MFS confirms talks over Stella purchaseJanuary 23, 2008 -...

MFS confirms talks over Stella purchase


January 23, 2008 - 5:32PM


The new head of troubled property funds manager MFS Ltd says the company is assessing several proposals for a partial purchase, which may take only weeks to resolve at most.

"We have a lot of proposals that we are assessing with several proposals for a partial purchase at the moment, but who knows where it will end," said managing director Craig White, who replaced Michael King on Monday.

Asked why the market reacted so violently to the proposal of spinning off the Stellar travel business to pay down debt, Mr White said: "I can't honestly say what they were concerned about but Michael's presentation created a great deal of concern.

"Whether it was the debt I don't know but one thing is very clear they found the proposal very concerning. I guess there was not enough certainty around the proposal."

Mr White's comment's follow last week's 70 per cent drop in MFS' share price when the company announced that it would spin off the Stella interest in an effort to pay down debt, but the original plan has since been disbanded.

"I think in light of the offers and reaction to the demerger proposal on Friday, we will put that on hold at the very least," Mr White told AAP.

Asked whether the offers on the table are going to be enough to appease investors and pay the required debt, Mr White said the company had a very good relationship with its financier.

"We have a number of initiatives to resolve the situation and I want to be clear that it will be achieved by one of these proposals," he said.

"I am hoping to resolve the situation as quickly as possible and we are trying to see how the business will look, going forward."

Mr White said an outcome to the proposals was likely soon, perhaps only in a few weeks at most.

He said despite the difficult conditions surrounding his appointment, he looked forward to the challenges of the job.

"It is certainly a challenge but that is what you get out of bed for and with help of others here I look forward to taking the company forward."

According to Shaw Stockbroking analyst Brent Mitchell US private equity fund, CVC Asia Pacific is a likely suitor.

"They have had approaches from them and third parties," Mr Mitchell said. "It is not surprising as Stella has good assets.

"There is still some value left in MFS, and such an action would support the balance sheet. CVC are one party in there and have already done significant due diligence last year over four or five months."

MFS clarified its debt position earlier Wednesday, confirming that the proceeds of any transaction would not only result in full repayment of all short-term maturing debt facilities, but strengthen the financial position of MFS.

According to the company, the entire MFS group has total debt of $1.687 billion.

This includes $1.055 billion in secured term debt, $189 million in asset-backed facilities and $443 million in unsecured notes.

MFS said $220 million of the debt was due in under three months. Another $119 million is due in one to three years.

MFS said the proposals received were conditional on limited further due diligence and satisfaction of any necessary regulatory approvals.

The company said it had requested that its shares continue to be suspended on the Australian stock exchange while it considers the offers.

Securities in the related MFS Diversified Group fell sharply on Wednesday after it released an announcement clarifying its relationship with MFS Ltd.

MFS holds a 16.9 per cent stake in the fund, the announcement said.

MFS Diversified Group shares closed down three cents at 67 cents.

Another entity related to MFS, MFS Living & Leisure Group, was placed in a trading halt on Wednesday morning and last traded at 36 cents a security.

MFS last traded at 99 cents a share.