from todays melbourne herald sun

MFS admits debt blowout



Ben Butler and Nicole Lindsay

January 24, 2008 12:00am

BANKERS were circling property financier MFS yesterday after the company revealed debt had nearly quadrupled to almost $1.7 billion over the past six months.

MFS told the stock exchange it had total debt of $1.69 billion compared with about $426 million as shown in the group's 2007 annual report, released in September.

The debt -- held in a complex series of subsidiary companies and funds -- has escalated out of control since the end of the financial year.

The company has yet to explain the blowout and yesterday requested trade in its scrip be suspended.

Property development spin-off MFS Diversified sought to distance itself from the mess yesterday, dumping former MFS director Michael Hiscock as chairman.

Hopes that the Commonwealth Bank would refinance a $150 million debt to US hedge fund Fortress were also dashed yesterday, with the bank telling the ASX it "has not agreed to refinance this or any other MFS debt facility".

MFS is believed to have handed over a share in MFS Diversified worth about $18 million to another lender, which has already started selling off the stake.

MFS is desperately trying to offload tourism arm Stella to a "preferred party", believed to be private equity fund CVC Asia Pacific.

And in another blow for the Gold Coast group it emerged that director Paul Manka was forced to dump all of his $5.18 million stake in the company on Friday, following a margin call from his banker.

Mr Manka's forced sale is the second margin call on an MFS director this month.
Former CEO Michael King, dumped last week, was made to sell 500,000 shares in the company two weeks ago as he was holidaying in Canada.

New CEO Craig White did not return calls.

MFS Diversified managing director Guy Farrands said that he was aiming to get his company clear of MFS.

"MFS Diversified is a separate, solvent, high-performance business," he said.

"While I'm very sad to see MFS having some business troubles, it doesn't have a whole lot to do with MFS Diversified."

Mr Farrands said that even if MFS fell over, Diversified could meet all its obligations using existing finance, and bankers were happy with the company's performance.

"We don't need to sell anything to meet our liabilities," he said.

Diversified's main line of credit is a $425 million syndicated facility, led by the Bank of Scotland International.

Other members of the syndicate are believed to be St George, Suncorp-Metway and ANZ.

Another MFS spin-off, MFS Living and Leisure, was also suspended from the stock exchange yesterday.