Embattled debt buyer Pioneer Credit has missed the July 17 deadline for refinancing its debt but has managed to negotiate an extension to a standstill agreement with its senior financier until August 14.
Pioneer owes A$141.6 million to Project Robin LP, which is part of private equity firm Carlyle Group.
Pioneer and Carlyle came together last December, when they entered into a scheme of arrangement for Carlyle to acquire Pioneer.
At the time Pioneer was in default with its lenders, Bankwest and Westpac, following a loss that was triggered by a change to the accounting treatment of its purchased debt ledgers. Carlyle took over the senior facility agreement as part of the scheme.
By March the deal was in trouble, with Pioneer reporting that Carlyle had not finalised its takeover offer. It complained that Carlyle was either trying to back out or wanted to force Pioneer to accept a lower offer.
The takeover was off but the parties came to an agreement on the debt. With a principal of $141.6 million and an interest rate of 20 per cent, Pioneer agreed to pay a minimum of nine months interest. Carlyle has calculated that the payout is $165.8 million.
Pioneer announced yesterday that the refinancing has been progressing but “the process to date has taken longer than anticipated”.
The extended agreement allows Pioneer to recommence its debt purchasing program within agreed limits.
The company has requested that trading in its shares, which has been suspended since early June, remain suspended.
In its most recent quarterly update the company reported that it is cash flow positive, with $12.9 million of net cash from operating activities in the March quarter.
Pioneer’s problems go back to an accounting change in the 2018/19 financial year. There was a material difference in its expected net profit for 2018/19 due to the classification and measurement of its financial assets at amortised cost.
The application of amortised cost to more than 900 debt portfolios changed the timing of when earnings are recognised in the accounts and triggered a substantial fall in earnings.
In turn, the fall in earnings triggered a breach of the company’s financial covenants under its senior financing facility.
Last September, the company reported that events of default had occurred and that it had entered into a standstill agreement with its senior financiers, Bankwest and Westpac.