Alchymie, the European production and distribution operation for which British financier Flashpoint has pledged $250m, has pulled out of financing what was expected to be its debut project, Born Romantic.

But a spokesperson for Flashpoint, which launched Alchymie in October under UK producer Simon Channing-Williams, dismissed rumours that Flashpoint is beset by financial problems as "complete nonsense".

BBC Films, which developed Born Romantic, and production outfit Kismet Films have rapidly re-financed the project with recently launched Harvest Pictures. Harvest is a UK fund recently-launched through tax relief structure the Enterprise Investment Scheme that is backing BBC projects such as Love Honour & Obey and Pandemonium.

Under the new arrangements, Alison Thompson's The Sales Co is expected to handle international sales on the project, which marks director David Kane's follow-up to hit comedy This Year's Love. The comedy about three men pursuing three women while taking lessons at a London salsa club is set to shoot February 7.

"When it came to cash flow last week and this week, there was a problem," said Joanie Blaikie, head of production for BBC Films and single drama. "When you have a film in its fourth week of pre-production, when there are problems at that stage, we had to pull out all the stops."

An earlier BBC statement said that Alchymie would finance and co-produce the Kismet Films production with BBC Films, with Alchymie distributing the picture in the UK. But a Flashpoint spokesperson claimed that the company had never signed a deal.

"Born Romantic did not fit with the very stringent investment criteria which Flashpoint set for Alchymie deals," said the spokesperson, who declined to elaborate on the criteria.

Commenting on Flashpoint's assertion that a deal was not signed, producer Michele Camarda said: "I find it surprising to hear that, considering they were cash-flowing the production for the first four weeks."

Camarda praised the project's crew and associated agents for their support, as well as BBC Films and its chief David Thompson for the speed of re-financing the project.

Flashpoint launched Alchymie with culture secretary Chris Smith attending the opening event and citing the company as an example of the City of London working with the film sector. While Flashpoint has always declined to reveal the source of its financing, it has raised $250m in venture capitol over the last four years.

Most of that cash has gone to fund US productions, including Gods And Monsters, but Flashpoint also bankrolled a string of UK pictures from Channing-Williams before launching Alcyhmie. Titles included New Year's Day and Accelerator.

Speculation about Flashpoint and several other film financing companies seems to be fuelled by rising tension among lenders and insurers because of disputes over unrelated insurance deals. One of the latest and most high-profile disagreements made headlines last month when the Wall Street Journal reported that a group of insurance companies were suing Chase Manhattan Bank and insurance broker Heath Insurance Broking, plus a related company, Heath North America & Special Risks.

The insurance companies - which include Australia-based HIH Casualty & General Insurance and Lexington Insurance Co, a unit of American International Group - reportedly aimed to rescind insurance policies written to help finance five Phoenix Pictures productions. The projects included The Mirror Has Two Faces and The People Vs Larry Flynt.

The suit is seen as particularly significant because the original deal helped trigger a surge of interest in similar methods of insurance-backed film financing. The structure helped film companies secure bank loans for financing films by partially securing those loans with insurance policies designed to partly repay the funding if the films were not successful. But some insurers are now reportedly considering exiting the film sector after unprofitable films.