Private credit portfolio remains resilient and well positioned to navigate the volatility of the pandemic

Sygnus Credit Investments Limited (SCI) reported a first quarter (Q1) record for core revenues, core earnings and net profits for Q1 ended September 30, 2021.

SCI’s core revenues or total investment income grew by 39.3 per cent or US$514,500 for the period under review to register a first quarter record of US$1.82 million. This compares with US$1.31 million for the three months ended September 30, 2020.

This performance was driven by strong growth in net interest income from a record private credit portfolio. The management says it “remains on track to achieve its target of generating at least US$8.0 million in total investment income prior to 2023, as outlined at its December 2020 annual general meeting to shareholders”.

Net profit was up 88.9% to a record US$1.51 million

Core earnings or net investment income grew by 34.4 per cent or US$288,800 to a first quarter record US$1.13 million compared to US$839,000 for the comparable three month period. Net profit attributable to shareholders grew by 88.9 per cent or US$709,100 to a record US$1.51 million for  the quarter compared with US$$797,800 for the same time in 2020.

The results for the first quarter  were driven by a record portfolio of private credit investments, continued disciplined investment origination and the structuring of investments with adequate downside protection to manage risk.

The management notes that the impact of the global COVID-19 pandemic on the Caribbean region and on middle market businesses is ongoing, and the trajectory of the regional economic recovery remains uncertain, despite apparent green shoots of recovery.

However, the management of SCI is boasting that its “private credit portfolio remains resilient and well positioned to navigate the volatility of this ongoing pandemic“. Net profit attributable to shareholders grew by 88.9 per cent or US$709,100 to a first quarter record US$1.51 million vs. US$$797,800 for first quarter of 2020.

The earning per share (EPS) was US$0.25 US cents for the first quarter vs. US$ 0.23 cents for the comparable period in 2020.

Total Operating Expenses

Total operating expenses increased by 48.0 per cent or US$225,700 to US$695,800 compared to US$470,100 for the same period in 2020. This outcome was driven primarily by higher management fees and corporate services fees related to larger assets under management and performance fees related to unadjusted amounts from the June 2021 financial year end results.

Performance fees were charged for the first time at the end of the June 2021 financial year, as the performance hurdle rate was exceeded. Management fees and corporate services fees were a combined 74.7 per cent of operating expenses, while all three fees inclusive of the performance fees were a combined 82.1% of operating expenses.

Excluding management fees, corporate services fees and the performance fees, operating expenses were US$124,800 for the quarter under review, up US$162,000, or 14.9 per cent, vs US$109,600 last year. These increases were primarily driven by higher professional fees partially related to the debt capital raise and the corporate credit rating.

During the quarter, the company received its first corporate credit rating by the Caribbean’s regional rating agency CariCRIS, in keeping with its promise to become a rated entity at close to a US$100-million private credit portfolio. SCI was assigned an investment grade rating of jmBBB with a stable outlook.

The company also launched a dual currency multi-series debt capital raise via a private placement equivalent to US$22.0 million. SCI drew down US$5 million from series 1 during the quarter and is in the process of drawing down at least a further US$22.0 million (upsized) from two remaining series for a total record debt capital raise of approximately US$27.0 million equivalent.