OREANDA-NEWS. May 17, 2010. Mikhail Prokhorov’s MFC Bank has acquired debt of the majority shareholder of 7th Continent, which is secured by a majority stake in 7th Continent. MFC acquired the stake from Natixis Bank (and from other creditors), and plans to hold the pledge, expecting the debt to be repaid within seven years, reported the press-centre of OTKRITIE Financial Corporation.

View: The debt scheme pans out as follows: the grace period will be 3 years, after which loan will start being repaid out of 7th Continent dividends. In the event that this scheme is approved, there will be no possibility for the company to grow. Generally speaking, it has been underperformed its peers in terms of revenue growth. Overall, we regard the news as negative.

Valuation and Action: We reiterate our SELL rating for the stock, which trades at a 2010 EV/EBITDA of 9.2x, implying a 31% discount to EM peers.