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Why the Pioneer Credit share price crashed 29% lower on Monday

The Pioneer Credit Ltd (ASX: PNC) share price is one of the worst performers on the All Ordinaries index on Monday.

After being suspended for four months, the financial services company’s shares have returned to trade today and dropped 29% lower to $1.75.

This makes it the second-worst performer on the index behind Decmil Group Limited (ASX: DCG).

Why is the Pioneer Credit share price crashing lower?

Pioneer Credit’s shares returned to trade today after it entered into a confirmation deed with its existing senior financiers and Carlyle Group.

This confirmation deed will see Carlyle Group acquire the debt outstanding under Pioneer’s existing $130 million senior secured debt facility from its existing senior financiers. This remains subject to the entry into substitution and transfer documentation and the satisfaction of other customary conditions precedent.

Pioneer has also signed a variation deed with Carlyle Group which will effect the waiver by Carlyle Group of its existing defaults under the senior facility and vary its key terms.

This includes the provision of additional interim funding of up to $28 million to fund the ongoing investment in purchased debt portfolios, payment of the special dividend, and working capital as required.

With an initial nine-month term, the replacement facilities are expected to provide Pioneer Credit with sufficient time and flexibility for the previously announced scheme of arrangement with Carlyle to be implemented. This is currently expected to occur in April 2020.

Scheme of arrangement.

At the start of the month Pioneer Credit revealed that it has entered into an agreement which will see Carlyle Group acquire 100% of Pioneer’s shares outstanding for a consideration representing a total value of $1.82 per share.

This includes a 24 cents per share fully franked special dividend that Pioneer intends to pay prior to implementation of the scheme. 

Whilst this was a significant discount to the last trade price, it is arguably as good as it will get given the company’s poor performance and significant debt load.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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