Blue Chip severs ties with NZ franchise

Embattled finance property finance company Blue Chip has washed its hands of the New Zealand franchise. The move wipes around 80% off its revenue base and leaves New Zealand mum and dad investors, who are owed around $70 million, in the dark about what funds may be available to repay money owed them.

Independent Financial Review
March 26, 2008

Blue Chip severs ties with NZ franchise
Denise McNabb

Embattled finance property finance company Blue Chip has washed its hands of the New Zealand franchise.

The move wipes around 80% off its revenue base and leaves New Zealand mum and dad investors, who are owed around $70 million, in the dark about what funds may be available to repay money owed them.

Blue Chip Financial Solutions told the ASX last week it continues to trade with the support of its bankers, but can no longer pay a A3c dividend to its shareholders due on April 2.

It has also appointed unnamed professional advisers to look at "various alternatives and the status" of the company after the liquidation of the New Zealand franchise trading entity, Mide.

In its first notice since voluntary suspension from trading on February 14, Blue Chip chairman Julian Gosse told the ASX cancellation of the New Zealand franchise had "significantly impacted on the company's asset base and existing profit guidance."

Former chief executive Andrew Murray said in a company presentation in May last year the New Zealand business accounted for 80% of sales.

The New Zealand franchise, operating since last August, has borrowed $38m from the listed parent and its chief executive Mark Bryers has guaranteed that $38m based on margins from a yet-to-be-built property development.

That issue wasn't mentioned in the ASX announcement.

Gosse told the exchange the company had given itself an internal time line of March 31 to confirm its new business plan, the introduction of new capital and to re-confirm the support of its bankers, listed in its share float prospectus as ANZ.

Blue Chip stopped trading in Australia just days before a raft of companies under the New Zealand franchise toppled into liquidation.

The company said it requested a trading halt before suspension because of an unusually high turnover of its stock on the morning of February 12 and a 35% fall in its share price that day. The stock fell 73%, from A34c on January 14 to A9c.

Gosse said the board had been meeting to discuss an announcement to the market concerning the future direction of the business when it called the halt.

He said institutional shareholders had been selling Blue Chip stock amid heightened investor nervousness associated arising from refinancing problems experienced by several high-profile Australian listed property companies.

Blue Chip only became aware of difficulties in the New Zealand master franchise in mid-December, but it had been assured problems relating to delays in rental payments to clients were temporary, Gosse said.

In the first week in January it engaged investigating accountants Meltzer Mason Heath to brief it about the financial health of the New Zealand group. The firm was subsequently appointed liquidator of the New Zealand franchise companies.


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