BY DAVID ROSE Observer business writer davidr@jamaicaobserver.com
MORRIS… I don’t think that there are many stumbling blocks to clearing up Mystic Mountain
Sygnus Credit Investments Limited (SCI) is looking to collect its principal on its prior Mystic Mountain deal as the firm gets ready to reopen in short order.
Mystic Mountain was declared bankrupt in February 2022 due to defaulting on a bond. Sygnus Credit had US$1-million exposure to the tourism attraction business with external third-party securities. Following numerous court hearings, Northjam Island Tours Limited became the new owners of the asset as it offered US$13 million for the business and its leases. Mystic Mountain welcomed more than 100 employees in its relaunch effort last month as it looks to get back on stream after being shuttered late last year.
As such, SCI expects to receive the payout within the next month as it looks to close this portfolio transaction. Jason Morris, chief investment officer at Sygnus Capital Limited, noted that SCI was not as optimistic regarding recovery of funds in MV Cayman in the Cayman Islands and was moving to secure the assets for a mining and quarrying company. SCI’s non-performing investments ratio was only 1.1 per cent of its entire US$128.85-million private credit portfolio.
“We’re working through the legal process. For Mystic Mountain, I assume that this will be very soon. Hopefully, by the time we reconvene for the next report of SCI, just based on the nature of how things are unfolding, I don’t think that there are many stumbling blocks to clearing up Mystic Mountain,” Morris explained at SCI’s investor briefing on February 15. Sygnus Capital is the investment manager of SCI.
SCI had filed a claim in the Supreme Court of Jamaica against former Mystic Mountain trustee Debbie-Ann Gordon over her position in disallowing its claim on Mystic Mountain during the bankruptcy proceedings. Gordon was granted an extension by the Court of Appeal on February 12 to apply for permission to appeal each legal case she’s involved in. There was a case management conference on March 5.
With Sygnus Credit set to receive these proceeds, it plans to deploy the funds to some of its committed deals in its growing pipeline of deal flow. Morris noted that SCI’s ‘pipeline’ of deals in Jamaica was US$75 million prior to it completing its recent preference share issue. However, since then, he noted that demand has doubled with its US$50.25 million (J$7.78 billion) preference share raise attracting more attention. SCI will also receive US$8.50 million from Express Catering Limited whose recently oversubscribed bond offer closed on March 1.
This also comes at a time when it is looking to sponsor a US$100-million impact investing fund in Puerto Rico which will be expounded on further in its third-quarter report. The move comes amidst SCI’s recent US$3-million investment in the Sygnus Credit Investments Puerto Rico Fund LLC for an additional 0.58 per cent stake during the second quarter. Sygnus Credit now owns 95.58 per cent of the Puerto Rico Fund, which in turn owns 100 per cent of Acrecent Financial Corporation.
“We’re hunkering down trying to, let’s say, get to US$500 million in AUM across Puerto Rico and the English-speaking Caribbean region. For example, we’re looking at sponsoring another private credit investment vehicle in an English-Speaking Caribbean territory,” Morris added while reserving further discussion on this new private credit vehicle.
SCI’s interest income reached a new record of US$3.94 million in the second quarter as it earned more from its growing portfolio of investments which now stands at 35 companies. Its overall income or total revenue was up 21 per cent to US$2.80 million during the second quarter with fee income making up 8.4 per cent of that figure. Despite total expenses rising 19 per cent to US$1.23 million, its profit before tax came in at US$1.57 million with net profit at US$1.53 million, a 25 per cent improvement over the prior year.
For the overall six months, SCI’s total income is down four per cent to US$4.70 million as its fair value gains on investments was cut drastically from US$1.49 million to US$118,094. This was as a result of the fair value loss from its Puerto Rico Fund in the first quarter. Total expenses grew 20 per cent to US$2.30 million as it paid a larger amount in management and performance fees to Sygnus Capital. Net profit is down 20 per cent to US$2.28 million with basic earnings per share (EPS) at US$0.0039. The trailing 12 months EPS is US$0.0078.
SCI’s total assets were up 26 per cent to US$206.63 million which was driven largely by the capital raise which pushed its cash to US$43.45 million. Total liabilities grew 44 per cent to US$136.15 million as a result of the preference shares issue while shareholders equity marginally improved to US$70.48 million.
SCI’s share price closed Tuesday at J$10.70 and US$0.0899. The company declared a US$0.00263 dividend totalling US$1.55 million to be paid on April 5 to shareholders on record as of March 28. This brings the trailing dividend payments to US$0.00535 and translates a dividend yield of 5.95 per cent. SCI has not executed any additional share buy back purchases since June 2023 under its US$9-million share buy-back programme.
“Obviously, the path to get to the scale that we want is not a straight line. You’re going to have twists and turns, but what we want to be very clear about is that SCI is not about just being a small thing. We want to be the dominant force in private credit and alternative investments in the Caribbean territory,” Morris closed.
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