MELBOURNE (Reuters) - Australian financial services firm MFS Ltd <MFS.AX> said on Monday it will be able to meet a debt repayment deadline thanks to selling a 65 percent stake in its Stella tourism business to private equity firm CVC Asia Pacific.
By Victoria Thieberger
MELBOURNE (Reuters) - Australian financial services firm MFS Ltd <MFS.AX> said on Monday it will be able to meet a debt repayment deadline thanks to selling a 65 percent stake in its Stella tourism business to private equity firm CVC Asia Pacific.
MFS, the latest Australian casualty of a global credit crunch, said it will receive A$409 million ($372 million) for the stake, more than enough to repay the A$220 million in short-term debt maturing by the end of March.
It also signaled further asset sales as it restructures following the collapse of a A$1.3 billion ($1.15 billion) deal to sell its funds management business.
!ADVERTISEMENT!Shares in MFS have been suspended indefinitely after investors bailed out of the stock on January 18 on concern about the firm's debt levels and financial viability, sending its shares down 70 percent.
"It's a forced sale. This deal, together with the (aged care business) sale last week, more than covers their debt and it provides some additional working capital," said Shaw Stockbroking analyst Brent Mitchell.
The deal will remove some A$905 million of Stella's debt from MFS's balance sheet.
MFS was swept up in turmoil that hit Australian property groups and smaller financial firms after news that shopping mall owner Centro Properties Group <CNP.AX> had trouble in extending a tight refinancing deadline for A$3.9 billion in debt.
Credit markets have dried up for many of these firms in the fallout from the U.S. subprime mortgage crisis.
Once MFS has repaid its debt due next month, it has no further debt due till 2010, new Chief Executive Craig White told Reuters, adding the Stella sale was a "significant step" in the right direction.
"More asset sales are certainly things that are being considered as we receive interest from a variety of parties," White said in a telephone interview.
Analysts have said MFS could be considering the sale of assets including its Sheraton Mirage resort in Port Douglas in far north Queensland state.
Some analysts had expressed concern that the deal valued the whole of Stella at about 40 percent less than the value of the business two months ago.
"The value we have achieved is the best that's possible in the current climate," White said.
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.
MFS will retain the remaining 35 percent of Stella, which 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.
MFS has requested its shares remain suspended while it completes a strategic review.
($1=A$1.10)
(Editing by Jonathan Standing & Ian Geoghegan)
