Sygnus raising capital via new route

Sygnus Credit Investments Limited, SCI, plans to raise up to $2.3 billion in its first preference share issue this month, and is weighing the prospect of yet another equity raise within a year or two.

The funds from the current offer will go towards financing investments in its pipeline.

“This will be our first preference share offer, although we would have done other forms of equity raise, such as our additional public offering in 2021,” said Gregory Samuels, head of investment banking at Sygnus Group.

The cumulative convertible preference share offer will raise the funds in two equal tranches of $1.15 billion each on the private market, with the option of Jamaican or US dollar currency subscription.

SCI’s ordinary shares trade on the main and USD markets of the Jamaica Stock Exchange, but the preference offer is not being made through the stock market, nor does Sygnus intend to list them after issue.

“However, investors will have the option to convert their preference shares into ordinary shares at redemption in an APO or renounceable rights issue within the next 12 to 24 months, which will be listed,” said Samuels.

Under the preference offer, which closes July 18, investors who choose to invest in the Jamaican dollar class of shares will receive a cash dividend of 8.5 per cent paid quarterly, and a bonus dividend at redemption within the next 12 to 24 months of 6.0 per cent; and those who opt for USD-indexed shares will receive a cash dividend of 6.0 per cent paid quarterly, and a bonus cash dividend of 6.0 per cent in the same period.

The JMD rate on offer is above the nearly 8 per cent Treasury bill yield. T-bill rates are generally seen as the risk-free rate.

“We believe the preference shares are priced very attractively as investors stand to receive double-digit total return, with potential upside of well over 20 per cent,” said Samuels.

The upside includes conversion at redemption, which, the investment banker noted, would be done at a discount to the prevailing market price.

“Whilst we can’t say what that discount will be, our last APO in 2021 was issued at a discount to the prevailing market price of between five per cent and 17.5 per cent,” Samuels said.

SCI is in the business of offering non-traditional credit to medium and large businesses in the Caribbean region. Samuels said that its pipeline of projects consists of opportunities in all the major sectors, such as manufacturing, distribution, energy, finance, hospitality, transportation, biopharma and government/quasi-government operations. These entities are based across the English, Spanish and Dutch Caribbean, namely, Jamaica, The Bahamas, Trinidad, Puerto Rico, eastern Caribbean states and the ABC islands.

“This equity raise will allow us to scale and raise further leverage or debt to help fund these opportunities,” said Samuels.

Sygnus Credit, which was founded in 2017, also conducts investment banking, investment management and tax advisory services. It was one of a handful of financial entities formed over the decade by former executives of established investment firms who launched out into business on their own.

In the quarter ending March, Sygnus Credit reported net earnings of US$370,600, down two-thirds relative to the 2021 period. The company, citing the enlarged portfolio of assets under its control, said the growing operation had higher professional fees to deal with and larger write-downs allowances for financial assets.

Sygnus Credit’s debts at US$62 million is nearly on par with its capital of US$66.4 million. The previous year, those liabilities were 30 per cent of its capital.

“SCI’s debt to equity was 0.93 times, well below management’s target threshold of 1.25 times and substantially below the limit of 2.0 times,” the investment company noted in its March quarter results, while noting that its leverage was in keeping with global best practices for private credit companies.

Sygnus Credit held total assets of US$135 million as of March, up 58 per cent year-on-year, due in part to its acquisition of a stake in the Puerto Rico Credit Fund during the financial year. The growth in SCI’s total assets was financed by capital raised through its multi-series debt instruments, the company said.

In January, Sygnus Credit raised US$27 million from a bond that funded its rapid growth of assets beyond the US$100-million mark. The company hit the US$100-million marker two years ahead of its targeted timeline.

steven.jackson@gleanerjm.com