Saratoga Investment Corp. to Host Investor Day on June 1, 2016

Saratoga Investment Corp. to Host Investor Day on June 1, 2016

NEW YORK, May 2, 2016 – Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced it will host an Investor Day in New York City on Wednesday, June 1, 2016 at 10:00 ET. Management will discuss a range of topics on all aspects of the Company’s financials, operations and investment strategy.

Led by senior management of Saratoga Investment, including Christian L. Oberbeck, Chairman and Chief Executive Officer, Michael J. Grisius, President and Chief Investment Officer, and Henri J. Steenkamp, Chief Financial Officer and Chief Compliance Officer, this forum will provide attendees with a strategic overview and review of the Company. There will also be CEOs of the Company’s portfolio companies in attendance and presenting.

Interested Parties

Individuals interested in attending can contact Adam Prior of The Equity Group Inc. at aprior@equityny.com or by calling (212) 836-9606.

Webcast

The presentation portion of the day will be archived on the Company’s website and available via the “Investor Relations” section of Saratoga’s website at http://saratogainvestmentcorp.com/.

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 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.

Healthy Dialogue Curbs Hostile Activism

Healthy Dialogue Curbs Hostile Activism

The rise of investor activism is certainly a controversial topic within many circles and industries. It’s even caused some companies to reshape their CFO searches. The business-development company sector is seeing a rise in activism as stocks fall across many institutions in the market. While boards will almost always agree that they are capable of guiding the company to success, some relationships between shareholders and the company indicate a disconnect between the two.

Shareholder activism tends to reveal this underlying miscommunication between a company and its shareholders. Many of these scenarios can be avoided with a proactive mindset and approach. At my business-development company, Saratoga Investment, we haven’t encountered any issues with shareholder activism to date.

We credit this to maintaining a healthy relationship with our investors that centers on proactive communication and mutual respect — ideally negating the need for escalation on the shareholders’ part, which can often feel hostile to a board and its management. When partnering in this type of communication with positive results and actions supporting various parties different interests, all parties can likely avoid escalating issues to a point of contentiousness. Instead, we can come together and discuss the best course possible for everyone.

A continued dialogue is essential to the success of a business-development company and the relationship with its investors. Our primary goals are maintaining quality through disciplined underwriting, keeping liquidity strong, and generating meaningful returns for our shareholders.

In doing so, our shareholders are more likely to see the short- and long-term benefit of investing with Saratoga and understand our direction. While short-term results have produced solid earnings, we discuss and remain focused on long-term returns. That’s why we suggest holding regular meetings to update investors of any pressing news or developments in the company and/or sector as disclosed in our public releases and earnings calls.

By laying out these goals and agendas during these releases, Saratoga maintains transparency with our investors. Having follow-up calls with us as requested allows them to voice ideas, questions, and concerns that may arise so that we may address them in a timely fashion. Certainly listening is key, but considering their insights is just as vital. You must listen and consider investor input whenever possible. These people are investing in your company. They deserve to be heard. You never know when some excellent ideas will come forth.

Even if the company opts to go in a different direction, the shareholders and the board can look back to see the healthy dialogue that led to this point. Sometimes more rounds of conversation will arise, but if the reasons and objectives are clearly laid out by the board, general understanding and respect is more likely to be reached.

We try to keep our fingers on the pulse of our environment, market, and the views of our various constituents, and take a proactive approach to communicating our successes. Thankfully, we’ve been able to avoid any significant setbacks in recent quarters, but negatives need to be communicated when they occur.

Even when negative news arises, there is an opportunity for proactive communication that leads to an expression of solutions and strategies. In some cases, this isn’t possible and the news must simply be delivered. But regardless of the scenario, healthy talks with investors are almost assuredly going to lessen tensions that could otherwise escalate and lead to hostile shareholder activism.

This post was originally published on CFO.com

 

Rethinking Your Approach to Shareholder Engagement

Rethinking Your Approach to Shareholder Engagement

Does your company’s interaction with shareholders feel more like an obligation than an opportunity? If so, it might be time to consider a different approach.

If you’re curious why this happens, think about the relationship between your business and its investors. Is there a high level of confusion or contention between investors and the board? Is the business’s approach to communication seen as a formality? Is your engagement usually conducted strictly during times of crises?

In recent years, articles and interviews with executives discussing shareholder engagement appear to be on the rise, indicating an uptick in awareness. Still, as a whole, businesses could stand to improve their outreach.

At Saratoga Investment Corp., we place a high emphasis on shareholder engagement and outreach. The reason is simple: proper investor outreach is mutually beneficial. By keeping your investors further informed on business proceedings, you give them a greater sense of immersion and connection to their investment. When investments continue to perform, investors are less likely to consider pulling their money from the venture. They may even opt to invest further.

In short, if your company isn’t thinking like a shareholder activist, maybe it’s time to consider a paradigm shift when it comes to your outreach. As Vanguard chairman and CEO F. William McNabb III notes, thinking like an activist helps your company in the very best sense. He elaborates, “Healthy and vibrant boards think like an activist in the very best sense. They ask:

  • Where should we be pushing harder or taking costs out? What are the management team’s blind spots?
  • What are the board’s blind spots?
  • And how do we correct that? Some boards bring in sell-side analysts that have a ‘sell’ on the company to tell them what they’re missing.”

By thinking like an activist, your company can become proactive in ways that a shareholder couldn’t possibly from merely an investment standpoint. Now the business places itself in an advantageous position. Imagine the next time you communicate to your shareholders that you did notice areas of improvement. The issue was resolved and now the business is reporting the positive improvement to its investors.

That sort of engagement is bound to produce positive sentiment, don’t you think?

If your business effectively communicates its financial performance, that’s excellent, but it’s far from all you can do. To expand your outreach efforts, consider expanding the discussion to include strategy, risk assessments, and other topics that are important to investors. By discussing these, you give investors a higher level of transparency, which has a high likelihood of translating into a higher level of confidence and trust for your business.

Even if your business is working on producing the numbers your investors want to see, an in-depth engagement approach provides investors with a deeper level of understanding of your business. By granting access to more pertinent information, the investor is able to understand their investment on a deeper level — a desire you might have heard more about since the financial crisis.

From dedicated teams to a few tweaks, more of today’s businesses are listening to the opportunities and benefits that come with improved shareholder engagement. If your company hasn’t done so, it’s high time to at least consider adapting your current approach. In the end, all parties could reap the benefits.

This post was originally published on CFO.com

What Millennials Should Know About BDCs

What Millennials Should Know About BDCs

Adults under 30 years of age — the millennial generation — are faring well financially and enjoying their earnings, but only 26 percent report that they own any stock, according to a recent Bankrate survey.

The biggest reason for ignoring the stock portfolio is the misconception that millennials do not have enough money to invest. The second reason for neglecting to invest is not knowing anything about stocks.

A lack of trust in the market is also preventing many from believing investing is a viable way to save for the future. According to a Capital One Investing survey released by CNNMoney, 93 percent of millennials reported both a distrust of the market and a lack of investing knowledge.

Bottom line: Millennials are fearful and not knowledgeable enough to invest.

Fortunately, millennials have many resources at their disposal to learn about investing basics and pick out a few high-performing investments. Online wealth management firms and DIY brokerages are some good starting points. These resources and tools can help younger investors learn about investing strategies and create a starter portfolio that carries them through their working years. Learning about business development company (BDC) investments can be extremely valuable for a young investor who wants to build or diversify his or her portfolio.

How Millennials Approach Investing

In its “Millennials and Money” white paper, Merrill Lynch revealed the results of its Young High Net Worth Insights Survey, which shows 65 percent of young investors take the same approach as their parents. These investors are independent and skeptical, which means they may be more inclined to make carefully researched choices and be somewhat conservative in their approach. This generation makes thoughtful spending decisions and may not be so eager to indulge in luxury purchases or seek out high-risk stock trading activities.

BDCs might be the ideal option for millennials who want to diversify with minimal risk and also get the highest returns on their portfolio. Here are some important things millennials should know about BDCs:

Saratoga Investment Corp.’s, recent Q3 FY 16 earnings report

Saratoga Investment Corp.’s, recent Q3 FY 16 earnings report

Getting Started with BDC Investments

A BDC is a publicly registered company that provides financing to small and mid-sized businesses. BDCs fund other companies and answers to their own board of directors. BDCs were created by Congress in 1980 as an amendment to the Investment Company Act of 1940. These companies represent a very transparent portfolio of lines which are open for public trading without any restrictions.

People who choose to invest in BDCs are, therefore, investing in the performance of an company. BDCS can pay high dividends because they take on risks in the process of buying stock in various companies. Since their own portfolios are so diverse, well managed BDCs can show a steady track record of success, which in turn makes them even more appealing to individuals looking to build a portfolio.

Why BDCs Are So Attractive

One of the biggest reasons BDCs are so attractive to millennials is because they provide for diversification of funds. Instead of investing in a single stock or company, the investment is spread across dozens or hundreds of small businesses, which means the risk level is similar to that of a mutual fund. Young investors seeking out lower-risk opportunities may find BDCs to be among the most attractive options for their portfolio. For an idea of what this diversification looks like, take a look at this graph from my company, Saratoga Investment Corp. This is from our recent Q3 FY Earnings Report:

Another benefit of BDCs is the tax advantage. Like real estate investment trusts (REITs), BDCs are not taxed at the corporate level under certain conditions, which means they provide investors a higher dividend yields than other investments. This is one of the reasons why BDCs work so well in retirement accounts — when a shareholder holds a BDC in an IRA, they enjoy the benefit of tax-exempt gains and cash distributions.

Identifying the Right BDCs

Millennials exploring the idea of investing in BDCs need to do some due diligence to make informed decisions. Since these companies are transparent about their schedule of investments, it’s a good idea to review this information closely and focus on BDCs that are investing in companies with a positive cash flow. BDCs investing in fast-growing companies and market leaders are more likely to provide investors with high returns.

Young investors do not need to shy away from the prospect of investing when they arm themselves with valuable knowledge about stock trading and learn about attractive investment opportunities such as BDCs. With careful planning and an accurate assessment of risk, many millennials will find BDC investments to be an extremely valuable addition to their portfolio.

This post was originally published  on ChrisOberbeck.com

The CFO’s New Role in Recruiting and Training New Talent

The CFO’s New Role in Recruiting and Training New Talent

The role of a CFO has evolved in recent years. Previously, CFOs were seen as financial-specific decisions makers, often just numbers people. That, now, is not the case in the large majority of corporations. A 2013 Consero Chief Financial Officer data survey found that 81% of the 1000 CFOs surveyed felt that their company saw them more as a strategic partner that went beyond the financial elements of the business.

The CFO now serves as an influential figure in the company. Whether a junior reports to you or not, it’s the CFO’s job to lead by example and teach when possible. From efficiency to leadership, a good CFO can shape the future of the company and set the team dynamic and culture, just like any other executive.

It’s not just board decisions where a CFO now can influence the organization. Today, a CFO has the opportunity to ensure that the future of the company looks bright by having a hand in the recruiting and training of its youth talent. If you’re not taking this proactive approach, it’s time to consider doing so–especially if you find your company lagging in internal promotion candidates or you’re losing top candidates to competitors.

If you find yourself struggling to establish this relatively new CFO mentality to your workplace, start by considering your communication efforts.

Effective Communication

You can talk to your colleagues or you can communicate with them.

Effective communication conveys goals, messages, lessons, etc. to your team members. Be it the newest hire, the board or investors, you must get the right message across. With clear communication, everyone understands what must get done.

When it comes to hiring, if you can identify and communicate ideal traits and skills in a new hire to your Hiring Manager, they are best positioned to recruit the right applicants. Without stepping on the toes of your colleague, you’ve conveyed a need the company wants to fill with its newest addition–thus, displaying your foresight for the company as a whole while remaining a respectful team player.

Once you’ve recruited the right youth additions it’s time to cultivate that talent into the future leaders of the business. The first thing you can do is establish goals for the junior team members. With a direct marching order, they know what is expected of them. In the ideal scenarios, they’ll excel and you’ll just need to occasionally check-in to ensure their development is at optimal levels.

In other situations, your leadership could help steer them back on track.

Righting Their Ship

Sometimes your junior team members won’t reach their goals. When this occurs, you can choose to watch them sink, or try to offer them a hand.

A CFO with effective communication skills can help steer the junior back by reminding them of the goals they need. While re-establishing goals, you can hone in on the struggles of the associate, possibly allowing you an opportunity to impart some sage advice to ease their woes. If you have specific examples of their work, you can serve as a vital leader to them as you pinpoint examples of areas where they can improve. By providing them direct examples, they now have areas to specifically revise and build upon. Now that the employee has direct, concise feedback, they once again know exactly what is expected of them. And they have the opportunity to succeed or fail.

Talent Flourishes

Now comes the fun part: taking notice of emerging talent.

It’s amazing to see people learn, improve and then rise in the company. As CFO, you should be looking at your company’s rising stars. If you pinpoint the potential leaders of tomorrow today, you benefit all parties. You’re showing talented juniors that the company wants them for the long haul and believes in them. They know you are invested in their potential and want to see them flourish with your business.

Conversely, your company now has a new name to consider for future leadership. The fact that you made the call further affirms your acumen as a strategic leader in the business. It was already clear you had the knack to lead, but this helps cement your status as a strategic business partner.

It was already clear to the company that you know the dollars and figures. By taking these steps, they now also understand that you know what is important in growing the business.

 

Saratoga Investment Corp. to Report Fiscal Year End and Fourth Quarter 2016 Financial Results and Hold Conference Call

Saratoga Investment Corp. to Report Fiscal Year End and Fourth Quarter 2016 Financial Results and Hold Conference Call

NEW YORK, April 19, 2016 – Saratoga Investment Corp. (NYSE:SAR), a business development company, will report its financial results for the fiscal year and quarter ended February 29, 2016 on May 17, 2016, after market close. A conference call to discuss the financial results will be held on May 18, 2016. Details for the conference call are provided below.

Who:

Christian L. Oberbeck, Chief Executive Officer
Michael J. Grisius, President and Chief Investment Officer
Henri J. Steenkamp, Chief Financial Officer

When:

Wednesday, May 18, 2016
10:00 a.m. Eastern Time (ET)

How:

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. ET on
Wednesday, May 18, 2016 through 1:00 p.m. ET on Wednesday,
May 25, 2016 by dialing (855) 859 -2056 (U.S. and Canada) or
(404) 537-3406 (outside U.S. and Canada), passcode for both replay numbers: 94018191.

Webcast:
Interested parties may access a simultaneous webcast of the call and find the FY 2016 presentation by going to the “Events & Presentations” section of Saratoga Investment Corp.’s investor relations website, http://www.saratogainvestmentcorp.com/investor.html

Information:
Saratoga Investment Corp.’s Form 10-K for the fiscal year ended February 29, 2016 will be filed on May 17, 2016 with the Securities and Exchange Commission.

How to Maintain Healthy Board Relationships

How to Maintain Healthy Board Relationships

Your Board of Directors are a group of expert insiders offering a unique set of talents, expertise, and insights. Maintaining healthy relationships among team members is critical to the success of your company. There are several things you can do to ensure all parties stay on good terms with each other and are eager to contribute. Setting healthy boundaries, maximizing each member’s strengths and coordinating productive meetings is part of the process.

Here are some of the most effective ways to maintain healthy board relationships:

Maximize Available Time

Whether you’re scheduling a one-hour meeting to introduce a new idea or a longer meeting during a product launch, encourage attendees to show up on time and confirm their attendance at least a week in advance. This will help board members plan their schedules around the meeting and reduce the risk of delays on meeting day. If you are preparing a slideshow or a formal speech, make sure all materials are ready in advance, and preferably provided to them so that they can prepare.

Inform Your Board Members

As the head of your company, you know your company better than anyone. Your job is to inform board members of the risks, challenges, threats, and opportunities as they relate to your company and the market as a whole. Ensuring that board members know these factors will help them to do their job more effectively.

Slides can be powerful visual tools that can illustrate these points during a board meeting. Consider creating slideshows to present materials, charts and graphs, and then provide a copy of the presentation for attendees to review later. Graphical presentations are always more powerful than lots of words.

Set Management Boundaries

Board members provide valuable insights and make recommendations on various company activities. Their primary objectives should be to solve major problems and find solutions—not to take on management roles. Encourage them to share their resources and participate in meetings. Make these tasks a priority during and after meetings, providing opportunities for board members to communicate their ideas and insights at every opportunity. This way, they will feel less obligated to take on management tasks and can provide more value to the company as a whole.

Handle Disagreements Effectively

Disagreements will arise but the board must focus on resolving the issue together. Encourage board members to state the issue clearly during a meeting and maintain respectful relations with other members as they work on solving a problem. Consider bringing in a third-party mediator to resolve conflicts or provide independent perspectives, but only if necessary.

Adhere to a Reporting Schedule

Make sure everyone is aware of what is going on and what key decisions are being made during all meetings by summarizing conversations in a meeting and creating reports on any actions taken, or to be taken. Make sure all board members receive this report shortly after a meeting so everyone stays up to date. This could take the form of a comprehensive summary of 10 to 20 pages, or a simple one-page outline of discussions and action steps agreed upon. This report should be distributed to attendees within a week of the meeting.

At the end of the day, it’s all about results. You need to be proactive in order to maintain healthy board relationships and coordinate productive board meetings through business challenges, growth phases, and when making key business decisions. Use these tips to maximize meeting times and make full use of your board member’s expertise to help move your business forward.

How to Stay Up to Date in the BDC Sector

How to Stay Up to Date in the BDC Sector

The business development company sector is a fast evolving facet of the financial marketplace. It is imperative that you stay abreast of the news, or you could fall behind. As a member of the board, and CFOs specifically, you can’t miss the latest comings and goings. If you do, you are not only disserving yourself, you are stunting the performance of your BDC as a whole.

How does one stay up on the latest news while juggling the daily ebb and flow of the company?

To best position myself and Saratoga Investment Corp., I employ key initiatives that provide me the time to catch up on current events without any work falling behind. This includes placing a significant level of investment on emerging talent, and networking on behalf of myself and the company.

If you’re finding yourself having trouble keeping up on the news, try these measures to improve your BDC acumen:

No “I” in Team

If you aren’t relying on your team, it’s high time to start. Your team is vital not only to the success of your BDC’s operations. It is vital to taking some work off your plate so you can focus on the road ahead. With a bit of time freed up, you can now focus on the market, accounting and regulatory news and determine how these developments factor into your plans.

Use your leadership to delegate some responsibilities. This is perfectly acceptable as long as you aren’t passing off work that requires a CFO’s particular insight. A good leader knows what their team can take on. Even if they aren’t sure, this can serve as a great low-risk opportunity to find out. You aren’t asking the world from them. Rather, you are asking them to take on some higher level responsibilities while you focus on the development of the brand and industry. It provides those teammates with career-building experience while you get to focus on other areas of need.

If you aren’t relying on your team, I can’t stress enough the need to do so. You need to have time to focus on the ‘bigger picture’ items.

In doing so, it leads me to my next point:

Developing Talent

By relying on the team to accomplish some duties, you not only afford yourself the time to stay up to date on the sector; you invest in the future of your company. You send a clear message to those that support you that your BDC is invested in their professional growth. This level of investment often fosters a culture of go-getters and high achievers. With this mentality firmly in place at your BDC, you can expect to see above and beyond performances from your team.

Not only does this help distinguish rising talent, you begin to pinpoint the level of investment each associate needs to make that next step in their career. These individuals are likely to further immerse themselves in the sector as well. Now, it’s not just the CFO staying informed of the recent news. Your entire team is on board. Just in case something slips through the cracks, your support team is just as wise to industry developments. This sort of all hands on deck mentality serves on countless levels. It may take a bit of your time early on, but it will pay dividends for you in short work.

Every Quarter Counts

Quarterly earnings calls offer you the chance to see the face of the industry from both a micro and macro viewpoint. From individual BDCs to the larger macro environemtn, each call can shed new light on the shape of the sector to come. You’ll likely be running your own call, so staying up to date there should be second nature. But don’t forget to track the market and individual BDCs as well.

Leave no stone unturned when it comes to fact finding.

Networking

Meet and greet functions, conferences and roundtables can benefit you on a variety of levels. By holding your own, you not only introduce your BDC to a captive audience; you also get to show off yourself. At these events, you can field questions asked by investors, peers and the media. In doing so, you can tout the performance and potential of your BDC. Additionally, you can field questions that let you know what’s on the mind of your peers in the market.

However you approach these gatherings, you provide your BDC ample opportunities to further get its name out to key individuals in your sector. If you leave your audience with the right impression, you could even come away with good resources to help you keep up on the latest news.

Reliable Sources

The people you meet at events and other occasions can become integral outside sources of information. Instead of remaining within your BDC’s pipeline, an outside resource–think a contact at an accounting firm–can minimally engage you to get through complex issues. These people often are on the cutting edge of the market. They have key details and information that they can share with you.

Instead of sourcing all the news yourself, you now have a reliable individual or two that can provide expert insight from an outside-the-BDC mindset.

If you combine some, or ideally all, these tips you are likely to become the BDC that remains ahead of the pack. Your wealth of information will prove beneficial to your company and the investors that trust in your acumen to provide a return on their investment.

Saratoga Investment Corp. Increases Quarterly Dividend to $0.41 per Share

Saratoga Investment Corp. Increases Quarterly Dividend to $0.41 per Share

NEW YORK, March 31, 2016 – The Board of Directors at Saratoga Investment Corp. (NYSE:SAR) has declared a quarterly dividend of $0.41 per share for the fiscal quarter ended February 29, 2016, payable on April 27, 2016 to all stockholders of record at the close  of business on April 15, 2016. 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.

The Company also further exercised its share repurchase plan during this quarter. 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. Last quarter, this share repurchase plan was extended for another year, and increased to 400,000 shares through October 2016. As of March 30, 2016, Saratoga repurchased 37,920 shares at a weighted average price of $14.10 per share under this plan.

“In light of the volatility and challenges facing the BDC market, we are very pleased to continue paying an increasing and healthy quarterly dividend,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “Our ability to over-earn our dividend results from the stable and growing income yield generated from our prudently increasing and high quality portfolio. During this past quarter, we have repurchased 37,920 shares demonstrating our commitment to building shareholder value while maintaining adequate capital to leverage market opportunities.”

Mike Grisius, President and Chief Investment Officer, said, “Our financial performance rests on a new deal pipeline that remains productive despite market tightening. We enjoy strategic flexibility in how we source and deploy capital and feel well positioned to face current market conditions.” During the last four quarters, the Company has paid quarterly dividends of $0.27 per share for the quarter ended February 28, 2015, $0.33 per share for the quarter ended May 31, 2015, $0.36 per share for the quarter ended August 31, 2015, $0.40 per share for the quarter ended November 30, 2015, and a special dividend of $1.00 per share in June 2015.

For more information, visit the Saratoga Investment Corp website.

How Vision And Quality Lead BDCs To Success

Summary

  • This article discusses why I believe BDCs don’t need to sacrifice credit quality when increasing their asset base, as evidenced by Saratoga Investment Corp.’s continued out-performance in Q3 of fiscal 2016 and throughout fiscal 2016.

  • By maintaining quality and other key pillars, a BDC can maintain a high quality asset base with a strong yield and return on equity.

  • A BDC can see additional potential by maintaining a strong liquid base for future funding while looking for promising investments.

Over Q1 and Q2Saratoga Investment Corp. has been able to boast an impressive record of growth leading to increased financial performance. For Q3, including our deals that closed shortly after quarter-end we did much of the same. During that time, Saratoga’s success has been accomplished by a disciplined focus on various milestones and objectives that I believe all BDCs can use as a roadmap for their company.

Along with Chief Executive Officer Christian Oberbeck and Chief Investment Officer Mike Grisius, Saratoga built upon its already growing momentum from the previous year by reviewing and staying true to our primary focus and long-term objective during the last five years–which is to increase the quality and size of our asset portfolio base with the ultimate purpose of building Saratoga Investment Corp. into a best-in-class BDC, generating meaningful returns for our shareholders. By maintaining that focus while seeking areas of additional improvement, we continued our momentum gained during the first two fiscal quarters and last year towards realizing our long-term strategic objectives. Highlights from just the past quarter include:

  • Consistent originations sustain assets under management amongst significant redemptions.

    • Total AUM up 153% from FY12.

    • Since quarter-end, new originations of $31.2 million with minimal redemptions.

  • Continued improvements in key performance metrics.

    • NAV increased 1.6% to $127.3 million.

    • Investment quality at strongest level ever. Over 97% of loan investments with highest rating.

    • Return on equity of 10.8% for Q3 and 12.9% YTD, beating industry average of 4.3%.

  • Declared new dividend of $0.40 per share continuing increase in quarterly dividends, more than doubling our quarterly dividends in past 12 months.

    • Represents dividend for quarter ended November 30, 2015, payable on February 29, 2016 for all stockholders of record on February 1, 2016.

When it comes to other BDCs striving for similar goals, achieving success is built on certain fundamental objectives:

Maintain a robust high quality asset base, with strong yield and return on equity:

As we grow our portfolio asset base and generate competitive yields, we’ve done so with a continued focus on the quality of our portfolio.

Despite an unusual industry-wide concentration of redemptions, Saratoga’s metrics held strong on a quarter-over-quarter basis. This is in large part due to our endeavors to maintain a robust, quality asset base that offered portfolio diversity through various industries, as well as strong yields and return on equity. This holds true with Saratoga’s simple and consistent objectives.

In thinking both short and long-term, executing our strategy requires expansion without sacrificing credit while benefiting from scale. Crucially, we are seeing more deals by growing our pipeline. This is done by internally adding to our management team and capabilities thereby providing Saratoga the best possibility to increase our capacity in a thoroughly researched and repeatable way.

As evidenced by the graph below when combined with the new originations subsequent to quarter-end as previously maintained., we have been growing consistently and expect the coming quarters to indicate a further net portfolio growth–a growth that would not be possible without sticking to the plan. And this growth has taken place while continuing to maintain an extremely high credit quality:

1

Overall Strengthening of a BDCs Foundation Enables Continued Increases in Cash Dividends.

With a current quarterly dividend yield of 10.7%, Saratoga more than doubled its regular quarterly cash dividend in the past 12 months. Shareholders can also continue to participate in our dividend reinvestment plan, if they elect to opt in.

2

 

Our strengthened foundation and DRIP program allows the opportunity for shareholders to reinvest dividend in our stock, which is trading below NAV while at the same time being in a growth phase.

Maintain a Strong Liquidity Base, Look for Promises of Improvement

Saratoga is in the midst of obtaining its second SBIC license. On April 2, 2015 Saratoga was given its green light and go forth letter from the SBA. If approved, the license allows for Saratoga to grow its assets by at least $112.5 million. Additionally on May 29 2015, Saratoga entered into a Debt Distribution Agreement with Ladenburg Thalmann. By entering into the agreement, Saratoga can offer first sale from time to time up to $20 million in aggregate principal amount of our existing Baby Bonds issuance through an at the market offering. Since the agreement was struck and through the end of Q3, Saratoga sold bonds with a principal of $13.1 million with an average percent premium of 1.2.

Furthermore, with our Board of Directors extending our share repurchase program, Saratoga can repurchase up to 400,000 shares of its common stock up to October 2016. During Q2, Saratoga repurchased 2,500 shares.

By keeping a strong liquidity base while expanding into other areas of improvement, a BDC strategically places itself in an area of stability and improvement. Our available dry powder at the conclusion of Q3–consisting of SBA debentures, our secured revolving credit facility, and cash and cash equivalents–gives Saratoga the ability to grow AUM by over 60% without any new external financing (see below).

3

 

While these pillars might need adjusting to fit a particular BDC, a strong foundation built on a consistent vision of quality while exploring future growth opportunities should translate positively to all companies.

Disclosure: I am/we are long SAR.

Stocks: SAR
This post was originally published on Seeking Alpha

Henri Steenkamp
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.