Polestar Group, the UK print conglomerate and one of the largest printing groups in Europe, have just been recapitalized. The Group, with sales of around $800 million, will in this recapitalization reduce its outstanding debt from UK£814 million ($1.6 billion) to UK£257 million ($503 million). A proportion of this was generated due to funding of the debt created from the founding of Polestar in 1998 when the Group was created by the merger of two large printing groups, BPC and Watmoughs. This merger was financed through investment company Investcorp. In this recapitalization the investment of Investcorp has been written off with Investcorp losing UK£700 million ($1.37 billion). The new Polestar company will now be owned by the existing senior secured lenders, a group of financial institutions.

 This transaction, agreed by the firm’s senior secured lenders, would form part of a debt-for-equity swap where these senior lenders will instead own 100% of Polestar Group. It is understood that in addition to losing its total investment, Investcorp will also forfeit the $490 million believed to be owed to it by Polestar. In addition to the debt defined above Polestar has a pension deficit of UK£141.7 million ($277 million). Under the new agreement Polestar will have no ownership with its pension scheme that will be administered by a new company, but Polestar will make a contribution into this fund of UK£45 million ($88 million) over the next 12 years. A report in the Financial Times newspaper on December 8 called the recapitalization the worst failure of a European leveraged buyout in recent years.

While this deal may be good for Polestar Group and its customers one has to comment that it appears to be an appalling deal for the rest of the printing industry. How can it be good for the industry for a company to have failed in such a substantial way as Polestar has done, to be able to come back into the market without its debt burden and probably continue in the way that drove into almost into bankruptcy? Barry Hibbert, Polestar’s CEO, commented on the deal by saying, “The completion of the restructuring has greatly strengthened Polestar. The recapitalization provides the business with a stable platform which will allow it to focus on the opportunities in the market place.”