MFS Sells Stella Stake, Is Able to Repay Debt

Australian financial services firm MFS said on Monday it will sell a 65 percent stake in its Stella tourism business to private equity firm CVC Asia Pacific, raising enough cash to meet its short-term debt obligations.

Shares in MFS, the latest Australian casualty of the global credit crunch, have been suspended indefinitely as it struggles to recapitalise and repay short-term debt due in March.

MFS was forced to restructure after a A$1.3 billion (US$1.15 billion) deal to sell its funds management business collapsed and as investors bailed out of its stock on concern about the firm's financial viability. Its shares dived by 70 percent on Jan. 18.

Its problems follow shopping mall owner Centro Properties' Group's difficulties in extending a tight refinancing deadline for A$3.9 billion in debt.

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.

MFS said it will receive A$409 million ($372 million) from the sale of the majority stake in Stella, and will retain the remaining 35 percent.

"The proceeds from the transaction will enable MFS to repay its short-term debt obligations and at the same time provide it with the flexibility to manage its commitments into the future," MFS Chairman Andrew Peacock said in a statement.

It will no longer consolidate some A$905 million of Stella's debt.

Stella operates travel agencies including HarveyWorld Travel in Australia and Global Travel in the UK and runs luxury resorts including Peppers and the Saville hotel group.

A report in the Australian Financial Review newspaper on Monday said the deal would value the whole of Stella at about A$1.6 billion, or some 40 percent less than the value of Stella about two months ago.

MFS said in the statement on Monday it has requested its shares remain suspended while it completes a strategic review of its remaining financial services business.

CVC had proposed taking a 50 percent stake in Stella last November, but MFS rejected the deal at the time because of strong travel market conditions.