Debt buyer Pioneer Credit has refinanced its business for the third time in two years, as it continues to deal with the aftershocks of defaulting on its loan in 2019.
The company is upbeat about the latest round of funding, saying it positions it for growth and profitability.
On Monday, Pioneer announced that it has executed an agreement for a $200 million four-year senior debt facility with investment manager Fortress Investment Group.
It has also upsized a medium term note issue to $60 million and extended the term to 2026.
Pioneer said the new arrangements will reduce its cost of funds significantly and provide funds for growth.
Pioneer’s problems go back to the 2018/19 financial year, when a change in the accounting treatment of its purchased debt ledger triggered a substantial fall in earnings. In turn, this triggered a breach of its covenant with its lenders.
The company revealed in its 2018/19 financial report that events of default had occurred and that it had entered into a standstill agreement with its senior financiers, Bankwest and Westpac.
In December 2019, Pioneer entered into a scheme implementation agreement with private equity Firm, the Carlyle Group.
But by March last year, Carlyle had pulled out of its agreement to acquire Pioneer.
Carlyle had taken over the debt from Westpac and Bankwest, worth about $140 million, and wanted out of that too. The parties came to an agreement that required Pioneer to refinance by July.
After missing a couple of deadlines, in September last year Pioneer executed a senior syndicated facility agreement with a syndicate of lenders arranged by Nomura Australia. The package included a $169 million term facility, a $20 million acquisition facility for portfolio debt purchases and 15.7 million warrants to be issued to the syndicate.
The arrangement was only ever going to be short term because the costs were high. The weighted average interest was 11 per cent, plus a 2 per cent fee on amounts drawn and a 2.5 per cent fee on any undrawn commitment under the acquisition facility.
Pioneer said its deal with Fortress significantly reduces its funding costs. It expects the margin to be around 7.5 per cent over the life of the facility.
The company has also issued $5.4 million of shares to institutional and high net worth investors.
All this disruption has taken its toll on the business, which lost $40.1 million in 2019/20 and $19.6 million in 2020/21. The purchased debt portfolio has shrunk, as the company has not had the funds to invest.
Investment in purchased debt ledgers fell from a peak of $79.5 million in 2019 to $36 million over the past 12 months. The company said investment is growing again.