Taken from The Australian Business Section.....TALK about a...

Taken from The Australian Business Section.....

TALK about a messy divorce. Not only did the odd couple of MFS and Stella want to go their separate ways, but they blew up the house as a parting gift to each other. Criterion thought this kind of thing only happened in outback mining towns, but clearly it happens in the rarified reaches of Gold Coast capitalism.

Walking through the aftermath yesterday, one wonders if there is not still something of value left in the debris, to be snapped up when trading resumes tomorrow.

A couple of analysts think so and have buys on MFS at $1 and a price target of $1.60.

A quick recap on what has happened: a separation was proposed between the MFS funds management business and 100 per cent-owned Stella Travel; the MFS share price plunged; and chief executive Michael King has walked.

It's a good thing his former deputy Craig White has taken the reins, as he will have a good handle on several pressing matters: whether the separation and related rights issue will in fact happen; and how to refinance a near-term debt of $150 million that needs to be done by March.

And there's a bit more debt there too, which will need to be done in time.

Stella's tourism business looks good, as attested by a fistful of suitors who have come a courting.

Property investor City Pacific made an offer for the company's financial services business valued at about $1.3 billion, but withdrew it yesterday.

Potential investors would have to ask: why would you?

Only if you thought there was something worth hanging on to.

Brent Mitchell, research manager at Shaw Stockbroking, says there is nervousness about possible heavy debt margins.

"The recapitalisation to raise $550 million raised concerns as to why they would want that additional money," he says.

Nevertheless, Mitchell has MFS as a buy.

"The company represents a favourable opportunity on its merits," he says. "I believe a group debt of $1.5 billion is not a real funding problem."

UBS Securities also has it as a buy, although it said the share price fall represented a significant risk to the MFS retail funds management business.

"On the issue of debt, most of it is within Stella and is non-recourse to MFS Ltd, with cash currently within Stella and future cash flows to be used for repayment of the debt as opposed to being distributed to MFS or shareholders."

So that's at least two in favour of buying. Criterion will join them tomorrow morning to rank MFS a speculative buy.