With demand for flexible capital across the region climbing amid expansion plans by companies, Sygnus Credit Investments Limited (SCI) is projected to hit US$100 million in investments by the end of 2021 as the private credit business deploys more funds into medium-size businesses.

This comes amid SCI’s record-breaking performance for its 2021 financial year (which ended June 30), where its net profit skyrocketed by 155 per cent to US$5.03 million ($746.76 million), underpinned by an investment portfolio valued at US$82.8 million ($12.30 billion). SCI has now deployed funds to 31 companies across seven territories and 11 industries.

“A US$100 million PCI [Private Credit Investment] portfolio will be a big deal as it represents a key milestone that will allow the company to start getting recognition in the international private market space once it surpasses the target. Typically, US$100 million to US$200 million represent that minimum threshold for international partners in the private markets, which can unlock multiple channels to scale the business to the next level. Alternative investments will thrive in this market environment because of the need for flexible capital to bridge the gap to the recovery and beyond. Flexible capital solves the financing needs of entrepreneurs to exactly match the growth and expansion of their business,” stated chief investment officer at Sygnus Capital Limited Jason Morris in an interview with the Business Observer. Morris is also a co-founder of the Sygnus Group.

SCI had projected that it would hit a US$100-million portfolio within two to three years at its December 2020 annual general meeting when its portfolio was valued at US$67.04 million. Through a successfully upsized additional public offering in January, SCI was able to raise US$27.1 million. In June, SCI began a private placement where it hoped to raise US$22 million in three series of bonds with varying maturity dates. On August 27 the board approved a further raise of US$22 million in debt capital over the next 12 months, which was also coupled with the company seeking an additional US$10 million in revolving credit lines from its senior banking partners.

“SCI has already utilised a part of the US$5 million that was drawn and will draw down on the remainder as projects in the pipeline move from approval to execution phase. Private credit transactions can be lumpy at times, so this isn’t a “smooth process, as transactions that were in the pipeline for months [such as financing for a buy-side M&A (merger and acquisition) where the final terms are agreed between buyer and seller] can coincide with transactions that take three weeks [such as a simple 1 year bridge facility].

“With regards to the US$10-million revolver, those discussions are ongoing,” explained Morris on the dry powder raise by SCI. Although SCI’s total income was US$7.93 million for its 2021 FY, its total investment income was US$6.49 million, which was slightly below the US$8- million target. Despite benefiting from lower expected credit loss provisions and foreign exchange losses, SCI’s total expenses were still 10 per cent higher at US$2.87 million due to higher management and performance fees to investment manager. Equity closed the period at US$66.74 million, with total liabilities decreasing by 10 per cent to US $21.13 million.

In closing out the interview Morris highlighted that the company will be seeking a credit rating once it officially hits the US$100 million target as it looks to new markets for improving shareholder capital. SCI will be considering a dividend at its board meeting on September 10. In another two years, SCI will begin its share buy-back programme as stated in its original prospectus. “Flexible capital solves the financing needs of entrepreneurs to exactly match the growth and expansion of their business. Flexibility is a highly prized asset for entrepreneurs and businesses, especially in small, open Caribbean economies, and alternative investments is the number one provider of flexible capital. Investor appetite for alternatives remain undiminished as disruption to the regional economies has created demand among investors for assets that can generate income, provide diversification, or act as a hedge against other asset classes. There is an increased number of fund managers and participants in the space, which is good for developing and deepening the ecosystem and deal flow; for example, syndication of large deals, co-investor participation, or sell down, etc will help the growth of the overall market. We haven’t quite gotten to US$100 million as yet, but we continue to see strong demand for flexible capital,” said Morris.