Blue Star yields to bondholders by tweaking restructure deal

The new deal essentially allows bondholders to lend their own money to Blue Star in return for equal conditions to private equity backer Champ Funds.

In the original deal, Champ Funds was to loan NZ$15m, in conjunction with a NZ$10m working capital injection by banks; however, the private equity fund would be placed ahead of bondholders in the queue.

Under the new terms, any investment from bondholders would reduce the amount contributed by Champ.

The distaste some bondholders’ felt for the original amendment offer has been given prominent exposure in the New Zealand press; the deal has also been treated with scorn by investors in online forums.

The fact bondholders would be subordinate to Champ Funds seemed to be a major bugbear, along with the fact the NZ$105m worth of bonds would be carry interest rate of 9.1%, payable from July 2013 – less than half the 18.5% accrued on Champ’s loan.

In the letter to investors on 2 August, chairman Nick Greiner said the company did not originally anticipate “that bondholders would want to subscribe for shareholder senior loan notes on the same terms and conditions as Champ Funds”.

In another change, Champ’s previous NZ$10m loan will be converted into equity, as long as bondholders give the restructure their seal.

The new deal represents an 11th-hour bid to allay any concerns and win the requisite 75% bondholder approval needed to get the restructure through at a meeting on 10 August.

Greiner said: “Blue Star hopes these developments address issues raised by the bondholders regarding the perception that the terms of the amendment offer are unfair to bondholders.”

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