Sygnus Credit Investments Limited (SCI) received the green light on Tuesday from its preference shareholders to extend its two classes of preference shares by an additional three years.

The vote took place at the two general meetings that were held at the AC Hotel and online. This means that both cumulative redeemable preference shares will see their maturity dates move from December 2025 to December 2028, with the class C (10.50 per cent J$) paying a 9.85 per cent dividend yield and the class D (8.00 per cent US$) paying a 7.50 per cent dividend yield. However, these adjustments are set to take effect on December 23, 2025, a day after the preference shares were originally set to mature.

This means that the next two preference share payments would be calculated at the current rates before being adjusted in the coming months. These new terms mean that SCI will save an extra 65 basis points (0.65 per cent) or $10.40 million (US$64,494) annually on its class C preference shares and save 50 basis points (0.50 per cent) or US$83,904 on its class D preference shares.

The general meetings were initially held on August 26, but had to be adjourned since a quorum of 50 per cent of the value for each preference share had not been met. The class C meeting held on August 26 had 46.81 per cent of value present in person or proxy while the class D meeting had 41.4 per cent of value present in person or proxy.

At Tuesday’s class C meeting, 9,699,666 units or 89.72 per cent of the 10,811,147 units cast voting in favour of the extraordinary resolution. That translated to 67.57 per cent of the 16 million preference shares in issuance being represented at the meeting.

The class D meeting saw 1,039,938 units or 92.84 per cent of the 1,120,120 units cast voting in favour of the extraordinary resolution. That translated to 66.75 per cent of the 1.678 million preference shares in issuance being represented at the meeting.

When asked by a class C preference shareholder why the company was going through the route to extend the preference shares, Jason Morris, co-founder and chief investment officer at Sygnus Capital Limited, highlighted that the current process to issue a new debt instrument or note is costly and takes time compared to an extension request from existing preference shareholders. Sygnus Capital is the investment manager for Sygnus Credit Investments.

“We would have to file an entire new prospectus, go through a very long process to get approval, and that actually would cost SCI way more money and time to do that than simply speaking to the existing shareholders of this preference share. If we had come with a brand new note in this market, because rates have gone down, we would be benchmarking the rate or dividend on that preference share with what rates are in the market,” Morris explained to shareholders.

The Sygnus executive also pointed out certain advantages that would be available to preference shareholders if they voted to extend the listed instrument. For the class C preference share, Morris noted that there was a 3.50 per cent difference between the dividend yield and the Bank of Jamaica’s (BOJ’s) policy rate when the preference share was issued in December 2023. Based on the BOJ’s current 5.75 per cent policy rate, this translates to a difference of 4.75 per cent with the existing 10.50 per cent dividend yield.

With a projection that the BOJ’s rate would be cut to 5.50 per cent by December, this means that class C owners would receive a return 4.35 per cent above the BOJ’s policy rate. Apart from the rate being above the inflation rate, Morris also explained that investors wouldn’t face reinvestment risk to find another instrument giving a similar return and profile to SCI’s preference share.

The BOJ’s next monetary policy announcement is set for September 29.

“We expect rates to absolutely be going down over the three-year period just based on the fact that the new United States President has another 3 1/4 [years] left on his term and he’s not interested in rates going up,” Morris stated in response to a query at the class D meeting.

The United States Federal Reserve is set to meet between September 16 to 17 to announce its next rate decision. The US Fed has not cut rates since December 2024 when it lowered its fed rate to 4.25-4.50 per cent. Many analysts have estimated rate cuts between 25 to 50 basis points (0.25-0.50 per cent) with Morris’ presentation projecting a 25 basis point cut.

This meant that class D shareholders would earn at least 3.25 per cent over the US fed rate, higher than the 2.50 per cent difference in December 2023 when the preference share was issued.

SCI’s class C preference shares were trading at $104 as of Thursday, $4 above the $100 issuance price while the class D preference shares were trading at US$10.50, US$0.50 above the US$10 issuance price.

Morris highlighted that preference shareholders should reach out to Sygnus Capital’s representatives who would connect them to the broker JMMB Securities Limited. This is meant to facilitate those who want to purchase more preference shares versus those who want to sell more preference shares.

SCI’s class E preference share (8.50 per cent US$) is set to mature in December 2026 at US$10 per share with a face value of US$23.22 million. SCI’s class E preference share closed Thursday at US$11.37.

SCI’s class C, D, E, H and I preference shares quarterly dividends are set to be paid on September 30. SCI’s board will consider an ordinary dividend today.