Shares in Australia’s second biggest hotel operation, MFS, were today smashed by up to 70% as it emerged from a two day trading half to join Centro in the debt-addicts emergency clinic.

Chairman Andrew Peacock will be really earning his fees now after MFS shares plunged $1.88 to $1.30 by 12.15pm after hitting a low of $1.03 as 45 million shares or 10% of the company changed hands.

Andrew, you can’t hide forever in this market and today’s 13-page presentation on the proposed demerger of the Stellar hotel business from the colourful Gold Coast-based financial planning business was, err, underwhelming.

Swiss investment banking giant UBS, which is itself reeling from the credit crisis, made the MFS boys step up and unveil a $550 million rights issue as part of the demerger. The 10am conference call with analysts and fund managers must have been really tough given all the equity they’ve stumped up for MFS over the past year. That $159 million capital raising at $5.10-a-share 11 months ago is not looking real flash.

UBS wants its $800 million loan back but a $550 million entitlement issue won’t do the job with the whole of MFS capitalised at just $500 million when the stock hit its low of $1.03. Anyone fancy buying the 15,000 hotel beds in the Stella hotel business? Even $1billion is looking fanciful now.

Oh for the glory days of $6.70 a share last June when the MFS business was worth more than $3 billion.

There are victims everywhere and all sorts of collateral damage.

Peter Costello’s great mate Joe Girsch thought he was selling his Melbourne-based property advisory business to MFS for $97 million last August. The silly lad took MFS scrip which is now barely worth $20 million.

If you thought the Centro board and management had some skin in the game, try MFS for size – half a dozen of them crack my Rich List with the lower $20 million cut-off.

The two founders – CEO Michael King and Dubai-based Phil Adams – will both be disappearing off the BRW Rich List and the big question is how much margin lending the various directors have over their plunging stock.

The institutional pain is also substantial with the likes of Barclays doing their shirts, but you have to laugh at Merrill Lynch. Fresh from writing off $US16 billion from the sub-prime mess overnight, yesterday they filed this hilarious MFS substantial shareholder notice.

The clowns lifted their MFS stake from 30.26 million shares to 35.1 million or 7.26% on January 8. Oh dear.

Merrills now have a slightly larger exposure than the two founders and, of course, good old UBS Nominees are also in there with 30 million shares as they simultaneously play the debt and equity side of the ledger.

The broader MFS family has also been smashed today.

Units in MFS Diversified Trust are down 7c to a record low of 68c and MFS Leisure and Living has plunged 8c to 60c. Owning trophy assets such as the Melbourne Aquarium and the Mt Hotham ski resort isn’t looking so flash now.

The debt instruments are also plunging as MFS notes slumped $13.95 to $84 on default worries. I’m the only buyer at the moment offering $72 for 7 of them.

There’s blood on the streets folks. Who’ll be next?