Sygnus Credit Investments Limited (SCIJMD) Earnings Call Transcript & Summary

All right. Good morning, again, everyone. Thank you for your patience. I'd like to warmly welcome you all to Sygnus Credit Investments Limited's earnings call. Today, we'll be discussing the results for the financial year ended June 30, 2025. My name is Damani Reid, and I'm a member of the Investment Management unit at Sygnus Capital Limited, and I'll be your moderator for this morning's presentation. It's important to remember that all the information that is presented here should be read in conjunction with the MD&A and financial statements, which can be found both on the Jamaica Stock Exchange and the Sygnus Group's website. [Operator Instructions]. Now without further ado, I would like to welcome our presenter for today, Mr. Jason Morris, Co-Founder, Executive Vice President and Chief Investment Officer at Sygnus Capital, who will be guiding us through the presentation this morning. Jason?

All right. Thanks, Damani, and good morning to everyone. I know that in Jamaica -- those who are in Jamaica are preparing for a big day tomorrow, election day, are being safe and exercising their franchise, right? So just jumping into the performance for Sygnus Credit Investments Limited for the financial year. I think I'll start out as usual by just creating a backdrop. I think SCI had a tremendous year, achieved some new milestones. We also had a few disappointments, and we'll go through those throughout the rest of the presentation. So first half, in terms of milestone, I think from a pure revenue-generating perspective, we've kind of exceeded our expectations on that front, where SCI would have generated USD 15.39 million in core revenue, exceeding our expectations and breaking the $15 million barrier for the first time. I think the targeted objective was to hit $12.5 million or thereabouts. So we did a pretty good job there in delivering. And moving on to the second point, one of the main drivers for this was what happened with the Puerto Rico business. For those who are not yet aware, after acquiring the Puerto Rico business in 2022, February, over the last 2 years since July 1, 2023, 2 years fully, would have gone through a transformation of the Puerto Rico business, which has been -- has an incredible management team and that business would have generated in total net profit over a 2-year period now $8.85 million, which is an incredible feat given that if you take the previous 20 years of its existence, Puerto Rico wouldn't have generated anything close to $8.85 million. So that business has been transformed and it's just the beginning of that business in terms of its transformation. We expect it to scale much bigger and much faster for the future. So we look forward to subsequent reports when this business will do even much better. From a return to SCI shareholders of the capital that SCI would have used to acquire that business that's generating a 17.7% return on invested capital, which we expect will actually increase in the near term or over the medium term as the business grows and expands. Fourth item is just in terms of towards our platform requirement. I think this would be one of the areas where we kind of underperformed somewhat. We had a number of delays in terms of execution and deployment of deals, 1 or 2 deals fell through. And so this year, the total platform deployment, $87.3 million, still a very big number in the grand scheme of things, right? But when you look at how much we deployed in the previous year and what we were kind of targeting, we were expecting to be north of $100 million. Of course, those transactions that were delayed, many of those are going to get executed in the current financial year. So we look forward to great things for the current financial year in which we are in. But that's one of the things that we -- was kind of a little bit underwhelming. And as I said before, it mainly stem from transactions that couldn't get across the finish line, for one reason or the other, they were delayed. And so we expect to have a much better outturn in the current financial year that we're in. In terms of shareholder dividends, though, we delivered an upfront USD 3.2 million, was paid to shareholders, which is from a semi-annual dividend payment perspective that's 14 consecutive quarters of dividend being paid to shareholders. So that was a good outcome. And then final thing, in terms of just want to keep -- always keep this perspective and what the private credit platform has been doing is that in -- from a annualized loss ratio point of view, SCI's annualized loss ratio ended the year at 0.2%, which means that of the about $525 million give or take that SCI has deployed over -- since inception, we would have only crystalized 0.2% loss of that over the last 8 years in operation. So we can move to the next slide. Jumping straight into the actual financial performance. You can see that from a revenue perspective, SCI, as I said before, would have done a phenomenal job increasing total investment income by 52.4% to $15.39 million, and that was driven primarily by Puerto Rico credit fund investment income, which generated a gain of $6.32 million versus a gain of $1.3 million last year. And this would have been driven, of course, by a record performance that Acrecent Financial, which is the underlying operating entity in Puerto Rico, the main underlying operating entity in Puerto Rico, would have delivered. Acrecent actually generated record net investment income and record total investment income, which I'll delve into on a slide that is dedicated to the Puerto Rico business later on in the presentation. There are actually 2 investments that SCI has in Puerto Rico. So there is the main investment Puerto Rico credit fund, which is Acrecent itself. And then SCI would have also invested $1.5 million in impact fund in Puerto Rico, $1.5 million as of June 30 last year -- sorry, end of last financial year, meaning the 2024 financial year. And so far, that investment has generated, again, $107,600. SCI's may invest another, $1 million to $1.5 million in that business, either in the current financial year, or the next financial year depending on when that capital is called. So that's something you can look out for. We think that this business will do very well for SCI and also generate double-digit return as well, perhaps not at the scale that Acrecent is doing, simply because they are 2 different types of businesses and the impact from it actually has a finite life. So moving on to net investment income, which includes operating expenses that would have been achieved a new milestone as well $10.02 million or 89.6% versus $5.28 million last year. Now despite that very incredible performance on the top line, net profit generated was $4.28 million, down 29% versus $6.03 million last year. And there are 2 reasons for this. One was we actually had some realized - we crystalized some charge-offs of $1.44 million. And we would have did a -- done an early recognition of expected credit losses, which would have brought down our net profit, and I'll get into that on the next couple of slides. As a result of the lower net profit earnings per share came out USD 0.74 versus USD 1.03 for the financial year last year. And dividends per share would have been USD 0.0055 versus USD 0.0052 last year. Can I go to the next slide. So this slide is just highlighting, when we say that a new milestone was achieved, the gap between the end of last financial year in terms of total investment income versus what was achieved for the 2025 financial year. And we expect to continue this trend for the current financial year. So on a compounded annual growth rate perspective, SCI has been able to grow top line revenues by 44.1%. Now just looking at some key items on the fiscal income statement, just to give perspective, right? The first line item I want to highlight is net interest income. So even though we're in a high interest rate environment where as SCI funded the expansion of its balance sheet with additional debt or additional borrowed funds, which meant that interest expense will have gone up, we still were able to eke out a gain in terms of net interest income, where we would have generated the highest ever net interest income level of $8.87 million. So that's an item that would have also been impacted by some one-off events during the year in terms of the interest expense because we took -- we utilized bridge financing twice during the financial year. And those bridge financings would have had higher than normal funding cost and that would have kind of increased interest expense a little bit more than we would have liked. And so that kind of narrowed the margin between interest income and interest expense. We don't really expect that to recur in the current financial year for a number reasons. One, interest rates are -- continue to trend -- well, interest rates have started to trend down. And two, we don't expect to utilize those types of facilities that we needed to do last year when we were funding some pretty large transactions at very short notice, which is what required us to actually utilize bridge financing versus [indiscernible] raise your regular financing and then use that regular financing, deploy that capital over time. So we expect net interest income margin to show better results even though that was a recurring that show better results in the current financial year. From the fee line, very quickly there, basically, we had a reclassification of how we account for the fees. Effectively, we started amortizing the fees versus taking -- we receive the cash flow from the fees. But rather than applying it directly in the income statement, we have to actually amortize it over time. So if the instrument is a 4-year instrument, and we generate fees on that upfront, we have to amortize it over 4 years versus booking all of the fee upfront. So that's what's really driving the difference in participation and commitment fees there. The big item Puerto Rico credit fund investment income, it's there, self-explanatory, and I'll go through that on the next slide. And I already mentioned the business impact, so I won't go too much into that. Next 2 two line item I want to highlight would be the fair value gain or loss. I think in many prior quarters, I would have -- prior quarterly earnings call, I would have stressed that the fair value gain or loss, it can be very volatile. It can move, swing in one direction positively, and it can swing in another direction negatively from quarter-to-quarter because what we are doing there is evaluating what is our expectation in terms of the fair value of fair value instruments on balance sheet which involve forecasting what prospective earnings will be for companies at any given quarter as well as long-term discount rates at the point in time when we are reporting -- when we are evaluating those financial statements. And as those 2 things move, they can move in positive direction or negative direction. And as at the end of the financial year, these were moving in a negative direction. And so we would have booked an annualized fair value loss of $2.09 million, and this will fluctuate from quarter-to-quarter, like I said. Net foreign exchange gain was substantially positive, primarily because SCI has utilized a lot of Jamaican dollar liabilities. And so when the Jamaican currency depreciates, we generate a foreign -- an unrealized foreign exchange gain on that. And of course, this figure can move up and down depending on where the exchange rate moves. And most important thing on the phase of the income statement is the $3.44 million in unrealized -- well, in impairment allowance. This was driven by 2 things. And I'll delve into this a little bit later but just to highlight here, that there are onetime charge-offs of $1.44 million, which were crystallized and then there's $2 million of unrealized early recognition for one portfolio company, which effectively we took the decision to change the classification from Stage 1 to Stage 2 because the portfolio company actually proposed a business strategy that required some proposed changes to the terms of their private credit instrument. And those changes means that we will have to -- well, we will, in the future if those proposal are approved change the classification from Stage 1 to Stage 2, and we took a decision to reclassify it at the end of the financial year, given where we were at the time we're doing the financial statements. Now move to next slide, Damani. So let's delve into Acrecent's business this year. So again, for those who are joining us for first time and not having seen this before, the Puerto Rico business primarily made up of Acrecent Financial LLC. So starting from the bottom of to slide up. On the right-hand side, the right-hand column is showing you what the performance would have been last year. And the middle column is showing what this performance is this year, on the left-hand side is showing you the entities in the structure. So at the bottom, Acrecent Financial Limited as a operating entity that has the balance sheet in excess of $125 million in assets. So that company would have generated $4.67 million in net profit, up 11.7% versus $4.18 million last year, right? And if you move up this slide, Acrecent is 100% subsidiary of Sygnus Credit Investment Puerto Rico Fund, SCIPRF. And the $4.67 million translate into $4.26 million in net profit consolidated up at the SCIPRF level and that was up 15.6% versus last year. As you can see on the right-hand side that net profit of $4.18 million last year would have consolidated up at $3.69 million in net profit for a similar period last year, right? Now the key here is that when you move to the next level, where SCI owns Sygnus Credit Investment Puerto Rico Inc, right, that owns 95.58% of SCIPRF. There's no consolidation that's taking place. The way the accounting treatment works from here is that we have to actually generate a fair value of $4.26 million in net profit means. In other words, if we were to go and try and sell this business to someone who wanted to purchase it, well, what would that value be? So last year, we had a big disadvantage because $3.69 million was generated, the amount of the $3.69 million that flowed through the income statement of SCI was only $1.30 million. And I recall last year, I went to great lengths to explain how can we generate $3.69 million in net profit consolidated in the holdco and only $1.3 million of that gets reported in SCI's financial. And I explained that we are using market multiples and discount rates to come -- to arrive at the valuation. And so last year, we didn't get that benefit. It was a big negative for us. And this year, things are normalized because markets have actually improved substantially in terms of the relative market multiples that we are using that are our public listed companies. And so this year, we get the benefit of the more favorable environment, with the $4.26 million in terms of the what figure that filters through the SCI, translate to $6.32 million. So you can see that 1 year, we lost -- we have lost about $2-point-something million, $2.3 million or so lower value. And this year, we get almost $2 million in higher value. So [ in the wash ], everything has kind of normalized. So that's what generated the big Puerto Rico private credit investment income for SCI. I just want to remind shareholders that in SCI's income statement, we would have basically used borrowed funds to do the acquisition for the Puerto Rico business. And therefore, in the interest expense line, is the amount of money that we -- is the interest expense that we are spending to -- for the acquisition that we used to fund the acquisition of Acrecent, right? But there is no interest income line from that business. And so this effectively is the value that we have generated from the expenditure that is in the interest expense line. And so from a normalization perspective, this is showing great value for SCI where the decision to actually do this acquisition has started to pay off. And as we see later on, when we get to the outlook slide, Acrecent is about to start -- make its first dividend payment to SCI, which will flow back up to SCI shareholders. But I'll get into that a little bit later. On the next slide, I won't spend a lot of time here. This is just showing you the efficiency and management expense ratio. The first one being the efficiency ratio, which is for every $1 of revenue that SCI generates, how much of it goes out into operating expenses. And you can see that in 2023 and 2024 financial year, we were right on the threshold level that we have set ourself and we have now fallen below that threshold level down at 34.9% as we had promised to get ratio back down. And if you move to the next slide, Damani, you'll see that from a management expense ratio, which is now taking the total assets under management and looking at how much of that represents operating expenses, we are well within the 2.85% target threshold that we promised. And why are these 2 ratios important? Well, it's very important because the less money that goes out in operating expenses, the more retained earnings we have to utilize pay dividends and of course, to also reinvest in SCI and/or, if in the future, we so desire, if we need to fund another business opportunity that requires us to do borrowing and fund those borrowings via paying interest expense to do the deployment into any new business opportunities that will -- may arise, and we do have a few of those considering and I'll get more into that in the outlook section. Next slide. This is balance sheet. $73.17 million in shareholders' equity, which is up 1.5% from last year. And in terms of total assets, $221.65 million, which is up 11.6% from last year. Again, at the start of the call, I said we had some -- we achieved some substantial milestones, but we also had 1 or 2 disappointments. One of the disappointment, at least from our perspective, is the return on average equity, was only 5.9%. And this ROE is coming down from a double-digit rate because at the 9-month mark, we were at double-digit ROE because we have a target of 10%. Of course, in the current financial year, we look to regain our footing to push again to exceed that 10% ROE minimum threshold level. Dividend yields and APO price, which we said we want to with the minimum for that is 5%. We are at 5.3%. And our target is to really push dividends to get to beyond 7%. It might not be a straight line to get there, right? But that's our objective and our target to keep pushing. Next slide. Looking at the balance sheet, SCI is an incredibly low levered business and deliberately so. What the lower leverage does, it allows SCI to be able to navigate any type of environment. If you have a fast-growth environment, okay, even better. If you have a slow growth recessionary environment, then we have the flexibility because we are not utilizing a whole a lot of debt, right? So debt to total assets 0.5x. Right now the margin where we target to manage the business up from 0.33x last year. Asset coverage ratio, 3.05x. We have our minimum target of 1.5x, and this metric basically just says, hey, if we have -- if we borrow monies from debt, from whether it's bonds or revolving credit lines or whatever the type of liability, the higher asset coverage ratio, the faster or easier it is for us to repay those liabilities because effectively, it's saying that we have enough assets that we can convert those assets by selling them off and using the proceeds to pay back debt. And so we always want to maintain that threshold above 1.5x because that's what allows us to do. In our worst case scenario, if, for example, we can't raise -- if we can't go to market and raise new financing, then this is saying that once we have good quality assets on balance sheet, we can liquidate them and repay debt if required. And so this -- we always want this ratio to be above 1.5x. And obviously, as at the end of the financial year, we are at 3.05x. So we are twice, 2x above what the minimum threshold is. And from a debt-to-equity perspective, we really target getting to 1.25x threshold. We are at 0.57x. So we have a lot more room to effectively take on additional debt to fund the growth of the business. So obviously, we are managing the business, and we will utilize the excess capacity that we have on the balance sheet to do so. From a nonperforming investment ratio perspective, we're at 0.6% versus 0.8% last year and that's primarily because we were carrying two Stage 3 defaulted credits and the balance sheet for the first 3 quarters. And then in the fourth quarter, we took the decision to write off one of those assets. So we only have one Stage 3 asset remaining. And I'll get into that a little bit more when I get to the risk slide. Next slide. So now just a quick summary of investment activity. Investment in portfolio companies is now $209.77 million, up from $188.05 million. And this, of course, includes the investment that we have in Acrecent aka the Puerto Rico credit fund as well as $1.5 million in our Puerto Rico business impact fund. From a portfolio company investments, has it changed by much? This does not mean that we haven't made new investments. So just to be clear, we would have exited a lot of investments during the year and put on new investments during the year as well, right? I think we exited $22 million -- or $21.91 million worth of exits during the year. So we've got back that cash, raw cash in our hand from investments that would have matured or exited early, et cetera. And then we would have obviously deployed out that money back into new investments, right? So the reason why the portfolio -- number of portfolio companies hasn't changed, it's not that we're not doing investments. It's just that when we exit something, we redeploy the capital. New investment commitments during the year, $39.15 million versus $65.28 million. I guess this is, again, one of the disappointments that we had throughout the year in terms of not deploying as much as we would like because a few large transactions were delayed. And of course, as I said before, those are going to get executed in the current financial year. Yield, kind of went up a little bit, 15.7%, versus 15.1%. Of course, we expect that this yield is going to start coming back down in terms of new assets going onto the balance sheet in the current financial year. Likewise, we expect that the cost of liabilities that SCI is carrying is also going to get refinanced at a lower rate as well as interest rates begin the long trek downwards or continue to trek downwards, which started earlier over the last 15 months. Tenor, 1.4 years, average versus 1.5. Again, majority of our investments are not very long term and that's just based on the environment and the demand that we are seeing from companies who are looking for private credit investments. A lot of these being acquisition financing, receivables financing, working capital financing, et cetera. In terms of dry powder on balance sheet, $2.27 million versus $2.7 million for the similar period last year. I would like to note though that subsequent to the end of the financial year we would have exited, I think, $21-or-so million of additional exits subsequent to the end of financial year. And that capital, obviously, would have -- we wouldn't have that capital to use to deploy into new transactions as well as if appropriate, repay liabilities or pay down and credit lines, et cetera, to increase the volume of credit lines that we have available that we can then draw on or pay down whatever liabilities as the case may be. So that capital is actually would have been available subsequent to the end of the quarter. Next slide, now to the risk slide, I want to spend some time here so that everyone is very clear and understand when you say we are proactively managing risk, what we mean by that, and how we manage risk in Sygnus. So just to circle back to the financial statements, I said that we had passed into the income statement, $3.44 million in increased -- well, in impairment allowance and financial assets. And I'm going to break this down for you on this slide. So the first contributor to the $3.4 million would be charge-offs or write-offs that would have been crystallized, right? So the first item I want to discuss here is that would have charged off $195, 900 from one investment, which would -- was that investment in the construction industry, we would have invested $1.34 million, if memory serves me right. The asset would have been carried asset as a Stage 2 asset, work with the client diligently over like an 18-month period and the client came through in terms of the structural workout where we would have recovered $1.5 million. So this $1.5 million, obviously includes principal plus interest. And we work out a structured solution to say, okay, given how far the client has come, we mutually agreed and written off $195, 900. So we made money, and the client would have been satisfied in terms of the flexibility that would have been provided them on their business. So that was a good case in terms of the charge-off. So we recognize that fully in the other realized charge-offs at the year-end financials, right? The second portfolio investment is a Stage 3 asset that we would have been carrying since COVID times, and would have been trying to work with the client to see how we could help their business as well as recover our moneys because we are investors, right? Unfortunately, in this instance, it didn't work out. So in the third quarter, we moved against the assets that we had. And in the fourth quarter, we basically charged off $1.26 million. From the sale of those assets, we will have recovered about $316, 200. I think our initial investment was about $1.25 million or thereabout. So this one didn't pan out as well as we would have liked, but that's just the nature of private credit business. You're going to win some time, you're going to lose some time. So this $1.44 million in total from these 2 portfolio companies, and we had nil last year would have been a contributor to the $3.4 million in impairment charge that you would have seen -- impairment allowance in the income statement. So looking at the other item that -- so it's $3.44 million is the total charge-off onetime or recurring $1.44 million. So we have $2 million left, right? So this $2 million was driven almost 100% by one portfolio company, which effectively at the end in -- during Q4, the company -- well, the company would have been in discussion with the company and they made a proposal that they requested a change to the structural payment terms of the private credit investment as part of an overall enhanced business strategy that they proposed to the creditors. And if this is approved our creditors, then effectively because of the change in the proposed -- well, based on the proposed changes in the payment terms, which effectively involve, for example, deferring some of the interest payments to a longer time period, then we would effectively have to reclassify this portfolio company from a Stage 1 to a Stage 2 in a future period, meaning, let's say, this gets approved in the current quarter that we are in, then in this current quarter, we would have had to reclassify the company from Stage 1 to a Stage 2, simply because of the nature of the change to the terms, right, maybe extending the tenor and changing the coupon rates in terms of deferral, et cetera. So once we are making those type of changes to an investment, we have to change how much allowance we are carrying in terms of expected credit loss. So the way how ECL works. Stage 1, you use an ECL over a 12-month period, meaning what is the amount of loss you expect over a 12-month period. If you classify a asset as Stage 2, you then have to use, what we call a lifetime ECL, which is how much you expect over the entire life of holding the asset. So clearly, when you move a asset from Stage 1 and it goes to Stage 2 because you are using a longer time horizon, because the investment is a 5-year investment, you basically need to say how much you expect each of those 5 years, right? You expect to lose and add that up versus how much you expect to do over a 12-month period. So naturally, you're going to have a higher impairment allowance that you have to carry. Now this is an unrealized impairment allowance, but that's what you have to do for Stage 2 assets. So given where we were, during the fourth quarter and given where the proposal was in terms of being presented for approval, et cetera, we decided to early recognize this asset as a Stage 2 rather than wait until all approvals had come in, if they are coming. So the company was continuing to honor its obligations according to plan, right? They were still making their payments, et cetera. But despite this, given the high likelihood that if the payments -- if the new payment structure that they propose is approved, this would change the structure of the private credit investment, then we decided that, you know what, let's recognize this early. And so that's what we did. And this recognition would have increased ECL for this portfolio company by $2.5 million. And this $2.5 million is what drove the -- would have what -- is what would have driven the movement in ECL. Of course, the net change in the ECL that's unrealized came out in the end to $2 million. So if you look in the notes in the financial statement, you will see the balance sheet carrying value, $3.44 million. And the realized amount is $1.44 million, right? So the difference between the 2 is $2 million. So this portfolio company was $2.5 million or the net difference for the unrealized impairment allowance was $2 million. And the question is, why is it a lower number of $2 million? Well, it's a lower number of $2 million because remember, I said that we would have exited quite a decent amount of transactions during the course of the year, including the assets that we would have been charged off. And the way how ECL work, our impairment allowance work, once you charge off an asset or you exit an asset, then the unrealized ECL amount that you are carrying on the balance sheet, you are going to reverse the ECL carrying amount. So effectively, by reversing those other ECLs, which either crystallized one -- in one case or you successfully got back your money, then the ECL is then reversed. So remember that ECL is basically just an expectation. How much you expect and if you exit the transaction, then you reverse whatever the carrying value that you would have been carrying. And if you charge off an asset, you also reverse the carrying value that you would have been carrying. So that is what basically drove the impairment loans at end of the financial year. And with that big jump, which we felt it was prudent to take that charge at end of the financial year versus wait for some time in the new financial year to take it. So from a non -- total nonperforming investment ratio, having said all of that, we have one remaining Stage 3 portfolio company that represents 0.6% in terms of nonperforming assets at the end of financial year. We are expecting 100% recovery because this structure of the transaction, we have protection both in terms of what we expect to recover from the portfolio company itself as well as other protection outside of the portfolio company itself. We expect this to be resolved hopefully, before the end of this calendar year. I've been saying this for the longest time. But when companies are -- go through bankruptcy and they go through bankruptcy proceeding in the courts, it can be very, very long. So I don't want to make any more predictions about when we expect to get paid out. I hope that on the next earnings call, we get paid out, and I can just come and breathe a sigh of relief and say, hey guys, we have recovered our investment. And so we're still following up on that. We expect, hopefully, before the end of the year to be paid out. I think there is a plan for other creditors to actually get part of the -- at least half of the payment proceeds in short order with the following half to come later in the year but let's see how that time line works out between now and December this year. From a annualized loss ratio, SCI has only lost -- crystallized or realized 0.2% of its portfolio per year since the business started in 2017. So historical deployment over the last 8 years, $355.43 million. I think I misspoke. I think I said $525 million, it's $355.43 million. And the total realized historical losses over the last 8 years, $5.28 million. So if you take the $1.44 million charge-off that we have, plus $3.8 million for hotel asset that we did write in the middle of COVID, out of those 2 figures, we get $5.28 million divided by $355.43 million and then take that over 8 years, annualized historical loss ratio 0.2%, which is a phenomenally low realized loss ratio. In other words, every dollar that we get, we deploy, we pay back dividends, and we have only lost 0.2% of the capital that we have deployed, which is a phenomenal track record. Final thing, during the third quarter and in the fourth quarter as well, we also made a couple of changes that the margin would have also impacted ECL impairment allowance during the third quarter and somewhat in the fourth quarter would have included a new tool called Moody's CreditLens. This is a tool that the Puerto Rico business has been using for quite some time. And we transitioned this credit monitoring tool to SCI itself, which meant that our internal rating models of the portfolio investments we have to use our internal rating model to rate each portfolio investment and based on the rating of that portfolio investment, that is what generates, kind of inform how much impairment allowance we take for each asset, right, upfront. So we implemented that in Q3, which would have resulted in our impairment allowance, increasing during Q3 because we kind of -- so many portfolio companies were re-rated. And at the margin, the rating would have declined marginally for a few companies, which means that the amount of ECL that we needed to carry for them would have increased marginally, right? And we continue this process into Q4 into the year-end. So we are now complete with that. And so this one-off jump in -- or one-off increase due to the change in ratings at the margin, internal margin would have been now standardized across the entire private credit platform. So in the new financial year, where we are, we now have one view in terms of how we look at individual portfolio companies and what internal rating that they get, which is now an automated process. Of course, as I said before, these are unrealized, but we have to provide upfront for them. So this is a chart of the balance sheet ECL charge. And you can see that, as I just mentioned, in March Q3, which would have presented in the Q3 earnings call that due to the implementation of Moody's CreditLens, we would have seen an increase in the balance sheet ECL charge that we are carrying. And then the Q4 figure of that ROE of 2% was primarily driven by the big ECL charge for the portfolio company that we recognized early as a -- we reclassified early as a Stage 2 investment primarily because of the changes that we think will come to the structure of the terms of the private credit investment. Next slide. From a allocation exposure per industry, nothing has really changed here. Substantially diversified across 20 different industries, with top 10 industries accounting for 88% of the portfolio. Next slide. And from a regional exposure for the platform, Puerto Rico still remains #1 at 34.1%, Jamaica, 24.2%; Bahamas, 15.1%; St. Lucia, a tad under 13%, at 12.9%, and SSS Islands at 6.3% and we expect to maintain this level of diversification both from a industry level as well as from a country level on a go-forward basis as we look to expand and grow the business. Now to the final slide in terms of how are we intending to enhance shareholder value. Well, the first thing, it has to do with Puerto Rico. Now for the last, maybe 5 or so quarters, I've been really pushing the narrative around the Puerto Rico business very -- in short order, likely to become bigger than SCI itself. And we are firmly on that track. We are seeing where the level of profitability of the Puerto Rico business is growing. So we've gotten $8.85 million over a 2-year period, and we expect that this financial year, we could actually exceed that run rate. Why? Well, primarily because rates have started to come down and the Puerto Rico business balance sheet actually borrows in using variable rate, but it invests in fixed rate. And so what is likely to happen because it has a $100 million credit line, which is its main financing dry powder capability. It means that the liability side of the balance sheet is likely to get re-rated or likely to change faster than the asset side, right? And therefore, the margin between the borrowing cost and investment earning asset is likely to increase as rates fall. And this may trigger a faster growth. Obviously, putting our new assets on the balance sheet are going to be at lower rates. But I'm saying that based on the assets on the balance sheet, now they're going to take a while to run off the balance sheet and -- but the entire credit line is repriced and then rates move down. And so the margin spread is likely to be bigger. So we are generating 17.7% at the moment under investment and that will [indiscernible] will remain in high double-digit, or it could increase slightly. So it's a very, very good business that is growing. In terms of what we can look out for, the Puerto Rico business is likely to pay its first dividend back up to SCI sometime perhaps by the end of Q1. And of course, we just started September. So by the end of Q1, September or perhaps early fiscal Q2, I'm not sure exactly when, what we are expecting that there will likely be a dividend that will flow. So this is the true test of the investment. We have been showing how much net profit the company has been making. Well, when it start to pay dividends, which is something that I have been saying for quite a while now, that will be the true test of where these profits are really, right? Just kidding. That -- the net profit is coming back as dividends up to SCI as a shareholder. Finally, credit line is obviously $100 million, and I spoke about the fact that as rates decline, which we firmly expect them to do, the cost of that credit line will get cheaper and that will lead on to the benefit of the business. Notwithstanding the $100 million credit line, the Puerto Rico business led by excellent CEO James Connor, is also exploring some other very interesting capital raising strategies to grow and expand the business and to bring a new investor class into that business that will see the business grow from strength to strength, right? Some of the other things I had also 2 years ago said that our focus for near term would have been to ensure that we kind of start to dominate the Puerto Rico market. And once we have gotten to a decent level then we would perhaps start to consider expansion beyond the borders of Puerto Rico. So that is something that will start to come on the horizon, certainly over the next 12 months or so as we move into our new strategic session. The business is now going into -- or will be entering new strategic session in the last quarter of the calendar year. And that's going to be something that will be put on the table to see are there opportunities to now expand beyond the horizon. So once these things start to unfold, I'll bring more information to shareholders, of course. But I just want to put that on table in just ensuring that we are following the trajectory of the time line in terms of how we are looking at strategy. From SCI's growth path, the $1 billion in private credit transaction across the division that we have spoken about, we're well on our way. I think we have participated in over $500 million and counting now. In the just concluded fiscal year, we kind of didn't do as much volume as we thought we would have done at the start of the year. Again, this had to do with delays in large transactions that either got delayed and pushed back [indiscernible] that fell through. And we expect that we will catch up over the course of this new fiscal year. Core revenues, we had a target of $12.5 million. I think it's safe to say we achieved that target, $15.39 million. So we will, of course, try to maintain or increase that level in the new financial year. ROE, 10%. We were doing fine at 12.7% for 9 months and for the third quarter, 10%. But I think primarily driven by the early recognition to Stage 2 and the decision to take that advance impairment allowance upfront, put paid to that. So our net profit would have dragged us back down to 5.9%. Of course, it's a new financial year, and we will dust off and go again to try and achieve that 10% ROE. EPS, 20% annual growth, of course, we are down 28.1% versus being up. We were at -- on a good trajectory for 9 months, we were at 16.5% at the end of March. Again, I already explained what would have put paid to that at the end of the fourth quarter. So that's still up an item in progress that we have to dust off and go again to try and achieve that target. Dividend yield, I think we are -- we have been maintaining that steady pace. Dry powder, we would have during the financial year, had quite a different, a phenomenal year in terms of raising $33 million in perpetual preference shares, which is the largest capital raise for a perpetual preference share in the history of Jamaica Stock Exchange by SCI, as an 8-year-old company, that was a phenomenal achievement. So we thank all the preference shareholders who would have participated in that. And thank you very much for your confidence that you continue to show in SCI. We would have at the start of the year said that the WBC, World Business Capital, $10 million facility that would have been approved after over a year of due diligence that was guaranteed by U.S. Development Finance Corporation, that transaction, even though we think something may come of it, it's still on hold. So we'll just continue to watch and see what will happen if anything will change over the next medium term or not. That being said, we are -- we have been speaking with other like-minded partners. We are evaluating 2 term sheets, I think, one for $30 million and one for $50 million. We'll see whether or not we can get those transactions across the line. Incidentally, I have to say that SCI would have undergone due diligence from, I don't know, 1, 2, maybe 3 years or so multilaterals as well as other institutional type investors over the past 12 to 15 months, and some of them as recently as 2 months or 1 month ago, right? So SCI has been undergoing a tremendous amount of due diligence because we are -- well, we are really pushing very hard to let this business be a really world-class business. And for us to do that, we need to attract external -- an external investor base and to attract internal -- external investor base, we have to open the books to those external investors for them to come and shake the tree, so to speak, do their evaluation and build those relationships and then close a transaction with one or more of them. So we are really pushing very hard, and we have undergone a lot of due diligence. And of course, this level of due diligence do enhance our business practices and open new avenues and opportunities for us to expand the business model of SCI in areas that we might not have been thinking about before, right? So as I said we are directly into item #3, which is new business partnership, which is, out of one of these due diligence, which is with a multilateral financial institution, I think it's safe to say that we -- SCI has a new financing partner, that will -- is going through the final process to provide $10 million of financing to a business that SCI will effectively -- I'm going to use word partnering with in a particular business, that's an asset-backed business. And the business in question has submitted a business license application, which is under review. Hopefully, we get approval, hopefully, before this quarter that we're in, ending September is concluded. That's our hope. And if that were to come to fruition, it means that, that new business would start to operate sometime during Q2 of SCI fiscal, which is Q4 of current year, so sometime between October and December. And that initial $10 million financing would be the first, we hope, of multiple -- a multi loan financing as well as the first financing of other financing that, that business would expect to get from external investors as this particular business grows and expands and this is in the English-speaking Caribbean. So we would expect that whatever capital that SCI would put into this business would generate substantial double-digit return on invested capital, similar to how Puerto Rico is generating double-digit return on invested capital. At the same time, we are also exploring other business partnerships that can be forged to grow the business. So when I have more information on that, I'll provide additional information. That's all I can say for now. And finally, share buyback. We didn't do -- we didn't have an opportunity to do much activity during the financial year. I think in the current financial year that we are now in, we will have an opportunity to do more activity. As I said before, based on how much deployment we did and what we were expecting to do in previous year that perhaps influence our decision as well as share buybacks. And we kind of expect a different -- have a different expectation for the current year -- financial year that we are in. So in summary, I think we achieved quite a number of new milestones during the year, as I intimated at the start. One of the new milestones is really this new business partnership that is -- we are on the cusp of launching for SCI as a business partner and the milestones and revenue, et cetera. The one thing that kind of we underperform on would be the amount of capital we actually deployed in the year. Of course, we intend to rectify that. And obviously, the fact that we took the decision to reclassify early asset that we think once the terms of the private credit investment change in the manner that we suspect that they will change, then we have to use lifetime ECL, which automatically means that we have to go to Stage 2. And so we will work with the client on that. But overall, we think the business has a very bright future. Growth is very strong. And we are looking forward to the first dividend that will be paid by Puerto Rico. Of course, the Board of Directors of SCI will meet, I think, on the 12th to consider and if seen fit, make another dividend payment announcement. Yes, so that's the end of the presentation. I will now take questions.

Thank you for that very informative walk-through, Jason. I'm sure that patrons on the call, investors and like appreciate the clarity that you brought to our past, current and future performance and trajectory. We will now move on to the question-and-answer session. I see questions in both the Q&A as well as the chat. So I'll remind everyone to utilize the Q&A option on both the YouTube chat and the Teams' chat. Otherwise, if having any difficulties with that, you can put it in the chat, and I will get to those questions. I'll kick off with the first question here. What is the anticipated time line for the dedicated asset-backed investment company to start operations within the English-speaking Caribbean territory? And will it have a material impact on the top line and bottom line of SCI?

I could have guessed that would have been the first question, right? So like I said, the business license is under review, was submitted a couple of months back, a month, maybe 2 months now, I think. So we hope to get approval, September, October. If we get approval -- so once we get approval, we would expect to be up and running within like, I would say, 30 to 60 days from approval date. We have everything lined up, right? We have the pipeline lined up. We have the first set of funding lined up. We have the structure that we want to utilize lined up. We have familiarity. We have everything is lined up, right? We're are just waiting on, as I said, the business approval. So I would say between 30 and 60 days, we would be able to execute our first set of transactions, would be able to start operating. Obviously, would need to -- approval process and et cetera, and maybe if the company requires a Board of Directors, et cetera. So all of those things we can't really execute them per se until our business license is in place. But 30 to 60 days after business license is what I would say it would take us to do.

Okay. Thank you for that, Jason. The next question is, I guess, short and sweet. Let's see. What is the forecast for growth in interest income over the next year or 2?

So interest income. I mean, we would expect interest income to just to continue growing. Probably -- that growth is probably going to be high single-digit growth rate. It could end up being double digits, right? It all depends on the volume of deployment, which is going to be driven primarily by whether or not we can get -- so we are trying to get like -- we have 2 discussions now trying to get -- trying to see. One is for $30 million, one $50 million. If we can nail down one of those lines, right, one of those financing facilities, if we can nail down one of them, it would -- I would say easily, we would be double digits, right, very easily. As I keep saying, the challenge that we have as a relatively small Caribbean operation, relative to, say what's happening in the U.S., right, is ability to access dedicated credit lines. And the reason why we need credit lines, and I keep saying it, again for those who are here for the first time, is if I borrow $1 today, if I need to fund $1 tomorrow and I can borrow that $1 today, for the $1 tomorrow and if I exit the $1 Friday, meaning I sell up the asset and I don't have anything to invest in until next week, Friday. And once I sell off the asset Friday, I can repay that $1 Friday. And then next week, Friday, when I need to invest again $0.50, I can borrow up to $0.50 and keep doing that over and over. I will make a much, much bigger margin, right, on the private credit activity I just described. But if I have to borrow $10 today and then invest $1 tomorrow, $1 Friday, $1 next week Friday, $1 next month Friday, that's not a very efficient way to -- for us to invest, right? Because obviously, I'm paying interest expense on the $10 that I borrowed today and all of it upfront, while I would have only deployed $1 tomorrow and $1 next week Friday and $1 next month Friday. So I would have invested $3 over 1 month, and I'm earning interest on $3 and I'm paying interest on $10. And even though the interest on $10 is a lower rate than the interest I'm earning on $3, the volume of $10 is much bigger. And so I end up with what you call a negative carry for a long period. So that's the reason why we're pushing very hard. That's the reason why we have done so many due diligence with so many prospective financing partners trying to see which one will actually be flexible enough to allow us that opportunity to get what I'm going to call a big credit line because right now, our credit line is $8 million, which is compared to what the credit line that Puerto Rico has of $100 million with their balance sheet, half of our size is crazy, right? So we're pushing there. So to answer the question, if we are able to unlock a revolving credit line, which we are pushing hard for, we will grow double digits easily. If not, it's going to be high single digits. So what we are projecting right now being cautious is high double digits -- sorry, high single digits. And optimistically, if we get over the line on one of these facilities, then all bets are off, we are off to the races, so to speak.

All right. Thanks for that, Jason. The next question is in relation to SCI share buyback program. Effectively, the patron is asking, why didn't SCI buyback initiatives during the 2025 full year, well, financial year? And will SCI extend the share buyback? And will the company ramp up the program shortly?

So the answer to the last part of the question, it will be extended. Well, let me not speak out of turn because the Board has to approve the extension. But yes, I suspect that management will go to the Board and say extend it, absolutely, on that. In terms of why we didn't, well, as I said before, if you look at the deployments that we were doing because we were kind of underdeployed, we felt it wasn't the right time to use excess capital to buy back shares with that state because the level of net interest income, et cetera, that we would expect, even though if we ended up with a record wouldn't be as robust, right? And so we needed to kind of conserve our dry powder and try and deploy as much as possible to try and get that deployment up. Hopefully, in this financial year, when we have -- hopefully, we'll have a much bigger pipeline of dry powder so that we can get those big transactions across the line and then we will obviously have excess interest income to utilize to buyback shares. So that's what really drove the decision maybe.

Okay. And another question, Sygnus Credit adjourned its Class C and D preference share meetings last week. What is Sygnus Credit doing to ensure that the necessary take-up of preferred shareholders is met to carry out the business of the meeting? Also, would SCI seek to refinance if the threshold to the change of terms is not met?

Thanks for that question. So I should provide a little bit of background. So maybe it's because we were a bit too ambitious, right, because we should have perhaps started the process from early July, all right? And we would have got nobody over the line, right? Because basically what happened is, during August, 2 combination of factors occurred. One is half the people weren't available. You call they're not -- I mean, they've gone on vacation, drinking rum and sitting in the sun. And two, the level of resources available to make the calls during August, is the last part of August that those resources fully came on stream. So I guess, pretty early on, we realized that we kind of made a miscalculation and I take responsibility for that. We should have started it very early in July, August, let the date actually be a date in September because what we have seen in terms of the run rate since that time, since literally the last, I guess, 8 or so days in August was pretty strong. So in terms of what we are doing, well, we have been making the calls along with our lead broker and contacting the clients, right, who have all been now `coming back off vacation and everybody is now amped up and people are now back in the normal mode of doing business and doing investment and having conversations, et cetera. So we have been doing the rounds. The question -- so we expect to get there. So the question is, what if we don't get there? Well, yes, I mean, if I back up and say the reason why we asked for the extension, is very simple, right? So in the more developed market, we have what you call -- and I'm going to use some terms, we have what you call shelf registration. And what the fancy term shelf registration mean is that I can go and register to -- register for multiple capital raises at one time. So I can go and say, listen, I intend to do these 5 raises in these tranches and I make one registration, right? And you know that, okay, when 6 months gone, I made the first capital raise, when 12 months gone, I activate the second and the third, right? So basically, what you do is like you put stock on our shelf and store them. So you put them, you create your shelf and then you take the stock out of your shelves one by one as needed. So that's our shelf registration, right? Unfortunately, in [indiscernible] we don't have that process as of yet. And obviously, we'll encourage regulators to get to that standard and not criticizing them or anything, they have been phenomenal and have worked with us every single time. So it's not a criticism. I'm just saying the state of our market. So because each time we want to raise capital, we're going to have to go back to a very long process, file a lot of information, take a long time to get reviews and then start our process. If we have investors who are already in notes, the simpler and easier method is simply say, well, ask those same investors, are you willing to extend your note. And there may be investors who want to or don't want to extend, and we would have to obviously make preparations for those who don't want to say, okay, we can pay out. But those who do want to, okay, no problem, people vote, and they agree to extend the term of the facility and the ones who actually have liquidity needs and may need to get back their cash, we make provision for paying them back. But then the others, they can continue with the note, right? So that's the reason why we are doing the note in the first place. So if we don't get success up, if we don't get over it -- this threshold, obviously, what we'll 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. So [indiscernible] it's -- we're adopting this approach because it's simpler and it's cheaper as well. So for our shareholders, it's cheaper because it's less money that SCI has to pay to do a new capital raise versus an extension.

Thank you for that. I'll take some questions from -- coming in from the YouTube chat and then come back to further questions in the Teams chat. From YouTube, [ Jerome ] asks, will the dividend from Acrecent go directly to the cash used to pay dividends by SCI?

Very good question. I suspect that it will form part of the pool of the cash that SCI will be paying. Money is fungible, right? So the dividend payment that's coming in is just cash to SCI. And obviously, SCI will use all available cash resources to pay dividends, assuming that the Board approve. I don't want to pre-empt the Board decision, right? But the answer to your question would be yes. It would form part of the cash that SCI uses to pay dividends.

And one additional dividend question from [ Jerome ]. You achieved the dividend yield target of 5% at the APO price for a while. What's the new target? Or is it that there are no plans to increase it much more beyond that?

No, no, no. So I'm happy that, that question is asked. We do not have a 5% dividend target, so just for clarity, the target is greater than 5%, right? So if we can get to 7%, 8%, 9%, whatever percent, similar to what the companies in the U.S. are doing, I can go and buy a private credit company in the U.S. and get that type of yield. So the same type of trajectory we want to be on. So the target isn't 5%. So when we get to 5%, we're not sitting back and say, oh, we achieved the target. It's just a minimum threshold, right? So as high as we can get to above 5%, that's the target. So there's no new target. We're just pushing. Once the business is growing and expanding, of course, there will be times when the business will face challenges and have to navigate challenges, et cetera. But what I'm saying is that once the business is growing and achieving its objective, then the objective is always to push where the minimum yield that we want to be paying at least 5% on the APO price. So we want to get as high as we can possibly go, which is why we are doing all of these new partnerships and trying to get credit lines and all of those things because all of those things, if they are successful, will feed into the amount of net profit that SCI will have, which then means that [indiscernible] payables, we can get more profit, right? Because at the end of day, if our costs are down, our net interest income is higher, is more cash flow we're getting, therefore, is more dividend we can pay.

Thanks for that. Question from the Teams chat. What will drive the scaling of the Acrecent Financial business in Puerto Rico? Can you shed some light on the competitiveness of the private credit industry in Puerto Rico and how Acrecent is positioned there?

Well, it's very competitive. I think Acrecent is probably number -- I don't know, it's fluctuating between #1 and #2, right, in terms of deal flow, transactions being executed. And in terms of size, I think it's probably #2 or #3 in terms of AUM. But that being said, since Sygnus would have acquired the fund, the manager, right? And Acrecent in Puerto Rico is now recognized as a Sygnus brand. So it's now -- everything in Puerto Rico is now Sygnus Credit Investments. This Sygnus Credit Investments in Puerto Rico, this Sygnus Credit Investment in Puerto Rico and the brand name of Sygnus has actually helped to propel the exposure of the Puerto Rico business for SCI. And with the phenomenal leadership that Puerto Rico has, they have been actually maximizing the Sygnus brand. So the Sygnus brand is now very well known in Puerto Rico. We have gone there and had seminars along with the team, et cetera and they are pushing and expanding the footprint of the business in Puerto Rico. So in terms of strategy to grow the business, hey, we have a big origination vehicle over there. So origination is not really an issue. We just have to ensure that we continue executing important deals, solving the problems for our clients, being very okay with what the client is facing, I mean, solution oriented. So for example, the Puerto Rico team have been the first private credit team to actually solve problems for clients using tax credits, right, which is a big deal to many entrepreneurs in the Puerto Rico market. The social footprint of the Sygnus Credit Investments business in Puerto Rico by giving back to the community, investing where it matters most, education, et cetera. So hospital -- funding equipment to hospitals, solving some real life problem and becoming a fabric of the Puerto Rico financial architecture. So the team is very good, and they have built a tremendous exposure in the market, have very strong relationships and they have a $100 million credit line, right, from one entity. So that should tell you the level of respect that they have. And so what they are now doing is they are exploring other channels through which they can raise additional capital as well as other channels through which they can deploy additional capital. And of course, the entity is SEC registered, right? It's no longer -- so it's no longer a tiny shop. It's -- they're playing with the big boys, so to speak, because they are now SEC registered. So let me not say too much more outside of that. So like I'm saying, the additional channels to explore additional means for additional origination opportunities and additional financing by getting new partners in who will provide capital. And I don't want to see much more than that. But just rest assured that the Puerto Rico business is -- it's in a $100 billion economy. It has an opportunity to go north or go south, right? And that's all I will say for now in terms of what the next 1 or 2 -- 1 to 3 years hold. I guess I'll stop there before I misspeak.

Sticking with the theme for Puerto Rico just a bit. Jason, can you give a lot more context of the business impact fund, such as the life and purpose. Also, what's the additional future commitment to the impact fund?

Okay. So that's a $125 million target raise fund. It's 10 years. And it's really raising capital to deploy in Puerto Rico itself, the way our SCI is invested with $1.5 million so far is that we take a junior tranche position, right, which means that by being junior in the fund, we get a higher expected rate of return because effectively, the senior investors in that fund get a fixed rate of return. And obviously, when the fund deploys capital, let's say, deploy money at 12%, 13%, the senior investors in the fund get, let's say, a 7% return, which is fixed. Then the difference between the 7% and the 12% after you subtract all expenses that will accrue over time to SCI and other type of junior investors. And so when the fund is being wound up, that money, which is called carried interest, then gets paid to SCI and other junior investors. During the interim, though, SCI continues to receive like a 7% cash distribution on a semiannual or quarterly basis. So the way SCI has invested is that it will generate double-digit return once the fund does below because it is in the fund as a -- I guess you could say a quasi-equity investor. So that's how it's structured. In terms of additional investments. As I said, we made -- as the fund get bigger in size, we put more money in. Right now, we have a commitment for an additional $1 million to $1.5 million. And the fund last year started at $11 million. I think the capital commitment now is at $28 million, and the target is to get to over $100 million. So we expect to increase that over time.

Okay. Thank you for that. Move to some SCI questions here. While SCI has historically had a low charge-off [indiscernible] portfolio, the impairment charges tend to have significant impact to the P&L. Even with the inclusion of Moody's Lens, what has the risk review process revealed recently, i.e., the portfolio companies and stability in this tough environment?

Good question. So I mean, Moody's itself don't really reveal anything per se outside of what we already know because remember, the risk management process involves multiple tiers. So we have a risk management committee meeting with our internal committee meeting. We go over the entire other assets in the portfolio, look at the ones that are experiencing challenges, devise some kind of plan to say how we're going to manage the exposure. In that same frame of mind, we also have what you call a high-risk committee that effectively looks at assets that have challenges and those challenges are not just normal challenges. They are challenges that, for example, will require some kind of restructuring of the investments, right? So this restructuring will normally be, okay, the current structure of the terms of the investment, let's say, it was a 3-year kind of investment, and the rate was 14%, right, paid quarterly. Then the restructuring, I might say, well, we need to change by extending the tenor because we won't get repaid in 3 years. And the current portfolio company can't manage 14% cash coupon, right? So we're going to reduce the cash coupon for simplicity to say 5% and for 2 years and then the difference, which would be 9%, we defer that payment in time and start collecting on that 2 years from now, but we are going to want something in return for giving that flexibility to the client. And it might be that we want them to put in additional injection of equity capital or if they don't have the injection of equity capital, and we do the maths and see that by deferring some of our coupon that allows the client flexibility, then we want something in return for taking on that risk, like we want a share of profit, share of revenue or it might be that the client may be looking to do a public listing, and we are going to apply some kind of conversion to our debt when they are doing the listing to make back the money that we would have given up because that [indiscernible] we are doing a present value of cash flows, right? So we do that type of stuff, right, which Moody's CreditLens in of itself is going to reveal that. What Moody's CreditLens is doing is saying, okay, based on the financial health of the company, this is the rating, which is following a Moody's credit rating profile, right? And of course, Moody's credit rating profile, Baa1, Baa2, Caa1, BB, et cetera, right, Baa2, et cetera. So what that does then is basically automatically reference internal rating, which then generates a credit score that then says, okay, when you're looking at ECL, this is going to be the expected impairment charge. So our internal monitoring process simply utilizes that tool as part of risk management process. We also have quarterly risk management -- investment risk management committee review. We have external members of the risk committee looking at the portfolio and primarily looking at the challenging credits that exist. Of course, during the interim, we'll be checking covenants and visit companies, we check collateral, the whole 9 nine yards, right? So just want to say that Moody's system itself isn't enough itself by itself revealing anything per se different from what we would have known before, but it does help with the enhancement of the monitoring. So internal health of the portfolio, obviously, we have assets within the portfolio that obviously are facing challenges, right, which is why we have Stage 2 assets, which are primarily there because they are going through a restructuring exercise. In some instances, portfolio companies will recognize the challenge that they're having, and they come to us and say, listen, I want to restructure, and we enter the negotiation of how we do the restructuring. In other instances, we are the ones who say, hey, you are not performing according to plan. You're having difficulty making consistent payments. And therefore, we are coming to you to say you need to -- we are going to put a restructuring proposal on top. We are going to require as part of that proposal that we have Board seats at the company, or Board observation rights. We're going to require additional injection of capital. We want the ability to -- we have to be kept abreast of any key expense changes in management. So there are a whole modus operandi in terms of how we manage risk within the portfolio, which is no different from how any well-run private credit company will manage it. What I would say is that over the past 18 or so months, we have been building and enhancing and reinforcing our risk monitoring process and protocol. And we have also taken on board some of the items that -- or some of the suggestions that would have been brought to the fore in some of the due diligence that we have undergone from multiple discussions with multiple -- with many multilaterals and institutional investors who are international. So all of these have actually helped us. We have also tightened upon the -- what you call the investment memo that we use to evaluate an original credit also look to say, okay, concentration limits don't be too overly concentrated in particular industries or particular individual investment companies, right? So risk management is a entire process and not just a simple thing around Moody's CreditLens, but Moody's CreditLens does assist and what it does is standardize the way that we look at risk right across the entire business. But that's a very good question. I hope I didn't evade the question. And if I didn't answer it properly, just please rephrase it or ask the part that you need answer because I went into a long [indiscernible] to address, just to make sure that I explained it.

Yes. Thank you, Jason. Actually, the patron said it was a great explanation. So -- another one. So earlier in the presentation, we would have showed that debt to total assets is near the threshold of 0.5x. However, net debt to equity is below target. Will SCI consider revising the debt to total asset target?

Good question. I mean our debt to total asset work, it's -- if I borrow money and I use it and fund an asset, the ratio basically remain constant. So the ratio will fluctuate from time to time, depending on how much cash we have or don't have, right? So we're not going to revise that debt to total assets target. I mean, sometimes we creep a little bit above it. But generally speaking, and I think this question was asked maybe 5 quarters ago, if my memory is working properly. So if I borrow $1, right, that's debt, then I take the $1 and I invest it in $1 of asset, right? The $1 debt are probably, let's say, I get charged $3 on it, but the $1 asset, I start to make $10 on it, then what's going to start happen is that [indiscernible] payables, my total asset ratio is going to increase because the debt that I borrowed -- the asset that I take, the money that I borrowed to invest in is increasing at a faster pace than the liability side. I hope -- let me say that again, I borrow $1. So we have 50% debt, $0.5 now, right? I borrow $1 and I have interest expense on it. But then I invest $1, and I get interest income on it. And the interest income is higher than interest expense. So [indiscernible] payables, my total assets is going to be increasing, right, at a margin because I'm earning more on the asset than on the liability side. And unless I get some big charge-off, which is crystallized, my asset value which is always going to be higher than my liability side. So we don't really need to change it. Once we increase debt, what I'm saying, once we increase debt, the asset side of the balance sheet will increase faster than the liability side and therefore, the ratio will come back in. And we have seen this a couple of times before.

Thank you, Jason. Another question here, a lot of questions for this earnings call. When will Sygnus Credit PR close the ring-fenced assets in Mexico and Panama?

Very good question. I'm happy about that [indiscernible] as well, right? So we actually -- at the end of the financial year, the Puerto Rico team would have taken a decision to write off about $1.6 million or so of those assets. We had -- we have [indiscernible], we have collateral, right? However, it's hard to get to the collateral. So basically, been going to court for years, right? And we don't see the court cases ending anytime soon. So we can't get access to sell it because it's being held up. So what the team did was basically say, no, let's recognize this loss now, write it off. And then hopefully, in the future, if court case get resolved, or whatever the holdup is get resolved, then we can write it back and it does flow directly to the income statement. So they did write down some of that. So the amount that's left is now substantially less than before. And perhaps that's one of the reasons why we didn't make even more as well as what has happened [indiscernible], Puerto Rico could have actually made a lot more profit. So they decided to take that charge from now upfront to clean the slate, so to speak, which then prepares the runway for the future, you don't have that to contain in future periods. So that's actually a good question. So I could provide that level of clarity on that.

Thanks for that, Jason. In the theme of additional clarity, could you provide or give more context [indiscernible] the WBC funding, which was paused with the change in administration?

Yes. So we got approval and then it was just a matter of getting ready for disbursement. And when the administration changed, basically, all funding programs got frozen. So we are waiting -- I know that there's a line, there's a -- like things are happening, but there's -- because everything was frozen for all transactions, it's a very long list of transactions that have been slowly coming back on stream. And it's a very long line, right? And we don't know where we are in the line because remember, we are -- our [ $10 million ] is just a drop in the bucket, right? And in the grand scheme of things is probably not as important as many other transactions that have been delayed. So I suspect that at some point, we will get our turn. So we are just waiting for that to happen, but there's nothing else we can do at the moment other than to move on to -- have negotiation and discussion with other like-minded institutions. And of course, as I said before, another multilateral has effectively is now as I said looking to be a Sygnus' partner, pretty much all done and dusted. We're just waiting on that business license. And then we will have formally a multilateral that is SCI partner, which will be the second one because it's just that U.S. DFC, the funding has been -- it's [ clogged ] at the moment.

Thank you for that, Jason. And I think we've answered a lot of the questions that have been asked. I will ask just one more question that I see here in the chat. And that is what are the risks and opportunities associated with the USD 1 billion pipeline of private credit transactions?

With the $1 billion private -- with what, how much?

USD 1 billion in pipeline of private credit transaction.

Risks, well...

Yes and opportunities.

Well, I don't want to say that there are any risks. I mean, basically, there's no risk outside of normal risk that exist when you are investing in credit, right? I mean things can blow money, right? So for example, any transaction -- what are the transactions that we have, I mean, we could wake up one day and something happened to our business, and it can meet its commitment, and we get hit, right? But that's always the risk that we take when we are doing credit. And the trick is, well, are we good enough such that we don't constantly have hits that cause us to lose money constantly because as was demonstrated with our Cayman investment during COVID when we got hit and at that time, it was a big hit, right? But we have recovered from it, and we have improved and enhanced and moved on from that. So these things will happen from time to time, but it's just a question of our robustness of our risk management process. So we're constantly improving. And in terms of opportunity, obviously, the key here is just to get a large pool of accessible capital because if we get the capital, we can deploy it. And so that's a big opportunity. We have to close on one of these international facilities to help us to really do major damage in the region with private credit. And hopefully, we get across the line. Hopefully, this year is the year, we get across the line in a big way in terms of our revolving credit line. I mean we are pretty much across the line in getting a multilateral financing facility already. I mean we have 2, one of them is stuck in the pipeline and the other one is within our business license. What I'm talking about getting like a big $50 million or $100 million or even $30 million of revolving credit financing facility that is structured using floating rate. That would be a big deal. That's what we're pushing to try and get. Yes, that's a big opportunity for us.

Okay. Okay. I think we've answered almost all the questions that have been asked both across the YouTube chat and in the Teams chat here. Thanks again, Jason, for the clarity that you've provided on the business performance, trajectory, et cetera. I'd like to remind everyone that the recording for this call as well as the presentation deck will be available on both the Sygnus Group's website and the YouTube page. A special thanks to you, our attendees, patrons and our listeners. Thanks for the time -- sorry, thanks for taking the time to listen to the presentation. If you have any lingering queries or questions, we encourage you to reach out to us via [email protected] or [email protected]. And I'd like to wish everyone on the call a productive rest of your day and week. And to all of you, goodbye.