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08 August 2022

Refinance Deal and 2021 AGM

Managing Director, Keith John, discusses our recent refinancing deal and the 2021 Annual General Meeting with ausbiz.

Andrew: Pioneer Credit coming out of a trading halt yesterday, following a $5.4 million raise. Good timing too, for the company's AGM, which was held yesterday with the managing director, Keith John revealing the company had signed a four year facility agreement. To take us through the detail, he joins us now. Terrific to have a chat. All right, so you've secured this $200 million, four year senior debt facility agreement with Fortress Investment Group. What's that allowed you to do?

Keith: Thanks Andrew. Over the course of the last year, we've been working to refinance a package that we had in place coming out of the back of a terminated scheme of arrangement. That we had to sell the business, which was way laid by the pandemic. That was expensive. We worked very hard among the board and among the executive to ensure that we could refinance without doing a deeply discounted equity raises, as was pretty common going back last year. We're pleased now that we've done that. So we have a 200 million facility with Fortress at around half of the cost that we were paying previously. We supplemented that with a 20 million increase in medium term notes. So we now have 260 million of financing in place with about 32 million available for us for growth funds. And that was all supported by 5.4 million equity raise, which was at a significant premium to market. And exceptionally well supported by some very high quality institutions and high net worth investors.

Cara: And so I understand on completion of this entire package, the goal is to get the company to profitability. Walk us through that timeline and what else needs to happen to get there.

Keith: Yeah. Cara. So this actually returns us to profitability this financial year. We're very, very pleased with that coming from a 19 million loss last year, we're expecting a profit of at least 1.5 million this year after tax. And then we expect that to grow quite significantly in FY 23 and 24 and beyond.

Andrew: So Keith, obviously the opportunity there was to cut your funding costs. However, you're also obviously wanting to find those growth opportunities. Where are they? What are they at the moment?

Keith: Andrew, yes. It's a really interesting time in our space in our business, Pioneer Credit buys underperforming retail debt portfolios, principally off the banks. Clearly it's been a really challenging time for consumers in Australia at many levels. We expect there will be significant opportunity for those portfolios to be sold to a group like Pioneer over the course of the next 12 to 18 months. Pioneer is ideally placed to take advantage of that. We're exceptionally well regarded by the banks. We've got an exceptional record from a governance and compliance perspective. And one of the things that we did yesterday was also achieved shareholder approval for an amendment to our constitution, to allow us to progress with B Corp certification, which is an internationally recognized ESG certification. And of course, all part of building the credentials that are so important. As we're dealing with financial institutions in a world that's increasingly concerned and rightly so with the treatment of consumers and stakeholders, more broadly.

Cara: Keith, so a big event risk on the table today when it comes to the RBA, still likely to not height rates until at least next year. Their 24, target's still very much on at the table, but once that landscape changes and the debt market changes, how do you move with the times?

Keith: Yeah, Cara, look it's a really good question. Our team of data, scientists and analytics spend a lot of time trying to understand where consumers are heading and where the stress points are for them. Clearly It would seem that we've got a little bit of time to prepare for that more broadly. But as we come out of the pandemic and the world returns to normal, we expect to see a tick up in underperforming loans. And certainly those consumers are going to need to be treated carefully. And manage through a way process, so that they can heal again and repay and get back on track. Housing, I think, remains a concern, particularly given the high levels of leverage that's gone into that, at very low interest rates. And if we see any sort of material tick up in interest rates in the next couple of years, as is expected, then there could be some real stress in that area.

Andrew: Yeah. Certainly the environment has changed as Cara said there. Now we're into the tightening cycle, essentially. Globally yes. But it's that problem perhaps that we've all become addicted to debt.

Keith: Yeah, certainly. Our business obviously services that part of the industry. We serve an important function in the way that we manage those consumers and the way we look after them through the servicing of those. In a manner that's generally better than the financial providers themselves. This is our area of expertise. We're certainly forecasting growth. We're very careful about how we grow and about where we grow. We're looking for consumers that we can help get ahead. We don't participate in the very low quality and highly expensive debt, like payday loans, for example. That's not where our business operates. But certainly over the course of the next couple of years, Andrew, we're expecting to see a material tick up in the availability of portfolios that we typically buy.

Andrew: Keith, thanks very much for joining us from Pioneer Credit.

Keith: Thank you. Appreciate it.

Cara: Thanks Keith. Well, let's check in on that share price. As you can see there, slightly in at the green today. Up 0.86 of a percent.

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