KEY POINTS:
While not clinically dead, finance company MFS Boston declared itself to be on life support this week and is begging investors who are owed $38.5 million not to pull the plug.
The indirectly owned subsidiary of troubled Australian firm MFS Ltd, like sister company MFS Pacific, is seeking
a Geneva Finance-style moratorium, in effect, breathing room to try to right the ship, or at least keep it afloat long enough to repay investors.
Investors will vote on the proposal on March 14 while a moratorium vote by MFS Pacific investors, who are owed more than $300 million, is now likely to be a couple of weeks later, the company says.
Investors in the troubled MFS companies have been promised much in recent months. Last year MFS Pacific touted its so called "put option" with parent MFS Ltd, which meant the Australian company would underwrite MFS Pacific's obligations to its investors should trouble arise. If, as Stock Takes hears, much of the money raised by MFS Pacific was lent out in related party transactions, that seems only fair.
MFS Pacific defaulted on repayments in January, and Stock Takes is not sure investors would agree with the firm's directors who this week said they "do not consider it would be in the best interests of investors for MFS Pacific to exercise the put option at this time".
So it's not in their interests to get their cash back? Or is it simply a case of MFS Ltd, looking more and more like dog tucker with each passing day, not being able to meet the commitment. Now, when this "put option" is needed most, it appears useless.
MFS Boston and MFS Pacific investors have to ask themselves, will receivership now be any worse than the prospect of recoveries after MFS Ltd's Australian creditors have picked over the assets?
And what of the undertaking to make good losses incurred by investors whose cash was steered into Bridgecorp by MFS Ltd-owned New Zealand financial advisory group Vestar?
STILL IN THE DARK
At risk of boring readers by incessantly banging on about Fisher Funds, Stock Takes notes the eagerly awaited statement this week on the departure of Warren Couillault did little to fill the "information vacuum" Carmel Fisher last week said had been filled with "all sorts of stories".
The scanty statement painted Couillault's departure as merely an amicable parting of the ways, somewhat at odds with the impression generated by the now infamous message to brokers instructing them not to accept trades from Couillault on Fisher Funds' behalf.
Couillault has said little, but it has been reported that under the terms of his exit deal he can't work in funds management for the rest of the year.
AS EASY AS ABC
Meanwhile, some of Fisher Funds' Australian investments continue to take a battering.
With the Barramundi Fund having taken a bath on its investment in Credit Corp, shares in ABC Learning Centres, which is held by Fisher Funds' Australian Growth Fund, also went into freefall this week after the company reported a 42 per cent fall in half-year profit. ABC shares closed down 42.8 per cent at A$2.14 on Tuesday, wiping A$760 million off the company's value. Shares in the company, which operates about 80 childcare centres in New Zealand, were placed in a trading halt the next day.
While acknowledging ABC's poor result was a factor, Fisher Funds' senior portfolio manager Frank Jasper told Stock Takes he believed much of the share price rout was precipitated by short selling of the stock by hedge funds.
Things haven't been helped by the fact that four of ABC's directors, including founder and chief executive Eddy Groves, were forced to sell about A$52 million in shares after being hit by margin calls.
Jasper says the Australian Growth Fund's ABC holding is very small. Just as well.
POWERING UP
A week ago at its half year result, Contact Energy raised its full year earnings guidance citing high wholesale power prices and its ability to capitalise on those through its geographic and fuel diversity.
Goldman Sachs JBWere analyst Matt Henry has run his slide rule over Contact's numbers and has come up with even more potential upside.
Contact is forecasting a 4 per cent increase on last year's $543.7 million in earnings before interest, tax, depreciation, amortisation and fair value of financial instruments.
Henry is forecasting ebitdaf of $574 million, a 5.5 per cent increase. He bases that on an upward revision of expected average wholesale power prices to $76 per megawatt hour against $70 previously.
Henry's forecast is also driven by higher retail prices.
Contact closed up 2c at $7.74 yesterday against Goldman Sach's conservative discounted cash flow valuation of $9.61. Henry rates the stock a "buy".
CAPITAL BUYOUT
Wellington boutique stockbroker Waddell Johnston McCarthy, headed by former Macquarie Equities boss Ian Waddell, is to be bought out by another Wellington firm, McDouall Stuart.
Stock Takes understands WJM was finding it difficult to grow the business, despite marketing efforts including big adverts on Wellington buses owned by Mana Coach Services, a Waddell family business.
