Octaviar disappears as Stella splits in two

Written on the 10 August 2009

STELLA Group has split its travel and hospitality operations to create two separately managed, financed and independently operated businesses.

As a result, the CVC Asia Pacific-controlled group has assumed $245 million of long-term debt, while Stella Travel Services Australia/New Zealand has assumed $40 million.

Each of the businesses will operate as a separate entity with its own dedicated P&L, capital structure, customer base, board of directors and management team. Stella Hospitality Group and the Stella Travel Services Group will continue to be majority owned and controlled by funds advised by CVC Asia Pacific.

Each company will focus on building distinct identities in its respective market, with a further announcement regarding a rebranding of Stella Hospitality Group’s business-to-business operations imminent.

Chief executive Bob East, says the restructure and recapitalisation ensures the long-term financial stability of each business.

“Whilst the market continues to be challenging, our business has proven to be very resilient, with strong support for our business model from our stakeholders,” says East.

“The separation and recapitalisation sets the foundation for the years ahead and provides us with a fantastic platform to grow Stella Hospitality Group’s position in the Australasian market.”

The now defunct Octaviar cast itself adrift from Stella Group in exchange for a halt to legal action brought by its joint-venture partner CVC Asia Pacific.

CVC bought into Stella in February last year, paying Octaviar (then MFS) $409 million for 65 per cent of the business.

The deal was struck amid the heated fallout of MFS’s financial collapse. Relations between the companies later soured when CVC launched a warranty claim against Octaviar seeking $249 million compensation for selling it a ‘lemon’.

Octaviar was placed into liquidation last month following a ruling in the Queensland Supreme Court. Created by Gold Coast lawyers Michael King and Phil Adams, MFS was once a $4 billion financial powerhouse.

It has sunk with debts totaling around $2 billion with unsecured creditors left with between 1c and 4c in the dollar.


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