Hedge funds lose out as MFI soars

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The Independent Online

Dozens of hedge funds saw millions of pounds wiped off their portfolios yesterday after shares in MFI recorded their biggest-ever one-day gain. They leapt 17 per cent on the news that the furniture retailer had sold its French kitchens business, Hygena Cuisines, for €135m (£93m).

MFI has more hedge fund investors betting on a fall in the stock than any other company in the UK, with its management admitting last month that one in four investors were short sellers of the stock.

However, news that the troubled furniture group had disposed of its French business to Nobia, a Swedish kitchen maker, for a price equivalent to almost 17 times the division's 2005 pre-tax earnings, was welcomed in the City. MFI said it would use the sale proceeds to pay down its bank debt, allaying fears it may have needed to hold a rights issue to contain its debt.

The deal comes four months into a strategic review, instigated when Matthew Ingle took over as chief executive in October. He said yesterday: "The sale and cash receipt strengthen our ability to focus on the recovery and growth of the group in the UK."

Although the deal was welcomed by investors, members of MFI's pension scheme, which has a deficit of £300m, will be disappointed by the news that none of the proceeds will be allocated to the pension fund. A spokesperson for the group said that MFI was reviewing its pension scheme funding.

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