Pioneer Credit Ltd

The fund managers believe Pioneer Credit Ltd represents a compelling, undervalued opportunity in the Australian credit space, particularly in a “higher for longer” interest rate environment. In their opinion, the company is well-positioned to benefit from rising delinquencies on small personal loans and credit cards, as economic pressures mount and borrowers come under strain. While Pioneer has a troubled past—stemming from a 2019 accounting misstep that led to a debt covenant breach—the fund managers view the current management team as focused and undistracted by ongoing legal proceedings with PwC. They note that Pioneer is actively rebuilding its position, recently raising $10 million in strategic capital (with participation from key shareholder Samuel Terry Asset Management) to fund the acquisition of additional Purchased Debt Portfolios (PDPs) at attractive internal rates of return. In their view, the business is executing well, having lifted investment guidance and working to secure improved financing terms from senior lender Nomura. If successful, the refinancing could significantly lower financing costs and materially boost earnings in FY25. The fund managers believe Pioneer is trading at a steep discount to peers like Credit Corp, and see strong upside potential as the company returns to profitability and investor confidence improves around its capital structure and earnings outlook.