Specialised private credit company Sygnus Credit Investments Limited is marking the successful completion of its fifth year of operations for the financial year ended June 30, 2022, having deployed over US$200 million cumulatively in Caribbean businesses during half a decade of private credit investing.

The company also boasts a record total investment income of US$8.25 million, net profits of US$3.82 million, a US$21.22 million acquisition in Puerto Rico and US$3.10 million in dividends paid to shareholders, the highest to date. 

SCI’s core revenues or total investment income grew by 27.1 per cent or US$1.76 million to a record US$8.25 million for the financial year ended June 2022.

This compares with US$6.49 million for the financial year ended June 30, 2021. The performance was driven primarily by growth in net interest income and Puerto Rico Credit Fund investment income, a new revenue line item stemming from the 93.7 per cent stake in the acquisition of Acrecent Financial Corporation (AFC) in Puerto Rico. AFC does not meet the criteria for consolidation all the way up to SCI.

Net profit attributable to shareholders fell by 24.0 per cent or US$1.21 million to US$3.82 million vs US$$5.03 million for FYE Jun 2021, while earnings per share were 0.65 US cents vs 1.11 US cents for the previous year.

Net profits were primarily impacted by the charge-off on one portfolio investment in the Cayman Islands of US$3.85 million, which more than offset fair value gains of US$2.88 million.

The effective charge-off on this one portfolio investment represents SCI’s first charge-off in its five-year investment history, and amounts to an annualised loss rate of less than 0.4 per cent on over US$220 million of investment capital deployed over the five-year period, which is extremely low by international standards.

Notwithstanding the charge-off already booked, SCI is pursuing all available avenues to recover part of or all of its investment as part of its normal course of business. The acquisition of a 93.7 per cent stake in AFC, through its subsidiary SCI Puerto Rico Inc. was completed on February 28, 2022, giving the company access to a Spanish-speaking private credit market in a US$100 billion territory within the Caribbean region. 

AFC has deployed over US$437 million in private credit investments since it began operations and is one of the largest private credit firms in Puerto Rico.

On July 31, 2022, the phase I integration of AFC into SCI was completed, with the transfer of fixed assets and the workforce from AFC to the new investment manager, thus aligning the operating and cost structure of both business models.

With the addition of the Puerto Rico investment, SCI is effectively diversified across 16 industries and nine territories, with portfolio companies from Puerto Rico accounting for 39.6 per cent, followed by Jamaica with 24.1 per cent.

Shareholders were paid a record US$3.10 million in dividends during the financial year, up 77.9 per cent or US$1.36 million over the prior year. The board of directors will meet to consider a dividend payment on Friday, September, 2.

The company received its first credit rating of jmBBB/Stable from CariCRIS in September 2021, and subsequently tapped the debt markets, raising in excess of US$50 million in debt capital including facilities that were rolled to finance its growth and expansion.

“SCI has had an amazing and successful first five years of operations. As a start-up in July 2017, SCI had US$16M in equity and total assets. With the faith and support of shareholders, partners, portfolio companies and employees, its equity has grown to US$67M and total assets to US$137M, while deploying an estimated US$220M to more than four dozen middle-market businesses across the Caribbean region, inclusive of a US$22M private credit acquisition in a US territory,” stated Jason Morris, co-founder, executive vice president and chief investment officer of Sygnus Group.

“In the five years since it began paying dividends in 2018, SCI has paid ~US$7.7M in dividends or nearly 13 per cent of share capital, even during the worst pandemic in the past 100 years. In short, SCI deliberately built a very solid foundation over the past five years, with only one charge-off of US$3.85M on the US$220M of capital deployed (~0.3 per cent loss rate), with an average portfolio tenor of ~2.4 years and a balance sheet that has never had more than 1x debt/equity, that is, we have been deliberately conservative with regards to leverage and risk during the first five years in order to build a long-lasting business,” he continued.

“From this very strong foundation, we have begun the next five years singularly focused on enhancing shareholder value through increased earnings per share, higher dividends, double-digit return on equity and delivering on the promise to buy back up to 15 per cent of its shares as stated during the IPO. We are in advanced discussions with international financing partners for large credit facilities to substantially scale and grow the business across the Caribbean, while we integrate the Puerto Rico operations to deliver a robust combination of capital gains and dividend income to shareholders over the next 5 years,” Morris added.