Australia's MFS Says It Has Two Suitors for Stella

Troubled Australian financial services firm MFS said on Tuesday it has at least two suitors for its Stella tourism business, a week after a A$1.3 billion (US$1.15 billion) deal to sell its funds management business collapsed.

MFS said it has hired the corporate advisory arm of liquidator KordaMentha to advise it on a restructuring, but denied this was a precursor to going into voluntary administration.

Shares in the firm have been suspended indefinitely, following a 70 percent dive on Jan. 18 as investors became concerned MFS was in financial distress after worries emerged about its debt position.

Several smaller Australian financial firms, including Challenger Financial Services Group and Allco Finance Group, have also had their share prices savaged as investors focus on the fallout from a global credit squeeze sparked by the U.S. subprime mortgage mess.

"We have at least two interested parties" proposing to take an unspecified stake in the Stella business, an MFS spokesman told Reuters.

He declined to comment on speculation that one suitor was private equity firm CVC Asia Pacific, which had proposed taking a 50 percent stake in Stella last November.

MFS hopes to reach an agreement within two weeks. Proceeds from the sale of a stake will be used to pay down debt and recapitalise the entire group.

MFS has A$220 million in short-term debt maturing by the end of March, out of a total group debt of A$1.687 billion. It sold some investments last week including securities in the Babcock & Brown Communities retirement home company to raise cash.

The spokesman said the KordaMentha corporate advisory arm, called 333 Capital, had been hired to focus on the restructuring. Advisers Grant Samuel are handling the sale of the Stella stake.

"It's going to be a different looking company once we sell the stake in Stella, so 333 Capital will be advising us on the structure of the group going forward," he said.

MFS last week replaced its chief executive, Michael King, with his deputy Craig White after rival firm City Pacific abandoned a plan to buy the MFS funds management business.

MFS has about A$5 billion under management, and Stella operates travel agencies including HarveyWorld Travel in Australia and Global Travel in the UK.