ANZ faces big losses from Bill Express collapse: Boyd

Another week; another $50 million written off. That sums up the latest woes of ANZ, Australia’s most trouble-prone bank.

ANZ says it will lose $50 million on the collapse of payments group Bill Express, just a week after announcing it would lose $50 million on the collapse of Primebroker Securities, the margin-lending arm of Chimaera Financial Group.

In keeping with most of the dud companies that ANZ has financed in recent times, Bill Express is at the centre of a spaghetti bowl of cross-shareholdings that will result in the likely demise of at least one other company and possibly more. The collapse is clouded by conflicts of interest, related party transactions, questionable corporate governance practices and complex legal disputes.

ANZ will not just lose money on the Bill Express collapse. It is also in danger of losing the payments business of up to 14,000 merchants, including about 3000 newsagents that were using Bill Express electronic payment terminals.

In a last ditch effort to keep the newsagents connected to the ANZ payments system, the bank will today send the agents 2500 new eftpos terminals. But this belated contingency plan looks to be too little too late.

The Australian Newsagents’ Federation has been recommending for some time that its members shift their payments business to St George and Suncorp. Many newsagents have been following that advice partly due to the rapid assistance provided by the two rival banks.

ANZ’s failure to come up with a timely contingency plan for taking over the Bill Express newsagents may have been because of its heavily conflicted position. It was a lender to Bill Express and it had a shareholding in the company inherited from its margin lending business. ANZ’s shareholding in Bill Express peaked at a stake of about 25%, but as of yesterday was about 13.2%.

Bill Express first popped up as being another potential problem for ANZ earlier this year when its parent company On Q Group said it had financed the purchase of 27 million Bill Express shares held by ANZ Nominees that had been acquired by ANZ through the collapse of margin lender Opes Prime.

On Q Group, which has a 37% shareholding in Bill Express, was planning to merge its operations with those of Bill Express. That deal is obviously off and the future of On Q Group looks very shaky.

When the Bill Express administrators, Craig Crosbie and Ian Carson of PPB, sift through the company’s assets they will find a 20% shareholding in ETT Ltd, a company that was offering broadband over satellite until the Thai company that owns the satellite tried to terminate the agreement. The stock has been suspended and is yet to lodge its March accounts.

One of the company’s most promising assets was the BoPo pre-paid Visa cards which were selling well among 18 to 30 year olds. Bill Express spent about $3.5 million marketing the business in the six months to December last year.

A broader issue that follows the Bill Express collapse is the creation of a near monopoly in the electronic mobile phone recharging market for ePay, the Australian arm of European payments giant, Euronet.

Bill Express was handling up to 50% of all pre-paid mobile recharge transactions in Australia. However, that business struck trouble several months ago when Optus refused to continue using its service because of Bill Express’s alleged failure to pay debts.

The demise of Bill Express can be sheeted home to the collapse earlier this month of Technology Business Systems and associated company Technology Business Investments, which were leasing payments equipment to merchants. Those companies owed Bill Express about $43.9 million at December 2007.

The collapse of that domino came in the midst of negotiations between Bill Express and Saudi group Al Othman Group to rescue the company through a recapitalisation. Al Othman, which owns 10% of Bill Express, has a joint venture with Bill Express in the Middle East call IPAY Express.

Another loser from the sale is the European payments group Fortis. However, when contacted yesterday the company adopted the “we are ignorant communications strategy” and referred all calls to head office in Brussels.

The Australian Newsagents’ Federation, one of the most powerful small business lobby groups in Australia, has also suffered a blow to its credibility.

The ANF signed a five year deal with Bill Express in 2003. ANF chief executive Don MacAskill says ANF did the deal without bothering to check the terms and conditions of the contracts which were presented by Bill Express to individual newsagents. The ANF contract with Bill Express may be the subject of a class action by newsagents against the ANF.

ANF collected about $1 million from Bill Express over five years. Mark Fletcher, who owns two newsagencies and is trying to convince newsagents to use his eziPass payment system, says the newsagents who used Bill Express funded about $90 million in equipment leasing fees for companies associated with Bill Express.

Fletcher, whose blog has kept the industry in the loop while ANZ and Bill Express have been less than forthcoming about the ongoing problems, says people using Bill Express to pay bills will be affected and the biggest impact will be in rural areas.

This article first appeared on Business Spectator

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