CVC Asia Pacific restructures Australia's Stella Group

UBS has reportedly written off more than A$500m of Stella Group’s debt in return for a 40% stake in the travel and hospitality company.The group's hospitiality arm operates a portfolio of more than 140 resorts, hotels and apartments.

CVC Asia Pacific-backed Stella Group said it has completed a restructuring following reported negotiations with lenders in January over the repayment of A$860 million ($724 million; €504 million) in debt.

Its mega-firm sponsor recently injected A$40 million into the company, on top of its additional A$3 million purchase of Stella Group’s remaining 35 percent stake from Australian investment firm Octaviar in July, according to The Australian.

In February 2008, CVC bought a 65 percent stake in the travel and hospitality company for A$400 million from Octaviar, then known as MFS Limited. CVC reportedly inherited A$905 million in debt from that deal.

As part of the recapitalisation, UBS is believed to have written off more than A$500 million in debt in return for a stake of between 35 percent and 40 percent in Stella Group, the Australian daily reported. CVC continues to be the group’s controlling stakeholder, according to a Stella Group statement.

The business has also been restructured, with Stella Group breaking up its travel and hospitality operations into two separate divisions, Stella Travel Services Group and Stella Hospitality Group.

Stella Travel Services Group, in turn, will operate as two separately managed units – one focused on the UK market and another on Australia and New Zealand. Stella Hospitality Group continues to operate its portfolio of more than 140 resorts, hotels and apartments, the statement noted.

As a result of the recapitalisation, Stella Hospitality Group has A$245 million in long-term debt while Stella Travel Services Australia/New Zealand has A$40 million in long-term debt. Stella Travel Services UK is debt-free aside from existing bonds, according to the statement.

The group will also undergo a rebranding with a name change to be announced within the next four weeks, said a Stella Group spokeswoman.

Another CVC Asia Pacific portfolio company in Australia, PBL Media, was restructured in December 2008. The buyout firm, which closed a $4.1 billion fund in April 2008, injected A$335 million into the media group as part of an A$445 million recapitalisation package, where in return, banks relaxed debt covenants on the group. Post-recapitalisation, PBL Media has $3.8 billion in long term debt.

UBS declined to comment. CVC Asia Pacific was not available for comment. Octaviar did not reply to requests for comment at press time.