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Blue Star debt threat puts company at risk

Thursday, 26 February 2009
By Print 21 Online Article

Cost-cutting measures may not be enough to cushion the impact of current trading conditions.

The printing company’s parent, Sirius NZ Finance, is in danger of breeching interest payments on $105 million bonds attracting 9.1 per cent interest. If this happens Blue Star is faced with guaranteeing a higher rate of interest, 13.1 per cent, to 3700 New Zealand investors.

Last year the company reported a net profit after tax of $11.3 million on sales of $490 million. Blue Star is the larger of the two trans-Tasman PE-backed printing giants – GEON is the other. Under its new CEO, Chris Mitchell, it recently closed down McMillan Printing costing over 40 jobs as part of on ongoing rationalisation. It operates in Sydney, Canberra and Melbourne, Australia; Auckland, Wellington and Christchurch, New Zealand, and last year employed 2,000 staff.

According to the company, a program of stringent cost cutting is “well advanced” to deal with the threat posed by the economic down turn, but it says that its future is uncertain. In a statement reported on the National Business Review in New Zealand, Blue Star warns: It is not certain, however, that these initiatives will be sufficient to fully offset, in the short term, the current trading conditions.

Blue Star is owned by private equity firm, Champ, which bought it three years ago for NZ$385 million. Champ has recently allowed another one of its properties, discount chain, ’Go-Lo’ to fail.

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