MFS mfs limited

mfs told write off 25m or else

  1. 339 Posts.
    FINANCIALLY crippled MFS Limited has been given an ultimatum either to write off a $25 million loan provided to one of its unlisted trusts, or the fund will call in the corporate undertaker.

    MFS Alternative Asset Limited (AAL) has submitted a "business case" to its parent company in which it has warned it faces collapse if it is still obligated to repay the loan.

    The dilemma facing MFS is that it has a 33% stake in MFS AAL, which like other MFS unlisted funds, has also provided a tidy source of management fees.

    MFS Limited ripped $877,000 in fees from AAL last financial year, along with the $12.7 million profit it booked when it sold its remaining stake in hedge fund HFA to the trust for $78 million.

    MFS provided its loan to AAL to help fund the sale, along with margin lenders believed to be St George Bank, Citigroup, Suncorp Metway and Sydney's Lift Capital.

    AAL's problems spiralled out of control last month when it received a margin call on the HFA investment and had to sell its 20% stake at a $39 million loss.

    It is feared the forced sale has left the fund with fewer assets than liabilities, leaving a hole of at least $30 million.

    MFS AAL chief executive Richard Lourey refused to discuss the matter with BusinessDay. "We're under directions that all media inquiries go to John Hurst (head of corporate affairs at MFS)," he said. Mr Hurst would not discuss the matter.

    Since the resignation of AAL's former chief executive Richard Keary in December, Mr Lourey is yet to offer his unit holders an update on the fund's financial position, nor for another unlisted fund he oversees, the MFS Water Fund.

    But it is believed the management at MFS Limited, whose shares remain suspended from trading, are giving AAL a favourable hearing.

    The debt to AAL is just one of many loans and cross-investments made between listed and unlisted MFS vehicles that are adding further strain to the heavily indebted Gold Coast property group.

    Last week, the group's largest unlisted trust, the $770 million Premium Income Fund ¡ª which has stopped its 11,000 unit holders from withdrawing their investments ¡ª was forced to extend by two months the maturity of a $67 million loan provided to the distressed MFS Living and Leisure.

    MFS Limited is effectively offering the rest of its businesses for sale after entering into exclusive talks to sell its Premium Income Fund to rival City Pacific.

    MFS has already come under fire for selling a 65% stake in tourism and accommodation group Stella too cheaply.
 
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