Pioneer receives respite from lenders

Pioneer Credit has reached a standstill agreement with two of its major lenders as it attempts to deal with the fallout from a change in the accounting treatment of its consumer debt portfolios.

Pioneer announced to the ASX it had secured a standstill deal under which Bankwest (a wholly owned subsidiary of the Commonwealth Bank of Australia) and Westpac will not enforce existing defaults on the company’s financing facility until October 14.

It reiterated a statement made earlier this month that it had appointed Azure Capital to procure a buyer for the business or attract new investment.

Today, Pioneer, which has been suspended from the ASX since late last month, said this process was proceeding well.

On September 2, Pioneer said it could be in breach of its loan covenants after 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”.

Pioneer had previously said on several occasions that a change in the accounting treatment of its consumer debt portfolios would not have a material effect on its bottom line.

As of Pioneer's last financial report, Kerry Stokes' 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.