02/09/2019 - 14:16

Pioneer lender cuts off funds amid probable profit hit

02/09/2019 - 14:16

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Pioneer Credit could be in breach of its loan covenants, after it said a change in the accounting treatment of its consumer debt portfolios would likely result in a dent to its underlying earnings.

Pioneer lender cuts off funds amid probable profit hit
Pioneer Credit managing director Keith John.

Pioneer Credit could be in breach of its loan covenants, after it said a change in the accounting treatment of its consumer debt portfolios would likely result in a dent to its underlying earnings.

In a statement, the debt management company said its new move to classify and measure its financial assets at amortised cost would have a “material difference” on its net profit after tax, which would also flow to its underlying earnings.

“This likely material difference in earnings before interest and tax could result in a breach of a financial convenant under the company’s senior financing facility … this could also result in a default under the senior financing facility and also the medium term notes,” it said.

Pioneer said it was advised by one of its lenders that it would not be extending its financing facility beyond the current expiry date of March 2020, and that “it will not waive any breaches that may arise”.

“The company remains in discussions with its financiers and is working with them to reach a constructive outcome.”

Pioneer did not disclose who the lender in question is, but Business News understands it is one of the big four banks.

Pioneer, which counts Kerry Stokes’ Wroxby as one of its major shareholders, went into a trading halt last week after flagging a previously unforeseen downgrade to its net profit following its adoption of the new reporting standard.

In April, it gave guidance of a 14 per cent increase in net profit to $20 million.

In the same month, Pioneer also announced that it had several non-binding takeover offers and Azure Capital was the financial adviser in relation to it.

As of Pioneer's last financial report, Wroxby owns a 5.2 stake in the company, making it the third largest holder, while Pioneer chief executive Keith John is company’s largest shareholder with an 8.5 per cent holding.

Shares in Pioneer last traded hands at $2.46 each.

 

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