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Polestar restructuring could result in £650m of losses

Investcorp will lose 100 percent of its stake in printing business Polestar in a restructuring, after struggling in the sector.

Polestar, an Investcorp-backed European printing company, is about to undergo a financial restructuring, in which the company’s £650 million bank debt will be cut to £250 million, with lenders writing off £400 million in favour of an equity stake in the new structure.  It is thought that Invescorp will lose £250 million. The new figure is more than the previous expected loss of £300 million, reported in October.

Polestar:services  newspaper supplements and magazines

The transaction, which will reduce Polestar’s total outstanding debt from £814 million to £272 million, is expected to complete next week, the company said in a statement. 

A debt-for-equity swap led by Bluebay, a fund manager, Deutsche Bank, JP Morgan and Royal Bank of Scotland, means Investcorp will lose its 100 percent stake to creditors.  The debt equity conversion will be structured through a new company being formed to buy the group.  

Junior debt holders, who are owed £350 million, have been wiped out, according to the Financial Times.

A spokesman told the Financial Times: “If you leverage high, you can make a fortune.  But if you are in a sector that struggles you don’t have any headroom.”

A new working capital facility of £15 million and additional new facilities will be provided by the existing senior secured lenders.

Houlihan Lokey Howard & Zukin, an investment bank, gave financial advice, while legal advice came from Freshfields, the Financial Times reported.

Polestar prints newspaper supplements, magazines, travel brochures and mail order catalogues, as well as providing stationery to financial institutions.  Its customers include The Radio Times, a television guide; Hello!,a gossip magazine, and Style, a Sunday Times supplement.

Investcorp formed Polestar in 1998 following an £810 million leveraged buyout.  Investcorp backed the public-to-private of printing company Watmough, which it subsequently merged with British Printing Company, the group formerly owned by Robert Maxwell.

Polestar’s problems go back to 2001 when it restructured its debt.  As recently as 2004 Investcorp invested an additional £74 million as part of a debt restructuring and ongoing investment programme.