Bluestone News

Bluestone Group sells Australasian operations, agrees UK share buy-back

Bluestone Group, the international financial services business headquartered in the UK, announced today that it has agreed terms for the sale of its Australasian mortgage lending and portfolio servicing operations (Bluestone Holdings Australia) to entities associated with Cerberus Capital Management LP (‘Cerberus’). Under the terms of the transaction, Cerberus will acquire 100% of the shares of Bluestone Holdings Australia and subsidiaries in an all-cash transaction.

At the same time, Bluestone Group’s shareholders have agreed terms with major shareholder, Lloyds Development Capital (‘LDC’) pursuant to which LDC will exit their investment in Bluestone via a share buy back. The transaction will result in entities associated with Bluestone’s founder, Alistair Jeffery, regaining a controlling stake in the remaining Group. Australian investment bank, Macquarie Bank, will see their shareholding after the management buy-out increase to 30% and Bluestone Group CEO, Peter McGuinness will become a 10% shareholder. LDC, the UK’s leading mid-market private equity investor, acquired their stake in Bluestone Group in April 2014.

Bluestone was founded by Mr Jeffery in Australia in 2000, and quickly gained a reputation as a leading specialist lending business, writing and securitising over A$5bn residential and commercial mortgages prior to the financial crisis. The business expanded to New Zealand in 2002, and diversified its product range into commercial and equity release mortgages. The business was voted fastest growing Australian business in Fairfax Media’s BRW Fast 100 in 2004. In 2005, a significant stake was acquired by funds managed by ABN AMRO and the UK’s Cambridge Place, who exited in 2008 and 2014 respectively.

The Australian and New Zealand business stopped lending for several years during and after the financial crisis, before resuming origination in 2013 in Australia. During this time, Mr Jeffery, who is originally from New Zealand, moved to the UK and established Bluestone’s European operations, focusing initially on the acquisition and management of stranded financial assets. The business acquired Close Credit Management in 2011, and shortly afterwards, a large portfolio of auto loans in Ireland.

As the European markets recovered from the crisis, Bluestone shifted its emphasis back to the origination and management of secured loans, acquiring the UK residential lending business, Basinghall Finance Ltd, from Erste Abwicklungsanstalt (“EAA”) the German Government’s asset management agency, in a joint venture with Macquarie Bank. Bluestone currently runs residential lending operations in the UK and Australia, and an auto finance business in Ireland. These lending businesses are supported by a call centre in Manila, established in 2013. The business also provides debt collections services in the UK, and third party servicing services in Australia.

Bluestone Group appointed Rothschild Global Advisory in 2017 to conduct a review of strategic alternatives available for the business. These discussions led to the agreement of buy-back terms with LDC and the subsequent sale process of the Australian and Philippines operations to provide capital for the MBO, as well as raising significant expansion capital for the further growth of the UK and Irish operations. On completion, Bluestone Group will have a team in Europe of 130 staff and net assets of over £20m / A$35m.

Commenting on the transaction, Mr Jeffery said, “Whilst I’m sad to be ending my near 20 year association with the Australasian businesses, I’m very proud of what has been achieved here, and I’m very excited for the local team and their new shareholders. The Australian and New Zealand mortgage markets are renowned globally for innovative products, a quality macro-prudential environment, and strong self-regulation amongst the lenders. I’d like to think that Bluestone contributed in a small way to this reputation and I’m delighted we were not only able to survive the financial crisis that took down many of our peers, but prosper afterwards. I wish Campbell and the team all the very best in the future with their new parent.”

Mr Jeffery will remain Chairman of Bluestone Group in the UK, leading its retail expansion in Europe from its head office in Cambridge. He retains property and other business interests in both Australia and New Zealand.

Campbell Smyth, Bluestone’s Australian CEO said, “The Asia Pacific business has performed strongly since returning to mortgage origination in 2013 in Australia and more recently New Zealand. With volumes approaching our pre-crisis levels and the market providing further interesting opportunities for growth, we are excited to be working with Cerberus and have the resources to capitalise on these opportunities. This will include broadening the product set we offer, benefiting the ever increasing number of borrowers looking for alternative lenders to mainstream banks. Ultimately this transaction will facilitate the acceleration our business plan whilst still leveraging the strong brand and reputation we have built to date”.

Bluestone Group was advised by Rothschild, Addisons, Clayton Utz and PwC. Cerberus were advised by Allens and Deloitte.

Editors Notes:

Bluestone Consolidated Holdings Limited (Bluestone Group) is a fast growing European financial services business with its headquarters in Cambridge and offices in London, Sheffield and Dublin.

Founded in 2000, Bluestone employs a team of around 130 professionals and specialises in loan origination, consumer loan purchase and portfolio servicing. The business is owned by a mix of private and institutional shareholders including interests associated with founder, Mr Jeffery, Australia’s Macquarie Bank Limited and the management team.

Bluestone Group operates residential mortgage lending and servicing businesses in the UK, and an auto finance business in Ireland. The business reported net assets of £43m and earnings of £5.8m pa (FY17) prior to the sale of Bluestone Australia.

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Bluestone Holdings (Australia) Pty Ltd (Bluestone Australia) is a leading non-bank mortgage lender and servicer, headquartered in Sydney with operations in Australia, New Zealand and the Philippines. In addition to lending to borrowers who don’t meet bank criteria, Bluestone also provides servicing solutions to third parties, leveraging its proprietary origination and servicing systems and resources. Bluestone has successfully issued 24 securitisations across Australia and New Zealand primarily under its Sapphire shelf. The business reported net assets of A$41.2m and earnings of A$12.4m for FY17.