Saratoga Investment Corp. Announces Fiscal Third Quarter 2020 Financial Results and Quarterly Dividend of $0.56 per Share ($2.24 per Share on an Annualized Basis)

NEW YORK, Jan. 08, 2020 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal third quarter. In addition, the Company announced that its Board of Directors has declared a dividend of $0.56 per share for the fiscal quarter ended November 30, 2019, payable on February 6, 2020, to all stockholders of record at the close of business on January 24, 2020.

Summary Financial Information

The Company’s summarized financial information is as follows:

Summary Financial Information Saratoga

“Our third quarter quarterly performance metrics were remarkably strong with LTM return on equity of 17.6%, adjusted NII per share of $0.61 per share, earnings per share of $1.37, and an additional increase in NAV per share this quarter of $0.83, or 3.4%, to $25.30. This quarter included another significant realized gain, with our Censis equity investment recognizing an $11 million gain through a sale,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “Our continued strong price and volume stock market performance also enabled us to issue a further $49.4 million of equity accretively under our existing ATM program this quarter, essentially fully funding the equity requirement for our second SBIC license.  Drawing down debt under our second SBIC license at the 2-to-1 leverage ratio, our approximate all-in 3% cost-of-debt would be highly accretive to earnings and drive future earnings growth when invested consistent with our current portfolio. Today we also announced a $0.56 per share dividend for the quarter ended November 30, 2019, unchanged from the prior quarter. Our liquidity is robust, providing us the ability to grow our AUM by a further 52% utilizing the current liquidity and committed credit facilities at our disposal and following the $50.0 million baby bond repayment in December.

In addition, subsequent to quarter-end, our entire investment in Easy Ice was repaid in a change of control transaction, resulting in more than $35 million of proceeds, interest and fees, as well as a repayment of our $28 million second lien term loans and $11 million preferred equity. These proceeds are currently estimated to result in at least a $17 million, or $1.51 per share increase in NAV, with the exact amounts and characterization to be finally determined after completion of the full fourth quarter and incorporating overall operating results.”

Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated how the long-term measured growth of our AUM in strong portfolio companies can result in outsized equity returns, with our $1.0 million equity investment in Censis resulting in a $11.3 million total realized gain.  The quality of our asset base remains exceptionally high, with 99% of credits rated in our highest category. We’ve maintained our forward momentum in the face of macroeconomic conditions and lending dynamics that continue to provide headwinds, with LIBOR again decreasing this quarter. We also continue to bring new platform investments into the portfolio, with another investment in a new company added this quarter, in addition to the success we continue to have with follow-ons in existing portfolio companies. We remain confident that our experienced origination team, exceptional underwriting standards and tested investment strategy and focus will continue to steadily grow portfolio size and maintain quality over the long-term.”

As of November 30, 2019, Saratoga Investment increased its assets under management (“AUM”) to $487.0 million, an increase of 0.03% from $486.9 million as of August 31, 2019, and an increase of 9.7% from $443.8 million as of November 30, 2018. The increase this quarter consists of $40.8 million in originations, offset by repayments and amortizations of $51.2 million, reflecting net repayments and amortizations of $10.4 million. Repayments includes the sale of our Censis equity that generated an $11.3 million realized gain on a $1.0 million cost basis. Saratoga Investment’s portfolio remains strong, with a continued high level of investment quality in loan investments, with 99.0% of its loans this quarter at its highest internal rating. This quarter’s originations include one investment in a new platform, and three follow-ons in existing portfolio companies. Since Saratoga Investment took over the management of the BDC, $435.4 million of repayments and sales of investments originated by Saratoga Investment have generated a gross unlevered IRR of 14.8%.

For the three months ended November 30, 2019, total investment income of $14.2 million increased by $1.4 million, or 10.6%, compared to $12.8 million for the three months ended November 30, 2018, and by 2.2% on a quarter-on-quarter basis from $13.9 million for the three months ended August 31, 2019. This increased investment income was generated from an investment base that has grown by 9.7% since last year and was relatively unchanged from last quarter. In addition, these increases were achieved despite the weighted average current coupon on non-CLO BDC investments decreasing to 10.1% this quarter from 11.3% last year and 10.4% last quarter. The decrease in the current coupon is primarily due to the reductions in LIBOR over these periods.

As compared to the three months ended November 30, 2018, the investment income increase of $1.4 million was offset by: (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from the $20.0 million baby bond follow-on issuance last year; and (ii) increased base and incentive management fees generated from the management of this larger pool of investments. Total expenses, excluding interest and debt financing expenses, base management fees, incentive fees and income tax benefit, increased from $1.4 million for the three months ended November 30, 2018, to $1.5 million for the three months ended November 30, 2019.

Net investment income on a weighted average per share basis was $0.46 for the three months ended November 30, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $0.61. This compares to adjusted net investment income per share of $0.68 for the three months ended August 31, 2019, and $0.65 for the three months ended November 30, 2018. During these periods, weighted average common shares outstanding increased from 7.5 million shares for the three months ended November 30, 2018, to 8.3 million shares and 10.0 million shares for the three months ended August 31, 2019, and November 30, 2019, respectively. These share increases primarily reflect the 1.4 million shares issued last quarter and the 2.0 million shares issued this quarter pursuant to the At-the-Market (“ATM”) equity offering program, both of which were accretive to net asset value (“NAV”) per share.

Net investment income yield as a percentage of average NAV (“Net Investment Income Yield”) was 7.2% for the three months ended November 30, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 9.7%. In comparison, adjusted Net Investment Income Yield was 11.0% and 11.2% for the three months ended August 31, 2019, and November 30, 2018, respectively.

NAV was $282.2 million as of November 30, 2019, an increase of $57.9 million from $224.3 million as of August 31, 2019, an increase of $101.3 million from $180.9 million as of February 28, 2019, and an increase of $108.9 million from $173.3 million as of November 30, 2018.

  • For the nine months ended November 30, 2019, $13.2 million of net investment income, $12.6 million in net realized gain from investments and $4.9 million of net unrealized appreciation were earned, partially offset by $1.8 million deferred tax expense on net unrealized gains in Saratoga Investment’s blocker subsidiaries and $13.8 million of dividends declared. In addition, $2.2 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”), and 3,400,481 shares were sold through the ATM equity offering during the nine months, for net proceeds of $84.0 million.

NAV per share was $25.30 as of November 30, 2019, compared to $24.47 as of August 31, 2019, $23.62 as of February 28, 2019, and $23.13 as of November 30, 2018.

  • For the nine months ended November 30, 2019, NAV per share increased by $1.68 per share, reflecting the $15.1 million, or $1.68 per share increase in net assets (net of the $1.65 dividend paid during the first three quarters). In addition, there was a $0.02 net accretive impact in this quarter resulting from this quarter’s 1,986,942 share issuances from the DRIP and ATM programs. The Company made no repurchases of common stock in the open market during this period.

Return on equity for the last twelve months ended November 30, 2019 was 17.6%, compared to 10.1% for the comparable period last year.

Earnings per share for the three months ended November 30, 2019, was $1.37, compared to earnings per share of $0.91 for the three months ended August 31, 2019, and $0.49 for the three months ended November 30, 2018.

Investment portfolio activity for the three months ended November 30, 2019:

  • Cost of investments made during the period: $40.8 million
  • Principal repayments during the period: $51.2 million

Additional Financial Information

For the fiscal quarter ended November 30, 2019, Saratoga Investment reported net investment income of $4.6 million, or $0.46 on a weighted average per share basis, and a net realized and unrealized gain on investments of $9.1 million, or $0.91 on a weighted average per share basis, resulting in a net increase in net assets from operations of $13.7 million, or $1.37 on a weighted average per share basis. The $9.1 million net gain on investments was comprised of $10.7 million in net realized gain on investments, offset by $0.5 million in net unrealized depreciation on investments and $1.1 million of net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.

The $10.7 million net realized gain reflects the gain from the realization of the Company’s Censis Technologies investment during the quarter.

The $0.5 million net unrealized depreciation primarily reflects the $4.3 million reversal of previously recognized appreciation following the realization of the Company’s Censis Technologies investment, offset by $3.7 million unrealized appreciation on the Company’s Easy Ice investment.

This is compared to the fiscal quarter ended November 30, 2018, with net investment income of $5.1 million, or $0.69 on a weighted average per share basis, and a net realized and unrealized loss on investments of $1.5 million, or $0.20 on a weighted average per share basis, resulting in a net increase in net assets from operations of $3.7 million, or $0.49 on a weighted average per share basis. The $1.5 million net loss on investments consisted of $0.07 million in net realized loss, $1.0 million in net unrealized depreciation on investments, and $0.4 million in net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.

Adjusted for the incentive fee accrual related to net unrealized capital gains, net investment income was $6.1 million and $4.8 million for the three months ended November 30, 2019 and 2018, respectively – an increase of $1.3 million year-over-year, or 26.6%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, decreased from $1.3 million for the three months ended November 30, 2018, to $0.5 million for the three months ended November 30, 2019, decreasing from 1.2% to 0.8% of average total assets. The decrease was primarily due to the deferred tax benefit of $1.0 million recognized in the quarter related to the Easy Ice blocker subsidiary.

Portfolio and Investment Activity

As of November 30, 2019, the fair value of Saratoga Investment’s portfolio was $487.0 million (excluding $81.1 million in cash and cash equivalents), principally invested in 38 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 62.2% of first lien term loans, 20.8% of second lien term loans, 0.4% of unsecured term loans, 7.0% of subordinated notes in a CLO and 9.6% of common equity.

For the fiscal quarter ended November 30, 2019, Saratoga Investment invested $40.8 million in new or existing portfolio companies and had $51.2 million in aggregate amount of exits and repayments, resulting in net exits and repayments of $10.4 million for the quarter.

As of November, 2019, the weighted average current yield on Saratoga Investment’s total portfolio for the twelve months ended was 9.8%, which was comprised of a weighted average current yield of 10.0% on first lien term loans, 11.4% on second lien term loans, 0.0% on unsecured term loans, 14.9% on CLO subordinated notes and 2.2% on equity interests.

Portfolio Update:

Subsequent to quarter-end, Saratoga Investment’s second lien term loans in Easy Ice, LLC and Easy Ice Masters, LLC were repaid at par, and its preferred equity was sold in a change of control transaction. In addition to the second lien term loans of $27.9 million and the preferred equity of $10.7 million being repaid in full including all accrued interest, Saratoga Investment also received approximately $35.6 million of additional proceeds, interest and fees.

The estimated impact of the Easy Ice sale transaction, on a pro forma basis, would be to increase our existing quarter-end NAV by at least $17.0 million, or $1.51 per share, to a pro forma NAV per share as of November 30, 2019 of at least $26.81 per share. The above pro forma balances are estimates and do not take into consideration Saratoga Investments ongoing business nor does it reflect any other potential transactional impacts that could be the result of other unrelated or unforeseen events. The actual impact of the Easy Ice sale transaction on Saratoga Investment’s Net Investment Income and NAV will be reflected in its financial statements for the quarter and fiscal year ending February 29, 2020.

Liquidity and Capital Resources

As of November 30, 2019, Saratoga Investment had no outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million SBA debentures outstanding, $134.5 million of baby bonds (fair value of $138.1 million) issued and an aggregate of $81.1 million in cash and cash equivalents.

With $45.0 million available under the credit facility, the $81.1 million of cash and cash equivalents and $175.0 million in undrawn SBA debentures from the newly approved second SBIC license, Saratoga Investment has a total of $301.1 million of undrawn borrowing capacity and cash and cash equivalents available as of November 30, 2019. Following the $50.0 million baby bond repayment subsequent to quarter-end and noted below, the $251.1 million pro forma undrawn borrowing capacity allows Saratoga Investment to grow current AUM by 52% without any new external financing. The net proceeds from the DRIP and ATM equity programs totaled $50.2 million of equity issuances for the three months ended November 30, 2019. Saratoga Investment also has the ability to issue additional equity or baby bonds through the existing shelf registration statement.

On November 15, 2019, the Company caused notices to be issued to the holders of its 6.75% 2023 baby bonds regarding the Company’s exercise of its option to redeem, in part, the issued and outstanding 2023 baby bonds.  The Company redeemed $50.0 million in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 baby bonds on December 21, 2019 (the “Redemption Date”). The baby bonds were redeemed at 100% of their principal amount ($25 per baby bond), plus the accrued and unpaid interest thereon from September 30, 2019, through, but excluding, the Redemption Date.

On January 8, 2020, the Company caused notices to be issued to the remaining holders of its 6.75% 2023 baby bonds regarding the Company’s exercise of its option to redeem the remaining $24.45 million in aggregate principal amount of issued and outstanding 2023 baby bonds.  The Company will redeem this remaining amount of issued and outstanding 2023 baby bonds on February 7, 2020 (the “second Redemption Date”). These baby bonds will also be redeemed at 100% of their principal amount ($25 per baby bond), plus the accrued and unpaid interest thereon from December 31, 2019, through, but excluding, the Second Redemption Date.

On March 16, 2017, Saratoga Investment entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time-to-time, up to $30.0 million of its common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc were also added to the agreement. On July 11, 2019, the amount of common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of common stock to be offered through this offering was further increased to $130.0 million. As of November 30, 2019, the Company sold 3,895,153 shares for gross proceeds of $96.5 million at an average price of $24.77 for aggregate net proceeds of $95.2 million (net of transaction costs).

Dividend

Today, Saratoga Investment announced a dividend of $0.56 per share for the fiscal quarter ended November 30, 2019, payable on February 6, 2020, to all stockholders of record at the close of business on January 24, 2020.  In fiscal year 2020, the Company has paid a quarterly dividend of $0.56 per share for the quarter ended August 31, 2019, $0.55 per share for the quarter ended May 31, 2019, and $0.54 per share for the quarter ended February 28, 2019. Total dividends declared for the fiscal years ended February 28, 2019, and 2018, were $2.10 per share and $1.94 per share, respectively.

Shareholders have the option to receive payment of the dividend in cash or receive shares of common stock, pursuant to the Company’s DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal years 2018, 2019 and 2020, this share repurchase plan was extended for another year at the same level of approval, currently through January 15, 2021. As of November 30, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

Saratoga Investment made no purchases of common stock in the open market during the three months ended November 30, 2019.

2020 Fiscal Third Quarter Conference Call/Webcast Information

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About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC.  Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financials

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(1) Adjusted net investment income yield is calculated as adjusted net investment income divided by average net asset value.Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, Saratoga Investment provides information relating to adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with the Company’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, Saratoga Investment accrues, but does not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, Saratoga Investment believes that adjusted net investment income,  adjusted net investment income yield and adjusted net investment income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield and net investment income per share to adjusted net investment income per share for the three and nine months ended November 30, 2019 and November 30, 2018.

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(1) Adjusted net investment income yield is calculated as adjusted net investment income divided by average net asset value.
(2) Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.

Saratoga Investment Corp. to Hold Conference Call to Report Fiscal Third Quarter 2020 Financial Results and Announce Third Quarter Dividend

NEW YORK, Dec. 09, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR), a business development company, will report its financial results and announce its dividend for the fiscal quarter ended November 30, 2019, in a conference call to be held on January 9, 2020. Details for the conference call are provided below.

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About Saratoga Investment Corp.
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund. It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO. The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Saratoga Investment Corp. Announces Fiscal Second Quarter 2020 Financial Results

NEW YORK, Oct. 09, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal second quarter.

Summary Financial Information

The Company’s summarized financial information is as follows:

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“The second fiscal quarter of 2020 has been important for us with many significant accomplishments”, said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “1) We received approval for a second SBIC license, providing us access to up to $175 million in additional long-term, low-cost capital in the form of SBA debentures to further enable us to support our core small business constituency; 2) Our second quarter performance metrics were also exceptionally strong with LTM return on equity of 14.3% and an increase in NAV per share of $0.41 to $24.47. Our adjusted NII per share of $0.68, taking into account our newly issued ATM shares, still over-earned our current $0.56 dividend per share, which was recently increased for the twentieth sequential quarter; 3) Our continued strong price and volume stock market performance enabled us to issue $34.1 million of equity accretively under our existing ATM program in Q2, importantly providing initial equity capitalization for this new second SBIC license; 4) Asset quality and growth were strong this quarter, with $2.6 million of net realized and unrealized gains on investments, and AUM growing by 19% to $486.9 million; and 5) with our new second SBIC license our dry powder has expanded significantly, providing us the ability to grow our AUM by a further 50% utilizing the current liquidity and committed credit facilities at our disposal.”

Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated our ability to build AUM without sacrificing quality, as our investments grew by 19% from last quarter, while those rated in our highest category remained at 99%. We always emphasize that quarterly portfolio growth can be lumpy and is dependent on various factors, including a robust pipeline, credit quality of deal pipeline, and the level of repayments – this past quarter we benefitted from all three. We’ve accomplished this amid macroeconomic conditions and lending dynamics in the lower middle market that continue to provide headwinds, with LIBOR again decreasing this quarter. We also continue to bring new platform investments into the portfolio, with four more investments in new companies added this quarter, and two more since quarter-end. We remain confident that our experienced origination team, exceptional underwriting standards and tested investment strategy and focus will continue to steadily grow portfolio size and maintain quality over the long-term.”

As of August 31, 2019, Saratoga Investment increased its assets under management (“AUM”) to $486.9 million, an increase of 18.9% from $409.5 million as of May 31, 2019, and an increase of 23.9% from $392.9 million as of August 31, 2018. The increase this quarter consists of originations of $93.2 million, partially offset by repayments and amortizations of $19.0 million. Including realized and unrealized gains, Saratoga Investment’s portfolio has grown significantly this quarter and remains strong, with a continued high level of investment quality in loan investments, with 99.0% of its loans this quarter at its highest internal rating. Included in this quarter’s originations are also four investments in new portfolio companies. Since Saratoga Investment took over the management of the BDC, $392.5 million of repayments and sales of investments originated by Saratoga Investment have generated a gross unlevered IRR of 14.0%.

For the three months ended August 31, 2019, total investment income of $13.9 million increased by $2.5 million, or 21.8%, compared to $11.4 million for the three months ended August 31, 2018, and by 8.9% on a quarter-on-quarter basis from $12.8 million for the three months ended May 31, 2019. This increased investment income was generated from an investment base that has grown by 23.9% since last year and by 18.9% from last quarter. In addition, these increases were achieved despite a decrease in interest earned on CLO equity and the weighted average current coupon on non-CLO BDC investments decreasing to 10.5% this quarter from 11.1% last year and 10.8% last quarter. Much of the decrease in the current coupon is due to the reductions in LIBOR over these periods. The impact of the AUM increase is also only partially reflected in this quarter’s results.

As compared to the three months ended August 31, 2018, the investment income increase of $2.5 million was offset by: (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from increased SBA debentures and the $60.0 million baby bond issuance last year; and (ii) increased base and incentive management fees generated from the management of this larger pool of investments. Total expenses, excluding interest and debt financing expenses, base management fees, incentive fees and income tax benefit, increased from $1.3 million for the three months ended August 31, 2018, to $1.4 million for the three months ended August 31, 2019.

Net investment income on a weighted average per share basis was $0.59 for the three months ended August 31, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $0.68. This compares to adjusted net investment income per share of $0.60 for the three months ended May 31, 2019, and $0.69 for the three months ended August 31, 2018. During these periods, weighted average common shares outstanding increased from 6.9 million shares for the three months ended August 31, 2018, to 7.7 million shares and 8.3 million shares for the three months ended May 31, 2019, and August 31, 2019, respectively. These share increases primarily reflect the secondary equity offering of 1.15 million shares on July 13, 2018, and the 1.4 million shares issued this quarter pursuant to the At-the-Market (“ATM”) equity offering program, both of which were accretive to net asset value (“NAV”) per share.

Net investment income yield as a percentage of average NAV (“Net Investment Income Yield”) was 9.6% for the three months ended August 31, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 11.0%. In comparison, adjusted Net Investment Income Yield was 10.1% and 11.9% for the three months ended May 31, 2019, and August 31, 2018, respectively.

NAV was $224.3 million as of August 31, 2019, an increase of $43.3 million from $180.9 million as of February 28, 2019, and an increase of $51.7 million from $172.7 million as of August 31, 2018.

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NAV per share was $24.47 as of August 31, 2019, compared to $24.06 as of May 31, 2019, $23.62 as of February 28, 2019, and $23.16 as of August 31, 2018.

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Return on equity for the last twelve months ended August 31, 2019 was 14.3%, compared to 11.6% for the comparable period last year.

Earnings per share for the three months ended August 31, 2019, was $0.91, compared to earnings per share of $0.99 for the three months ended May 31, 2019, and $0.45 for the three months ended August 31, 2018.

Investment portfolio activity for the three months ended August 31, 2019:

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Additional Financial Information

For the fiscal quarter ended August 31, 2019, Saratoga Investment reported net investment income of $5.0 million, or $0.59 on a weighted average per share basis, and a net realized and unrealized gain on investments of $2.6 million, or $0.31 on a weighted average per share basis, resulting in a net increase in net assets from operations of $7.6 million, or $0.91 on a weighted average per share basis. The $2.6 million net gain on investments was comprised of $1.9 million in net realized gain on investments and $1.5 million in net unrealized appreciation on investments, offset slightly by $0.7 million of net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.

The $1.9 million net realized gain reflects (i) a $1.3 million gain from the realization of the Company’s Fancy Chap investment during the quarter, as well as (ii) a $0.6 million gain on the Company’s Censis Technologies investment resulting from the receipt of a dividend recap in excess of the investment’s cost basis.

The $1.5 million net unrealized appreciation primarily reflects (i) $1.3 million unrealized appreciation on the Company’s Censis Technologies investment, (ii) $1.9 million unrealized appreciation on the Company’s Easy Ice investment, (iii) $1.3 million unrealized appreciation on the Company’s Netreo Holdings investment, (iv) $0.6 million unrealized appreciation on the Company’s Grey Heller investment, and (v) numerous smaller unrealized appreciations across the portfolio on various investments. This was offset primarily by (i) $1.2 million reversal of previously recognized appreciation following the realization of the Company’s Fancy Chap investment, and (ii) $2.7 million unrealized depreciation on the Company’s CLO equity investment, reflecting both the equity distribution received during the quarter as well as an increase in the discount rate used to fair value the equity.

This is compared to the fiscal quarter ended August 31, 2018, with net investment income of $5.1 million, or $0.74 on a weighted average per share basis, and a net realized and unrealized loss on investments of $2.0 million, or $0.29 on a weighted average per share basis, resulting in a net increase in net assets from operations of $3.1 million, or $0.45 on a weighted average per share basis. The $2.0 million net loss on investments consisted of $2.2 million in net unrealized depreciation on investments, offset by $0.2 million in net deferred tax benefit on unrealized losses in Saratoga Investment’s blocker subsidiaries.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $5.6 million and $4.8 million for the three months ended August 31, 2019 and 2018, respectively – an increase of $0.9 million year-over-year, or 18.3%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, increased from $0.9 million for the three months ended August 31, 2018, to $1.0 million for the three months ended August 31, 2019, increasing from 0.9% to 1.0% of average total assets.

Portfolio and Investment Activity

As of August 31, 2019, the fair value of Saratoga Investment’s portfolio was $486.9 million (excluding $24.1 million in cash and cash equivalents), principally invested in 36 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 62.5% of first lien term loans, 20.5% of second lien term loans, 0.4% of unsecured term loans, 7.4% of subordinated notes in a CLO and 9.2% of common equity.

For the fiscal quarter ended August 31, 2019, Saratoga Investment invested $93.2 million in new or existing portfolio companies and had $19.0 million in aggregate amount of exits and repayments, resulting in net investments of $74.2 million for the quarter.

As of August 31, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.1%, which was comprised of a weighted average current yield of 10.3% on first lien term loans, 11.6% on second lien term loans, 0.0% on unsecured term loans, 14.7% on CLO subordinated notes and 2.6% on equity interests.

Liquidity and Capital Resources

As of August 31, 2019, Saratoga Investment had no outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million SBA debentures outstanding, $134.5 million of baby bonds (fair value of $138.6 million) issued and an aggregate of $24.1 million in cash and cash equivalents.

On August 14, 2019, Saratoga Investment’s application for a second SBIC license was approved. The new license will provide up to $175 million in additional long-term capital in the form of SBA debentures.

With $45.0 million available under the credit facility, the $24.1 million of cash and cash equivalents and $175.0 million in undrawn SBA debentures from the new second SBIC license, Saratoga Investment has a total of $244.1 million of undrawn borrowing capacity and cash and cash equivalents available as of August 31, 2019. This allows Saratoga Investment to grow current AUM by 50% without any new external financing. The net proceeds from the DRIP and ATM equity programs totaled $34.3 million of equity issuances for the three months ended August 31, 2019. Saratoga Investment also has the ability to issue additional equity or baby bonds through the existing shelf registration statement.

On March 16, 2017, Saratoga Investment entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time-to-time, up to $30.0 million of its common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc were also added to the agreement. On July 11, 2019, the amount of common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of common stock to be offered through this offering was increased to $130.0 million. As of August 31, 2019, the Company sold 1,942,786 shares for gross proceeds of $47.1 million at an average price of $24.25 for aggregate net proceeds of $46.5 million (net of transaction costs).

Dividend

On August 27, 2019, Saratoga Investment announced a dividend of $0.56 per share for the fiscal quarter ended August 31, 2019, payable on September 26, 2019, to all stockholders of record at the close of business on September 13, 2019. This increase is the twentieth sequential increase to the Company’s quarterly dividends. On May 28, 2019, Saratoga Investment announced a dividend of $0.55 per share for the fiscal quarter ended May 31, 2019, payable on June 27, 2019, to all stockholders of record at the close of business on June 13, 2019. Total dividends declared for the fiscal years ended February 28, 2019, and 2018, were $2.10 per share and $1.94 per share, respectively.

Shareholders have the option to receive payment of the dividend in cash or receive shares of common stock, pursuant to the Company’s DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal years 2018 and 2019, this share repurchase plan was extended for another year at the same level of approval, currently through January 2020. As of August 31, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

Saratoga Investment made no purchases of common stock in the open market during the three months ended August 31, 2019.

2020 Fiscal Second Quarter Conference Call/Webcast Information

When: Thursday, October 10, 2019, 10:00 a.m. Eastern Time (ET)

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About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financials

Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities

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Saratoga Investment Corp.
Consolidated Statements of Operations
(unaudited)

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Saratoga Investment Corp.
Consolidated Statements of Operations
(unaudited)

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Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, Saratoga Investment provides information relating to adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with the Company’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, Saratoga Investment accrues, but does not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, Saratoga Investment believes that adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield and net investment income per share to adjusted net investment income per share for the three and six months ended August 31, 2019 and August 31, 2018.

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Saratoga Investment Corp. to Report Fiscal Second Quarter 2020 Financial Results and Hold Conference Call

NEW YORK, Sept. 23, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR), a business development company, will report its financial results for the fiscal quarter ended August 31, 2019 on October 9, 2019, after market close. A conference call to discuss the financial results will be held on October 10, 2019. Details for the conference call are provided below.

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About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund. It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO. The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Saratoga Investment Corp. Increases Quarterly Dividend to $0.56 per Share Represents the 20th Sequential Quarterly Dividend Increase

Aug 27, 2019
Saratoga Investment Corp. Increases Quarterly Dividend to $0.56 per Share Represents the 20th Sequential Quarterly Dividend Increase

NEW YORK, Aug. 27, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced that its Board of Directors has declared an increased quarterly dividend of $0.56 per share for the fiscal quarter ended August 31, 2019, payable on September 26, 2019, to all stockholders of record at the close of business on September 13, 2019.

This increase is the twentieth sequential increase to the Company’s quarterly dividends.  The Company paid a quarterly dividend of $0.55 per share for the quarter ended May 31, 2019, $0.54 per share for the quarter ended February 28, 2019, $0.53 per share for the quarter ended November 30, 2018, $0.52 per share for the quarter ended August 31, 2018, and $0.51 per share for the quarter ended May 31, 2018, as well as quarterly throughout fiscal years 2018, 2017 and 2016.

“This quarter’s dividend reflects almost five years of increased quarterly dividends,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “This further increase is supported by our ability to consistently generate strong investment income and increased net asset value and net asset value per share over the long-term, despite market volatility. This continues to differentiate us in the BDC industry, and underscores the value of our high quality management team, disciplined credit analysis and investment sourcing pipeline.”

Saratoga Investment has increased its regular quarterly dividends each of the past twenty quarters from $0.18 per share for the third quarter of fiscal 2015 to $0.56 per share for this second quarter of fiscal 2020.

Shareholders will have the option to receive payment of the dividend in cash or receive shares of common stock pursuant to the Company’s dividend reinvestment plan (“DRIP”). Saratoga Investment shareholders who hold their shares with a broker must affirmatively instruct their brokers prior to the record date if they prefer to receive this dividend and future dividends in common stock.  The number of shares of common stock to be delivered shall be determined by dividing the total dollar amount by 95% of the average of the market prices per share at the close of trading on the ten (10) trading days immediately preceding (and including) the payment date.

About Saratoga Investment

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Saratoga Investment Corp. Receives Approval of Second SBIC License Providing Up to $175 Million of Additional Growth Capital

NEW YORK, August 21, 2019 – Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced that it has received notification from the Small Business Administration (“SBA”) that the Company’s application for a second Small Business Investment Company (“SBIC”) license has been approved.

The new license will provide up to $175 million in additional long-term capital in the form of SBA debentures. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225 million to $350 million. With this license approval, Saratoga will grow its SBA relationship from $150 million to $325 million of committed capital.

“We are excited to grow our relationship with the SBA through a second SBIC license,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “Gaining access to capital in the most efficient manner possible has always been a key focus for Saratoga, and our SBA-guaranteed debentures are a great benefit to our capital structure, enabling us to provide innovative and cost effective solutions to the many smaller and middle market companies we finance. We are grateful to the SBA for their continued support of Saratoga.”

Michael J. Grisius, President of Saratoga Investment, added, “We are pleased with our ability to consistently generate strong investment income and increased net asset value over the long-term. We believe this underscores the value of our high-quality management team, disciplined credit analysis and robust investment sourcing pipeline.  We will continue to apply the same investment principles as we deploy the additional capital being made available to us with a second SBIC license.”

About Saratoga Investment

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns two SBIC-licensed subsidiaries and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Saratoga Investment Corp. Announces Fiscal First Quarter 2020 Financial Results

Jul 10, 2019

NEW YORK, July 10, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal first quarter.

Summary Financial Information

The Company’s summarized financial information is as follows:

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“Highlights from our fiscal 2020 first quarter include LTM return on equity of 11.7%, an increase in NAV per share of $0.44 to $24.06, and adjusted NII per share of $0.60,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “These results have been achieved while we continue to strengthen our organizational and capital foundation and grow our high quality asset base. Important differentiating metrics include dividend coverage – our adjusted NII per share of $0.60 is five cents above our current $0.55 dividend; relative performance – LTM ROE of 11.7% is almost 300 basis points above the BDC industry mean; and NAV growth – NAV per share of $24.06 is up 4.3% from the same period last year. Last month, we also increased our dividend for the nineteenth consecutive quarter, a $0.01 increase to $0.55 per share. Our management team continues to generate outperformance despite increasingly challenging market conditions.”

Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated our ability to steadily build AUM without sacrificing quality, despite a borrower-friendly environment that has made this difficult to accomplish. Our capital deployed this quarter matched our redemptions, which continue to be lumpy and difficult to predict, and importantly, the portfolio investments rated in our highest category remained at a very high 99%. We also continue to increase our investments in new platforms, with three more investments in new portfolio companies added this quarter, and one more since quarter-end. Despite growing market headwinds, we remain confident that we can steadily improve portfolio size and maintain quality over the long-term by remaining true to our disciplined investment approach, exceptional underwriting standards and the long-term strategy and focus that has guided us since taking over management of the BDC.”

As of May 31, 2019, Saratoga Investment increased its assets under management (“AUM”) to $409.5 million, an increase of 1.8% from $402.0 million as of February 28, 2019, and an increase of 19.2% from $343.4 million as of May 31, 2018. The increase this quarter consists of originations of $27.4 million offset by repayments and amortizations of $26.9 million, with the bulk of the quarterly increase reflecting unrealized appreciation. Including realized and unrealized gains, Saratoga Investment’s portfolio has continued to grow this quarter and remains strong, with a continued high level of investment quality in loan investments, with 98.7% of its loans this quarter at its highest internal rating. Included in this quarter’s originations are also three investments in new portfolio companies. Since Saratoga Investment has taken over the management of the BDC, $375.7 million of repayments and sales of investments originated by Saratoga have generated a gross unlevered IRR of 13.9%.

For the three months ended May 31, 2019, total investment income of $12.8 million increased $2.3 million, or 21.6%, compared to $10.5 millionfor the three months ended May 31, 2018. This increased investment income was generated from an investment base that has grown by 19.2% since last year. In addition, the benefit of an increase in interest earned on CLO equity was partially offset by the weighted average current coupon on non-CLO BDC investments decreasing from 11.3% to 10.8%. In addition, this quarter’s investment income was down 1.8% on a quarter-on-quarter basis from $13.0 million for the quarter ended February 28, 2019.

As compared to the three months ended May 31, 2018, the investment income increase of $2.3 million was offset by: (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from increased SBA debentures and the $60.0 million baby bond issuance last year; (ii) increased base and incentive management fees generated from the management of this larger pool of investments; and (iii) the non-recurrence of the $0.3 million income tax benefit generated last year from net operating losses in Saratoga Investment’s blocker subsidiaries. Total expenses, excluding interest and debt financing expenses, base management fees and incentive fees and income tax benefit, reduced from $1.5 million for the three months ended May 31, 2018 to $1.3 million for the three months ended May 31, 2019.

Net investment income on a weighted average per share basis was $0.48 for the quarter ended May 31, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $0.60. This compares to adjusted net investment income per share of $0.66 for the quarter ended February 28, 2019, and $0.64 for the quarter ended May 31, 2018, reflecting decreases of $0.06 per share and $0.04 per share, respectively. During these periods, weighted average common shares outstanding increased from 6.3 million shares for the three months ended May 31, 2018, to 7.5 million shares and 7.7 million shares for the three months ended February 28, 2019 and May 31, 2019, respectively.

Net investment income yield as a percentage of average net asset value (“Net Investment Income Yield”) was 8.0% for the quarter ended May 31, 2019. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 10.1%. In comparison, adjusted Net Investment Income Yield was 11.2% and 11.1% for the quarters ended February 28, 2019 and May 31, 2018, respectively.

Net Asset Value (“NAV”) was $186.8 million as of May 31, 2019, an increase of $5.9 million from $180.9 million as of February 28, 2019, and an increase of $42.0 million from $144.8 million as of May 31, 2018.

  • For the three months ended May 31, 2019, $3.7 million of net investment income and $4.0 million of net unrealized appreciation were earned, partially offset by $0.02 million deferred tax expense on net unrealized gains in Saratoga Investment’s blocker subsidiaries and $4.2 million of dividends declared. In addition, $0.7 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”), and 76,448 shares were sold through the Company’s At-the-Market (“ATM”) equity offering during the quarter.

NAV per share was $24.06 as of May 31, 2019, compared to $23.62 as of February 28, 2019, and $23.06 as of May 31, 2018.

  • For the three months ended May 31, 2019, NAV per share increased by $0.44 per share, primarily reflecting the $3.5 million, or $0.45 per share increase in net assets (net of the $0.54 dividend paid during the first fiscal quarter of 2020). This was slightly offset by the $0.01dilutive impact of the quarter’s 107,688 share issuances from the DRIP and ATM programs. The Company made no purchases of common stock in the open market during the quarter.

Return on equity for the last twelve months ended May 31, 2019, was 11.7%, compared to 14.9% for the comparable period last year.

Earnings per share for the quarter ended May 31, 2019, was $0.99, compared to earnings per share of $1.04 for the quarter ended February 28, 2019, and $0.61 for the quarter ended May 31, 2018.

Investment portfolio activity for the quarter ended May 31, 2019:

  • Cost of investments made during the period: $27.4 million, including investments in three new portfolio companies
  • Principal repayments during the period: $26.9 million

Additional Financial Information

For the fiscal quarter ended May 31, 2019, Saratoga Investment reported net investment income of $3.7 million, or $0.48 on a weighted average per share basis, and a net realized and unrealized gain on investments of $4.0 million, or $0.51 on a weighted average per share basis, resulting in a net increase in net assets from operations of $7.6 million, or $0.99 on a weighted average per share basis. The $4.0 million net gain on investments was comprised entirely of $4.0 million in net unrealized appreciation on investments, offset slightly by $0.02 million of net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.

The $4.0 million unrealized appreciation primarily reflects (i) $1.6 million unrealized appreciation on the Company’s Censis Technologies investment, (ii) $1.2 million unrealized appreciation on the Company’s Flywheel investment that was realized subsequent to quarter-end, (iii) $1.2 million unrealized appreciation on Saratoga’s CLO equity investment, reflecting first quarter performance exceeding projections, and (iv) $0.8 million unrealized appreciation on the Company’s Ohio Medical investment reflecting improved performance. This was offset primarily by $0.7 million unrealized depreciation on the Company’s My Alarm Center investment. This is compared to the fiscal quarter ended May 31, 2018, with net investment income of $3.9 million, or $0.63 on a weighted average per share basis, and a net realized and unrealized loss on investments of $0.09 million, or $0.01 on a weighted average per share basis, resulting in a net increase in net assets from operations of $3.8 million, or $0.61 on a weighted average per share basis. The $0.09 million net loss on investments consisted of $0.2 million in net realized gains on investments and $0.6 million in unrealized appreciation, offset by $0.9 million in net deferred tax expense on unrealized gains in Saratoga Investment’s blocker subsidiaries.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $4.6 million and $4.0 million for the quarters ended May 31, 2019, and May 31, 2018, respectively – an increase of $0.6 million year-over-year, or 15.9%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, increased from $1.2 million for the quarter ended May 31, 2018, to $1.3 million for the quarter ended May 31, 2019, but decreased from 1.4% to 1.1% of average total assets.

Portfolio and Investment Activity

As of May 31, 2019, the fair value of Saratoga Investment’s portfolio was $409.5 million (excluding $61.0 million in cash and cash equivalents), principally invested in 33 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 53.6% of first lien term loans, 26.7% of second lien term loans, 0.5% of unsecured term loans, 9.3% of subordinated notes in a CLO and 9.9% of common equity.

For the fiscal quarter ended May 31, 2019, Saratoga Investment invested $27.4 million in new or existing portfolio companies and had $26.9 million in aggregate amount of exits and repayments, resulting in net investments of $0.5 million for the quarter.

As of May 31, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.6%, which was comprised of a weighted average current yield of 10.7% on first lien term loans, 11.8% on second lien term loans, 0.0% on unsecured term loans, 16.0% on CLO subordinated notes and 2.8% on equity interests.

Liquidity and Capital Resources

As of May 31, 2019, Saratoga Investment had no outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million SBA debentures outstanding, $134.5 million of baby bonds (fair value of $137.5 million) issued and an aggregate of $61.0 million in cash and cash equivalents.

With $45.0 million available under the credit facility and the $61.0 million of cash and cash equivalents, Saratoga Investment has a total of $107.1 million of undrawn borrowing capacity and cash and cash equivalents available as of May 31, 2019. This would allow Saratoga Investment to grow current AUM by 26% without any new external financing. The net proceeds from the DRIP and ATM equity program totaled $2.4 million of equity issuances for the quarter ended May 31, 2019. Saratoga Investment also has the ability to issue additional equity or baby bonds through the existing shelf registration statement.

On March 16, 2017, Saratoga Investment entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time to time, up to $30.0 million of its common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc were also added to the agreement. On July 9, 2019, the amount of common stock to be offered through this offering was increased to $70.0 million. As of May 31, 2019, the Company sold 571,120 shares for gross proceeds of $13.0 million at an average price of $22.78 for aggregate net proceeds of $12.9 million (net of transaction costs) since inception, with $1.8 million gross proceeds generated in the quarter ended May 31, 2019.

On September 27, 2018, the SBA issued a “green light” letter inviting Saratoga Investment to file a formal license application for a second SBIC license. If approved, the additional SBIC license would provide the Company with an incremental source of long-term capital by permitting Saratoga Investment to issue, subject to SBA approval, up to $175.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the Company’s first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an additional SBIC license, or of the timeframe in which it would receive an additional license, should one ultimately be granted.

Dividend

On May 28, 2019, Saratoga Investment announced a dividend of $0.55 per share for the fiscal quarter ended May 31, 2019, payable on June 27, 2019, to all stockholders of record at the close of business on June 13, 2019. This increase is the nineteenth sequential increase to the Company’s quarterly dividends. On February 26, 2019, Saratoga Investment announced a dividend of $0.54 per share for the fiscal quarter ended February 28, 2019, paid on March 28, 2019, to all stockholders of record at the close of business on March 14, 2019. Total dividends declared for the fiscal years ended February 28, 2019 and 2018 were $2.10 per share and $1.94 per share, respectively.

Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal years 2018 and 2019, this share repurchase plan was extended for another year at the same level of approval, currently through January 2020. As of May 31, 2019, Saratoga purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

Saratoga Investment made no purchases of common stock in the open market during the quarter ended May 31, 2019.

2020 Fiscal First Quarter Conference Call/Webcast Information

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Saratoga Investment Corp.
Consolidated Statements of Operations
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Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, Saratoga Investment provides information relating to adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with the Company’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, Saratoga Investment accrues, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, Saratoga Investment believes that adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield and net investment income per share to adjusted net investment income per share for the three months ended May 31, 2019, and May 31, 2018.

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Saratoga Investment Corp. Increases Quarterly Dividend to $0.55 per Share Represents the 19th Sequential Quarterly Dividend Increase

May 28, 2019
Saratoga Investment Corp. Increases Quarterly Dividend to $0.55 per Share Represents the 19th Sequential Quarterly Dividend Increase

NEW YORK, May 28, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced that its Board of Directors has declared an increased quarterly dividend of $0.55 per share for the fiscal quarter ended May 31, 2019, payable on June 27, 2019, to all stockholders of record at the close of business on June 13, 2019.

This increase is the nineteenth sequential increase to the Company’s quarterly dividends.  Total dividends declared for the fiscal years ended February 28, 2019 and 2018 were $2.10 per share and $1.94 per share, respectively. The Company paid a quarterly dividend of $0.54 per share for the quarter ended February 28, 2019, $0.53 per share for the quarter ended November 30, 2018, $0.52 per share for the quarter ended August 31, 2018, and $0.51 per share for the quarter ended May 31, 2018. Throughout fiscal year 2018, the Company paid a quarterly dividend of $0.50 per share for the quarter ended February 28, 2018, $0.49 per share for the quarter ended November 30, 2017, $0.48 per share for the quarter ended August 31, 2017, and $0.47 per share for the quarter ended May 31, 2017.

“Saratoga investment has been able to consistently generate strong investment income and increased net asset value over the long-term, despite credit market volatility,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “This has given us the ability to continue to grow our dividend payments, delivering nearly five years of increased quarterly dividends. This sets us strongly apart from most others in the BDC industry, underscoring the value created from our high quality management team, ample available liquidity, disciplined credit analysis and robust investment sourcing pipeline.”

Strong financial performance has enabled Saratoga Investment to increase regular quarterly dividends each of the past nineteen quarters from $0.18 per share for the third quarter of fiscal 2015 to $0.55 per share for this first quarter of fiscal 2020.

Shareholders will have the option to receive payment of the dividend in cash or receive shares of common stock pursuant to the Company’s dividend reinvestment plan (“DRIP”). Saratoga Investment shareholders who hold their shares with a broker must affirmatively instruct their brokers prior to the record date if they prefer to receive this dividend and future dividends in common stock.  The number of shares of common stock to be delivered shall be determined by dividing the total dollar amount by 95% of the average of the market prices per share at the close of trading on the ten (10) trading days immediately preceding (and including) the payment date.

About Saratoga Investment
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns an SBIC-licensed subsidiary and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements
This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Contact: Henri Steenkamp
Saratoga Investment Corp.
212-906-7800

Roland Tomforde
Broadgate Consultants
212-232-2222

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Source: Saratoga Investment Corp

Saratoga Investment Corp. Announces Fiscal Year End and Fourth Quarter 2019 Financial Results

May 8, 2019

NEW YORK, May 08, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2019 fiscal year end and fourth quarter.

Summary Financial Information

The Company’s summarized financial information is as follows:

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“Fiscal year 2019 continued the strong performance trend for Saratoga Investment Corp. with significant strengthening of our organizational and capital foundation,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “We continued to make steady progress growing our high quality asset base while maintaining our industry leadership in key performance metrics and credit quality. We also took important steps to expand our capitalization and liquidity through equity and long-term debt issuances, raising over $90 million in the public capital markets. We increased our quarterly dividend for the 18th consecutive quarter to $0.54 per share, reflecting a 2% year-over-year increase while still overearning the dividend. Year-over-year, NAV grew by 26% and NAV per share by 3%. Our LTM ROE for the year was 10.6% is in the top tier of the BDC industry.”

Michael J. Grisius, President and Chief Investment Officer, added, “In this fiscal year, our organization originated $167.7 million of new investments, excluding the CLO warehouse – a record amount for us. We continue to see steady year-over-year asset base expansion, with an increase in our investments at fair value of 17% compared to last year, despite some significant repayments in Q4 of $57.0 million, excluding the CLO warehouse. Furthermore, market headwinds have not impaired our exceptional underwriting standards and consistent ability to deploy capital in high quality credits. This continued post quarter-end as we closed investments in three new platforms. 99% of our investments continue to hold our highest quality rating. Our belief remains that successful investing rests on sound judgment and steady, continuous discipline, taken one decision at a time. It is our conviction that our commitment to a long-term strategy and focus on quality will continue to reap positive rewards.”

As of February 28, 2019, Saratoga Investment increased its assets under management (“AUM”) to $402.0 million, an increase of 17.3% from $342.7 million as of February 28, 2018, and a decrease of 9.4% from $443.8 million as of November 30, 2018. The annual increase reflects originations of $187.7 million new investments during the year ended February 28, 2019, offset by repayments and amortizations of $135.7 million. These investments and repayments for the year are inclusive of the $29.3 million in originations and $77.0 million in repayments during the quarter ended February 28, 2019. Since Saratoga management has taken over the management of the BDC, $357.8 million of repayments and sales of investments originated by Saratoga have generated a gross unlevered IRR of 13.8%. Saratoga Investment’s portfolio has remained strong, with a continued high level of investment quality in loan investments, with 98.6% of its loans at its highest internal rating for this quarter.

As a result, both the year and quarter ended February 28, 2019 benefitted from higher investment income as compared to the prior-year period – investment income increased to $47.7 million for the year ended February 28, 2019, up 23.5% from $38.6 million for the year ended February 28, 2018, and up to $13.0 million from $10.1 million for the same quarterly periods, a 28.2% increase. This increased investment income was generated from an investment base that has grown by 17.3% since last year, partially offset by the weighted average current yield decreasing from 11.1% to 10.7%. In addition, this quarter’s investment income was also up 1.2% from $12.8 million for the quarter ended November 30, 2018.

As compared to the year ended February 28, 2018, the investment income increase was offset by (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from increased SBA debentures and the $60.0 million baby bond issuance, (ii) increased base and incentive management fees generated from the management of this larger pool of investments, and (iii) increased total expenses, excluding interest and debt financing expenses, base management fees and incentive fees and income tax benefit, reflecting primarily higher administrator expenses, higher directors fees and expenses and higher professional and general and administrative expenses, partially due to increased Sarbanes-Oxley (“SOX”) activities now that the Company has qualified as an accelerated filer. The increased expenses were offset by the recognition of a $1.0 million income tax benefit generated from net operating losses in Saratoga Investment’s blocker subsidiaries.

Net investment income on a weighted average per share basis was $2.60 and $0.54 for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $2.63 and $0.66, respectively. This compares to adjusted net investment income per share of $2.27 and $0.60 for the year and quarter ended February 28, 2018, reflecting an increase of $0.36 and $0.06 per share, respectively. This also compares to adjusted net investment income of $0.65 per share for the quarter ended November 30, 2018, an increase of $0.01 per share.

Net investment income yield as a percentage of average net asset value (“Net Investment Income Yield”) was 10.5% and 9.2% for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 10.6% and 11.2%, respectively. In comparison, adjusted Net Investment Income Yield was 10.2% for the year ended February 28, 2018, and 11.2% and 10.7% for the quarters ended November 30, 2018, and February 28, 2018, respectively.

Net Asset Value (“NAV”) was $180.9 million as of February 28, 2019, an increase of $37.2 million from $143.7 millionas of February 28, 2018, and an increase of $7.6 million from $173.3 million as of November 30, 2018.

  • For the year ended February 28, 2019, $18.3 million of net investment income and $2.0 million of net realized and unrealized gains were earned, offset by $1.8 million of deferred tax expense on net unrealized gains in Saratoga Investment’s blocker subsidiaries, and $14.2 million of dividends declared. In addition, $30.8 million of common stock was issued, net of offering costs and $2.2 million of stock dividend distributions were made through the Company’s dividend reinvestment plan (“DRIP”). 146,549 shares were sold through the Company’s At-the-Market (“ATM”) equity offering during the year.

NAV per share was $23.62 as of February 28, 2019, compared to $22.96 as of February 28, 2018, and $23.13 as of November 30, 2018.

  • During the past twelve months, NAV per share increased by $0.66 per share, primarily reflecting (i) the $4.3 million, or $0.57 per share increase in net assets resulting from operations (net of the $2.06 per share dividend paid during fiscal 2019) and (ii) the $0.09 accretive impact of the year’s 1,400,127 share issuances, including the equity offering, the ATM and the DRIP. The Company made no purchases of common stock in the open market during the year.

Return on equity for the year ended February 28, 2019, was 10.6%, compared to 13.2% for the comparable period last year.

Earnings per share for the year and quarter ended February 28, 2019, was $2.63 per share and $1.04 per share, respectively, compared to earnings per share of $2.93 per share and $0.89 per share for the year and quarter ended February 28, 2018, respectively, and $0.49 per share for the quarter ended November 30, 2018.

Investment portfolio activity for the year ended February 28, 2019:

  • Cost of investments made during the period: $187.7 million
  • Principal repayments and amortizations during the period: $135.7 million

Investment portfolio activity for the quarter ended February 28, 2019:

  • Cost of investments made during the period: $29.3 million
  • Principal repayments and amortizations during the period: $77.0 million

Additional Financial Information

For the fiscal year ended February 28, 2019, Saratoga Investment reported net investment income of $18.3 million, or $2.60 on a weighted average per share basis, and a net gain on investments of $0.2 million, or $0.03 on a weighted average per share basis, resulting in a net increase in net assets from operations of $18.5 million, or $2.63 on a weighted average per share basis. The $0.2 million net gain on investments was comprised of $4.9 million in net realized gain on investments offset by $2.9 million in net unrealized depreciation on investments and $1.8 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment’s blocker subsidiaries. The net realized gain primarily relates to the $4.7 million gain on the Company’s Health Media Network investment realized in the fourth quarter. The $2.9 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company’s Health Media Network investment, (ii) $1.4 million unrealized depreciation on the Company’s My Alarm Center investment, (iii) $1.6 million unrealized depreciation on the Company’s legacy Elyria investment and (iv) $1.8 million unrealized depreciation on the Company’s Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.8 million unrealized appreciation on the Company’s Easy Ice investment, most notably the participating preferred equity, (ii) $2.1 million unrealized appreciation on the Company’s Netreo Holdings investment, and (iii) approximately $1.0 million of unrealized appreciation on each of the Company’s Grey Heller, Censis and Vector investments. This compared to the fiscal year ended February 28, 2018, with net investment income of $12.7 million, or $2.11 on a weighted average per share basis, and a net gain on investments of $4.9 million, or $0.82 on a weighted average per share basis, resulting in a net increase in net assets from operations of $17.7 million, or $2.93 on a weighted average per share basis. The $4.9 million net gain on investments consisted of $5.9 million in net realized loss on investments offset by $10.8 million unrealized appreciation.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $18.6 million and $13.7 million for the years ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $4.9 million year-over-year, or 35.9%.

For the quarter ended February 28, 2019, Saratoga Investment reported net investment income of $4.1 million, or $0.54 on a weighted average per share basis, and a net gain on investments of $3.8 million, or $0.50 on a weighted average per share basis, resulting in a net increase in net assets from operations of $7.9 million, or $1.04 on a weighted average per share basis. The $3.8 million net gain on investments was comprised of $4.7 million in net realized gain on investments offset by $0.4 million in net unrealized depreciation on investments and $0.6 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment’s blocker subsidiaries. The net realized gain relates to the $4.7 million gain on the Company’s Health Media Network investment discussed above. The $0.4 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company’s Health Media Network investment, and (ii) $1.1 million unrealized depreciation on the Company’s Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.4 millionunrealized appreciation on the Company’s Netreo Holdings investment, (ii) $0.6 million unrealized appreciation on the Company’s Ohio Medical investment, (iii) $0.6 million unrealized appreciation on Saratoga Investment’s CLO equity investment, reflecting fourth quarter performance exceeding projections, and (iv) numerous smaller unrealized appreciations across the portfolio on various investments. This compared to the quarter ended February 28, 2018, with net investment income of $3.3 million, or $0.53 on a weighted average per share basis, and a net gain on investments of $2.2 million, or $0.36 on a weighted average per share basis, resulting in a net increase in net assets from operations of $5.5 million, or $0.89 on a weighted average per share basis. The $2.2 million net gain on investments consisted of $2.4 million unrealized appreciation offset by $0.2 million in net realized loss on investments.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $4.9 million and $3.8 million for the quarters ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $1.2 million year-over-year, or 31.1%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, decreased from $4.8 million for the year ended February 28, 2018 to $4.5 million for the year ended February 28, 2019, and decreased from 1.2% to 1.1% of average total assets. For the quarters ended February 28, 2019, and February 28, 2018, these total expenses decreased from $1.2 million to $1.0 million.

Portfolio and Investment Activity

As of February 28, 2019, the fair value of Saratoga Investment’s portfolio was $402.0 million (excluding $62.1 million in cash and cash equivalents), principally invested in 31 portfolio companies and one collateralized loan obligation fund (“CLO”). The overall portfolio composition consisted of 50.5% of first lien term loans, 31.3% of second lien term loans, 8.8% of CLO subordinated notes, 0.5% of unsecured term loans, and 8.9% of equity interests.

For the fiscal year ended February 28, 2019, Saratoga Investment invested $187.7 million in new or existing portfolio companies and had $135.7 million in aggregate amount of exits and repayments, resulting in net investments of $52.0 million for the year. For the quarter ended February 28, 2019, Saratoga Investment invested $29.3 million in new or existing portfolio companies, and had $77.0 million in aggregate amount of exits and repayments, resulting in $47.7 million of net exits and repayments for the quarter.

As of February 28, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.7%, which was comprised of a weighted average current yield of 10.9% on first lien term loans, 11.7% on second lien term loans, 14.6% on CLO subordinated notes, and 3.1% on equity interests.

As of February 28, 2019, 83.7% of Saratoga Investment’s portfolio is in floating rate debt, with many of these investments having floors. For all of these investments, the relevant 1-month or 3-month LIBOR rate is currently above the floors. Saratoga Investment has analyzed the potential impact of changes in interest rates on interest income from investments, and assuming that the investments as of February 28, 2019, were to remain constant for a full fiscal year and no actions were taken to alter the existing interest rate terms, a hypothetical change of 1.0% in interest rates would cause a corresponding increase of approximately $2.8 million to interest income.

 

Liquidity and Capital Resources

As of February 28, 2019, Saratoga Investment had $0.0 million in outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million outstanding of SBA debentures, $134.5 million of Baby Bonds (fair value of $136.3 million) and an aggregate of $62.1 million in cash and cash equivalents.

With the $45.0 million credit facility and the $62.1 million of cash and cash equivalents, Saratoga Investment has a total of $107.1 million of undrawn borrowing capacity and cash and cash equivalents available as of February 28, 2019. The net proceeds from the DRIP and ATM equity program totaled $32.9 million and $3.7 million of equity issuances for the year and quarter ended February 28, 2019, respectively. Saratoga Investment also has the ability to issue additional Baby Bonds through the existing shelf registration statement.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time to time, up to $30.0 million of its common stock through an ATM offering. As of February 28, 2019, the Company sold 494,672 shares for gross proceeds of $11.2 million at an average price of $22.72 for aggregate net proceeds of $11.1 million (net of transaction costs).

On July 13, 2018, Saratoga Investment issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

On August 28, 2018, Saratoga Investment issued $40.0 million in aggregate principal amount of 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.25 million and offering costs of approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025, and commencing August 28, 2021, may be redeemed in whole or in part, at any time or from time to time, at its option. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

On February 5, 2019, Saratoga Investment completed a re-opening and up-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 millionaggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018.

On September 27, 2018, the SBA issued a “green light” letter inviting Saratoga Investment to file a formal license application for a second SBIC license. If approved, the additional SBIC license would provide the Company with an incremental source of long-term capital by permitting us to issue, subject to SBA approval, up to $175.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the Company’s first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an additional SBIC license, or of the timeframe in which it would receive an additional license, should one ultimately be granted.

 

Dividend

During fiscal year 2019, Saratoga Investment declared and paid quarterly cash dividends of $2.06 per share, including $0.50 per share for the quarter ended February 28, 2018, $0.51 per share for the quarter ended May 31, 2018, $0.52per share for the quarter ended August 31, 2018 and $0.53 per share for the quarter ended November 30, 2018.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share for the quarter ended February 28, 2019, which was paid on March 28, 2019. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant the Company’s DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2018, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal year 2019, this share repurchase plan was extended for another year, through January 2020, at the same level of approval. As of February 28, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

We made no purchases of common stock in the open market during the year ended February 28, 2019.

2019 Fiscal Year End and Fourth Quarter Conference Call/Webcast Information

When:     Thursday, May 9, 2018, 10:00 a.m. Eastern Daylight Time (EDT)

Call:     Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada).

A replay of the call will be available from 1:00 p.m. EDT on Thursday, May 9, 2019, through 1:00 p.m. ET on Thursday, May 16, 2019, by dialing (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada), passcode for both replay numbers: 3985768.

Webcast:     Interested parties may access a simultaneous webcast of the call and find the FY and Q4 2019 presentation by going to the ?Events & Presentations? section of Saratoga Investment Corp.?s investor relations website, http://ir.saratogainvestmentcorp.com/events-presentations

 

About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns an SBIC-licensed subsidiary and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

 

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release that could cause our actual results to differ materially from those expressed or implied in such statements. Additional information is contained in the filings Saratoga Investment Corp. makes with the SEC. Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Financials

Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities

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Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, we provide information relating to adjusted net investment income, adjusted net investment income yield, and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield, and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with Saratoga Investment’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income, adjusted net investment income yield, and adjusted net income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. In addition, for fiscal 2017, adjusted net investment income also excludes the loss on extinguishment of Saratoga Investment’s 2020 Notes, and the interest expense related to the 2020 Notes during the call notice period while the 2023 Notes were already issued and outstanding. Both these expenses are directly attributable to the issuance of the 2023 Notes and the subsequent repayment of the 2020 Notes, and are deemed to be non-recurring in nature and not representative of the operations of Saratoga Investment. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield, and net investment income per share to adjusted net investment income per share for the years and quarters ended February 28, 2019 and February 28, 2018, and the year ended February 28, 2017.

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Saratoga Investment Corp. Increases Quarterly Dividend to $0.54 per Share Represents the 18th Sequential Quarterly Dividend Increase

Feb 26, 2019
Saratoga Investment Corp. Increases Quarterly Dividend to $0.54 per Share Represents the 18th Sequential Quarterly Dividend Increase

NEW YORK, Feb. 26, 2019 (GLOBE NEWSWIRE) — Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced that its Board of Directors has declared an increased quarterly dividend of $0.54 per share for the fiscal quarter ended February 28, 2019, payable on March 28, 2019, to all stockholders of record at the close of business on March 14, 2019.

This increase is the eighteenth sequential increase to the Company’s quarterly dividends.  Total dividends declared for the fiscal years ended February 28, 2019 and 2018 was $2.10 per share and $1.94 per share, respectively. The Company paid a quarterly dividend of $0.53 per share for the quarter ended November 30, 2018, $0.52 per share for the quarter ended August 31, 2018, and $0.51 per share for the quarter ended May 31, 2018. Throughout fiscal year 2018, the Company paid a quarterly dividend of $0.50 per share for the quarter ended February 28, 2018, $0.49 per share for the quarter ended November 30, 2017, $0.48 per share for the quarter ended August 31, 2017, and $0.47 per share for the quarter ended May 31, 2017.

“The increased size and continued high quality of our asset base over time has enabled us to generate strong investment income and increased net asset value,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “Our ability to increase our dividend payment for more than four straight years sets us strongly apart from our BDC competition and underscores the value of our high quality management team, ample available liquidity, disciplined credit analysis and robust investment sourcing pipeline.”

Strong financial performance has enabled Saratoga Investment to increase regular quarterly dividends each of the past eighteen quarters from $0.18 per share for the third quarter of fiscal 2015 to $0.54 per share for this fourth quarter of fiscal 2019.

Shareholders will have the option to receive payment of the dividend in cash, or receive shares of common stock pursuant to the Company’s dividend reinvestment plan (“DRIP”). Saratoga Investment shareholders who hold their shares with a broker must affirmatively instruct their brokers prior to the record date if they prefer to receive this dividend and future dividends in common stock.  The number of shares of common stock to be delivered shall be determined by dividing the total dollar amount by 95% of the average of the market prices per share at the close of trading on the ten (10) trading days immediately preceding (and including) the payment date.

About Saratoga Investment
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns an SBIC-licensed subsidiary and manages a $500 million collateralized loan obligation (“CLO”) fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements
This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment makes with the SEC. Saratoga Investment undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact: Henri Steenkamp
Saratoga Investment Corp.
212-906-7800

Roland Tomforde
Broadgate Consultants
212-232-2222

Henri Steenkamp is a finance executive with over 15 years of experience in his field. Steenkamp serves as chief financial officer, treasurer, and chief compliance officer of New York City-based Saratoga Investment Corp (NYSE: SAR) and Saratoga Investment Advisors, LLC.