Saratoga Investment Corp. invested a total of $15.3 million in new investments in the recent fiscal quarter, in Help/Systems Holdings and My Alarm Center.
Saratoga increased its investment in Help/Systems Holdings. The expanded investment, as ofNov. 30, comprised a $5 million, 6.25% first-lien term loan due 2019, and a $3 million, 10.5% second-lien term loan due 2020, according to the company’s 10-Q.
Help/Systems Holdings, based in Eden Prairie, Minn. and a subsidiary of HS Group Holdings, provides automation and business productivity software.
Moreover, Saratoga Investment Corp. added a $7.5 million 12% second-lien loan due 2019 to My Alarm Center to its investment portfolio in the recent quarter. My Alarm Center, a portfolio company of Norwest Ventures, provides residential and small commercial security services and home-automation technologies.
My Alarm Center closed a new $50 million second-lien term loan late last year via placement agent Imperial Capital with proceeds earmarked to repay mezzanine debt. In addition, the company’s first-lien term loan was increased by $25 million.
Saratoga’s repayments in the fiscal third quarter ended Nov. 30 totaled $27.9 million, outpacing new investments. New investments picked up after the quarter ended, with Saratoga adding $31.2 million on the back of repayments of $3 million.
“The timing of redemptions and the new rate originations during this quarter were unusual with most redemptions occurring during the quarter, while many new originations occurring following quarter end,” said CEO Christian Oberbeck in an investor call today.
Behind the magnitude of the redemptions is Saratoga’s strategy of pursuing higher-quality investments, which increases the chances of a debt refinancing or company sale, investors heard on the call.
“If you are making good investment selections, you are exposed to higher redemptions. We have experienced that,” said CIO Michael Grisius on the call.
Saratoga Investment has no significant direct exposure to the oil-and-gas industry, with some exposure to the ailing sector through its CLO.
“The lower middle market is the most attractive market segment to deploy capital, and the fundamentals here remain strong, leading to the best risk-adjusted returns, in our view,” Grisius added.