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

[Operator Instructions] And 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 Credit, who will be guiding us through the presentation this morning. Over to you, Jason.

Thanks, Eboni. Welcome, everyone. I'll talk about observe as usual. The discussions that we're having here should be really be referenced back to the audited financial statements and the management discussion and analysis that is on the JSE website as well as Sygnus Group's website. Okay. Let's jump right into it, starting with just given a background on the journey so far for Sygnus. Of course, everyone knows that the company would have done a private placement in 2017 and IPO 2018, additional public offering in 2021. The foray into Puerto Rico in terms of the African acquisition in 2022. We had a big milestone 2024 financial year in December when we raised $50 million in preference shares using Jamaica Stock Exchange. And then this financial year, we are setting some milestones because we can -- we have formally announced the first strategic partnership between SCI and multilateral financing partners, which is IDB Invest. So I will go that later on in the outlook section and strategy section, but that's a big milestone for us, and we have been at this now for maybe almost 2 years, trying to knock on these doors. The first one opened and we are in good about additional ones being opening very shortly. In terms of the overall platform, just again, I want to give some color, the platform deployment, and this is SCI since inception across Acrecent Financial [indiscernible] SCI would have acquired a majority stake in Acrecent in 2022 February, right? So you add those two numbers together, you get $653 million in deployment, which is a pretty hefty number. Of course, Acrecent by itself has in excess of $700 million because it has a long history, right, about 21 years or so. But I'm just talking about reference here is the element with regard to when SCI did that majority acquisition in February 2022. So that's what I mean by a platform, right? And similarly, if a platform exits $374 million cumulative from [indiscernible]. For SCI, in particular, I mean Acrecent primarily uses revolving credit line in $100 million. SCI self has raised in terms of discrete capital raises, excluding revolving bank credit lines, approximately $322 million and that includes all equity preference share and debt capital. In terms of where the platform is in terms of portfolio, that's now USD 315 million in total across Puerto Rico and the SCI portfolios combined. Of course, [indiscernible] $19 million when rounded up $18.7 million in actual [indiscernible]. And the preference share dividends, which we do have some perpetual preference shares, and we have other ordinary preference share, but I just want to give some insight in terms of the ability for SCI to put back cash to shareholders as well as to preference shareholders as well. We are not ordinary shareholders, obviously, but nevertheless, that $17 million. So if you were to tally those two numbers, that's $35 million in cash since inception that has gone back to those two groups of investors. And of course, I'm not including the debt investments here, right? Now jumping into the actual financial highlights. That our 2026 financial year-end. 6 items I want to look at here before we get into the actual results themselves. First one is earnings for Acrecent as we have been [indiscernible] Acrecent now for maybe 7 quarters straight, where we have pretty much been indicating to shareholders and the market in general that the intention is to scale the Acrecent business because it's in a pretty large market. And the reason why the acquisition was done is to; a, get diversification but also get access to transactions that simply aren't available in English-speaking Caribbean and get access to scale. So if you look at total investment income for Acrecent, that was up 34.6%, a very healthy growth at $11.29 million. And if you were to go further and look at interest income, I mean, that's almost $20 million, right? So Acrecent, right now, as we speak, you could say that depending on what metric you look at, it has overtaken SCI in terms of earnings power. So it's right on the cost of doing so. So the net profit figure for the year was a record USD 8.1 million. That is up 57.3% from last year. And as I show in later slides, the earnings power has just been tremendous. So the acquisition and reorganization has really born substantial fruit. In terms of return on invested capital for SCI, that's a very high double digit as you can see, almost 25%, right? And therefore, it makes a lot of sense for SCI to continue supporting this business by putting additional capital in once it gets an opportunity to do so. Of course, in terms of total platform requirement [indiscernible] Acrecent business and the SCI [indiscernible] would have crossed $100 million mark, $107.14 million, which are [indiscernible] like a USD 100 million deployment across the Caribbean is a big figure. And we are happy [indiscernible]. In terms of total platform while we are deploying capital, we are also getting cash back, right? So in terms of total platform that exits that was $47.71 million [indiscernible] SCI itself [indiscernible] of that. So I have the [indiscernible] of the portfolio so to speak. And then into the realize that we knock [indiscernible] which we expand 0.2 SCI service [indiscernible]. We knock on wood we hope to keep the realized losses down to a minimum. Of course, from time to time, we'll have to go through the structure and in some instances, of course, we have write-offs and other instances we have [indiscernible] right? But once you are in the financing debt finance business, those things are going to happen. What is most important is how you manage that risk on a go-forward basis, and how you ensure that your balance sheet can manage any unforeseen circumstances. Now to the performance highlights. Total investment income for SCI $19.68 million, up 27.9% and that net investment income, up 39%. But before I go to net investment income, I want to make a point about total investment income. In Q3, we told shareholders on the earnings call that the investment income figure at the time was trailing our expectation because net interest income was trailing at that time, right, if you recall. And we said that in Q3, there was a one-off adjustment that had to be made, which was a big number. And we said that at that time that this is just a timing difference, and it will adjust by year-end. Our hope was to adjust by year-end. In Q2 -- in Q1, sorry, we would have also indicated shown that interest -- net interest income and interest income was also below expectation. And the Q1 result was being driven by the fact that we would have received, I think, $19 million plus of exits from one large investment that we have, and it took us a while to redeploy that capital. And so because we got that cash back, right? In the Q1, that our interest income -- net interest income was down, I think, substantially in Q1. And our view pretty much at that time was that we will catch up. We intend to deploy that capital and then to catch up by the time we get to the end of the year. So Q1, we were down and then in Q3, we had that one-off. So I'm happy to report that basically interest income ended up the year at $11.75 million, which is up 32%. Obviously, from a cash receipt point of view, because you receive, we would have gotten that cash big stock of cash in Q1, and it took us all the way until Q3 to kind of redeploy that cash simply because of the time investment. You have investments that you do that you can turn the hand very quickly and the documentation and the perception of securities takes additional time, right? And therefore, sometimes that's how the market. That's how transactions grow. So if you look at the cash flow statement, you would obviously recognize the fact that, okay, interest cash is down on last year. But that's because if we got $20 million in Q1 and it takes us basically two quarters to deploy out, it means that we are earning very little cash interest in the interim, right? And that's what I meant by timing differences. Of course, at end of the year, we have the figures we have caught up, but I just want to highlight that because we did note in Q1 and Q2 and Q3 doing those earnigns call. So back to the net investment income that's $13.93 million, up 39% and obviously, a big driver of net investment income would have been not only the net interest income figure, but also the movement in Acrecent, right, because Acrecent would have delivered a record valuation for SCI based on the fact that it delivered record net profit of $8.1 million. Net profit for SCI is 9.55 million, just up $10 million, up 123.4% versus the $4.28 million for the similar period last year. And earning per share was USD 1.65 relative to USD 0.73 -- USD 1.65 relative to the USD 0.73 for the similar period last year. Dividend per share, and this dividend was dividend paid during the financial year was USD 0.0034, which is lower than the USD 0.0055 paid in the previous year. I want to make a comment here on the dividend. Basically, we would have highlighted, I guess, from Q1, when the first dividend was paid of USD 1 million that we were basically restructuring the terms of a number of portfolio investments, which even got, what's the term I'm looking for, which was enhanced the passage of hurricane. So after the hurricane came, that even highlighted what we were saying before in terms of just being a bit cautious with dividends. Even though at that time, Acrecent paid SCI its very first dividend. And as you can see, the record profit that has been generated, obviously, the dividend going to be paid that is going to be higher. So I'm making this comment on the lower dividends during the financial year that hey, that was a temporary adjustment don't want the dividend by prudently conserving cash, et cetera. Now that we have gotten to the end of the financial year, and we can -- we have concluded most of the restructuring that we were doing, and I'll go through some of those later on, we can obviously -- well we can propose to the Board to approve an appropriate dividend, right? Final point here is that the return on average equity was 12.4%, which is more than double 5.9% of last year. So now looking at the core revenues, you can see that the component annual growth rate of SCI's core revenue is pretty decent 41% since inception. Next slide, in terms of the summary results of operations. I won't go through every line item. I just want to highlight a few things. So the first one, obviously, is interest income. But if you look at Q3, Q2, Q1, you will see that relative to last year, interest income wasn't so hot, and I mentioned that already. Also I want to look at the Puerto Rico credit fund investment income, $7.6 million versus $6.3 million last year, and I'll go into that on the Puerto Rico slide. Total investment income, obviously, $19.68 million. A lot of this is driven by obviously the Puerto Rico line as well as the net interest income line. Impairment allowance, well, first, let me go to net FX of [ 471.6000. ] It's a loss and that loss is majority of it is unrealized because SCI's net long U.S. dollar by a very wide margin. The currency appreciated in the financial year, and so we see a reversal of the gain that we had last year, but that's npart for the course we don't have FX [indiscernible] business, right? Impairment allowance, this was driven, and I'll go into this on the impairment allowance, right, final by 1 portfolio, [ 1 stage 2 ] for the company...

Hey folks, just give us one second. We got some technical difficulty. [Technical difficulty] Give us a couple of minutes. Jason is just trying to reconnect. There's some slight difficulty with the microphone. Hold on a second.

Can you hear me, now?

Yes, we're hearing you, Jason.

Mic check. Can you hear me now?

Yes, yes. For those just joining us and those on the YouTube channel, just asking for a few minutes. We have some slight technical difficulties with Mr. Jason Morris, but he is working to get back connection. I'm just asking for a few minutes of your time. Thank you.

Mic check. Can you hear me now?

Yes, hearing you, Jason.

Loud and clear? All right. Apologies. Not sure.

We lost you at the impairment allowance.

Okay. Perfect. Let me go back. Right. So as I was saying, the impairment allowance of $3.86 million was primarily driven by one portfolio company that we needed to see line of sight to ensure that we did the appropriate restructuring of the terms of those agreements. We got all of those final documentation in. We saw all the contracts and we, therefore, concluded that restructuring exercise from Stage 1 to Stage 2. And once you move from Stage 1 to -- once you are changing terms, fundamentally change in terms of an investment company, then basically, we have to use what we call lifetime ECL. Similar exercise that what we did last year [indiscernible]. Basically same kind of thing, right? And as you can appreciate, we have had a situation where Jamaica has been hit by quite a number of, what I call, acts of God. So looking at some of these portfolio companies, it is better to completely restructure the terms of the facility and allow the company breathing room and space to allow them to meet their business goals as well as ensure that we can get repaid versus having them continue to make payments here and there. So that's what we basically looked at the book and have been doing. But I'll get into that a lot more on this slide impairment allowance. So all that, we then ended up with a profit of $9.55 million versus $4.23 million last year and earnings per share of USD 1.65 versus [ USD 0.7. ] Now I will spend a few moments going through again Acrecent in case there are people who are here for the first time. So the way to read this slide is from the bottom of the page to the top, right? At the bottom of the page, Acrecent, which is a wholly owned subsidiary of Sygnus Credit Investments Puerto Rico Fund, which itself is 95% owned by Sygnus Credit Investments Puerto Rico, which that figure from Sygnus Credit Puerto Rico is what gets reported on SCI income statement. So if you look at the second column, which is 2026 financial year, you can see the operating business generated net profit of $8.1 million. Incidentally, the 2025 figure was $4.7 million that [indiscernible] upsize the [indiscernible]. So you can see that when you consolidate to the SCI PRF level, you get $7.31 million because the holding company does have some expenses, et cetera, small amount. But beyond SCI [indiscernible] there's no [indiscernible]. We have to use a model to do a market valuation of what we see that the 95.58% is worth. And as you can see for this year, the $8.1 million in net profit which turned out to be $7.31 million in net profit at [indiscernible] ended up by [ $7.66 million ], right? Not a lot of difference. The previous year, it was a higher figure but in other years, we have had the situation where we report a decent amount of net profit and the figure that comes in the SCI income statement is substantial. So the point I want to make here, and I will make it every single quarter on earnings call is that you can have some variability in the number. But by and large, it will come out in U.S., that's point A. Point B is that now that the company has started to pay dividends, this figure that the dividends are being paid out that is going to come from the operating entity, right? So cash tells no lie [indiscernible]. Now on to the next slide, which is reorganization effect. I put this slide here again. I think in 2023, we had a similar slide when we did the reorganization where what we were trying to show everyone was why were we reorganizing the company, right? And this should basically tell the story. So effectively, if you look at the financial year 2023, which is an estimate because year-end was December [ 5%, ] and it changed to July to June 30, similar to SCI on July 1, 2023, right? So that 730,000 is actually an estimated figure just based on the 12 months. So if you look at what happened subsequent to the reorganization, you see where net profits have been on a steady upward path. And then if you look at top line revenue, you also see that it has been steady, right? Now the important thing to note here, and I don't have that bar chart which is the operating expense, but I summarized it down below. As you can see, right, the operating expenses to the total investment income, which effectively is our efficiency ratio. Before the reorganization, that was substantially above 50%, 65.7%. Post reorganization, this has averaged 27.2% financial year ended June 2026 27.3%, right. Bang on the average, and the cost base related to the reorganization is USD 1.24 million lower, while at the same time, net profit has grown by 10x. So the point we want to make here is that by reorganizing the entity, stripping out all of the internal management operating cost and then putting those expenses to affirm that is managing the pure balance sheet -- financial balance sheet -- financial asset balance sheet of the company and letting that cost be a fixed percentage of total assets under management, SCI has gained tremendously from this because the manager is the one who has all operating cost in terms of employee costs, et cetera, et cetera, while the company is only paying the manager a percent of asset management fee. But this has translated into much more lean and efficient entity and just generating substantial profitability because it has a substantial lower cost footprint. Of course, there are other things that we did in terms of letting the company become very tax efficient. But I just want to highlight why the reorganization was so important for Acrecent. Moving on to dividend distribution. Of course, during the last couple of earnings call, we have highlighted the fact that Acrecent did make their first dividend payment and the dividend policy of Acrecent is to pay a semiannual dividend and approximately 50% of net profit are paid as dividends give or take for some adjustment. So SCI would have received two dividend payments during the course of the financial year, which amounted to USD 1.83 million. So obviously, based on the year-end financial results, we expect that once Acrecent completes its audited financials and then the Board meet, they're going to declare that dividend obviously is going to be that first interim dividend is going to be higher than the interim dividends that have been paid so far because it's going to be based on a substantial higher net profit base. Speaking of dividends. SCI's dividend track record you can see the financial year 2019 to financial year 2026, and this is the dividend paid during the financial year, right? As you can see in 2021, there was a dip in the dividend paid 2023. There's another dip in the dividends paid. And in 2026, there's a dip in the dividend date. I know that many people are concerned about, hey, what is happening, why dividend reduce, et cetera. From time to time as a financing firm, we have to look and read the [indiscernible] and in some circumstances, we may temporarily reduce the dividend based on the market environment. And 2026 financial year was one such year, right? And we explained I think three quarters in a row why we conservatively reduced the dividend. It's not that we don't want to pay the dividend, it's that we were going through some restructuring. We weren't clear how things would shape out. I mean it could have ended up that restructuring, didn't get done, et cetera, right? So now that we have cleared that path, obviously, we meet in a couple of days, a week or so to consider and as appropriate, make an appropriate dividend, right? So I want to let people understand that's nothing nefarious about being conservative, one at times one has to conservative and especially in an environment where the Puerto Rico business started paying dividends and in so doing, we looked and if we had an opportunity to acquire more shares of Puerto Rico business, and we have a choice to do that between paying dividends, then we should obviously take that opportunity because the return on investment is bigger. So it's short, in a sense it's short-term paying for long-term gain. On this slide, I've also highlighted the preference dividends that SCI has also paid, which we started paying preference dividends in financial year 2026. So you can see those preferred dividends for each year there, and it totals about $17 million, right? Just highlighting that for information purposes to show the flow of cash that SCI is returning to partner shareholders plus preference shareholders. Efficiency ratio we give a commitment to shareholders, and you can see that we are substantially well within the threshold of 40%. So nothing much to spend time there. Same management expense ratio, 2.3%, substantially within the threshold that we promised to shareholders. So effectively managing the business very efficiently by ensuring that each dollar that is generated is going to expenses versus they are going back into shareholders' pockets as dividends, right? As far as we're using the money to increase our stake in Acrecent which obviously is giving us a big almost 25% return on invested capital. From a balance sheet summary, shareholders' equity is now $80.73 million, up 10.3% from $73.17 million last year. When you include the perpetual [indiscernible] that we have, total equity is $112 million -- $112.67 million, which is pretty good position to be in. It means that the balance sheet of SCI can withstand whatever economic environment exists in Caribbean and Puerto Rico. Total assets, of course, at $251.53 million, and that's up 13.5% from $221.65 million. And this, of course, would have been aided by capital that SCI would have raised during the year as well as netted against prepayment of debt that occurred during the financial year as well as the extension of notes, particularly preference shares, $26.99 million extension of preference shares that would have occurred. So all in all, SCI's balance sheet looks pretty healthy. And we intend to keep it that way. And if you look at the next slide in terms of the balance sheet KPIs, you can see that from a net debt to total assets perspective, that's at 3.35x. Our limit -- internal limit is 0.5x. So we're well within that from an asset coverage ratio and asset coverage [ beginning ] to what's the percentage between assets that we have that can be converted to cash very quickly relative to debt that we have to repay. And normally [indiscernible] [ EPS ] a ratio of greater than 1.5x, and we are at 2.5x, substantial above that. Net debt to equity, that's 0.78x. Our target that we really want to be optimized around -- around 1.25x. So anywhere between, say, 1 and 1.25x. We are below that now. So obviously, that means that we have capacity to do new financing, right, and capital to grow the balance sheet more aggressively. And of course, nonperforming investment ratio, 0.2%. If we now move to the summary of investment activity for the year. [ Total ] investment portfolio [indiscernible] [ USD 238.8 million ] [indiscernible]. New investment commitments deployed [ $45.4 million ] versus [ $39 million ] in previous year. So kind of very stable. And this hasn't grown very fast because to be fair, we don't -- we have been seeking revolving credit lines for quite some time in order to aggressively push this number. But I'll give more update on that later. Fair value yield has fallen to 14.8% versus 15.9% in tandem with the environment that we were in during the course of this financial year. Of course, in [indiscernible] for inflation, rates have kind of gone up, but I don't expect yields to really go up substantially based on the macroeconomic backdrop. Average tenor remains flat on the balance sheet [ $1.38 million ]. Now in terms of just general capital raising we are in the market raising [indiscernible] currency capital shares that will bolster our dry powder. We have been advancing discussions with international financing is actually more than 2, right? Of course, we would have [indiscernible] until finance, would have exited $25 million in investment during the course of the financial year. And after would have deployed $56 million and exit [indiscernible]. So we are turning the capital over, which is a very important thing for our private credit to expected credit loss. We don't want to spend some time. So the charge -- the change -- the charge that pass through the income statement, which is the difference between where the impairment charge was last year and this year is $3.86 million, which is higher than the $3.44 million last year, right? So what makes up this $3.86 million charge? Well, primarily one obligor in the manufacturing sector, which get the increase would have been USD 2.81 million, which is [ 22.6% ] of the overall ECL charge. And this obligor when we look at the business, they needed to do something, right? And something that they did was they went out and won a very large contract that they don't have to fund. And that contract and the nature of it will give the company an opportunity to increase EBITDA and get back to operating normally. Of course, when we look at the business, we had to structure or restructure the facilities to ensure that it gave the company the appropriate breathing room. And so we went in our toolbox and came up with a number of very innovative structures to provide the company that opportunity, one. Two, we would have in doing so, also taking a number of seats so that we are at the table, seeing everything that is happening and be able to interrogate management a lot more. And basically, I don't want to be involved in decision making. But ultimately, when you have a board seat, it means that you have not only a line sight but you can control you can assess certain outcomes. So that's the part that we have seeing with obligor and we think that [indiscernible] a very good chance of doing hearing feedback. So are you still hear me? I hope you are still hearing. Okay. So we are taking those steps given the restructuring that we have done here, right? And this is part of course. When you are doing restructuring, you have to ensure that you have a route to monitor the entity properly. So that's what we have done, and we feel very confident about the future of the company and the steps that we need to take and the company has the ability to grow from strength to strength and win additional contracts. So we'll be there at the table to ensure that have been saying, we can influence them. Now there are 2 others obligors that during the year and the ECL impairment charge on that was it is [indiscernible]. One of those obligors exit is [indiscernible] what I'm going to refer to as a liquidity event via the public markets. So obviously, we have to give the obligor room to basically take advantage of the opportunity to go to the public, right? So I don't want to say more than that more than that. Yes, we have -- we facilitated our exercise to allow the obligor to access public markets. And we have done this before. We have obligors now who would have provided assistance to before who are in the last steps of doing IPO, initial Public Offering Exchange within say, 12 months or less, right? And we have also had obligors in the past that we have assisted in quotation getting to the point where they are acquired by another company. So this is not something we are strange. It's part of the call for private credit company credit investments. And we already have a playbook that we used coming out of COVID. So we are just reutilizing that. Of course, all of the public talking here are Jamaica and the reason for that, obviously, Jamaica would have gotten severely impacted by Hurricane [ Melissa ]. And so as many companies are reorganizing and going through difficult times, the best thing to do is to assisting hand for them to get the that they need to regenerate profitability. And we see this all over the world, and that's standard course. Now all other movements across the book amounted to [indiscernible]. And this movement was primarily driven by the fact that in our rating model, which is by the way Moody's rating model for our internal ratings, all assets would have -- the risk would have gone up simply because of the environment. When we are doing the assessment, we are in a period where the going inflation is going up, therefore, the chance that interest rates go up very [indiscernible]. So we are doing this on a forward-looking basis. Of course, during the course of the year, things change and conditions [indiscernible], et cetera, et cetera, then when we do the rerating, obviously, the ECL charges will reverse, right? And as portfolio companies get, obviously, the ECL charge noncash charge. In terms of moving to Stage 3 assets. There is one Stage 3 asset still remaining on the book, so meaning one deposit obligor, original investment was $1 million. This has been going up from 2021, right, because the bankruptcy proceedings was from 2021, where are in 2026, right? However, the good news is that we got [ 791 ] recovered during the year. And we expect to get the final payout of the remaining balance before the end of the calendar year, I would say, and possibly before the end of this quarter that we are in. In fact, the money could already be in our bank account. But when it's there, it's there, right? So I would say that worst case, we should get paid by the end of the calendar year. But the chances are we probably get paid by the end of September. So that's a good news. And the recovery here would then be 100%. And again, I want to highlight the fact that our realized rate since inception is less than 0.2%. I'm going to speed through the next couple of slides to get to the strategy section. The allocation by industry remains very died. I won't spend a lot of time there. By region, nothing has changed there fundamentally in terms of Puerto Rico, the largest exposure and that's a good thing that [indiscernible] largest exposure. I just spoke about the Hurricane effects and restructuring that we have done to change the terms of a number of companies, which means that we have to assess them on a lifetime basis and therefore, take an annualized large. Now to the final and perhaps most important slide. So from a strategic perspective, we maintain -- continue to maintain that scale in Puerto Rico business which has deployed over $200 million by a fantastic management team since SCI would have done the acquisition, right? And the return to SCI is a phenomenal return. And therefore, part of our strategy is to inject additional capital into that business to grow that business substantially. That's the business. That business is now distributing dividends to SCI, which we intend to flow through shareholders. As we go through time, this dividend, we expect once the business continues to grow, that dividend will be bigger and bigger and bigger. And obviously, based on the results of [indiscernible] itself could actually pay SCI a dividend bigger than any dividend SCI has actually paid to shareholders in its history, which would be a great thing, obviously. So our creation is being rewarded in terms of our strategic trust and interest for the Puerto Rico business. Dry powder of Puerto Rico business, obviously, we need to increase that. We need to increase revolving credit line. We need to diversify revolving credit line. And we need to, as I said, keep investing to expand that, right? Second strategic pillar is obviously for SCI itself. Combined platform, we want to get to $1 billion. We think we are over $600 million already. And the upcoming financial year should get us pretty close, closer, a lot closer to that $1 billion mark. We had indicated at the start of the year some metrics in terms of core revenues, we wanted that to be about $12.5 million. We have exceeded that at [ 19.8% ]. We wanted ROE to be greater than 10%. We have exceeded that at 12.4%. We want EPS to grow at 20%. Obviously, we have far exceeded that EPS is at [ 17.4% ]. So these metrics really change, right? We still need ROE every year to come in above 10% and EPS to be at least 20%, right? [indiscernible] dividend [indiscernible] [ 3% ] in the year. Let's see whether that figure gets up in the new financial year because we are going to obviously Board dividend based on the new financial results for the year-end and pay the first interim dividend. So we'll see what that dividend comes together and what that yield is like. Dry powder, we need constantly $100 million minimum every year. So we are pushing hard on that with multiple partners and obviously with our normal capital raises, right? In terms of item #3, and this is a big item for SCI which is our first -- well, we would have said before that we were doing -- we were sponsor a company in English-speaking Caribbean territory. Everyone knows that, that is investment [indiscernible]. We had said that we had a strategic financing partner, everyone knows that that's [ IDB ] Invest, which was committed an initial $10 million and SCI is a guarantor for that up $to 10 million [ IDB ] Invest. Of course, the $10 million in our opinion is an initial figure. We intend to grow that figure not just with [ IDB ] Invest, but to grow that figure with other partners as well. So I don't want to give away too much of our business strategy. But rest assured that in a similar vein to how the Puerto Rico business is operating, that's the intention for this new business, which is actually a receivables financing business. That's what this business is. So -- of course, we IDB invest as a financing partner that comes with all the best and operational best-in-class and best practice that [ DFI ] utilizes. And so we'll be looking to support small and medium-sized businesses in Bahamas. And obviously, we give more update on this. We are looking to do our first transaction in the month of September here that before the end of this quarter, we hope to match our first deal and then ramp up the facility in terms of transactions plus in terms of the size of the capital that Sygnus Investment Bank [indiscernible]. Fourth pillar, obviously, we have to constantly manage risk. And at Sygnus we are proactive at managing risk. Obviously, you can't catch every single risk before they occur. And so the question is how do you mitigate and how do you manage. And we continue to do this, which is reflective of our less than 0.2% crystallized realized loss rate on an annual basis. So we'll continue to do that. We'll continue to take more seats as required when we do restructuring, we'll continue to support companies who need their facilities restructured in order to give them. And if there are companies in the market that face difficult financial circumstances, et cetera, we're always ready and willing to provide innovative financing solution to assist that's the purpose for which Sygnus Credit Investment Limited was created, which is different from, let's say, deposit that's what alternative asset managers. It's a different financing channel, more flexible. But at the same time, we have to structure and provides protection that we don't lose a lot of share. And finally, on the share buyback, the Board will meet shortly to consider the buyback's not there anything. That's going to a new proposal is going to the Board and I'm pretty confident that it should have a positive result coming out of it given where we are now and given the different pillars of SCI's business as we try to scale the business substantially and aggressively. The key to scale aggressively is those strategic financing partners with those large lines of credit our financing to allow us to be very flexible and nimble in how we approach the market. That's the end of my presentation, and we can now move to taking questions.

Thank you, Jason, for that very detailed and quite thorough presentation. We'll jump straight into it just given the time as well. I will -- before I start, I want to take the opportunity to remind everyone that you can view the question and answer option in the [indiscernible] chat. And we will read those questions for Jason to answer. So jumping straight into it. Question number one, and I believe you would have touched on it, but perhaps you can give a bit more color on how should investors interpret the relationship between SCI and Sygnus Investment Bahamas. It's not described as a subsidiary, but SCI is anchor investor. What's SCI's stake in Sygnus Bahamas and how will economics flow return to SCI?

So I knew that was going to be the first question. So it's not a subsidiary. In the same way how [indiscernible] Financial is not a subsidiary. So that's Part A. SCI's stake in the business, I don't want to disclose that. Let's just say that SCI is the only -- as a sponsor, SCI the only equity investor at the cable at the moment, right? There will be other equity investors that at the moment that SCI as a sponsor of Sygnus Invest Bahamas. How [indiscernible] back? Well, they will flow back through 2 means. One, the residual value that builds up in Sygnus Investment Bahamas will obviously come back to SCI as the anchor sponsor equity investor in a similar manner to how [indiscernible] is the residual value comes back to Sygnus Credit investment. [indiscernible]?

Yes.

If you want to press on some other point, they can press, but I hope I've explained very clearly pretty much similar to what you see. So in other words, dividends will be coming back to SCI and the residual value that's built up in investment, which you would say go to shareholders, right, similar to how in residual value that's built from Sygnus Investment Bahamas, we are okay, majority shareholder as the company make more profit, the company pays more dividends, it shows back up to you and then the value on your income statement, right? Value the asset, same mechanics is what's going to happen here. I would actually say similar mechanics what's going to happen. [indiscernible]

My follow-up question, another question. What's the value of the dual tranche perpetual cumulative redeemable preference share issue currently being raised via private placement? And when should the raise be expected to close?

The raise should be expected to close, I guess, sometime in September, I think, based on the [indiscernible]. Value, I think it's some -- don't hold probably forget that figure and [indiscernible] but it's as usual, we raise capital anywhere between $15 million to $20 million to $25 million. Normally, that's what amount [indiscernible] so it's somewhere in there, but I need to confirm.

Thanks, Jason. The next question is, is SCI planning to approach the market for -- with respect to the Class E preference shareholders to extend their preference shares? Or will the company be using the ongoing private placement to replace the maturing Class E issuances?

Good question. I mean at this stage, no decision has been made on that yet. Acquisition is made, obviously, we will communicate it. So I can't say at the moment at this present time today that I'm speaking here.

Okay. Another question. Will SCI's Board consider the renewal of the buyback program at the upcoming dividend meeting?