MFS fund defaults on $184m bank loan
A report in The Age says that troubles continue to mount at Gold Coast property group MFS with its unlisted investment vehicle MFS Premium Income Fund now effectively in the hands of its banker, Royal Bank of Scotland (RBOS).
The fund quietly announced last week that it had defaulted on a $184 million loan from the bank, which means the debt is payable on demand.
The two parties have agreed on a “standstill agreement”, but the stay of execution is only in place until next Monday while MFS and RBOS negotiate an “orderly realisation of assets to repay the loan”.
Failure to extend the agreement by this date could see MFS PIF placed into administration, although RBOS already controls the purse strings.
“Under the terms of the standstill agreement (MFS PIF) cannot deal with the assets of the fund, including for the purposes of making distributions or paying expenses on behalf of the fund, without the approval of the bank,” the fund said in its latest statement to shareholders.
The 11,000 investors who put $770 million into the fund face significant losses.
MFS froze redemptions from the fund in late January to stem a flood of withdrawals that could have led to its collapse.
Two weeks ago investors were informed the fund had ceased distributions to “conserve cash in order to continue to fund PIF’s development projects”.
The latest announcement said that the uncertainty surrounding MFS and its related entities had impacted the recoverability of certain assets of the fund and its auditor “is of the view that there is material uncertainty as to whether the trust can continue as a going concern”.
The fund has a $67 million loan to another cash-strapped MFS entity, MFS Living and Leisure. MFS PIF also has a $40 million exposure to a failed development in Sydney’s south.
The latest announcement adds further fuel to what promises to be an acrimonious shareholders meeting on the Gold Coast this Friday when MFS asks shareholders to change its name to Octaviar.
MFS chairman Andrew Peacock is also expected to provide an update on the company.
Its shares have not traded since January 18 when they dropped 69% to 99¢, amid concerns that the group faces collapse over its short-term debt problems.
Golf Australia announced yesterday that it would “part ways” with MFS after three years of sponsorship that included naming rights to the Australian Open.
A Report by The Mole from The Age
John Alwyn-Jones
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