$24m PDP investment and upgrade to guidance

00:00:00:00 - 00:00:28:07

Juliette

Pioneer Credit has acquired a $24 million debt portfolio from Panthera Finance, allowing it to upgrade its full year 24 PDP investment guidance to $85 million. The deal, in part funded by a Nomura finance facility and Pioneer, continues to work on refinancing its existing senior debt. For further details, Pioneer's managing director Keith John joins me now. Keith, just tell us in layman's terms what all this means.

00:00:28:09 - 00:00:54:12

Keith

Hi Juliette, thanks so much for the opportunity to talk to you today. In short, I mean, Pioneer invests in purchase debt portfolios. So these are portfolios of credit cards and personal loans predominately out of the big banks. And Panthera have divested a significant portfolio that they own of Commonwealth Bank originated the cards and loans which we've acquired.

00:00:54:12 - 00:01:24:05

Keith

So almost $370 million in face value of all accounts that they transferred onto our platform, after which we've paid about $24 million for. So it's a nice big step up for us in terms of investment this year and underpins what we've been talking about, which is the robust nature of the market and the opportunity that sits inside the purchased debt market in Australia for the quality participants.

00:01:24:07 - 00:01:52:05

Juliette

So, you do acquire, I guess, portfolios of customers experiencing financial difficulty. How's the higher interest rate environment I guess impacted your business? It not, not so much impact from the higher interest rates into those customers? Much more so and that's predominantly because not many of them have homes. What is impacting them, of course, is cost of living, and that's different across Australia.

00:01:52:05 - 00:02:28:11

Keith

Much more impact from higher electricity prices on the East Coast, not so much on the West Coast, but certainly very resilient consumer, full employment that is obviously very good for our business and underpins the financial commitments that these people have. Pioneer Although we're very conscious and very cautious about the outlook for the next year in particular, you know, it's going to be tough for those people as prices continue to stay high.

00:02:28:12 - 00:02:50:05

Juliette

That's the environment that we're going to be in. As we mentioned, the Panthera transaction is likely to give you. Well, it's you've increased your guidance I should say, by around $25 million. So can we expect, I guess, further moves like this in 24. What's your outlook as we look ahead to the new year? Yes, certainly, Juliette, I think there's lots of opportunity.

00:02:50:05 - 00:03:31:16

Keith

I mean, the that the challenge inside our business is we've got a limited balance sheet, as do most people. So, we need to think about where we can allocate our capital and how we can do that to get the best returns. This is a very good transaction for us. We're very pleased to have done it. We expect that there will be more lumpy transactions for us over the course of the next few months and certainly the big catalyst for our business in terms of really growing profitability is for us to refinance our senior debt, which is which is quite high in cost at the moment down to a more reasonable cost, and that's progressing,

00:03:31:16 - 00:04:03:17

Keith

well, which will open up our wealth, our ability to be able to invest more later in the later in the financial year as well. So how many customers have you acquired through this Panthera transaction? It is about 32,000 customers. We have about 250,000 customers on our books at the moment. And this will take the total receivables that we have owing to us on which we service, again, predominantly out of the big banks to about $2.2 billion.

00:04:03:18 - 00:04:31:11

Keith

So that's a that's a large amount across a very broad cross-section of consumers in Australia which we're charged with managing and which, like we said, is doing rather well given the employment environment, but conscious of what's ahead next year and the impact of the environment that we're in. Can I ask you as well, Keith, about your overall business?

00:04:31:13 - 00:04:59:21

Juliette

You did sue PWC for around $32 million in this long running accounting dispute. Just tell us the latest there. Sure. Yes, we've commenced proceedings against PWC it really was a result of them changing their opinion to us back in 2019 over the valuation of our portfolios over the method used to value them. We've been working on that in the background.

00:04:59:21 - 00:05:33:06

Keith

Our lawyers are very confident about our position. We're exceptionally disappointed, of course, having been only a small business and spent an incredible amount of money engaging what are supposed to be the top tier auditors and accountants in the in the country, let alone the world. We expected much more out of that and it didn't eventuate, and subsequently we expect to we expect to be made whole on the losses that they're that we believe they're responsible for.

00:05:33:08 - 00:06:03:04

Juliette

How much did it cost you and just tell us why initial chats with PWC weren't able to resolve it without going to the courts? Yeah, I can't talk to why initial chats with PWC didn't get a resolution. I would have expected more given their very regular communication to the markets about changed behaviour and actually righting the wrongs of the past.

00:06:03:06 - 00:06:29:04

Keith

That's for that organization to resolve when the cost to us over the course of the last few years has been about $60 million of which, you know, the calculations that our experts have done is about 27 million's apportionable to PWC plus some costs and interest as well. So that's where the claim has arisen.

00:06:29:06 - 00:06:53:16

Keith

Obviously, we're desirous of having that resolved that requires both parties to meet rather than one party to continue to pursue it. But if that's what we need to do then then, then we're fully prepared to do that. And Keith, just going back to that cost-of-living challenges that you mentioned, particularly if we are going to be in a higher interest rate environment for longer.

00:06:53:16 - 00:07:29:02

Juliette

And of course, that stems through into a number of factors that you were talking about, cost of living and the like. What kind of marked increase are you expecting to see in non-performing debt? Yeah, we're certainly starting to see that come through now Juliette. So, coming off historic lows, particularly outside of the banks or inside of the banks with their doubtful debts and the customers through that program, we're starting to see that as certainly the we'll see those numbers get back to pre-pandemic levels, levels of more normalized levels.

00:07:29:04 - 00:07:58:03

Keith

I don't think it's a concern to the economy so much in terms of clearly with structurally very sound banks in a very sound financial system. But there is a range of consumers that are finding it tougher than that than they did in the past. And, you know, we're charged with the responsibility of servicing those consumers and us in a really productive manner, one which lets them get ahead and obviously which through which we succeed as well.

00:07:58:03 - 00:07:59:15

Keith

And that's what we're focused on.