My apologies to Kongg especially for getting this wrong.
Actually what you have said is what I meant. But I badly explained it and understood it only roughly.
I meant no debt was paid off and "effectively" the two owners paid the loan interest. In other words it comes out of the earnings of Stella so CVC with 65% equity pay their share and MFS pay theirs.
As you say it more accurate to say STella pays 100%. But in the end the owners cop it.
The equity accounting is a fairly specific sort of accounting that applies to the sort of situation that exists between CVC, Stella and MFS. That is it applies for companies that own less than 50% and more than 20% of a company or business. The investor's equity value is a cost that's adjusted up or down as the equity changes due to acquisitions, cash movements and other asset changes in the investment. As pointed out the change in equity or net asset shows on the investor's books.
(With tradional accounting there would be just a cost and dividends to provide the income. Interest payments would be shown as a deduction against the earnings.)
Anyway thanks for pointing out the error.
The whole saga is a sad situation.
What CVC want from STella we will wait to see. If CVC, bulging with funds and assets, wants to expand and recapitalize the business I can't see how a cash-strapped MFS can keep up and retain their share.
HM
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