Stella Group swaps debt for hope
SYDNEY – The restructuring and recapitalisation of Australia’s largest tourism business, the Stella Group, has been put under the microscope today by Stephen Bartholomeusz, writing in Business Spectator.
Stella Group, once part of the MFS empire, has split its business into three discrete, separately managed units – the hospitality group (which operates the Peppers, Mantra and Breakfree brands), the Australasian Stella Travel business and Stella Travel Services in the UK.
Bartholomeusz says that more than $600 million of debt has disappeared in the restructuring.
“It would appear a reasonable assumption that CVC has put some more equity into the business. However, one of the positives of having just one banker (UBS) in an over-leveraged business is that the bank has more to lose than the equity provider.
“It’s also a lot easier to negotiate with one bank than a syndicate.
“It appears UBS has converted a significant proportion of its exposure to Stella from debt to equity.â€
Bartholomeusz went on, “Had Stella not been recapitalised its distressed condition, or even failure, would have caused significant damage to the local tourism and hospitality sector.
“The fact that the two main stakeholders have been able to so substantially re-make its balance sheet signals that they think that there is an attractive future for the group as the economy and the economics of the travel sector recovers.
“Stella will now have the balance sheet and liquidity to enable it to survive until that occurs.â€
Stella Hospitality Group CEO Bob East said, “Whilst the market continues to be challenging, our business has proven to be very resilient, with strong support for our business model from our stakeholders.
“The separation and recapitalisation sets the foundation for the years ahead and provides us with a fantastic platform to grow Stella Hospitality Group’s position in the Australasian market.â€
Ian Jarrett
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