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Sygnus Credit has US$31m of deals in the wings

Published:Wednesday | April 25, 2018 | 12:00 AM
Berisford Grey, CEO of Sygnus Capital Limited.

Sygnus Credit Investments Limited has US$31.4 million worth of deals in the pipeline for financing.

The company will fund these deals in part with the US$10 million it is seeking to raise from its initial public offering of shares on the main market and USD market of the Jamaica Stock Exchange,

Sygnus Capital Limited, the management company for Sygnus Credit's portfolio, will act as the lead arranger for the listing, Sagicor Investments Jamaica as lead broker and co-arranger, and JN Fund Manager as the co-broker of the offer, which runs from May 2-16.

Sygnus Credit will issue up to 90.9 million shares priced at J$13.72 and US$0.11. That will enlarge the total ordinary shareholding, if fully subscribed, from 159.2 million units to 250.18 million units.

CEO of Sygnus Capital Berisford Grey said 10 per cent of the US$31.4 million in deals have been approved, 39 per cent are signed but await due diligence, and about half are at various stages of discussion.

"We need to have a larger amount of deals in order to cherry-pick the best opportunities," he said.

Sygnus Credit proposes to invest and hold the net funds raised in the IPO in customised credit instruments issued primarily by medium-size firms across a broad range of sectors, including manufacturing, distribution, financial services, energy, real estate, oil and gas, transportation, infrastructure and business services.

Deals in the works include more than US8 million worth of manufacturing and distribution transactions, US$5 million in real estate, and more than US$2 million in gas distribution.

Sygnus Credit made US$660,900 in net profit at half-year ending December 2017 on revenues of US$748,300. That resulted in six months' earnings per share of US$0.01 (and not 0.01 cent as stated in the prospectus) as the average number of shares stood at 64.5 million units.

Grey said the company shares will list at 11 times its earning and at 1.05 times its price to book value, which, he argued, puts Sygnus Credit on par if not a more reasonable position than its peers in the financial sector.

"So it means there is a lot of upside for investors," he said.

Sygnus Credit has US$16.7 million in total equity as at December 2017.

The company wants to increase its capitalisation and hence its capacity to fulfil its mandate to provide financing solutions to medium-size firms. Its focus is non-traditional financing to firms across the wider Caribbean.

Non-traditional forms of credit are more customised and flexible than traditional financing. These instruments include bilateral notes and bonds, preference shares, asset-backed debt, mezzanine debt, convertible debt and other forms of structured private credit instruments.

For instance, Grey said Sygnus can provide inventory financing to a firm seeking to grow but unwilling to take on bank debt. In such a case, Sygnus could buy the inventory from the company and provide cash, then sell back the inventory over time.

"This allows another means of raising funds to the company outside of the traditional debt or bond market," he said. "There's a space for traditional and also a space for non-traditional financing for firms. So we are building out additional channels through which capital can be unlocked."