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Bluestone stake lifts Mac's mortgage exposure, Australian Financial Review Article
Tuesday 30 November 2010
Macquarie Bank will take a major stake in mortgage firm Bluestone Group, which plans to resume lending to borrowers with tarred credit histories.
Macquarie will take a 17.5 per cent stake in Bluestone through the subscription of newly issued ordinary shares, which will help the firm acquire loan books and provide funding to groups such as property developers affected by constrained bank finance.
Macquarie will have a seat on Bluestone's board.
Bluestone chief executive officer Peter McGuinness said that Macquarie was likely to have input into the way the mortgage book was run.
"They could help refinance our old book or with finance for future mortgages," he said. "But they are an instrumental investor and won't be participating in the retail sense."
Before the financial crisis, Bluestone specialized in loans to borrowers with tarred credit histories who failed credit criteria of major banks.
But the firm pulled out of the so-called non-conforming loan market as funding mortgage securitisation markets, on which it relied, became scarce during the credit crunch.
Mr McGuinness said the firm was still keeping a close eye on mortgage securitisation markets, which were coming back to life.
"The mortgage book is paying down but we still have $1.5 billion under management," he said.
"Were looking very seriously at re-entering the market over the next six to 12 months and would stick to the specialist lending area."
As part of its capital raising, Bluestone has refinanced around $20 million of debt on its balance sheet for four years with real estate investment fund manager Forum Partners, and a further $28 million with Bank of Scotland International.
Bluestone still draws 75 per cent of its revenue from its mortgage book, though the firm stopped originating new loans during the credit crisis and has branched out into arrears management.
Macquarie Bank has an existing mortgage business for retail customers, though mainly to existing bank clients.
It diversified its mortgage exposure in February, facilitating the launch of new mortgage aggregator Vow Financial, in which it holds a stake of less than 20 per cent.
Macquarie's investment leaves Bluestone founder Alistair Jeffery with 35 per cent, management with 15 per cent, Bank of Scotland with 10 per cent and private equity investors including Crescent Capital Partners with 15 per cent. Other minority investors include ABN Amro.
Bluestone expects to report net profit of $6.4 million for the year to June 30, slightly up on $6.1 million in the previous period.
Mr McGuinness said this reflected the lag in revenue from its arrears management business, where contracts took several months to secure with further delays before earnings were generated.
Bluestone established an office in the United Kingdom in early 2009, and is gaining regulatory consents and adapting its loan systems to operate as an asset manager in several European countries.
Mr Jeffery said: "Were very pleased that an institution with the strength and flair of Macquarie has chosen to invest."
Macquarie Group lending practices have recently been questioned after claims application deficiencies have been overlooked in loans brokered by Mortgage Miracles. The Perth-based firm is no longer operating after being accused of falsifying mortgage applications.
by Jane Searle, Australian Financial Review
