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Uncertainty remains over whether New Zealand debenture investors in MFS Pacific Finance will get their overdue interest payments even though Australia's MFS has reached a deal to sell a majority stake in its tourism business Stella Group.
The ASX-listed company said yesterday that it had agreed to sell
65 per cent of Stella to private equity firm CVC Asia Pacific for A$409 million ($466.9 million) cash and would no longer be consolidating A$905 million of Stella's debt.
The deal means control of the company - which includes New Zealand-based Gullivers Travel and its subsidiaries Holiday Shoppe and United Travel - will pass to CVC, although the agreement is still subject to foreign regulatory approvals in both New Zealand and Australia.
But it has yet to result in any change of status for MFS New Zealand, of which MFS owns 38.5 per cent, or its troubled subsidiary MFS Pacific Finance. It remained on a trading halt yesterday after voluntarily placing itself on a halt last Wednesday because of uncertainty in the Australian business.
MFS Pacific told investors on Thursday that it would not be able to meet payments on $27 million worth of debentures due by the end of January because MFS could not meet the financial commitment.
While a put option remains in place for the Australian company to meet the obligation, MFS New Zealand could not put a timeframe on when that might be.
MFS Pacific has not gone into receivership but is in talks with its trustee, Perpetual Trust, over the $300 million in debentures which its owes to around 12,000 investors.
Yesterday a spokesman for MFS said there were no further developments to report and the company had no further comments to make.
Perpetual Trust chief executive Louise Edwards said she had been hoping to hear from the company but had not done so by about 4.30pm.
She said the sale of Stella was good news but she did not yet know how it would affect the New Zealand firm.
In its announcement, MFS chairman Andrew Peacock said the proceeds from the transaction would enable MFS to repay its short-term debt obligations.
Last week the company said it had total debts of A$1.687 billion, with about A$220 million due in less than three months.
A further A$119 million is due within three years.
With the $409 million from Stella, the company has a further A$43.5 million profit from the sale of its Domain Aged Care business and about A$50 million raised from selling equity stakes over the past two weeks to play with.
But the sale of Stella was also far less than the company had first hoped for. It tried to sell the business last year to CVC but failed to reach an agreement over the price.
It is thought MFS was after about A$2.2 billion - over $1 billion more than yesterday's agreed stake price.
Last August MFS committed itself to paying for any financial needs of MFS Pacific when the New Zealand finance sector hit rocky ground.
It reiterated its promise just before Christmas. But a 69 per cent drop in its share price in one day after investor concerns about debt levels put the company under financial pressure.
The company has been in a trading halt since January 21 and has been trying to sell off assets to get together enough cash to keep itself going.
At December 31 MFS Pacific Finance had about $300 million in debentures with 12,000 New Zealand investors. Of that $27 million was due to mature last month and a further $54 million is due to mature this month and next. About 1000 investors are thought to have been affected by the failed January payment.
MFS New Zealand also manages another finance company, MFS Boston, and advisory group Vestar.
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Stella Group's New Zealand businesses:
Gullivers Travel Group, which includes 74 franchised Holiday Shoppe travel agencies and 97 United Travel stores.
Four Peppers hotels, in Rotorua, Martinborough, Christchurch and Queenstown.
Five Breakfree serviced apartment resorts in Queenstown.
High View apartment complex in Queenstown.
