Only a few months ago, debt buyer Pioneer Credit was finalising its third recapitalisation in a difficult three-year period but yesterday it put all that behind it with the announcement of a deal to acquire a debt portfolio with a face value of A$85 million.

Pioneer will pay around $38.5 million for the portfolio, which consists of 9550 big four bank and international lender accounts. It has forecast “lifetime liquidations” of around $68.5 million, representing a 13 per cent internal rate of return.

Pioneer said all the accounts are performing and the deal takes the value of its performing arrangements portfolio from $400 million to $458 million - its strongest growth in two years.

To support the deal, Pioneer has raised $11.3 million through an institutional and sophisticated investor placement. 

And Pioneer’s lender Fortress Investment Group has agreed to upsize its senior debt facility, currently $200 million, with a commitment of up to $40 million.

The deal is a breakthrough for Pioneer, which defaulted in 2019 and only put long-term refinancing in place late last year. 

The disruption took a toll on the business, which lost $40.1 million in 2019/20 and $19.6 million in 2020/21. The purchased debt portfolio shrank as the company did not have the funds to invest.

In the December half-year, Pioneer reported a loss of $22.8 million.

Income in the half increased by 6 per cent to $30.7 million but a 165 per cent increase in finance expenses to $26.5 million was one of the main reasons the company stayed in the red.

The company has made debt reduction a priority, saying it will use the proceeds of portfolio liquidations to pay down its facility.

The deal is good news for the debt buying, collection and credit management sector, which has been in a slump since lenders introduced forbearance policies during the early stages of COVID. Things may be getting back to normal.