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Pioneer Credit – Share Trading Suspension

by FIIG Research | Aug 28, 2019
  • On 28 August 2019, Pioneer Credit Limited (Pioneer, Company) voluntarily suspended its shares. We note that trading in Pioneer’s AUD40m 3mBBSW+5.25% Mar 2022 notes (Notes) are subsequently suspended.
  • The suspension follows an announcement earlier in the week that Pioneer was not in a position to finalise its financial results for the year ended 30 June 2019. The delay in finalising its accounts stems from the Company’s decision earlier in the year to adopt amortised cost--in line with industry standards--rather than fair value to determine the carrying value of purchased debt portfolios (assets) on its balance sheet. According to the Company, further information is being provided to its auditors in order to reach a conclusion and allow the auditors to complete their audit.
  • Pioneer noted it is likely that there would be a material difference in the expected net profit after tax previously disclosed to the market. It also confirmed that the change in accounting treatment does not change the amount and timing of cash flow recognition. Because any changes are applied retrospectively, a change could also have an impact on opening retained earnings (a component of net assets).
    This change in carrying value methodology could also have a bearing on Pioneer's covenant requirement to maintain secured debt at below 70% of the value of purchased debt portfolios (basically, a limit on gearing). 
  • The announcement is surprising given a number of assurances provided by the Company in recent months around the expected impact. The timing is also surprising (and disappointing) given the proximity to the scheduled end-of-year-reporting, although we find ourselves in something of an information vacuum and won’t be in a position to established a more informed view of the developments until the accounts are ultimately finalised and released.
  • Pioneer expects trading to resume prior to or on 2 September 2019. We note that if the shares remain in suspension from trading for five consecutive trading days, an event of default will have been triggered under the terms of the Notes. We will provide an update to noteholders when a further announcement is made, including an update to our views around the impact to continuing operations (if relevant).