The SIP16 report into events leading up to the sale — which has resulted in administration for various non-trading Polestar companies, including Polestar Magazines & Catalogues, Polestar Properties, and The British Printing Company — gives a stark description of Polestar’s ‘precarious’ financial position.

Joint administrator Chad Griffin of FTI Consulting described how wide-ranging attempts during 2010 to refinance the group’s debt failed after potential lenders became concerned about its financial performance towards the end of the year.

By the end of January, Polestar was in default with three of its existing lenders. These lenders were pressing for repayment and taking action to reduce their exposure to the business, "making the group's liquidity position increasingly difficult".

"In light of these events, the group decided to pursue a disposal on an accelerated basis as the only other viable option to an unplanned insolvency," Griffin stated.

Three offers were made for the business, with Sun Capital Partners providing "the best available outcome" for the companies’ creditors.

According to the Financial Times, Polestar's financial malaise was so severe that it had only two days' worth of ink left and had allegedly been threatened with the removal of the motherboards from its presses by the time Sun Capital stepped in to buy the company's senior debt and provide a £15m line of credit.

A Sun Capital Partners vehicle, Compass AcquisitionCo, acquired Polestar UK Print for £1 on 15 April, and took on £95m of Polestar debt. Some of this debt was subsequently "compromised or restructured" on completion as a condition of the sale.

"It is our view that the pre-packaged sale to Sun was the best option available in any event, and that a further period of marketing in administration would have led to a significantly poorer return to creditors," the administrators’ statement said.

Separately, Polestar finance director Peter Johnston told PrintWeek that a CVA had not been viewed as a viable option for the business: "It was important to keep the trade creditors whole, otherwise the business was likely to fail," Johnston said.

Polestar is still "considering all strategic options" regarding Hungarian subsidiary Revai, which was not included in the Sun sale.

TIMELINE
May 2010 Polestar appoints investment bank Houlihan Lokey (Europe) to explore debt refinancing and whether there is appetite for equity investment in the group
January 2011 Debt refinancing plans stall as potential lenders express concern over Polestar's financial performance. Houlihan Lokey instructed to approach potential buyers in 'accelerated disposal' process
February 2011 FTI Consulting appointed to explore ramifications of group-wide insolvency followed by sale of assets, or insolvency followed by administration and attempts to sell as going concern
March 2011 FTI remit is changed, now planning for pre-packaged sale
April 2011 Pre-pack sale to Sun Capital vehicle for £1 plus an undisclosed amount of Polestar's £95m debt, described as 'primarily inter-company debt that was written off after completion'. The majority of its pension scheme liability is also written off