Kiwi MFS suspended on news of a wind-upBrought to you by Anthony Klan | February 12, 2008 THE New Zealand arm of embattled financier MFS has been suspended from trading indefinitely after announcing plans to wind up its major financing arm in a bid to repay about $300 million in investor funds.
MFS Pacific Finance, the fundraising arm and major operating company of MFS New Zealand, announced it would enter a "moratorium" while attempting to repay 12,000 investors in the fund from loans it had made to property developers.
"The moratorium will allow MFS Pacific to conduct an orderly realisation of its loans and investments but will be subject to approval by investors and to obtaining any other regulatory approvals," the group told the NZ stock exchange yesterday.
However, the plan will hinge on struggling Gold Coast-based head company MFS Ltd -- which is currently also in an indefinite trading suspension -- providing MFS Pacific Finance with additional funding.
"We believe it is clear that the moratorium, coupled with an agreement with MFS around its future funding of MFS Pacific, will result in improved returns for investors than would otherwise have been available," the company said.
In the absence of a moratorium, which MFS Pacific plans to take to investors early next month, the company is likely to be placed in administration.
The trustee behind the group, Perpetual Trust, said MFS Pacific Finance had suffered a "timing problem" between the repayments of loans to developers and the maturity of loans it had received from investors.
"It wasn't an issue of a run on redemptions, it was a cash-flow problem at the time of repayment of interest and normal debenture maturities on January 31," Perpetual Trust chief executive Louise Edwards told The Australian.
The Gold Coast MFS Premium Income Fund last month froze redemptions on $770 million of investors' money, citing a run on redemptions in the wake of problems with listed Australian head company MFS Ltd.
Ms Edwards said it was "unlikely there will be any other outcome" than winding up MFS Pacific Finance because of the company's inability to pay its debts.
MFS Pacific Finance said a "critical component" of the timely wind-down of the group through a moratorium would depend on a cash injection by MFS Ltd.
MFS Pacific hopes to obtain that funding via a "put" agreement it holds that can force MFS Ltd to take control of any loans the company had made that were more than 90 days overdue.
MFS New Zealand chief executive Jason Maywald has declined to return numerous calls from The Australian this month.
According to a New Zealand newspaper, MFS Pacific Finance had $45.5 million of loans more than 90 days in arrears at its September 30 balance date.
A spokesman for MFS Ltd said any payments to MFS Pacific would be investigated as part of the company's "strategic review".
MFS Pacific Finance said MFS Ltd would provide funds to the group from the sale of majority stake in the Stella tourism business last week, but the amount to be paid had not been negotiated.
MFS Price at posting:
0.0¢ Sentiment: None Disclosure: Held
