Company overview  

• Polestar is a market leading European independent commercial printing company with operations in the UK, Spain and Hungary. Key customers include major magazine and newspaper publishers, retailers and direct mail organisations

Events leading to the transaction 
 
• Polestar was formed in 1998 through the merger of Watmoughs and the British Printing Company which was sponsored by Bahrain-based investment firm Investcorp. The business has since faced poor market conditions including over capacity in the market. In 2001 a restructuring process was undertaken as the business was unable to meet its debt service requirements

• In 2006 Investcorp sought to sell the Group. The process did not attract sufficient interest and the business was not sold. By mid 2006 the Group had total secured debt of c. £1.1bn with impending senior amortisation payments and a significant FRS17 pension deficit of c. £142m

• As a consequence of the high debt burden and negative industry fundamentals, the Company was forced to request a waiver from the existing Term A, Term B and RCF lenders (the “Senior Lenders”) in respect of amortisation and interest due in September 2006. At that time a waiver to the end of November was granted

Solution
 
• Close Brothers was appointed to advise the Company on its restructuring in September 2006. The business was restructured in a very compressed timetable (under 4 months)

• The business was provided with a new sustainable capital structure reducing total outstanding debt to £257 million (which included existing finance leases of under £105 million and new facilities of £145m). The new facilities (principally rolled Senior Lender debt) comprise three tranches of debt: a new Term A facility of £40m, a new Term B facility of £40m and a new £65m Mezzanine facility (including £50m of new money). This was achieved via a pre-packaged receivership of Polestar to a Senior Lender owned Special Purpose Vehicle (“SPV”). Senior Lenders converted the majority of their existing debt into 100% of the new equity in the SPV

• The Pension creditor was compromised in a deal agreed between the Senior Lenders, Pension Trustees and the Company. The structure sought to protect member benefits and also to facilitate a consensual solution. Polestar ceased to be the sponsor of the pension scheme but has agreed to cash contributions totalling £45 million to the scheme over a twelve year period. The structure was the first of its kind and the Pension Regulator has issued a clearance statement for the proposal

Commenting on the transaction, Polestar’s CEO Barry Hibbert said:

“The completion of the restructuring has greatly strengthened Polestar. The recapitalisation provides the business with a stable platform which will allow it to focus on the opportunities in the market place.

"This has been an extremely complex process; the fact that Polestar has been the net gainer of market share during this time, and didn’t lose a single customer, is testament to the fantastic support given to the Group by its customers and suppliers.”