help wanted, page-15

MFS to forgive loan of $25m to spin-off


* Scott Rochfort
* March 20, 2008


THE stricken MFS Limited looks set to forgive a $25 million loan provided to its spin-off MFS Alternative Asset Limited, in a desperate attempt to protect the unlisted vehicle, partly owned by its former chief executive, Michael King, from collapse.

Barely three months since AAL was being groomed for a possible sharemarket listing, the fund now lies in ruins after its chief executive, Richard Lourey, resigned from the board earlier this month.

For weeks MFS has said it has been in discussions with AAL over writing off the loan. After being appointed to the AAL board early this month, the MFS chief executive, Craig White, and his finance director, David Anderson, are now the fund's sole directors.

But an MFS spokesman dismissed the suggestion that this meant Mr White and Mr Anderson might be negotiating with themselves over the loan. He said Mr Lourey remained the fund's chief executive.

The company has now lost all its high profile non-executive directors, which include the former JP Morgan Australia head of equities, David Garrard, the AAMI boss, Michael Kay, and the former investment manager of Dick Pratt's investment vehicle Thorney Investments, Mark Hardgrave.

Ironically, the $25 million loan provided by MFS helped fund AAL's $78 million purchase of MFS's stake in the hedge fund investment company HFA. MFS booked the sale as a profit. The fund paid $877,000 in fees to MFS's investment management arm last financial year.

But AAL was forced by margin lenders to sell its 19 per cent stake in HFA in January at a $39 million loss. The investment comprised the bulk of AAL's assets.

The fund still has a 40 per cent stake in the hedge fund managers Fortitude and Vantage, which last year had a relatively minuscule $130 million of funds under management.

On Tuesday its board buckled to pressure from Chris Scott, the former chief of the hospitality business S8, which MFS bought for shares last year. Mr Scott called off plans for an extraordinary shareholder meeting after MFS agreed to let him and two representatives join the MFS board.