Cash injection from Stella sale
A report by Scott Rochfort in the Sydney Morning Herald says that troubled Gold Coast property group MFS Limited has finalised the sale of a 65 per cent stake in its Stella tourism business to CVC Asia Pacific, offering the company a much needed cash injection.
MFS announced on Friday evening that it had received $406 million in cash from the private equity group and would use the proceeds to repay a $200 million short-term debt facility due to expire this month.
The company will also see $900 million of debt taken off its balance sheet with the sale of the business, whose operations include Harvey World Travel, Gullivers Travel, Breakfree Hotels and the Saville Hotel Group. The Stella debt includes a $800 million facility provided by UBS.
MFS is also believed to be in the final stages of selling its property advisory business Gersh Investment Partners back to the founder of the group, Joseph Gersh.
The company also announced it earned $5.2 million in fees from the sale of the Sydney Park Hyatt.
Last month it also earned $43.5 million from the sale of its interest in Domain Aged Care, but it still has some way to go before settling some of its short-term liabilities.
Aside from the $200 million in short-term loans with the US financial concern Fortress, MFS has a put option guaranteeing the $330 million in debts of its struggling New Zealand subsidiary MFS Pacific.
MFS is also expected to have more difficulties servicing its longer-term debts, which include $443 million in unsecured notes and $189 million in asset-backed securities. This is because it is no longer earning fees from many of its funds, including its largest unlisted vehicle, the $770 million Premium Income Fund, which has frozen redemptions.
The company has come under fire for selling its Stella stake for about one-third what it wanted from CVC in November. Its most vocal critic has been Chris Scott, the former boss of the S8 leisure business, which was sold to Stella last year. He took MFS scrip for the sale of the business.
Mr Scott, who retains shares in MFS, is expected to use an extraordinary MFS general meeting on March 28 to call for a change to the board. The MFS chairman, Andrew Peacock, is believed to be drafting a resignation letter and it is doubtful he will attend the meeting, which the company has called for shareholders to vote on changing its name to Octaviar.
A Report by The Mole from The Sydney Morning Herald
John Alwyn-Jones
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