Despite generating a record US$22.29 million in interest income, Sygnus Credit Investments Limited (SCI) saw a 29 per cent cut in its net profit due to higher impairment provisions and expenses on its US$209.77 million private credit portfolio.

The private credit company’s consolidated net profit was cut from US$6.03 million to US$4.28 million for its 2025 financial year (FY) which ended on June 30. The main driver of the reduced earnings is a US$3.39 million impairment provision on its core private credit portfolio.

Under accounting rules, companies are required to make provisions for credit whether it is a receivable or a loan to an external third party. If the possibility of default increases for that client, the company is required to make a higher credit loss provision which is accounted for as an expense on its income statement. If the client repays the credit facility or receivable in full, that provision is reversed on the income statement as a positive figure.

One of SCI’s 38 portfolio companies approached the firm about a proposed change to its credit structure on a facility with the company. This proposal resulted in the portfolio entity moving from stage one (safe) to stage two (riskier) on SCI’s credit model. That triggered a US$2.50 million impairment charge on SCI’s income statement.

“We would have been in discussion with the company, and they made a proposal that they requested a change to the structure of the payment terms of the private credit investment as part of an overall enhanced business strategy that they’ve proposed to the creditors. Based on the proposed changes in the payment terms, which effectively involve deferring some of the interest payments to a longer period, then we would effectively have to reclassify this portfolio company from a stage one to a stage two,” said Jason Morris, co-founder and chief investment officer at Sygnus Capital, on SCI’s September 2 earnings call.

SCI also realised two charge-offs or write-offs for two of its portfolio companies. SCI was able to recover US$1.50 million from a construction company while writing off US$195,900. However, a mining company which has been having difficulty since COVID-19 had its assets seized during Q3 (January to March) and sold during Q4. SCI recovered US$316,200 but had a write-off of US$1.26 million.

Currently, SCI has a 0.6 per cent non-performing ratio with its only stage 3 (default) asset being MV Cayman in the Cayman Islands. This investment also pulled down SCI’s 2022 FY earnings due to the impairment provision made then. According to a recent Cayman News Service article, liquidators are taking Hugh Hart, Jonathan Murphy and Howard Sitzer to court. The seized property was sold in December for CI$8.6 million.

As part of its plan to enhance risk management, SCI implemented Moody’s Credit Lens in Q3 to improve the credit risk process. Morris also emphasised that SCI has an annualised loss ratio of 0.2 per cent and US$5.28 million in historical losses versus the US$355.43 million deployed over the last five years.

“Over the past 18 or so months, we’ve been building and enhancing our risk monitoring process and protocol. We’ve also taken onboard some of the suggestions that would have been brought to the fore in some of the due diligence [discussions] that we’ve undergone with many multilaterals and institutional investors,” Morris explained.

SCI hunting bigger credit line

Although Sygnus Credit has been in operation for eight years, the company is still aiming to execute US$1 billion in private credit transactions across the Caribbean. The company issued US$32.97 million over two perpetual preference shares in December and is in discussion with different international partners for more funding to scale its private credit portfolio.

“We have been speaking with other like-minded partners. We’re evaluating two term sheets; one for US$30 million and US$50 million. We’ll see whether or not we can get those transactions across the line. SCI would have undergone due diligence from maybe three or so multilaterals as well as other institutional type investors over the past 12 to 15 months,” Morris explained regarding the international funding discussions.

He highlighted that the company’s interest income could easily grow at a double-digit pace if SCI has access to a dedicated credit line. SCI was set to access US$10 million from World Business Capital (WBC) with a guarantee from the US International Development Finance Corporation (DFC) at the start of the 2025 FY, but the change in the US administration delayed that funding.

SCI’s core total investment income grew 52 per cent to US$15.39 million with net interest income rising to US$8.87 million for the period. The company’s income statement also benefited from US$4.34 million in fair value gains largely from the Sygnus Credit Investments Puerto Rico Fund LLC which it retains a 95.58 per cent interest in. This fund is set to pay its first dividend to SCI within the coming months.

SCI’s management fees also 18 per cent to US$3.39 million due to the continued growth of SCI’s balance sheet which also improved 12 per cent to US$221.65 million. The company’s profit before tax dipped five per cent to US$5.12 million due to the higher expenses for the period. SCI’s capital base grew to US$73.17 million after paying US$3.20 million in dividends for the year.

SCI share activities

SCI declared a J$2.50 dividend on its class H perpetual cumulative redeemable preference shares and a US$0.20 dividend on its class I perpetual cumulative redeemable preference shares. These dividends are to be paid on September 30 to shareholders on record as of September 15. SCI is set to consider a dividend at a board meeting on September 12.

SCI’s Jamaican dollar share price closed at $13.60 on Thursday which leaves the stock up nine per cent in 2025 while the United States dollar share price closed at US$0.0701 which leaves it up 0.29 per cent in 2025. The market cap on the JMD shares is J$4.60 billion (US$28.50 million) while the USD shares were worth US$17 million.

SCI has repurchased 10,274,482 JMD ordinary shares and 136,525 USD ordinary shares for US$829,726 between June 2023 to June 2024. SCI did not complete any share repurchases for the 2025 FY.

Morris noted that there was no buy-back activity in Q4 2025 due to the company deploying less capital at the time and monitoring the progress of proposed transactions. He highlighted that when SCI has more dry powder and generates excess funds, it can move to repurchase shares.

SCI’s US$9 million share buyback programme is currently scheduled to end in June 2026. Although Morris could not make a definitive comment regarding an extension of the programme, he noted that management may go to the board to request it be extended.

After adjourning its general meetings on August 26, SCI will resume the meetings for the class C and class D cumulative redeemable preference shares on Tuesday, September 9 by the AC Hotel Kingston. The class C meeting will be held at 10 am while the class D meeting be held at 11:30 am.

Both class C and D preference shares are set to mature on December 22. SCI is seeking permission from preference shareholders to extend the maturity of both preference shares by three years to December 2028 and adjust the class C dividend yield from 10.50 per cent to 9.85 per cent and adjust the class D dividend yield from 8.00 per cent to 7.50 per cent.

Neither meeting could proceed on August 26 due to the inability to have at least two shareholders owning 50 per cent of the value in person or proxy. As a result, both meeting had to be adjourned.

“If we don’t get over this threshold, obviously, what we will have to do is move to plan B which is go and raise a new note and go through the pain of doing a long form filing to raise the capital that way,” Morris closed.