Sygnus takes Cayman hit with little or no prospect of recovery
Published:Wednesday | November 16, 2022 | 12:09 AM
Sygnus Credit Investments, SCI, is holding out little hope of recouping any of the funds it lent MV Cayman after the court ordered its winding up in October.
The resort holding company based in the Cayman Islands was forced into liquidation after it failed to pay a court-ordered debt in a civil case it lost. It was also unable to raise capital to refinance its debts.
The petition was filed by Jeremy Beck, an investor in the resort held by MV Cayman Limited, who the court had ruled should be compensated US$2 million, in line with an agreement between the parties.
Sygnus wrote off US$3.85 million as a result at year ending June, and has signalled that it doesn’t see a path to recovering much of those funds.
SCI is classified as a junior creditor, and the MV Cayman receiver is expected to prioritise payments to the sole senior creditor.
Sygnus’ Chief investment Officer, Jason Morris, said on an investor call on Monday that since Cayman Islands law does not accommodate a second charge over assets, SCI’s unsecured loan would not be given priority.
“I give it a low probability of recovering anything substantial. If we do, then we’ll write it back to the income statement, but we’ve fully provided for it,” Morris said, adding that he prefers to keep a pessimistic view and then be positively surprised.
For the period July to September, Sygnus’s first quarter, the company grew revenue by nearly 25 per cent, but its interest expense tripled, which Morris attributed to an increase in the amount of debt utilised by the firm in the period.
Notes payable tripled from US$19.64 million to US$60.38 million in the span of a year. At least US$22 million of that, Morris said, was used in the acquisition of Acrecent Financial Corporation, a Puerto Rico-based company in which Sygnus took a 93.66 per cent stake earlier this year.
Sygnus, which specialises in alternative financing, also grew its earnings by eight per cent in the September quarter to US$1.63 million, equating to 28 cents per share.