UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
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1.01. Entry into a Material Definitive Agreement.
On August 11, 2022, Saratoga Investment Corp. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) by and among the Company and Saratoga Investment Advisors, LLC, on the one hand, and Ladenburg Thalmann & Co. Inc., as referral agent (“Ladenburg”), and certain institutional purchasers, on the other hand, in connection with the issuance and sale of $8,000,000 aggregate principal amount of the Company’s 6.00% Notes due 2027 (the “New Notes” and the issuance and sale of the New Notes, the “Offering”).
The New Notes were issued on August 15, 2022 as additional notes under the Base Indenture, dated May 10, 2013 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Tenth Supplemental Indenture, dated April 27, 2022 (the “Tenth Supplemental Indenture”; and together with the Base Indenture, the “Indenture”), pursuant to which the Company issued $87,500,000 aggregate principal amount of the 6.00% Notes due 2027 on April 27, 2022 and $10,000,000 aggregate principal amount of the 6.00% Notes due 2027 on May 10, 2022 (the “Existing Notes”). The New Notes are treated as a single series with the Existing Notes under the Indenture and have the same terms as the Existing Notes. The New Notes have the same CUSIP number and are fungible and rank equally with the Existing Notes. Upon issuance of the New Notes, the outstanding aggregate principal amount of the Company’s 6.00% Notes due 2027 is $105,500,000.
The New Notes bear interest at a rate of 6.00% per year. The Company will pay interest on the New Notes on February 28, May 31, August 31 and November 30 each year, beginning on August 31, 2022. The New Notes will mature on April 30, 2027. The Company may redeem the New Notes in whole or in part at any time, or from time to time on or after April 27, 2024, at the redemption price of par, plus accrued interest.
The Company intends to use the net proceeds from the Offering to make investments in middle-market companies (including investments made through Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, each a wholly owned subsidiary of the Company that is licensed as a small business investment company) in accordance with its investment objective and strategies and for general corporate purposes.
The New Notes are the direct unsecured obligations of the Company and rank pari passu with all existing and future unsubordinated unsecured indebtedness issued by the Company, senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the New Notes, effectively subordinated to all of the existing and future secured indebtedness issued by the Company (including indebtedness that is initially unsecured in respect of which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the Company’s senior secured revolving credit facility, as amended, and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.
The Indenture contains certain covenants, including certain covenants requiring the Company to comply with Section 18(a)(1)(A) as modified by Section 61(a)(2) of the Investment Company Act of 1940, as amended (the “1940 Act”), or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission (the “SEC”); to agree that for the period of time during which the New Notes are outstanding, the Company will not declare any dividend (except a dividend payable in our stock), or declare any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, the Company has an asset coverage (as defined in the 1940 Act) of at least the threshold specified in Section 18(a)(1)(B) as modified by such provisions of Section 61(a)(2) of the 1940 Act as may be applicable to the Company from time to time or any successor provisions thereto of the 1940 Act, as such obligation may be amended or superseded, after deducting the amount of such dividend, distribution or purchase price, as the case may be, and in each case giving effect to (i) any exemptive relief granted to the Company by the SEC, and (ii) any SEC no-action relief granted by the SEC to another business development company (“BDC”) (or to the Company if it determines to seek such similar no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by such provisions of Section 61(a)(2) of the 1940 Act as may be applicable to the Company from time to time; and to provide financial information to the holders of the New Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the Indenture.
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The New Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form N-2 (File No. 333-256366) and the prospectus supplement dated August 11, 2022. The transaction closed on August 15, 2022. The net proceeds to the Company were approximately $7,750,000, based on the public offering price of 97.800% of the aggregate principal amount of the New Notes, after deducting the referral fee of $74,000 to Ladenburg and the estimated offering expenses of approximately $50,000 payable by the Company.
The foregoing descriptions of the Purchase Agreement, the Tenth Supplemental Indenture, and the New Notes do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement, the Tenth Supplemental Indenture, and the form of global note representing the New Notes, respectively, each filed or incorporated by reference as exhibits hereto and incorporated by reference herein.
2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information required by Item 2.03 contained in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SARATOGA INVESTMENT CORP. | ||
| Date: August 15, 2022 | By: | /s/ Henri J. Steenkamp |
| Name: | Henri J. Steenkamp | |
| Title: | Chief Financial Officer and Secretary | |
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