Private equity investment company Sygnus Deneb Investments has poured US$4 million into Chukka Caribbean Holdings in the form of preference shares that are convertible to equity or ordinary shares.
Sygnus Deneb, the private equity arm of Sygnus Group, hasn’t disclosed the size of its potential equity stake in Chukka, but it is enough to give it a seat on Chukka Caribbean Holdings’ seven-member board.
“Every investment that we do has its minimum governance requirements. We therefore have a seat on the board, which will enable us to further protect our investment,” said Chief Operating Officer and Head of Private Equity and M&A at Sygnus Group, Ike Johnson. He said the investment represented “a minority stake”.
The injection comes as Chukka Caribbean is shaping up to execute on a new acquisition that is expected to deepen its footprint in nature adventure excursions across the Caribbean. Chukka Caribbean Adventure operates over 85 tours in Jamaica, Belize, Turks & Caicos, the Dominican Republic, and Barbados, including eight cruise ship ports.
Johnson did not disclose the date of conversion, only that the tour company would be under watch for 24 months or two years.
“What we do is to utilise convertible preference shares, and whenever the reporting requirements can be met, then we convert to ordinary equity,” Johnson said.
“The board of the entity will have to certify that the reporting is up to the criteria that we outline in our documentation,” he added.
Asked whether Chukka might be overleveraged, the Sygnus executive said the debt levels they are seeing are manageable, given the company’s cash position.
“It may seem that way now, but we think that Chukka can continue to generate strong cash flow, and Deneb is interested in investing in companies at the mature or growth stage of their life cycle,” he said.
The Sygnus Deneb investment comes with certain built-in protections, he added, including various covenants that Chukka Caribbean will have to adhere, and its right to vote on all major decisions that impact the tour company.
“No major shifts in the business line, selling down of assets or anything of the sort can be done without our consent,” Johnson said.
Sygnus Deneb is a regional private equity investment company managed by Sygnus Capital. The company provides equity and mezzanine capital in the growth industries regionally. SDI targets investments in medium-sized companies with revenue ranging from US$5 million to US$50 million. The fund typically invests in private companies by taking equity positions, using convertible preference shares, subordinated debt, and other hybrid securities with equity transactions.