Just read the Sigma Condensed notes to the consolidated...

Just read the Sigma Condensed notes to the consolidated financial statements interim results 2009,which are discussed in the article posted by L4leather,i thought i might post relevant part of the consolidated notes here,

"Sigma rewards and Gateway structure"

"As explained in the year end Statutory Accounts, the consolidated group operates a debtors securitisation programme as well a Pharmacy Financing programme these programmes are referred to as Sigma Rewards and Gateway respectively. The Sigma Rewards programme allows Sigma to receive cash in advance of actual debtor terms.
The Gateway programme allows Sigma to source competitive funding for Sigma customers as part of the overall Embrace programme.
Both programmes are recorded off balance sheet due to the fact that substantially all the risks and rewards of ownership are transferred to a third party (refer Allco investment below).
The cost associated with the Sigma Rewards programme is treated asfinance costs on the face of the income statement. There is no cost associated with Gateway.

Allco Finance Group (Allco) is an investor in both these programmes and bears the majority of the risk associated with defaulting debtors and defaulting loans. Accordingly we are able to achieve off balance sheet treatment due to the nature of Allcos investment (as the bearer of risk). During November 2008 Allco went into voluntary administration. These programmes continue
to operate as off balance sheet structures as Allco continues to maintain its investment in both programmes.

In the event that Sigma purchases Allcos investments, this would trigger consolidation of the underlying trust that carries the Sigma Rewards debtors and/or the trust that carries the loans receivable from individual pharmacists. In effect this would bring back on balance sheet all the debtors within Sigma Rewards and loans within Gateway as well as an equivalent external debt."




From my understanding of what is written in the consolidated notes,management are saying, there is little or no legal obligation unless Sigma purchases Allco's investments.

How likely do you think it is that Sigma is going to purchase ALL of Allco's investments?

IMHO, not very.

So they will have to wear the ire of the pharmacists,probably about the reward points,still not a good outcome either,but i think preferable to the onerous debt incurred if they went ahead with the total purchase.


if the article posted by L4leather is correct

"The Herald Sun believes that Sigma is in talks with ANZ, Westpac and other banks on refinancing at least $40 million of loans that Allco provided the company.
These loans, known internally as the Gateway program, were used by Sigma to deliver ``competitive funding'' for pharmacists to expand their businesses."

Sigma may be going for the softer debt option of keeping the loans alive and at least maintaining some shred of goodwill with Pharmacists.


IMHO if this article is correct,In a nutshell,keep the loans to pharmacists alive ,pharmacists reward points gone.


Happy to be corrected.