ROBUST SYGNUS
Credit Investments arm sees 51% net profit jump, private credit portfolio surges 117%
SYGNUS Credit Investments Limited (SCI) is reporting net profit of just under US$800,000 up 51.1 per cent, the highest for a September quarter, and record total investment income of US$1.31 million, up 19.8 per cent.
Additionally, the company said three-month earnings per share grew to US$0.0023, up from US$0.0015 in the previous year. Meanwhile, investment in portfolio companies across the Caribbean surged 116.9 per cent to a record US$62.3 million, diversified across 29 private credit investments, 10 industries and seven Caribbean territories.
“The value of new private credit investments during the period was US$8.7 million, which did not include US$4.0 million in additional commitments that were not fully drawn down by portfolio companies,” Sygnus said in a news release, adding that “the portfolio yield was 12.0 per cent”.
The performance, the company said, established it as “the clear leader in the regional private credit investment (PCI) industry, with a more than doubling of dedicated flexible debt capital to Caribbean middle-market businesses, while delivering a record financial performance”.
The company also reported that its private credit portfolio remained resilient during the quarter, with zero realised credit losses for a 13th consecutive quarter, and was well positioned to see out the novel coronavirus pandemic.
Following the growth in its portfolio, SCI’S board authorised the company to raise up
to US$50 million equivalent in equity and debt capital to finance its robust investment pipeline.
“We are very vigilant and clear about what our number one job is at this time: minimise permanent or ‘realised’ credit losses, which can destroy shareholder value. At this stage, we feel fairly comfortable with SCI’S private credit portfolio, and do not have any expectation of realised credit losses near term,” the release quotes Jason Morris, co-founder and chief investment officer of Sygnus.
“Private credit, like other forms of alternative investments, is agile and flexible capital, and thus resides in a different habitat to traditional debt financing — bank loans, corporate bonds, etc. We know that during periods of great market stress, middle-market businesses will have the greatest need for agile and flexible capital in order to recover and pursue growth opportunities,” Morris said.
“Through SCI’S regional footprint and deep market relationships, we are witnessing a material pickup in demand by Caribbean businesses for this type of financing amid the pandemic. As a result, SCI has a robust pipeline of high quality investment opportunities that are at various stages of due diligence,” Morris added.
“As the Caribbean leader in the private credit space, SCI is committed to playing a major role in financing the recovery and growth of middle-market businesses. In order to deliver on this commitment, SCI intends to raise US$50 million in additional capital within 12 months, first via an additional public offering very shortly, and later via an increase in debt,” he explained.
“In our view, for the Caribbean to have any chance of a robust recovery from
COVID-19, it will require an unprecedented deployment of different forms of alternative financing, including private credit, to complement traditional financing sources, given the significant constraint on regional government finances.”
Morris pointed to information provided by global alternative financial database Prequin stating that global private credit assets under management are projected to grow from US$848 billion in 2020 to US$1.46 trillion in 2025.
He said SCI wants to push the Caribbean region’s assets under management to above US$1 billion equivalent in this asset class over the medium term, from what may be, at best, US$200 million currently.