mfs debt

By way of background I am a finanical controller

According to the 30 June accounts MFS total liabilities are 2.23 billion of which about 2.1 billion is interest bearing.

That is the accounting liabilities.

We then look for "extra liabilities" by reading the notes to the accounts, there are a few;
Development loan guarantees (contingent liablities)
- Appear to be issued to related funds to ensure project development finance is available (probably for a fee to MFS) 200M roughly but if the developments are ok and the covenants are not breached this is not necessarily the end of the world.
- Other one THE BIG ONE IS MFS NZ guarantee of nz$397m. Not listed as a liabilities of MFS becuase it only owns 38% of MFS NZ and does not consolidate it. This liability is listed in the contingent liabilities section along with guarantees.

Before shareholders apply the swich blade razor MFS NZ needs to be looked at. At 30 Sep 2007 it had about $30m of investments in MFS entities and about $100m nz out on loan to MFS entities and was in receipt of $148 mnz from MFS, an increase in the loan from MFS to MFS NZ of $50m in the last 6 months. Things may have changed since 30 Sep 2007.

The good thing about MFS NZ is that the 75% of its loan book , at 30 September 2007) that is not lent out to MFS related entities is mostly receivable within 12 months. Put sinply MFS NZ which last traded at $1nz (currently no bidder) 12 month high of over nz $3, may be wound down with some red ink but maybe not catastrophic losses.

MFS built it self on a lot of debt, then added a NZ finance company and some project guarantees to arrive at total actual and potential liabilites of slightly under $3 billion. I believe they will loose money on MFS NZ as the prudent course of action would be to wind the loan book down or sell it but it shouldn't kill MFS.

To keep MFS NZ going may require more funds to be injected by MFS.

My sentiment is I wish I did not buy when I did.