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Report: CVC Australian portfolio company hits trouble

Stella Group’s difficulty in repaying its debt has been compounded by its poor financial performance.

Australian travel and hospitality business Stella Group, a portfolio company of buyout firm CVC Asia Pacific, is in talks with bankers over the repayment of A$860 million (€435 million; $575.7 million) after breaching the terms of one of its lending facilities, according to The Sydney Morning Herald.

CVC bought a 65 percent stake in Stella Group for A$400 million in February 2008 from Australian investment company MFS Limited. CVC also reportedly inherited A$905 million in debt from the deal.

At the time the investment was seen as a bargain, as MFS has originally wanted three times as much for the stake. MFS has since gone into administration and is now known as Octaviar.

For the last financial year, Stella’s parent company Global Voyager Holdings reported an A$42.7 million loss. Stella’s earnings before interest, tax, depreciation and amortisation were A$17 million. MFS had forecasted that Stella’s EBITDA for the same period would be A$210 million, according to the newspaper.

In addition, Stella’s managing director, Rolf Krecklenberg, left the company at the end of last year, the company confirmed. A replacement has yet to be appointed.

In November 2008, CVC agreed to inject A$335 million into another portfolio company, Australian media group PBL Media. The capital injection was part of a recapitalisation proposal to banks, which if accepted will relax debt covenants on the group, said PBL Media.

Stella and CVC were not available for comment at press time.