Debt buyer Pioneer Credit has entered into a standstill agreement with its lender, private equity firm Carlyle Group, and has until July to refinance a debt of A$141.6 million.
Last month the two parties were calling in their lawyers, with Carlyle claiming that Pioneer was in default and Pioneer threatening legal proceedings.
The parties have declared a truce, with Pioneer announcing yesterday that “the standstill agreement provides that the senior financier will not, subject to the company’s compliance with its terms, take any action during the term of the standstill agreement in relation to any anticipated or subsisting defaults under the company’s senior facility agreement.”
The loan principal is $141.6 million and the interest rate is 20 per cent. Under the agreement, Pioneer must pay a minimum of nine months interest. Carlyle has calculated that the payout is $165.8 million.
If refinancing does not occur by July 17, or been extended by agreement, Carlyle will be entitled to exercise its powers. The original loan agreement had required Pioneer to refinance by September.
Pioneer said that “as previously advised, discussions continue in relation to the refinancing of the company’s senior debt facilities. There is no assurance that the company will be able to refinance its senior debt facilities.”
Pioneer and Carlyle came together in December, when they entered into a scheme of arrangement for Carlyle to acquire Pioneer and a senior facility agreement. 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.
By March the scheme was in trouble, with Pioneer reporting that Carlyle had not finalised its takeover offer. It complained that Carlyle was either trying to back out of the deal or wanted to force Pioneer to accept a lower offer.
Last month, Pioneer provided an operational update, saying sales of debt portfolios by banks and other lenders have been put on hold in response to the COVID-19 crisis. Most lenders said they would review their positions at the end of June.
The company said: “This will increase the company’s cash position but reduce its investment in debt portfolios and therefore its asset growth.
“Looking forward, the possible economic downturn expected to be triggered by the shutdown and employment impacts of COVID-19 could lead to attractive opportunities for ongoing investment.”
It said its payment arrangement portfolio was performing well, experiencing a loss rate of 3.4 per cent. For the nine months to the end of March, liquidations were $78.4 million – an increase of 1.8 per cent over the previous corresponding period.
It said it has sufficient cash to continue operations.