Despite Sygnus Credit Investments Limited (SCI) generating record net interest income of US$2.13 million ($327.51 million), fair value losses from its Puerto Rican Fund dragged its bottom line by 54 per cent to US$744,834 in the first quarter.

The private credit firm has benefited from higher interest rates through the redeployment of capital at higher increased yields which led to its interest income jumping 54 per cent to US$3.68 million. However, the way in which its investment in its Puerto Rico Fund is accounted for saw it recording a fair value loss of US$539,653 compared to the fair value gain of US$697,703 in the prior period. This resulted in income dipping 26 per cent to US$1.90 million.

“However, the Puerto Rico credit investment income was impacted by pretty much volatile stock market conditions globally. Effectively, we use a market price to book multiple using daily prices over a two-year period and during the last quarter, in particular, the publicly traded prices of many of the international BDCs that we use as benchmark, the price to book would have fallen because of the reduction in global stock markets as the Fed would have spoken about higher for longer,” said Jason Morris, chief investment officer at Sygnus Capital Limited, at SCI’s November 16 earnings call.

Morris noted that prices would have gone back up subsequent to the quarter and that the book value of the Puerto Rican Fund actually increased in Q1. This was on top of the fund deploying US$17.07 million during the quarter relative to its US$79.20-million credit portfolio. Acrecent Financial Company Limited (AFC) was fully integrated on July 1 which makes it a pure credit fund with no employees or certain associated expenses.

SCI also had other notable points in the quarter such as its participation and commitment fee income rising from US$19,006 to US$62,223, which represents its new revenue stream from a larger business.

SCI’s total expenses grew 21 per cent to US$1.07 million in Q1 due to higher management fees from a larger investment portfolio, performance fees related to the 2023 financial performance and increased corporate service fees.

SCI deployed US$7.83 million in new private credit arrangements while exiting four transactions which totalled US$9.32 million. At the end of Q1, SCI’s credit portfolio stood at US$128.23 million deployed across 40 companies in seven territories. When the Puerto Rican Fund is included, this portfolio jumped to US$152.57 million spread across 10 territories.

Morris highlighted that the company is continuing to work on recovering funds in the two hospitality assets in Jamaica and Cayman Islands while it took an additional charge off related to a mining and quarrying company whose collateral is being sought now.

SCI’s total assets ended September 30 at US$161.97 million with US$2.57 million in cash and cash equivalents. Total liabilities and shareholders equity stood at US$93.02 million and US$68.95 million, respectively. The book value was US$0.1588 per share.

SCI’s stock prices closed Friday at J$11.45 and US$0.0891 which leaves the securities down at least 10 per cent year-to-date.

SCI is continuing its push to access US$100 million financing from international partners while looking to close out its US$25.10-million preference share raise on December 6. This will go towards the company’s US$75 million pipeline identified in Jamaica and US$150 million across the region in the future. SCI will also be sponsoring a new special focus fund in Puerto Rico and rolling out its impact investing strategy in 2024.

“In essence, this partnership facilitates the deployment of capital that generates an impact that is not only measurable, but which also produces sustainable financial returns. Starting in Q2, SCI will begin reporting its impact strategy and how its investments align with sustainable development goals, for the Puerto Rico business and the English- and Dutch-speaking Caribbean business,” the SCI Q1 report concluded.