Pioneer Credit (ASX: PNC) shares are currently in a trading halt and may be so for the rest of September 2019.
Pioneer Credit is a debt collecting business that also provides other financial services with over 160,000 customers across Australia and New Zealand. Pioneer Credit Solutions acquires and manages retail debt portfolios, Pioneer has headquarters in Perth, it also has offices in Sydney, Melbourne, Brisbane and Manila.
Pioneer Credit’s Trading Halt
Pioneer Credit has requested that its shares remain suspended and in a trading halt until 30 September 2019 or when it has resolved the issues that it’s facing.
There has been an ongoing issue with the fact that Pioneer Credit has in the past been accounting for its purchased debt portfolios (PDP) differently to many other in the industry.
For the FY19 result it is developing its financial model to calculate the value of its PDP under amortised cost, but it hasn’t yet determined an appropriate value and its auditors haven’t been able to complete the audit. Therefore, the company still can’t release its FY19 result.
However, as a result of this change, there is likely to be a “material” difference in the company’s net profit after tax and measurement of its assets at amortised cost.
The company has consistently stated that the amount and timing of cash flow recognition doesn’t change and the balance sheet impact is relatively insignificant. However, the net profit difference also impacts EBIT (click here to learn what EBIT means).
The EBIT impact could result in a breach of a financial covenant under a senior financing facility and as a result of its shares being suspended for more than five consecutive trading days this could also lead to a default of its senior financing facility and its medium term notes.
Pioneer Credit was also informed by one of its financiers that it will not be extending its financing facility beyond March 2020 and will not waive any breaches that may arise.
What’s Going To Happen Next?
Management continue to talk with its financiers and is working for a constructive outcome. For now it’s business as usual, including settling on forward flow contracts, which is being funded by free cashflow.
The company wants to realise the value of its assets for shareholders, so it’s working on other financing options and is talking to potential interested takeover parties.
Investors can’t do anything whilst the shares are in a trading halt, but I wouldn’t want to buy shares with how uncertain things look right now. I prefer reliable dividend shares, like the ones revealed in the free report below.
[ls_content_block id=”14945″ para=”paragraphs”]
[ls_content_block id=”18380″ para=”paragraphs”]
