The company has also announced a management buy-out linked to its change of strategy, led by founder and executive chairman Alistair Jeffery. The buy-out was funded partly by Bank of Scotland and Jeffery is the majority shareholder in the new group.
Chief executive Peter McGuinness is also part of the buy-out team. He said that some of the company's former shareholders had been unwilling to support the change of strategy.
Bluestone was set up in 2000 and played a major part in developing the market in Australia and New Zealand for lending to borrowers who did not fit the standard lending criteria applied by mainstream banks. It has assets of more than (Aus) $3 billion. The company obtained funding through securitisation, obtaining lines of funds from banks to build portfolios of mortgages that are converted and re-sold as bonds.
The international credit crisis has severely curtailed demand for mortgage-related bonds, hampering the ability of companies like Bluestone to finance their lending.
McGuinness said that lending had had to be scaled back "materially" and the company had told shareholders that it did not believe that the original business plan was sustainable.
The company did not expect to receive applications for funding in New Zealand in the immediate future, as it would be "highly selective". Staffing in New Zealand would be reduced. The situation in Australia was "not quite so bleak" although funding would be materially restricted there also.
Bluestone had not ruled out the possibility of coming back into the lending market if conditions changed. "We are warming down the power station. If we need to fire up again we can do it very quickly."
McGuinness said that loans already made to borrowers would remain in place and he foresaw no reason for the company not being able to refinance existing loans as they came up for renewal. However, he said that it would be a tough commitment to provide a guarantee on this.
Brokers would continue to receive trail commissions. Bluestone's equity release lending would continue as this was not subject to the same pressures that had affected its other mortgage lending operation.
Meanwhile, Bluestone would also develop its loan administration business. The company moved into the market by setting Bluestone Servicing in 2006 to administer in-house work that had previously been outsourced. McGuinness said that the work would involve arrears management, demand for which was likely to increase in the current market.
McGuinness said that the company had moved to restructure its business now to protect the interests of shareholders, borrowers and other business partners, including brokers.
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