrors, is locked in talks with its creditors to avert a default.
Polestar may provide lessons for other private equity-backed businesses saddled with too much debt and heading for reconstruction.
The group's steering committee of debt investors was unusual because it brought together traditional senior debt investors, including large investment banks, with BlueBay, a specialist secondary debt trader.
"There has been a lot of talk about how these restructurings can be done," says Chris Howard, a lawyer at Freshfields, an adviser to the steering committee. "As we move into the new wave of restructurings, secondary lenders are likely to take a more active role."
Such lenders, which also include Goldman Sachs and Apollo Management, adopt a "loan to own" strategy, with a view to replacing existing equity holders.
BlueBay played a lead role in the restructuring after taking a seat at the negotiating table by buying into Polestar's distressed debt.
"Some of the [old] lenders were able to get out and it makes for a more efficient market. Hedge funds can provide liquidity to the old-guard of investors," Mr Howard says.
Investors holding Polestar's senior debt have written off two-thirds of their investment, amounting to £250m. Junior debt holders, owed some £350m, including £167m held by Investcorp, have been wiped out.
Additional reporting by Gillian Tett
Copyright The Financial Times Limited 2008
Julie Evens - 04 December 2008
FT Oh it must be right then, 700m was NOT cash it was 55% rolled up interest on the balance sheet at 25% pa I remember it well and Bondholders did not get £ your point is ??
The Voice of Reason - 04 December 2008
it was still a value that was forgiven
Julie Evens - 04 December 2008
Fair Point !
The Voice of Reason - 04 December 2008
and I am happy to take your point in respect of the bonds.
Now, do you know anyone who can pull off a deal like that for me?
buyer man - 04 December 2008
Fantastic blog this but you lot do go on a bit !!
Having seen all the doom and gloom for the last few weeks on print week with companies going under and people like me kicked out, I think it is fantastic what they have pulled off here!! I work in a rival printers so I am no fan of Hibbert or Polestar! but respect is due, having been in the industry for 5 years I thought he created the debt in the first place so this is news to me !
I wish my CEO would get off his butt and do something, all I can see here is doom and gloom merchants predicting our downfall and out of a job. I wish I was over the fence in Polestar at least they are fighting. What's that song "When the going gets tough "
Jon Fennell - 04 December 2008
They are like a one arm bandit, keep putting money in and one day it may pay out.
How much equity can Polestar have left and how much more did they add to the debt pile in 2 years since the last deal.
I guess the principle of a price increase is feasible, but only if the competition followed, it would work if there were a few controlling groups, but there would have to be foothold in Europe and a reduction in capacity which the recession will likely bring.
Much the same as the mill groups, control supply and capacity and force price.
kathy woodward kathy woodward - 04 December 2008
Well said......and all the people e-mailing me saying so it was your fault.... give me a break!
Actually its nice to hear from you... i thought most of you were dead.
What you do have to give to guys like Barry, the team at Williams Lea and St Ives and many more they have all had the guts and the energy to stick with it for over a decade!...lesser men and women would have cashed in their chips and retired on their payoffs..
Kathy
the PM - 04 December 2008
Kathy,
lesser people like Tony Rudston who had a separate pension arrangement costing millions, and Jim Brown another few million to walk away with. And Chris Pavlosky who also needed a large enducement to leave. What giants.
Then of course there is Mr Hibbert who each year has taken between half a million and a million plus for his sterling efforts, but never returned a penny profit for his paymasters.
More moral people would hang their head in shame and walk away. The only thing they have done with guts and energy is to blow other peoples money. They have stuck with it as they seem to be allowed to get away with
buyer man - 04 December 2008
Well we would happy give him double that if he could join us! we might have a fighting chance to stay alive and me in a job! at the moment my company is going the same way as Quebecore, Jarrolds cradley and all the others. Our problem is a weak CEO !! If thats the going rate so what. My CEO is paid 350k and is bl***y useless. How many millions a year did the bank CEO'S get ??
Ian T. Cooper - 05 December 2008
Julie Evans, if you are going to quote figures at least try to get them right.
St Ives pension deficet is £48m not £140m.
Polestar have to make payments into their "sold" pension fund of £44 over 12 years which they have managed to discount to £19m on their Balance sheet.
Polestar EBITDA was £54m after credit of £84m from their "sold" pension fund.
St Ives made O/P of £35m against Polestar loss of £7.5 again after credit of £84m.
I could go on but St Ives net worth is £155m against debt of £30m and as yet they have not wiped out existing shareholders.
Admittedly I do not have Polestars accounts of 2008 but I doubt if they will be any less funny!!
Julie Evens - 05 December 2008
Buyer Man
Good point and the answer is millions more than him
Anyway 4000 employees pan European £350m TO sounds about right and lets face it instead of paying £40m a year in dividends to shareholders Polestar has returned £30m a year in interest payments \(check the accounts!) so lets not feel too sorry for the banks.
The test now is to see how they return a true net profit free of crippling debt payments?? Probably £30m or so>
Julie Evens - 05 December 2008
IAN
I like it !
£48M 2006/7 do the calculation on today's actuary valuations of all pension fund expectations for 08/09. I am guessing yes but probably £100m plus, we will find out later this year but the share price fall has factored this in.
Don't have time to debate relative valuations but if you are the Ian Cooper of fame you must have eaten poor Pindars alive when you sold...It all depends if you are a buyer or seller!! If you would like a non-exec role on our M & A team you got it!!
buyer man - 05 December 2008
Ian Cooper
Are you the one who sold CC down the river for Pindar to shut ? My mate worked for you and is now on the dole !
Print Guru - 05 December 2008
Good on Polestar I say. They've come up trumps yet again and doesn't it make the little people sick. They must be doing something right. What I'd do for their customer base!
billy bunting - 05 December 2008
This is great news in my book If I remember this consolidation stuff has already started. When Q and Jerrold's went to the wall Polestar and St Ives picked up the contracts and polestar took all the good kit out of Corby.
Me thinks lot of worried bitter and jealous folk on here ex \(probably fired) employees and worried printers on last legs..... Cos St Ives and Polestar r gona get ya ! Its called survival of the fittest, who cares how they do it as long as the publishers get some back after all the years of cutting prices,!! Go for it big guys. I love it fantastic...
buyer man - 05 December 2008
A little bird told me Wyndham are going the same way and will sort out Heron. If they do they will give St Ives and Polestar a run for the money and don't forget Southern print also a very good printer. But its about time we saw some fight back.
buyer man - 05 December 2008
So let me get this right the banks got stuffed mmmmm and I am supposed to say, like oh no you bad people how could you, yer right, do me a favour !!!!
the PM - 05 December 2008
Billy Bunting - a Polestar troll?
I have no issue with survival of the fittest but how can you say Polestar is fit and should survive? No assets. Lost over £1bn since formation. Shafted its pensioners. If that is your definition of a fit company then please let us know what constitutes a weak one in your book.
buyer man - 05 December 2008
They look fit to me, new presses brand new Sheffield site and full of work 7 days running and paying a lot of people overtime ! Who cares what the finances are. Now lets see Banking lets look up to them for how to do things. You so called managers have no more idea than I have and I'm just a printer !
billy bunting - 05 December 2008
No
A St Ives Troll !! you ?
The weak ones are the ones that don't have the work Q Jarrolds BGP CC, with crap kit etc and go bust putting people out of work. As I said us and Polestar will get through no problem and probably Heron too. What do you mean no assets !! Better kit than us look at Petty and Sheffield !
The Voice of Reason - 05 December 2008
PM Bang on mate
Buyer Man don't be rude about Ian, he kept a lot of people in good jobs for a long time. Its also clear that you don't allow issues like finding the money, on credit card rates, to build the plant in the first place to cloud you judgment. I love it.
Watch what they are going to try do at Maldon. The trick will be to keep the staff onside and quality up, which is a big issue at the moment, whilst simultaneously downsizing.
Julie
If you could merge all my debt and get someone to acquire it I would be most grateful.
Bunting
Most installed web kit is virtually worthless once you take off the moving expenses. Eight units especially. Whats a second hand gravure press worth? Why did KBA pack it in?
buyer man - 05 December 2008
The whole world is built on debt Including printing !!
billy bunting - 05 December 2008
Now that is true I agree,
so if that is the case and all printers big kit is worthless due to costs. What happens next, it still has to get printed ? Who can survive that? and what will publishers and retailers do if we all go bust ?
Julie Evens - 05 December 2008
V of R
Ah yes for me too !! HM Gov looks like a good bet, maybe we can pool yours and mine together and offer a package deal. :)
buyer man - 05 December 2008
Sorry did not want to be rude to Mr Cooper and the staff did like him, but my mate says thats what happened !
The Voice of Reason - 05 December 2008
Well "your mate" made you look like a bit of a nit wit I am afraid.
Jon Fennell - 05 December 2008
Ah yes for me too !! HM Gov looks like a good bet, maybe we can pool yours and mine together and offer a package deal. :)
I'll chip in a quid and some Woolies shares, if I can convince the bank to swop some credit card debt for cash i'll add a bit more.
The way this business is going we'd be better off renting deckchairs on Weston Super Mare sea front, as it look like european hols are off, cheaper to stay at home.
billy bunting - 05 December 2008
On CC lets wait and see...This saga is not over yet and one day the whole truth will come out. One or two people have worked out the scam here. You wait and see :)
buyer man - 05 December 2008
Well Voice of Plonker unless you are on the inside and know another story maybe your the nit wit, lets see who ends up with egg on our face and I will remind you of this blog.....Cant wait, oh and I'm not sorry now
The Voice of Reason - 05 December 2008
What do you sound like?
I suggest you adjust your cutoff control
Roger Clark - 06 December 2008
Well done doug the words regarding Barry is verry true I worked at bletchly under both him and your good self I will say that the costing of this group needs a lot to be desired as cost cutting to much aint a good thing.As for your good self cast your mind back to the launch of Pingo and the bindery good luck to all of the printing industry I had 50 years in it 44 of them on nights .
nobbey
buyer man - 09 December 2008
Just before I left Corby Polestar was hanging around for a few days before we went bust.
They picked up the New 72 page press, all the good finishing kit plus front end stuff \(cash) for a song from the administrators. plus most of the contracts, I bet they are just waiting for the next round of closures to dive in. One way of increasing market share without paying for the companies !!
Richard Head - 11 December 2008
I am hearing that the Mailshop \(ex Mailwrights) have just wound up their business and are trading under a new name.
Can anyone confirm if this is the case or not?
To post comments please log in here