Drastic action is expected at Polestar before the end of the year, though whether this will be enough to save the group is unclear. Deloitte has been given the task of finding a way forwards for the business, and is pursuing four options for its future according press reports at the weekend.
At worst this will mean insolvency for the business and the sale of assets to different parties. At best a debt for equity swap would see creditors receive shares instead of cash, though this will depend on their willingness to believe that better times are around the corner. Other options include a pre-pack sale or a trade sale.
The gravity of the situation has been underlined by reports in the Guardian and Sunday Times which are more likely to worry creditors than to reassure them. According to the Sunday Times, which claims to have seen a prelimary report from Deloitte, the company could run out of cash shortly after Christmas. It needs an “additional immediate and medium term funding requirement”, says the report.
Polestar’s predicament has been worsened by the closure of so-called lads mags Zoo and FHM, the decision of publishers like Bauer and Emap to concentrate on digital publications, which raise questions about the viability of long run print. The strength of sterling against the euro has made printing on the continent more attractive while bedding in the 96pp Goss Sunday 5000 presses has added to the companies difficulties.
Long time finance director Peter Johnston and chief operating officer Peter Andreou have also departed in recent weeks. Despite this chief executive Barry Hibbert says it is “very unlikely” that the business will call in administrators.
However, this requires the goodwill of suppliers who have been asked to delay demands for payment until the refinancing package can be sorted, something that is expected to take four or five weeks. A short term refinance package was organised seven months ago when £25 million was loaned by Barclays and £91 million from Swedish fund Proventus.
Should administration follow, these investors stand to loose the majority if not all their stake. A debt for equity swap is the preferred outcome given that there is only a remote chance that any single trade buy might emerge. Some of the assets will attract buyers in a fire sale, saving some of the 1,700 employed.
In the meantime both suppliers and customers, including Time Inc which signed an exclusive deal with Polestar only two years ago, will be examining their options.
Polestar has cut back to five sites including Chantry (above), but continues to suffer from excess capacity in the market. The installation of 96pp web presses in Sheffield has not managed to stave off the impact of what is a fast shrinking market. Ever since the John Holloran led management buyout from the Robert maxwell owned British Print Company, there has not been enough cash to reorganise the company as it should have been. The result is a business that has had to juggle cash resources rather than drive through the reorganisation needed.
