10-Q 1 d837459d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended November 30, 2019

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 814-00732

 

 

SARATOGA INVESTMENT CORP.

(Exact name of Registrant as specified in its charter)

 

 

 

Maryland   20-8700615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

535 Madison Avenue

New York, New York 10022

(Address of principal executive offices)

(212) 906-7800

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.001 per share   SAR   The New York Stock Exchange
6.75% Notes due 2023   SAB   The New York Stock Exchange
6.25% Notes due 2025   SAF   The New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The number of outstanding common shares of the registrant as of January 7, 2020 was 11,181,863.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

 

         Page  

PART I.

  FINANCIAL INFORMATION      3  

Item 1.

  Consolidated Financial Statements      3  
  Consolidated Statements of Assets and Liabilities as of November 30, 2019 (unaudited) and February 28, 2019      3  
  Consolidated Statements of Operations for the three and nine months ended November 30, 2019 (unaudited) and November 30, 2018 (unaudited)      4  
  Consolidated Schedules of Investments as of November 30, 2019 (unaudited) and February 28, 2019      5  
  Consolidated Statements of Changes in Net Assets for the nine months ended November 30, 2019 (unaudited) and November 30, 2018 (unaudited)      7  
  Consolidated Statements of Cash Flows for the nine months ended November 30, 2019 (unaudited) and November 30, 2018 (unaudited)      8  
  Notes to Consolidated Financial Statements as of November 30, 2019 (unaudited)      9  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      41  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      71  

Item 4.

  Controls and Procedures      72  

PART II.

  OTHER INFORMATION      73  

Item 1.

  Legal Proceedings      73  

Item 1A.

  Risk Factors      73  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      73  

Item 3.

  Defaults Upon Senior Securities      73  

Item 4.

  Mine Safety Disclosures      73  

Item 5.

  Other Information      73  

Item 6.

  Exhibits      74  

Signatures

     76  

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

 

     November 30, 2019     February 28, 2019  
     (unaudited)        

ASSETS

    

Investments at fair value

    

Non-control/Non-affiliate investments (amortized cost of $377,733,313 and $307,136,188, respectively)

   $ 375,544,979     $ 306,511,427  

Affiliate investments (amortized cost of $23,949,601 and $18,514,716, respectively)

     17,757,919       11,463,081  

Control investments (amortized cost of $80,333,567 and $76,265,189, respectively)

     93,728,061       84,045,212  
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $482,016,481 and $401,916,093, respectively)

     487,030,959       402,019,720  

Cash and cash equivalents

     51,646,844       30,799,068  

Cash and cash equivalents, reserve accounts

     29,465,785       31,295,326  

Interest receivable (net of reserve of $1,322,308 and $647,210, respectively)

     4,755,846       3,746,604  

Due from affiliate (See Note 6)

     —         1,673,747  

Management and incentive fee receivable

     286,720       542,094  

Other assets

     563,991       595,543  

Receivable for shares sold

     1,157,493       —    
  

 

 

   

 

 

 

Total assets

   $ 574,907,638     $ 470,672,102  
  

 

 

   

 

 

 

LIABILITIES

    

Revolving credit facility

   $ —       $ —    

Deferred debt financing costs, revolving credit facility

     (535,641     (605,189

SBA debentures payable

     150,000,000       150,000,000  

Deferred debt financing costs, SBA debentures payable

     (2,710,922     (2,396,931

2023 Notes payable

     74,450,500       74,450,500  

Deferred debt financing costs, 2023 notes payable

     (1,620,699     (1,919,620

2025 Notes payable

     60,000,000       60,000,000  

Deferred debt financing costs, 2025 notes payable

     (2,139,398     (2,377,551

Base management and incentive fees payable

     10,475,895       6,684,785  

Deferred tax liability

     1,061,640       739,716  

Accounts payable and accrued expenses

     1,453,345       1,615,443  

Interest and debt fees payable

     1,910,397       3,224,671  

Directors fees payable

     1,500       62,000  

Due to manager

     380,671       319,091  
  

 

 

   

 

 

 

Total liabilities

   $ 292,727,288     $ 289,796,915  
  

 

 

   

 

 

 

Commitments and contingencies (See Note 8)

    

NET ASSETS

    

Common stock, par value $.001, 100,000,000 common shares authorized, 11,154,998 and 7,657,156 common shares issued and outstanding, respectively

   $ 11,155     $ 7,657  

Capital in excess of par value

     289,744,224       203,552,800  

Total distributable earnings (loss)

     (7,575,029     (22,685,270
  

 

 

   

 

 

 

Total net assets

     282,180,350       180,875,187  
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 574,907,638     $ 470,672,102  
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE

   $ 25.30     $ 23.62  
  

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

3


Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Operations

(unaudited)

 

     For the three months ended     For the nine months ended  
     November 30, 2019     November 30, 2018     November 30, 2019     November 30, 2018  

INVESTMENT INCOME

        

Interest from investments

        

Interest income:

        

Non-control/Non-affiliate investments

   $ 9,749,294     $ 9,248,664     $ 26,862,643     $ 24,701,303  

Affiliate investments

     356,958       239,781       873,816       720,738  

Control investments

     1,300,923       941,942       4,627,395       3,340,180  

Payment-in-kind interest income:

        

Non-control/Non-affiliate investments

     198,984       260,440       530,728       621,462  

Affiliate investments

     42,397       41,269       123,812       110,898  

Control investments

     1,250,824       1,112,135       3,226,060       2,271,359  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest from investments

     12,899,380       11,844,231       36,244,454       31,765,940  

Interest from cash and cash equivalents

     119,539       13,657       316,691       41,405  

Management fee income

     629,671       380,765       1,888,932       1,129,921  

Incentive fee income

     —         147,602       —         493,846  

Other income

     547,165       446,758       2,385,075       1,292,693  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     14,195,755       12,833,013       40,835,152       34,723,805  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES

        

Interest and debt financing expenses

     3,896,968       3,613,531       11,628,266       9,202,737  

Base management fees

     2,146,214       1,849,220       5,955,623       5,027,341  

Incentive management fees

     3,102,139       923,651       7,300,794       2,803,784  

Professional fees

     401,010       407,422       1,181,010       1,418,472  

Administrator expenses

     556,250       500,000       1,575,000       1,395,833  

Insurance

     63,936       62,197       193,174       189,916  

Directors fees and expenses

     60,000       60,000       217,500       230,500  

General & administrative

     395,024       354,029       1,036,498       908,174  

Income tax benefit

     (1,001,089     (75,978     (1,464,878     (684,520

Excise tax credit

     —         —         —         (270

Other expense

     —         —         —         21,021  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     9,620,452       7,694,072       27,622,987       20,512,988  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INVESTMENT INCOME

     4,575,303       5,138,941       13,212,165       14,210,817  
  

 

 

   

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

        

Net realized gain (loss) from investments:

        

Non-control/Non-affiliate investments

     10,739,678       (67,164     12,609,767       145,007  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss) from investments

     10,739,678       (67,164     12,609,767       145,007  

Net change in unrealized appreciation (depreciation) on investments:

        

Non-control/Non-affiliate investments

     (4,322,305     (1,645,666     (1,563,573     (2,428,123

Affiliate investments

     (41,295     206,064       859,953       (1,125,240

Control investments

     3,827,449       408,489       5,614,471       1,010,934  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on investments

     (536,151     (1,031,113     4,910,851       (2,542,429

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     (1,061,608     (371,581     (1,786,801     (1,159,581
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss) on investments

     9,141,919       (1,469,858     15,733,817       (3,557,003
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 13,717,222     $ 3,669,083     $ 28,945,982     $ 10,653,814  
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE

   $ 1.37     $ 0.49     $ 3.33     $ 1.55  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED

     10,036,086       7,480,134       8,702,190       6,887,544  

 

See accompanying notes to consolidated financial statements.

4


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

November 30, 2019

(unaudited)

 

Company

 

Industry

 

Investment Interest Rate/

Maturity

  Original
Acquisition
Date
     Principal/
Number of
Shares
    Cost     Fair
Value (c)
    % of
Net Assets
 

Non-control/Non-affiliate investments—133.1% (b)

              

Apex Holdings Software Technologies, LLC

  Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 9.91% Cash, 9/21/2021     9/21/2016      $ 18,000,000     $ 17,943,620     $ 17,546,400       6.2

Apex Holdings Software Technologies, LLC

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.91% Cash, 9/21/2021     10/1/2018      $ 1,500,000       1,490,899       1,462,200       0.5

Avionte Holdings, LLC (h)

  Business Services   Class A Units     1/8/2014        100,000       100,000       863,098       0.3

CLEO Communications Holding, LLC

  Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 9.91% Cash/2.00% PIK, 3/31/2022     3/31/2017      $ 13,722,196       13,696,502       13,722,196       4.9

CLEO Communications Holding, LLC

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.91% Cash/2.00% PIK, 3/31/2022     3/31/2017      $ 16,953,208       16,845,952       16,953,208       6.0

CoConstruct, LLC

  Business Services   First Lien Term Loan (3M USD LIBOR+7.50%), 10.00% Cash, 7/5/2024     7/5/2019      $ 4,200,000       4,160,120       4,158,000       1.5

CoConstruct, LLC (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.50%), 10.00% Cash, 7/5/2024     7/5/2019      $       —         —         0.0

Davisware, LLC

  Business Services   First Lien Term Loan (3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024     9/6/2019      $ 3,000,000       2,970,557       2,970,000       1.0

Davisware, LLC (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024     9/6/2019      $       —         —         0.0

Destiny Solutions Inc. (d)

  Business Services   First Lien Term Loan (3M USD LIBOR+7.25%), 9.25% Cash, 10/23/2024     5/16/2018      $ 36,000,000       35,666,525       35,640,000       12.6

Destiny Solutions Inc. (h), (i)

  Business Services   Limited Partner Interests     5/16/2018        2,342       2,468,464       2,784,182       1.0

Emily Street Enterprises, L.L.C.

  Business Services   Senior Secured Note (3M USD LIBOR+8.50%), 10.41% Cash, 1/23/2020     12/28/2012      $ 3,300,000       3,299,991       3,300,000       1.2

Emily Street Enterprises, L.L.C. (h)

  Business Services   Warrant Membership Interests Expires 12/28/2022     12/28/2012        49,318       400,000       485,289       0.2

Erwin, Inc. (d)

  Business Services   Second Lien Term Loan (3M USD LIBOR+11.50%), 13.41% Cash/1.00% PIK, 8/28/2021     2/29/2016      $ 16,008,892       15,940,695       16,008,892       5.7

FMG Suite Holdings, LLC (d)

  Business Services   Second Lien Term Loan (1M USD LIBOR+8.00%), 9.70% Cash, 11/16/2023     5/16/2018      $ 23,000,000       22,858,846       23,000,000       8.1

GDS Holdings US, Inc. (d)

  Business Services   First Lien Term Loan (3M USD LIBOR+7.00%), 8.91% Cash, 8/23/2023     8/23/2018      $ 7,500,000       7,441,214       7,495,500       2.6

GDS Holdings US, Inc. (d), (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 8.91% Cash, 8/23/2023     8/23/2018      $ 1,000,000       990,384       999,400       0.4

GDS Software Holdings, LLC (h)

  Business Services   Common Stock Class A Units     8/23/2018        250,000       250,000       349,092       0.1

Identity Automation Systems (h)

  Business Services   Common Stock Class A Units     8/25/2014        232,616       232,616       720,398       0.3

Identity Automation Systems (d)

  Business Services   First Lien Term Loan (3M USD LIBOR+9.24%), 11.15% Cash, 3/31/2021     8/25/2014      $ 15,461,250       15,419,036       15,450,427       5.5

inMotionNow, Inc.

  Business Services   First Lien Term Loan (3M USD LIBOR+7.25), 9.75% Cash, 5/15/2024     5/15/2019      $ 12,200,000       12,088,502       12,195,120       4.3

inMotionNow, Inc. (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.25) 9.75% Cash, 5/15/2024     5/15/2019      $       —         —         0.0

Knowland Group, LLC

  Business Services   Second Lien Term Loan (3M USD LIBOR+8.00%), 10.00% Cash, 5/9/2024     11/9/2018      $ 15,000,000       15,000,000       14,914,500       5.3

National Waste Partners (d)

  Business Services   Second Lien Term Loan 10.00% Cash, 2/13/2022     2/13/2017      $ 9,000,000       8,954,732       8,954,100       3.2

Omatic Software, LLC

  Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 9.91% Cash, 5/29/2023     5/29/2018      $ 5,500,000       5,457,178       5,526,950       1.9

Omatic Software, LLC (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+8.00%), 9.91% Cash, 5/29/2023     5/29/2018      $       —         —         0.0

Passageways, Inc.

  Business Services   First Lien Term Loan (3M USD LIBOR+7.75%), 9.66% Cash, 7/5/2023     7/5/2018      $ 5,000,000       4,958,735       5,028,000       1.8

Passageways, Inc. (h)

  Business Services   Series A Preferred Stock     7/5/2018        2,027,205       1,000,000       1,739,546       0.6

Vector Controls Holding Co., LLC (d)

  Business Services   First Lien Term Loan 10.50% (9.00% Cash/1.50% PIK), 3/6/2022     3/6/2013      $ 8,120,756       8,120,103       8,201,964       2.9

Vector Controls Holding Co., LLC (h)

  Business Services   Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027     5/31/2015        343       —         2,492,010       0.9
          

 

 

   

 

 

   

 

 

 
    Total Business Services          217,754,671       222,960,472       79.0
          

 

 

   

 

 

   

 

 

 

Targus Holdings, Inc. (h)

  Consumer Products   Common Stock     12/31/2009        210,456       1,589,630       403,875       0.1
          

 

 

   

 

 

   

 

 

 
    Total Consumer Products          1,589,630       403,875       0.1
          

 

 

   

 

 

   

 

 

 

My Alarm Center, LLC (k)

  Consumer Services   Preferred Equity Class A Units 8.00% PIK     7/14/2017        2,227       2,357,879       —         0.0

My Alarm Center, LLC (h)

  Consumer Services   Preferred Equity Class B Units     7/14/2017        1,797       1,796,880       —         0.0

My Alarm Center, LLC (h)

  Consumer Services   Preferred Equity Class Z Units     9/12/2018        676       655,987       1,997,158       0.7

My Alarm Center, LLC (h)

  Consumer Services   Common Stock     7/14/2017        96,224       —         —         0.0
          

 

 

   

 

 

   

 

 

 
    Total Consumer Services          4,810,746       1,997,158       0.7
          

 

 

   

 

 

   

 

 

 

C2 Educational Systems (d)

  Education   First Lien Term Loan (3M USD LIBOR+7.00%), 8.91% Cash, 5/31/2020     5/31/2017      $ 16,000,000       15,967,799       16,000,000       5.7

EMS LINQ, Inc.

  Education   First Lien Term Loan (1M USD LIBOR+8.50%), 10.20% Cash, 8/9/2024     8/9/2019      $ 14,962,500       14,811,797       14,808,386       5.3

Kev Software Inc. (a)

  Education   First Lien Term Loan (1M USD LIBOR+8.63%), 10.33% Cash, 9/13/2023     9/13/2018      $ 21,285,674       21,132,402       21,219,689       7.5

M/C Acquisition Corp., L.L.C. (h)

  Education   Class A Common Stock     6/22/2009        544,761       30,241       —         0.0

M/C Acquisition Corp., L.L.C. (k)

  Education   First Lien Term Loan 1.00% Cash, 3/31/2020     8/10/2004      $ 2,315,090       1,189,177       6,260       0.0

Texas Teachers of Tomorrow, LLC (h), (i)

  Education   Common Stock     12/2/2015        750,000       750,000       690,867       0.2

Texas Teachers of Tomorrow, LLC (d)

  Education   First Lien Term Loan (3M USD LIBOR+7.25%), 9.75% Cash, 6/28/2024     12/2/2015      $ 19,710,600       19,523,221       19,704,687       7.0
          

 

 

   

 

 

   

 

 

 
              
    Total Education          73,404,637       72,429,889       25.7
          

 

 

   

 

 

   

 

 

 
              

TMAC Acquisition Co., LLC (h), (k)

  Food and Beverage   Unsecured Term Loan 8.00% PIK, 9/01/2023     3/1/2018      $ 2,216,427       2,216,427       2,073,024       0.7
          

 

 

   

 

 

   

 

 

 
              
    Total Food and Beverage          2,216,427       2,073,024       0.7
          

 

 

   

 

 

   

 

 

 
              

Axiom Parent Holdings, LLC (h)

  Healthcare Services   Common Stock Class A Units     6/19/2018        400,000       400,000       474,071       0.2

Axiom Purchaser, Inc. (d)

  Healthcare Services   First Lien Term Loan (3M USD LIBOR+6.00%), 7.91% Cash, 6/19/2023     6/19/2018      $ 10,000,000       9,932,342       9,984,000       3.5

Axiom Purchaser, Inc. (d), (j)

  Healthcare Services   Delayed Draw Term Loan (3M USD LIBOR+6.00%), 7.91% Cash, 6/19/2023     6/19/2018      $ 3,000,000       2,976,012       2,995,200       1.1

ComForCare Health Care

  Healthcare Services   First Lien Term Loan (3M USD LIBOR+7.50%), 9.41% Cash, 1/31/2022     1/31/2017      $ 15,000,000       14,918,932       14,983,500       5.3

HemaTerra Holding Company, LLC

  Healthcare Services   First Lien Term Loan (3M USD LIBOR+6.75%), 9.25% Cash, 4/15/2024     4/15/2019      $ 6,000,000       5,942,014       6,049,800       2.1

HemaTerra Holding Company, LLC (j)

  Healthcare Services   Delayed Draw Term Loan (3M USD LIBOR+6.75%), 9.25% Cash, 4/15/2024     4/15/2019      $ 10,000,000       9,907,821       10,083,000       3.6

TRC HemaTerra, LLC (h)

  Healthcare Services   Class D Membership Interests     4/15/2019        2,000,000       2,000,000       2,000,000       0.7

Ohio Medical, LLC (h)

  Healthcare Services   Common Stock     1/15/2016        5,000       500,000       528,000       0.2

Ohio Medical, LLC

  Healthcare Services   Senior Subordinated Note 12.00% Cash, 7/15/2021     1/15/2016      $ 7,300,000       7,271,152       7,300,000       2.6

PDDS Buyer, LLC

  Healthcare Services   First Lien Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024     7/15/2019      $ 12,000,000       11,884,014       11,880,000       4.2

PDDS Buyer, LLC (j)

  Healthcare Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024     7/15/2019      $       —         —         0.0

Roscoe Medical, Inc. (h)

  Healthcare Services   Common Stock     3/26/2014        5,081       508,077       —         0.0

Roscoe Medical, Inc. (k)

  Healthcare Services   Second Lien Term Loan 11.25% Cash, 3/28/2021     3/26/2014      $ 4,200,000       4,200,000       1,887,060       0.7
          

 

 

   

 

 

   

 

 

 
    Total Healthcare Services          70,440,364       68,164,631       24.2
          

 

 

   

 

 

   

 

 

 

Village Realty Holdings LLC

  Property Management   First Lien Term Loan (3M USD LIBOR+6.50%), 8.75% Cash, 10/8/2024     10/8/2019      $ 7,250,000       7,178,609       7,177,500       2.6

Village Realty Holdings LLC (j)

  Property Management   Delayed Draw Term Loan (3M USD LIBOR+6.50%), 8.75% Cash, 10/8/2024     10/8/2019      $ —         —         —         0.0

V Rental Holdings LLC (h)

  Property Management   Class A-1 Membership Units     10/8/2019        116,700       338,229       338,430       0.1
          

 

 

   

 

 

   

 

 

 
    Total Property Management          7,516,838       7,515,930       2.7
          

 

 

   

 

 

   

 

 

 

Sub Total Non-control/Non-affiliate investments

             377,733,313       375,544,979       133.1
          

 

 

   

 

 

   

 

 

 

Affiliate investments—6.3% (b)

              

Top Gun Pressure Washing, LLC (f)

  Business Services   First Lien Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024     8/12/2019      $ 5,000,000       4,951,267       4,992,000       1.8

Top Gun Pressure Washing, LLC (f), (j)

  Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024     8/12/2019      $       —         —         0.0

TG Pressure Washing Holdings, LLC (f), (h)

  Business Services   Preferred Equity     8//12/2019        350,000       350,000       350,000       0.1

GreyHeller LLC (f)

  Business Services   First Lien Term Loan (3M USD LIBOR+11.00%), 12.91% Cash, 11/16/2021     11/17/2016      $ 7,000,000       6,967,260       7,000,000       2.5

GreyHeller LLC (f), (h)

  Business Services   Series A Preferred Units     11/17/2016        850,000       850,000       2,231,673       0.8
          

 

 

   

 

 

   

 

 

 
    Total Business Services          13,118,527       14,573,673       5.2
          

 

 

   

 

 

   

 

 

 

Elyria Foundry Company, L.L.C. (f), (h)

  Metals   Common Stock     7/30/2010        60,000       9,685,028       2,038,200       0.7

Elyria Foundry Company, L.L.C. (d), (f)

  Metals   Second Lien Term Loan 15.00% PIK, 8/10/2022     7/30/2010      $ 1,146,046       1,146,046       1,146,046       0.4
          

 

 

   

 

 

   

 

 

 
    Total Metals          10,831,074       3,184,246       1.1
          

 

 

   

 

 

   

 

 

 

Sub Total Affiliate investments

             23,949,601       17,757,919       6.3
          

 

 

   

 

 

   

 

 

 

Control investments—33.2% (b)

              

Easy Ice, LLC (g)

  Business Services   Preferred Equity 10.00% PIK     2/3/2017        5,080,000       10,436,671       19,428,398       6.9

Easy Ice, LLC (d), (g)

  Business Services   Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023     3/29/2013      $ 23,279,165       23,215,894       23,642,320       8.4

Easy Ice Masters, LLC (d), (g)

  Business Services   Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023     10/31/2018      $ 4,180,484       4,169,121       4,245,700       1.5

Netreo Holdings, LLC (g)

  Business Services   First Lien Term Loan (3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK, 7/3/2023     7/3/2018      $ 5,136,437       5,094,308       5,239,166       1.8

Netreo Holdings, LLC (g), (h)

  Business Services   Common Stock Class A Unit     7/3/2018        3,150,000       3,150,000       6,865,992       2.4
          

 

 

   

 

 

   

 

 

 
    Total Business Services          46,065,994       59,421,576       21.0
          

 

 

   

 

 

   

 

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)

  Structured Finance Securities   Other/Structured Finance Securities 16.28%, 1/20/2030     1/22/2008      $ 69,500,000       24,267,573       24,496,985       8.7

Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g)

  Structured Finance Securities   Other/Structured Finance Securities (3M USD LIBOR+8.75%), 10.66%, 1/20/2030     12/14/2018      $ 2,500,000       2,500,000       2,452,000       0.9

Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g)

  Structured Finance Securities   Other/Structured Finance Securities (3M USD LIBOR+10.00%), 11.91%, 1/20/2030     12/14/2018      $ 7,500,000       7,500,000       7,357,500       2.6
          

 

 

   

 

 

   

 

 

 
    Total Structured Finance Securities          34,267,573       34,306,485       12.2
          

 

 

   

 

 

   

 

 

 

Sub Total Control investments

             80,333,567       93,728,061       33.2
          

 

 

   

 

 

   

 

 

 

TOTAL INVESTMENTS—172.6% (b)

           $ 482,016,481     $ 487,030,959       172.6
          

 

 

   

 

 

   

 

 

 
              
     Number
of Shares
     Cost      Fair Value      % of
Net Assets
 

Cash and cash equivalents and cash and cash equivalents, reserve accounts—28.7% (b)

           

U.S. Bank Money Market (l)

     81,112,629      $ 81,112,629      $ 81,112,629        28.7
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents and cash and cash equivalents, reserve accounts

     81,112,629      $ 81,112,629      $ 81,112,629        28.7
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of November 30, 2019, non-qualifying assets represent 11.4% of the Company's portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets. (b) Percentages are based on net assets of $282,180,350 as of November 30, 2019. (c) Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements). (d) These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 7 to the consolidated financial statements). (e) This investment does not have a stated interest rate that is payable thereon. As a result, the 16.28% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment. (f) As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the nine months ended November 30, 2019 in which the issuer was an Affiliate are as follows:

 

Company

   Purchases      Sales      Total Interest
from
Investments
     Management Fee
Income
     Net Realized
Gain (Loss)
from
Investments
     Net Change in
Unrealized
Appreciation
(Depreciation)
 

GreyHeller LLC

   $ —        $ —        $ 726,091      $ —        $ —        $ 585,220  

Elyria Foundry Company, L.L.C.

     —          —          123,812        —          —          234,000  

Top Gun Pressure Washing, LLC

     4,950,000        —          147,725        —          —          40,733  

TG Pressure Washing Holdings, LLC

     350,000        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,300,000      $ —        $ 997,628      $ —        $ —        $ 859,953  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g)

As defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the nine months ended November 30, 2019 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

   Purchases      Sales      Total Interest
from
Investments
     Management Fee
Income
     Net Realized
Gain (Loss)
from
Investments
     Net Change in
Unrealized
Appreciation
(Depreciation)
 

Easy Ice, LLC

   $ —        $ —        $ 2,894,007      $ —        $ —          5,601,543  

Easy Ice Masters, LLC

     —          —          382,067        —          —          25,143  

Netreo Holdings, LLC

     —          —          432,724        —          —          1,759,983  

Saratoga Investment Corp. CLO 2013-1, Ltd.

     —          —          3,219,531        1,888,932        —          (1,647,698

Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes

     —          —          213,378        —          —          (31,500

Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes

     —          —          711,748        —          —          (93,000
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 7,853,455      $ 1,888,932      $ —          5,614,471  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(h)

Non-income producing at November 30, 2019.

(i)

Includes securities issued by an affiliate of the Company.

(j)

All or a portion of this investment has an unfunded commitment as of November 30, 2019. (see Note 8 to the consolidated financial statements).

(k)

As of November 30, 2019, the investment was on non-accrual status. The fair value of these investments was approximately $4.0 million, which represented 0.8% of the Company's portfolio (see Note 2 to the consolidated financial statements).

(l)

Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company's consolidated statements of assets and liabilities as of November 30, 2019. LIBOR—London Interbank Offered Rate 1M USD LIBOR—The 1 month USD LIBOR rate as of November 30, 2019 was 1.70%. 3M USD LIBOR—The 3 month USD LIBOR rate as of November 30, 2019 was 1.91%. PIK—Payment-in-Kind (see Note 2 to the consolidated financial statements).

1M USD LIBOR - The 1 month USD LIBOR rate as of November 30, 2019 was 1.70%.

3M USD LIBOR - The 3 month USD LIBOR rate as of November 30, 2019 was 1.91%.

PIK - Payment-in-Kind (see Note 2 to the consolidated financial statements).

(See accompanying notes to the consolidated financial statements)

 

5


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2019

 

Company

 

Industry

 

Investment Interest Rate/

Maturity

  Original
Acquisition Date
    Principal/
Number of

Shares
    Cost     Fair
Value (c)
    % of
Net Assets
 

Non-control/Non-affiliate investments - 169.5% (b)

         

Apex Holdings Software Technologies, LLC

  Business Services  

First Lien Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021

    9/21/2016     $ 18,000,000     $ 17,922,851     $ 18,000,000       10.0

Apex Holdings Software Technologies, LLC

  Business Services  

Delayed Draw Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021

    10/1/2018     $ 1,000,000       992,183       1,000,000       0.6

Avionte Holdings, LLC (h)

  Business Services   Class A Units     1/8/2014       100,000       100,000       635,781       0.4

CLEO Communications Holding, LLC

  Business Services  

First Lien Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022

    3/31/2017     $ 13,514,320       13,437,153       13,514,320       7.5

CLEO Communications Holding, LLC

  Business Services  

Delayed Draw Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022

    3/31/2017     $ 12,142,015       12,040,280       12,142,015       6.7

Destiny Solutions Inc. (a)

  Business Services  

First Lien Term Loan

(3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023

    5/16/2018     $ 8,500,000       8,426,441       8,489,800       4.7

Destiny Solutions Inc. (a), (j)

  Business Services  

Delayed Draw Term Loan

(3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023

    5/16/2018     $ —         —         —         0.0

Destiny Solutions Inc. (a), (h), (i)

  Business Services   Limited Partner Interests     5/16/2018       999,000       999,000       1,062,440       0.6

Emily Street Enterprises, L.L.C.

  Business Services  

Senior Secured Note

(3M USD LIBOR+8.50%), 11.12% Cash, 1/23/2020

    12/28/2012     $ 3,300,000       3,299,122       3,314,520       1.8

Emily Street Enterprises, L.L.C. (h)

  Business Services  

Warrant Membership Interests

Expires 12/28/2022

    12/28/2012       49,318       400,000       505,509       0.3

Erwin, Inc. (d)

  Business Services  

Second Lien Term Loan

(3M USD LIBOR+11.50%), 14.12% Cash/1.00% PIK, 8/28/2021

    2/29/2016     $ 15,888,102       15,796,316       15,888,102       8.8

FMG Suite Holdings, LLC (d)

  Business Services  

Second Lien Term Loan

(1M USD LIBOR+8.00%), 10.49% Cash, 11/16/2023

    5/16/2018     $ 23,000,000       22,844,123       23,000,000       12.7

GDS Holdings US, LLC (d)

  Business Services  

First Lien Term Loan

(3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023

    8/23/2018     $ 7,500,000       7,430,649       7,495,500       4.0

GDS Holdings US, LLC (j)

  Business Services  

Delayed Draw Term Loan

(3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023

    8/23/2018     $ —         —         —         0.0

GDS Software Holdings, LLC (h)

  Business Services   Common Stock Class A Units     8/23/2018       250,000       250,000       277,139       0.2

Identity Automation Systems (h)

  Business Services   Common Stock Class A Units     8/25/2014       232,616       232,616       629,555       0.3

Identity Automation Systems (d)

  Business Services  

First Lien Term Loan

(3M USD LIBOR+9.00%), 11.62% Cash, 3/31/2021

    8/25/2014     $ 24,100,000       23,991,294       24,100,000       13.3

Knowland Group, LLC

  Business Services  

Second Lien Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash, 5/9/2024

    11/9/2018     $ 15,000,000       15,000,000       15,000,000       8.3

Microsystems Company

  Business Services  

Second Lien Term Loan

(3M USD LIBOR+8.25%), 10.87% Cash, 7/1/2022

    7/1/2016     $ 18,000,000       17,889,554       17,881,200       9.9

National Waste Partners (d)

  Business Services  

Second Lien Term Loan

10.00% Cash, 2/13/2022

    2/13/2017     $ 9,000,000       8,942,155       8,864,100       4.9

Omatic Software, LLC

  Business Services  

First Lien Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023

    5/29/2018     $ 5,500,000       5,451,758       5,537,400       3.1

Omatic Software, LLC (j)

  Business Services  

Delayed Draw Term Loan

(3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023

    5/29/2018     $ —         —         —         0.0

Passageways, Inc.

  Business Services  

First Lien Term Loan

(3M USD LIBOR+7.75%), 10.37% Cash, 7/5/2023

    7/5/2018     $ 5,000,000       4,955,204       5,063,500       2.8

Passageways, Inc. (h)

  Business Services   Series A Preferred Stock     7/5/2018       2,027,205       1,000,000       1,339,705       0.7

Vector Controls Holding Co., LLC (d)

  Business Services  

First Lien Term Loan

11.50% (9.75% Cash/1.75% PIK), 3/6/2022

    3/6/2013     $ 9,311,956       9,310,703       9,371,929       5.2

Vector Controls Holding Co., LLC (h)

  Business Services   Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027     5/31/2015       343       —         2,210,149       1.2
         

 

 

   

 

 

   

 

 

 
    Total Business Services         190,711,402       195,322,664       108.0
         

 

 

   

 

 

   

 

 

 

Targus Holdings, Inc. (h)

  Consumer Products   Common Stock     12/31/2009       210,456       1,713,605       505,094       0.3
         

 

 

   

 

 

   

 

 

 
    Total Consumer Products         1,713,605       505,094       0.3
         

 

 

   

 

 

   

 

 

 

My Alarm Center, LLC (k)

  Consumer Services  

Preferred Equity Class A Units

8.00% PIK

    7/14/2017       2,227       2,357,879       1,112,543       0.6

My Alarm Center, LLC (h)

  Consumer Services   Preferred Equity Class B Units     7/14/2017       1,797       1,796,880       —         0.0

My Alarm Center, LLC

  Consumer Services  

Preferred Equity Class Z Units

25.00% PIK

    9/12/2018       676       655,987       2,053,514       1.1

My Alarm Center, LLC (h)

  Consumer Services   Common Stock     7/14/2017       96,224       —         —         0.0
         

 

 

   

 

 

   

 

 

 
    Total Consumer Services         4,810,746       3,166,057       1.7
         

 

 

   

 

 

   

 

 

 

C2 Educational Systems (d)

  Education  

First Lien Term Loan

(3M USD LIBOR+7.00%), 9.62% Cash, 5/31/2020

    5/31/2017     $ 16,000,000       15,929,485       16,032,000       8.9

Kev Software Inc. (a)

  Education  

First Lien Term Loan

(1M USD LIBOR+8.63%), 11.12% Cash, 9/13/2023

    9/13/2018     $ 21,446,929       21,273,211       21,438,351       11.9

M/C Acquisition Corp., L.L.C. (h)

  Education   Class A Common Stock     6/22/2009       544,761       30,241       —         0.0

M/C Acquisition Corp., L.L.C. (k)

  Education  

First Lien Term Loan

1.00% Cash, 3/31/2020

    8/10/2004     $ 2,315,090       1,189,177       6,260       0.0

Texas Teachers of Tomorrow, LLC (h), (i)

  Education   Common Stock     12/2/2015       750,000       750,000       792,165       0.4

Texas Teachers of Tomorrow, LLC

  Education  

Second Lien Term Loan

(3M USD LIBOR+9.75%), 12.37% Cash, 6/2/2021

    12/2/2015     $ 10,000,000       9,952,251       9,807,000       5.4
         

 

 

   

 

 

   

 

 

 
    Total Education         49,124,365       48,075,776       26.6
         

 

 

   

 

 

   

 

 

 

TMAC Acquisition Co., LLC (k)

  Food and Beverage  

Unsecured Term Loan

8.00% PIK, 9/01/2023

    3/1/2018     $ 2,216,427       2,216,427       2,100,286       1.2
         

 

 

   

 

 

   

 

 

 
    Total Food and Beverage         2,216,427       2,100,286       1.2
         

 

 

   

 

 

   

 

 

 

Axiom Parent Holdings, LLC (h)

  Healthcare Services   Common Stock Class A Units     6/19/2018       400,000       400,000       402,990       0.2

Axiom Purchaser, Inc. (d)

  Healthcare Services  

First Lien Term Loan

(3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023

    6/19/2018     $ 10,000,000       9,923,962       10,020,000       5.5

Axiom Purchaser, Inc. (j)

  Healthcare Services  

Delayed Draw Term Loan

(3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023

    6/19/2018     $ —         —         —         0.0

Censis Technologies, Inc.

  Healthcare Services  

First Lien Term Loan B

(1M USD LIBOR+8.30%), 10.79% Cash, 9/27/2023

    7/25/2014     $ 19,950,000       19,877,861       19,991,895       11.1

Censis Technologies, Inc. (h), (i)

  Healthcare Services   Limited Partner Interests     7/25/2014       999       999,000       2,387,705       1.3

ComForCare Health Care

  Healthcare Services  

First Lien Term Loan

(3M USD LIBOR+7.50%), 10.12% Cash, 1/31/2022

    1/31/2017     $ 15,000,000       14,898,535       15,096,000       8.3

Ohio Medical, LLC (h)

  Healthcare Services   Common Stock     1/15/2016       5,000       500,000       208,250       0.1

Ohio Medical, LLC

  Healthcare Services  

Senior Subordinated Note

12.00% Cash, 7/15/2021

    1/15/2016     $ 7,300,000       7,263,114       6,735,710       3.8

Roscoe Medical, Inc. (h)

  Healthcare Services   Common Stock     3/26/2014       5,081       508,077       —         0.0

Roscoe Medical, Inc. (k)

  Healthcare Services  

Second Lien Term Loan

11.25% Cash, 3/28/2021

    3/26/2014     $ 4,200,000       4,189,094       2,499,000       1.4
         

 

 

   

 

 

   

 

 

 
    Total Healthcare Services         58,559,643       57,341,550       31.7
         

 

 

   

 

 

   

 

 

 

Sub Total Non-control/Non-affiliate investments

        307,136,188       306,511,427       169.5
         

 

 

   

 

 

   

 

 

 

Affiliate investments - 6.3% (b)

         

GreyHeller LLC (f)

  Business Services  

First Lien Term Loan

(3M USD LIBOR+11.00%), 13.62% Cash, 11/16/2021

    11/17/2016     $ 7,000,000       6,956,976       7,140,000       4.0

GreyHeller LLC (f), (h)

  Business Services   Series A Preferred Units     11/17/2016       850,000       850,000       1,496,169       0.8
         

 

 

   

 

 

   

 

 

 
    Total Business Services         7,806,976       8,636,169       4.8
         

 

 

   

 

 

   

 

 

 

Elyria Foundry Company, L.L.C. (f), (h)

  Metals   Common Stock     7/30/2010       60,000       9,685,028       1,804,200       1.0

Elyria Foundry Company, L.L.C. (d), (f)

  Metals  

Second Lien Term Loan

15.00% PIK, 8/10/2022

    7/30/2010     $ 1,022,712       1,022,712       1,022,712       0.5
         

 

 

   

 

 

   

 

 

 
    Total Metals         10,707,740       2,826,912       1.5
         

 

 

   

 

 

   

 

 

 

Sub Total Affiliate investments

        18,514,716       11,463,081       6.3
         

 

 

   

 

 

   

 

 

 

Control investments - 46.5% (b)

         

Easy Ice, LLC (g)

  Business Services  

Preferred Equity

10.00% PIK

    2/3/2017       5,080,000       9,683,612       13,357,444       7.4

Easy Ice, LLC (d), (g)

  Business Services  

Second Lien Term Loan

7.03% Cash/5.97% PIK, 2/28/2023

    3/29/2013     $ 21,184,063       21,126,021       21,268,799       11.8

Easy Ice Masters, LLC (d), (g)

  Business Services  

Second Lien Term Loan

7.03% Cash/5.97% PIK, 2/28/2023

    10/31/2018     $ 3,804,244       3,768,025       3,819,461       2.1

Netreo Holdings, LLC (g)

  Business Services  

First Lien Term Loan

(3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK,

7/3/2023

    7/3/2018     $ 5,067,057       5,021,133       5,092,899       2.8

Netreo Holdings, LLC (g), (h)

  Business Services   Common Stock Class A Unit     7/3/2018       3,150,000       3,150,000       5,179,101       2.9
         

 

 

   

 

 

   

 

 

 
    Total Business Services         42,748,791       48,717,704       27.0
         

 

 

   

 

 

   

 

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)

  Structured Finance Securities  

Other/Structured Finance Securities

16.67%, 1/20/2030

    1/22/2008     $ 69,500,000       23,516,398       25,393,508       14.0

Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g)

  Structured Finance Securities  

Other/Structured Finance Securities

(3M USD LIBOR+8.75%), 11.37%, 1/20/2030

    12/14/2018     $ 2,500,000       2,500,000       2,483,500       1.4

Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g)

  Structured Finance Securities  

Other/Structured Finance Securities

(3M USD LIBOR+10.00%), 12.62%, 1/20/2030

    12/14/2018     $ 7,500,000       7,500,000       7,450,500       4.1
         

 

 

   

 

 

   

 

 

 
    Total Structured Finance Securities         33,516,398       35,327,508       19.5
         

 

 

   

 

 

   

 

 

 

Sub Total Control investments

        76,265,189       84,045,212       46.5
         

 

 

   

 

 

   

 

 

 

TOTAL INVESTMENTS - 222.3% (b)

      $ 401,916,093     $ 402,019,720       222.3
         

 

 

   

 

 

   

 

 

 
                  Number of
Shares
    Cost     Fair Value     % of
Net Assets
 

Cash and cash equivalents and cash and cash equivalents, reserve accounts - 34.3% (b)

 

       

U.S. Bank Money Market (l)

          62,094,394     $ 62,094,394     $ 62,094,394       34.3
       

 

 

   

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents and cash and cash equivalents, reserve accounts

 

    62,094,394     $ 62,094,394     $ 62,094,394       34.3
       

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of February 28, 2019, non-qualifying assets represent 16.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.

(b)

Percentages are based on net assets of $180,875,187 as of February 28, 2019.

(c)

Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements).

(d)

These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 7 to the consolidated financial statements).

(e)

This investment does not have a stated interest rate that is payable thereon. As a result, the 16.67% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.

(f)

As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the year ended February 28, 2019 in which the issuer was an Affiliate are as follows:

 

Company

   Purchases      Sales      Total Interest
from Investments
     Management and
Incentive Fee
Income
     Net Realized
Gain (Loss) from
Investments
     Net Change in
Unrealized
Appreciation
(Depreciation)
 

GreyHeller LLC

   $  —        $  —        $ 963,289      $  —        $  —        $ 776,012  

Elyria Foundry Company, L.L.C.

     —          —          150,284        —          —          (1,629,600
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 1,113,573      $ —        $ —        $ (853,588
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g)

As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended February 28, 2019 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

   Purchases      Sales     Total Interest
from Investments
     Management and
Incentive Fee
Income
     Net Realized
Gain (Loss) from
Investments
     Net Change in
Unrealized
Appreciation
(Depreciation)
 

Easy Ice, LLC

   $ 1,684,448      $ —       $ 3,424,369      $ —        $  —        $ 1,720,004  

Easy Ice Masters, LLC

     3,629,682        —         161,468        —          —          51,436  

Netreo Holdings, LLC

     8,100,000        —         374,843        —          —          2,100,867  

Saratoga Investment Corp. CLO 2013-1, Ltd.

     14,268,609        (48,083     2,922,372        2,355,412        —          (701,722

Saratoga Investment Corp. CLO 2013-1, Ltd. Class F Note

     —          (4,500,000     412,069        —          —          900  

Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes

     2,500,000        —         61,761        —          —          (16,500

Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes

     7,500,000        —         205,333        —          —          (49,500

Saratoga Investment Corp. CLO 2013-1 Warehouse, Ltd.

     20,000,000        (20,000,000     511,731        —          —          —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 57,682,739      $ (24,548,083   $ 8,073,946      $ 2,355,412      $ —        $ 3,105,485  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

(h)

Non-income producing at February 28, 2019.

(i)

Includes securities issued by an affiliate of the Company.

(j)

All or a portion of this investment has an unfunded commitment as of February 28, 2019. (see Note 8 to the consolidated financial statements).

(k)

As of February 28, 2019, the investment was on non-accrual status. The fair value of these investments was approximately $5.7 million, which represented 1.4% of the Company’s portfolio (see Note 2 to the consolidated financial statements).

(l)

Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s consolidated statements of assets and liabilities as of February 28, 2019.

LIBOR - London Interbank Offered Rate

1M USD LIBOR - The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.

3M USD LIBOR - The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.

PIK - Payment-in-Kind (see Note 2 to the consolidated financial statements).

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)

 

     For the nine months ended  
     November 30, 2019            November 30, 2018  

INCREASE FROM OPERATIONS:

       

Net investment income

   $ 13,212,165        $ 14,210,817  

Net realized gain from investments

     12,609,767          145,007  

Net change in unrealized appreciation (depreciation) on investments

     4,910,851          (2,542,429

Net change in provision for deferred taxes on unrealized appreciation on investments

     (1,786,801        (1,159,581
  

 

 

      

 

 

 

Net increase in net assets resulting from operations

     28,945,982          10,653,814  
  

 

 

      

 

 

 

DECREASE FROM SHAREHOLDER DISTRIBUTIONS:

       

Total distributions to shareholders

     (13,835,741        (10,208,577
  

 

 

      

 

 

 

Net decrease in net assets from shareholder distributions

     (13,835,741        (10,208,577
  

 

 

      

 

 

 

CAPITAL SHARE TRANSACTIONS:

       

Proceeds from issuance of common stock

     85,228,325          28,991,238  

Stock dividend distribution

     2,188,811          1,594,506  

Offering costs

     (1,222,214        (1,387,957
  

 

 

      

 

 

 

Net increase in net assets from capital share transactions

     86,194,922          29,197,787  
  

 

 

      

 

 

 

Total increase in net assets

     101,305,163          29,643,024  

Net assets at beginning of period, as previously reported

     180,875,187          143,691,367  

Cumulative effect of the adoption of ASC 606 (See Note 2)

     —            (65,300
  

 

 

      

 

 

 

Net assets at beginning of period, as adjusted

     180,875,187          143,626,067  
  

 

 

      

 

 

 

Net assets at end of period

   $ 282,180,350        $ 173,269,091  
  

 

 

      

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Cash Flows

(unaudited)

 

     For the nine months ended  
     November 30, 2019     November 30, 2018  

Operating activities

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 28,945,982     $ 10,653,814  

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES:

    

Payment-in-kind and other adjustments to cost

     (3,082,715     (2,914,989

Net accretion of discount on investments

     (888,292     (793,588

Amortization of deferred debt financing costs

     1,037,764       820,836  

Net deferred income taxes

     —         (684,520

Net realized gain from investments

     (12,609,767     (145,007

Net change in unrealized (appreciation) depreciation on investments

     (4,910,851     2,542,429  

Net change in provision for deferred taxes on unrealized appreciation on investments

     1,786,801       1,159,581  

Proceeds from sales and repayments of investments

     97,152,448       60,854,504  

Purchases of investments

     (160,672,062     (160,661,533

(Increase) decrease in operating assets:

    

Interest receivable

     (1,009,242     (1,654,449

Due from affiliate

     1,673,747       —    

Management and incentive fee receivable

     255,374       65,806  

Cumulative effect of the adoption of ASC 606 (See Note 2)

     —         (65,300

Other assets

     826       (155,841

Deferred tax asset

     (1,464,878     —    

Receivable from unsettled trades

     —         (6,463

Increase (decrease) in operating liabilities:

    

Base management and incentive fees payable

     3,791,110       30,718  

Accounts payable and accrued expenses

     (162,098     569,632  

Interest and debt fees payable

     (1,314,274     (314,276

Directors fees payable

     (60,500     (41,500

Due to manager

     61,580       (27,276
  

 

 

   

 

 

 

NET CASH USED IN OPERATING ACTIVITIES

     (51,469,047     (90,767,422
  

 

 

   

 

 

 

Financing activities

    

Borrowings on debt

     20,200,000       45,590,000  

Paydowns on debt

     (20,200,000     (21,500,000

Issuance of notes

     —         40,000,000  

Payments of deferred debt financing costs

     (745,133     (1,940,910

Proceeds from issuance of common stock

     84,064,237       28,991,238  

Payments of cash dividends

     (11,646,930     (8,614,071

Payments of offering costs

     (1,184,892     (1,293,382
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     70,487,282       81,232,875  
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS

     19,018,235       (9,534,547

CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, BEGINNING OF PERIOD

     62,094,394       13,777,491  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, END OF PERIOD

   $ 81,112,629     $ 4,242,944  
  

 

 

   

 

 

 

Supplemental information:

    

Interest paid during the period

   $ 11,904,776     $ 8,696,177  

Cash paid for taxes

     18,153       61,569  

Supplemental non-cash information:

    

Payment-in-kind interest income

   $ 3,082,715     $ 2,914,989  

Net accretion of discount on investments

     888,292       793,588  

Amortization of deferred debt financing costs

     1,037,764       820,836  

Stock dividend distribution

     2,188,811       1,594,506  

See accompanying notes to consolidated financial statements.

 

8


Table of Contents

SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2019

(unaudited)

Note 1. Organization

Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). The Company commenced operations on March 23, 2007 as GSC Investment Corp. and completed the initial public offering (“IPO”) on March 28, 2007. The Company has elected to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code”). The Company expects to continue to qualify and to elect to be treated, for tax purposes, as a RIC. The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments.

GSC Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.

On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC’s limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.

On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.” in connection with the consummation of a recapitalization transaction.

The Company is externally managed and advised by the investment adviser, Saratoga Investment Advisors, LLC (the “Manager”), pursuant to a management agreement (the “Management Agreement”). Prior to July 30, 2010, the Company was managed and advised by GSCP (NJ), L.P.

The Company has established wholly-owned subsidiaries, SIA-Avionte, Inc., SIA-Easy Ice, LLC, SIA-GH, Inc., SIA-HT, Inc., SIA- MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc., which are structured as Delaware entities, or tax blockers (“Taxable Blockers”), to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass through entities). Tax Blockers are consolidated for accounting purposes, but are not consolidated for income tax purposes and may incur income tax expense as a result of their ownership of portfolio companies.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC LP (“SBIC LP”), received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form of SBA debentures.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), are stated in U.S. Dollars and include the accounts of the Company and its special purpose financing subsidiaries, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC), SBIC LP, SBIC II LP, SIA-Avionte, Inc., SIA-Easy Ice, LLC, SIA-GH, Inc., SIA-HT, Inc., SIA-MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc. All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

The Company, SBIC LP and SBIC II LP are all considered to be investment companies for financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services — Investment Companies” (“ASC 946”). There have been no changes to the Company, SBIC LP or SBIC II LP’s status as investment companies during the nine months ended November 30, 2019.

 

9


Table of Contents

Use of Estimates in the Preparation of Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as, a money market fund if such investment would cause the Company to exceed any of the following limitations:

 

   

we were to own more than 3.0% of the total outstanding voting stock of the money market fund;

 

   

we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets, except as allowed pursuant to Rule 12d1-1 of Section 12(d)(1) of the 1940 Act which is designed to permit “cash sweep” arrangements rather than investments directly in short-term instruments; or

 

   

we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.

As of November 30, 2019, the Company did not exceed any of these limitations.

Cash and Cash Equivalents, Reserve Accounts

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid investments in money market funds, representing payments received on secured investments or other reserved amounts associated with the Company’s $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.

In addition, cash and cash equivalents, reserve accounts also include amounts held in designated bank accounts, in the form of cash and short-term liquid investments in money market funds, within our wholly-owned subsidiary, SBIC LP.

The statements of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts.

The following table provides a reconciliation of cash and cash equivalents and cash and cash equivalents, reserve accounts reported within the consolidated statements of assets and liabilities that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

 

     November 30,
2019
     November 30,
2018
 

Cash and cash equivalents

   $ 51,646,844      $ 322,116  

Cash and cash equivalents, reserve accounts

     29,465,785        3,920,828  
  

 

 

    

 

 

 

Total cash and cash equivalents and cash and cash equivalents, reserve accounts

   $ 81,112,629      $ 4,242,944  
  

 

 

    

 

 

 

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

Investment Valuation

The Company accounts for its investments at fair value in accordance with the FASB ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be transferred at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

 

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Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

The Company undertakes a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

 

   

Each investment is initially valued by the responsible investment professionals of Saratoga Investment Advisors and preliminary valuation conclusions are documented, reviewed and discussed with our senior management; and

 

   

An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year.

In addition, all our investments are subject to the following valuation process:

 

   

The audit committee of our board of directors reviews and approves each preliminary valuation and our Manager and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

 

   

Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

The Company’s investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. The Company uses the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. The Company’s net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

Derivative Financial Instruments

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.

Investment Transactions and Income Recognition

Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts over the life of the investment and amortization of premiums on investments up to the earliest call date.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be

 

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recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At November 30, 2019, certain investments in four portfolio companies, including preferred equity interests, were on non-accrual status with a fair value of approximately $4.0 million, or 0.8% of the fair value of our portfolio. At February 28, 2019, certain investments in four portfolio companies, including preferred equity interests, were on non-accrual status with a fair value of approximately $5.7 million, or 1.4% of the fair value of our portfolio.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325, Investments-Other, Beneficial Interests in Securitized Financial Assets, (“ASC 325”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

Adoption of ASC 606

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which supersedes the revenue recognition requirements in Revenue Recognition (ASC 605). In May 2016, ASU 2016-12 amended ASU 2014-09 and deferred the effective period for annual periods beginning after December 15, 2017.

Under the new guidance, the Company recognizes revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Under this standard, revenue is based on a contract with a determinable transaction price and distinct performance obligations with probable collectability. Revenues cannot be recognized until the performance obligation(s) are satisfied and control is transferred to the customer. Management has concluded that the majority of its revenues associated with financial instruments are scoped out of ASC 606, and has concluded that the only significant impact relates to the timing of the recognition of the CLO incentive fee income. The adoption of ASC 606 did not have an impact on the Company’s management fee income or investment income.

The Company adopted ASC 606 to all applicable contracts under the modified retrospective approach using the practical expedient provided for within paragraph 606-10-65-1(f)(4); therefore, the presentation of prior year periods has not been adjusted. The Company recognized the cumulative effect of initially adopting ASC 606 as an adjustment to the opening balance of components of equity as of March 1, 2018.

Incentive Fee Income

Incentive fee income is recognized based on the performance of Saratoga CLO during the period, subject to the achievement of minimum return levels in accordance with the terms set out in the investment management agreement between the Company and Saratoga CLO. Incentive fee income is realized in cash on a quarterly basis. Once realized, such fees are no longer subject to reversal.

Upon the adoption of ASC 606, the Company recognizes incentive fee income only when the amount is realized and no longer subject to reversal. Therefore, the Company no longer recognizes unrealized incentive fee income in the consolidated financial statements. The adoption of ASC 606 results in the delayed recognition of unrealized incentive fee income in the consolidated financial statements until it becomes realized at the end of the measurement period and all uncertainties are eliminated, which is typically quarterly.

The Company adopted ASC 606 for incentive fee income using the modified retrospective approach with an effective date of March 1, 2018. The cumulative effect of the adoption resulted in the reversal of $0.07 million of unrealized incentive fee income and is presented as a reduction to the opening balances of components of equity as of March 1, 2018.

In conjunction with the third refinancing and issuance of the Saratoga CLO’s 2013-1 Reset CLO Notes (the “2013-1 Reset CLO Notes”) on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information. Prior to the refinancing, the Company reported $0.1 million and $0.5 million in incentive fees from the Saratoga CLO for the three and nine months ended November 30, 2018, respectively, and is reported as incentive fee income on the Company’s consolidated statement of operations.

 

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The following table presents the impact of incentive fees on the consolidated statement of assets and liabilities upon the adoption of ASC 606 effective March 1, 2018:

Consolidated Statement of Assets and Liabilities

 

     February 28, 2018  
     As Reported      Adjustments(1)      As Adjusted for
Adoption of
ASC 606
 

Management and incentive fee receivable

   $ 233,024      $ (65,300    $ 167,724  

Total assets

     360,336,361        (65,300      360,271,061  

Cumulative effect adjustment for Adoption of ASC 606

     —          (65,300      (65,300

Total net assets

     143,691,367        (65,300      143,626,067  

NET ASSET VALUE PER SHARE

   $ 22.96      $ (0.01    $ 22.95  

 

(1) 

Unrealized incentive fees receivable balance as of February 28, 2018.

Without the adoption of ASC 606, there was no impact to either the consolidated statements of assets and liabilities as of November 30, 2019 and February 28, 2019 or the consolidated statement of operations for the three and nine months ended November 30, 2019.

For the three and nine months ended November 30, 2018, the impact on the consolidated statement of operations without the adoption of ASC 606 is shown in the tables below:

Consolidated Statement of Operations

 

     For the three months ended November 30, 2018      For the nine months ended November 30, 2018  
     As Reported      Adjustments     Without
Adoption of
ASC 606
     As Reported      Adjustments      Without
Adoption of
ASC 606
 

Incentive fee income

   $ 147,602      $ (1,382   $ 146,220      $ 493,846      $ 3,581      $ 497,427  

Total investment income

     12,833,013        (1,382     12,831,631        34,723,805        3,581        34,727,386  

NET INVESTMENT INCOME

     5,138,941        (1,382     5,137,559        14,210,817        3,581        14,214,398  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

     3,669,083        (1,382     3,667,701        10,653,814        3,581        10,657,395  

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE

   $ 0.49      $ —       $ 0.49      $ 1.55      $ —        $ 1.55  

Other Income

Other income includes dividends received, origination fees, structuring fees and advisory fees, and is recorded in the consolidated statements of operations when earned.

Payment-in-Kind Interest

The Company holds debt and preferred equity investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company stops accruing PIK interest if it is expected that the issuer will not be able to pay all principal and interest when due.

Deferred Debt Financing Costs

Financing costs incurred in connection with our credit facility and notes are deferred and amortized using the straight-line method over the life of the respective facility and debt securities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the straight-line method over the life of the debentures.

The Company presents deferred debt financing costs on the balance sheet as a contra-liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

Contingencies

In the ordinary course of business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote. Therefore, the Company has not accrued any liabilities in connection with such indemnifications.

 

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In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.

Income Taxes

The Company has elected to be treated for tax purposes as a RIC under the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes, except as related to the Taxable Blockers when applicable.

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least

90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

In accordance with certain applicable U.S. Treasury regulations and private letter rulings issued by the Internal Revenue Service (“IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

The Company may utilize wholly-owned holding companies taxed under Subchapter C of the Code or tax blockers, when making equity investments in portfolio companies taxed as pass-through entities to meet its source-of-income requirements as a RIC. Taxable Blockers are consolidated in the Company’s U.S. GAAP financial statements and may result in current and deferred federal and state income tax expense with respect to income derived from those investments. Such income, net of applicable income taxes, is not included in the Company’s tax-basis net investment income until distributed by the Taxable Blocker, which may result in timing and character differences between the Company’s U.S. GAAP and tax-basis net investment income and realized gains and losses. Income tax expense or benefit from Taxable Blockers related to net investment income are included in total operating expenses, while any expense or benefit related to federal or state income tax originated for capital gains and losses are included together with the applicable net realized or unrealized gain or loss line item. Deferred tax assets of the Taxable Blockers are reduced by a valuation allowance when, in the opinion of management, it is more-likely than-not that some portion or all of the deferred tax assets will not be realized.

FASB ASC Topic 740, Income Taxes, (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations. During the fiscal year ended February 28, 2019, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2016, 2017 and 2018 federal tax years for the Company remain subject to examination by the IRS. As of November 30, 2019 and February 28, 2019, there were no uncertain tax positions. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

Dividends

Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of the DRIP by the dividend record date will have their cash dividends automatically

 

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reinvested into additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

Capital Gains Incentive Fee

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to the Manager when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time.

The actual incentive fee payable to the Company’s Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains net of realized and unrealized losses for the period.

Regulatory Matters

In August 2018, the SEC issued Final Rule Release No.33-10532, Disclosure Update and Simplification, which in part amends certain disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The effective date for these disclosures was November 5, 2018. Management has adopted these amendments as currently required and these are reflected in the Company’s consolidated financial statements and related disclosures. The presentation of certain prior year information has been adjusted to conform with these amendments.

New Accounting Pronouncements

In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has assessed these changes and does not believe they would have a material impact on the Company’s consolidated financial statements and disclosures.

Risk Management

In the ordinary course of its business, the Company manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount. The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

The Company has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

Note 3. Investments

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

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Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

 

   

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

 

   

Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities, for which some level of recent trading activity has been observed.

 

   

Level 3—Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level 2 inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level 3 if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation methodology.

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

The following table presents fair value measurements of investments, by major class, as of November 30, 2019 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

First lien term loans

   $ —        $ —        $ 302,773      $ 302,773  

Second lien term loans

     —          —          101,099        101,099  

Unsecured term loans

     —          —          2,073        2,073  

Structured finance securities

     —          —          34,306        34,306  

Equity interests

     —          —          46,780        46,780  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 487,031      $ 487,031  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following table presents fair value measurements of investments, by major class, as of February 28, 2019 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

First lien term loans

   $ —        $ —        $ 202,846      $ 202,846  

Second lien term loans

     —          —          125,786        125,786  

Unsecured term loans

     —          —          2,100        2,100  

Structured finance securities

     —          —          35,328        35,328  

Equity interests

     —          —          35,960        35,960  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 402,020      $ 402,020  
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended November 30, 2019 (dollars in thousands):

 

     First lien
term loans
    Second lien
term loans
    Unsecured
term loans
    Structured
finance
securities
    Equity
interests
    Total  

Balance as of February 28, 2019

   $ 202,846     $ 125,786     $ 2,100     $ 35,328     $ 35,960     $ 402,020  

Payment-in-kind and other adjustments to cost

     488       2,716       —         751       (872     3,083  

Net accretion of discount on investments

     641       247       —         —         —         888  

Net change in unrealized appreciation (depreciation) on investments

     (672     350       (27     (1,773     7,033       4,911  

Purchases

     155,588       —         —         —         5,084       160,672  

Sales and repayments

     (56,178     (28,000     —         —         (12,975     (97,153

Net realized gain (loss) from investments

     60       —         —         —         12,550       12,610  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of November 30, 2019

   $ 302,773     $ 101,099     $ 2,073     $ 34,306     $ 46,780     $ 487,031  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period

   $ (558   $ 196     $ (27   $ (1,773   $ 8,422     $ 6,260  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

Sales and repayments represent net proceeds received from investments sold and principal paydowns received during the period.

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There were no restructures in or out of Levels 1, 2 or 3 during the nine months ended November 30, 2019.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended November 30, 2018 (dollars in thousands):

 

     Syndicated
loans
    First lien
term loans
    Second lien
term loans
    Unsecured
term loans
    Structured
finance
securities
    Equity
interests
     Total  

Balance as of February 28, 2018

   $ 4,106     $ 197,359     $ 95,075     $ —       $ 16,374     $ 29,780      $ 342,694  

Payment-in-kind and other adjustments to cost

     —         413       1,739       —         —         763        2,915  

Net accretion of discount on investments

     73       498       223       —         —         —          794  

Net change in unrealized appreciation (depreciation) on investments

     (73     (1,082     (1,404     (135     (1,287     1,439        (2,542

Purchases

     —         83,871       47,844       22,216       275       6,455        160,661  

Sales and repayments

     (4,106     (42,701     (14,000     —         (48     —          (60,855

Net realized gain from investments

     —         145       —         —         —         —          145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance as of November 30, 2018

   $ —       $ 238,503     $ 129,477     $ 22,081     $ 15,314     $ 38,437      $ 443,812  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period

   $ —       $ (1,154   $ (1,312   $ (135   $ (1,287   $ 1,439      $ (2,449
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of November 30, 2019 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique    Unobservable Input   Range    Weighted Average*

First lien term loans

   $ 302,773      Market Comparables    Market Yield (%)     8.0% - 12.9%      10.2%
         EBITDA Multiples (x)   3.0x    3.0x

Second lien term loans

     101,099      Market Comparables    Market Yield (%)   9.7% - 83.7%    12.9%
         EBITDA Multiples (x)   5.0x    5.0x

Unsecured term loans

     2,073      Market Comparables    Market Yield (%)   20.8%    20.8%
         EBITDA Multiples (x)   5.2x    5.2x

Structured finance securities

     34,306      Discounted Cash Flow    Discount Rate (%)   9.75% - 18.0%    15.9%
         Recovery Rate (%)   70.0%    70.0%
         Prepayment Rate (%)   20.0%    20.0%

Equity interests

     46,780      Market Comparables    EBITDA Multiples (x)   4.0x - 14.0x    7.2x
         Revenue Multiples (x)   0.6x - 43.2x    7.5x
  

 

 

            

Total

   $ 487,031             
  

 

 

            

 

*

The weighted average in the table above is calculated based on each investment’s fair value weighting, using the applicable unobservable input.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2019 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique      Unobservable Input     Range      Weighted Average*  

First lien term loans

   $ 202,846        Market Comparables        Market Yield (%)         8.6% - 13.2%          11.0%  
           EBITDA Multiples (x)       3.0x        3.0x  

Second lien term loans

     125,786        Market Comparables        Market Yield (%)     10.5% - 41.1%        12.8%  
           EBITDA Multiples (x)       5.0x        5.0x  

Unsecured term loans

     2,100        Market Comparables        Market Yield (%)       15.00%        15.0%  
           EBITDA Multiples (x)       4.8x        4.8x  

Structured finance securities

     35,328        Discounted Cash Flow        Discount Rate (%)       9.0% - 15.0%        13.6%  
           Recovery Rate (%)       70.0%        70.0%  
           Prepayment Rate (%)       20.0%        20.0%  

Equity interests

     35,960        Market Comparables        EBITDA Multiples (x)       4.0x - 14.7x        6.7x  
           Revenue Multiples (x)       0.6x - 39.6x        10.1x  
  

 

 

            

Total

   $ 402,020             
  

 

 

            

 

*

The weighted average in the table above is calculated based on each investment’s fair value weighting, using the applicable unobservable input.

For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the earnings before interest, tax, depreciation and amortization (“EBITDA”) or revenue valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate and prepayment rate, in isolation, would result in a significantly lower (higher) fair value measurement while a significant increase (decrease) in recovery rate, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a market quote in deriving a value, a significant increase (decrease) in the market quote, in isolation, would result in a significantly higher (lower) fair value measurement.

 

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The composition of our investments as of November 30, 2019 at amortized cost and fair value was as follows (dollars in thousands):

 

     Investments at
Amortized Cost
     Amortized Cost
Percentage of Total
Portfolio
    Investments at
Fair Value
     Fair Value
Percentage of Total
Portfolio
 

First lien term loans

   $ 302,926        62.8   $ 302,773        62.2

Second lien term loans

     102,756        21.3       101,099        20.8  

Unsecured term loans

     2,216        0.5       2,073        0.4  

Structured finance securities

     34,268        7.1       34,306        7.0  

Equity interests

     39,850        8.3       46,780        9.6  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 482,016        100.0   $ 487,031        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

The composition of our investments as of February 28, 2019 at amortized cost and fair value was as follows (dollars in thousands):

 

     Investments at
Amortized Cost
     Amortized Cost
Percentage of Total
Portfolio
    Investments at
Fair Value
     Fair Value
Percentage of Total
Portfolio
 

First lien term loans

   $ 202,328        50.3   $ 202,846        50.5

Second lien term loans

     127,793        31.8       125,786        31.3  

Unsecured term loans

     2,217        0.6       2,100        0.5  

Structured finance securities

     33,516        8.3       35,328        8.8  

Equity interests

     36,062        9.0       35,960        8.9  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 401,916        100.0   $ 402,020        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

For loans and debt securities for which market quotations are not available, we determine their fair value based on third party indicative broker quotes, where available, or the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield valuation methodology. In applying the market yield valuation methodology, we determine the fair value based on such factors as market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. If, in our judgment, the market yield methodology is not sufficient or appropriate, we may use additional methodologies such as an asset liquidation or expected recovery model.

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. In connection with the refinancing of the Saratoga CLO liabilities, we ran Intex models based on assumptions about the refinanced Saratoga CLO’s structure, including capital structure, cost of liabilities and reinvestment period. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at November 30, 2019. The inputs at November 30, 2019 for the valuation model include:

 

   

Default rate: 2.0%

 

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Table of Contents
   

Recovery rate: 35-70%

 

   

Discount rate: 18.0%

 

   

Prepayment rate: 20.0%

 

   

Reinvestment rate / price: L+370bps / $99.50

Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”)

On January 22, 2008, the Company entered into a collateral management agreement with Saratoga CLO, pursuant to which the Company acts as its collateral manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, the Company completed a second refinancing of the Saratoga CLO with its reinvestment period extended to October 2018.

On August 7, 2018, the Company entered into an unsecured loan agreement (“CLO 2013-1 Warehouse Loan”) with Saratoga Investment Corp. CLO 2013-1 Warehouse, Ltd (“CLO 2013-1 Warehouse”), a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse Loan, which expires on February 7, 2020, bears interest at an annual rate of 3M USD LIBOR + 7.5%. Interest accrued on the investment in the CLO 2013-1 Warehouse Loan is included in interest income on the Company’s consolidated statement of operations. During the year ended February 28, 2019, the maximum amount invested by the Company in the CLO 2013-1 Warehouse Loan amounted to $20.0 million.

On December 14, 2018, the Company completed a third refinancing and upsize of the Saratoga CLO (the “2013-1 Reset CLO Notes”). The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period ending January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million aggregate principal amount of the Class G-R-2 notes tranches at par, with a coupon of LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. As part of this refinancing, the Company also redeemed our existing $4.5 million aggregate amount of the Class F notes tranche at par.

The Saratoga CLO remains 100.0% owned and managed by the Company. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.

For the three months ended November 30, 2019 and November 30, 2018, we accrued management fee income of $0.6 million and $0.4 million, respectively, and interest income of $1.0 million and $0.5 million, respectively, from the Saratoga CLO. For the three months ended November 30, 2018, we accrued $0.1 million related to the incentive management fee from Saratoga CLO.

For the nine months ended November 30, 2019 and November 30, 2018, we accrued management fee income of $1.9 million and $1.1 million, respectively, and interest income of $3.2 million and $2.0 million, respectively, from the Saratoga CLO. For the nine months ended November 30, 2018, we accrued $0.5 million related to the incentive management fee from Saratoga CLO.

As of November 30, 2019, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $24.5 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of November 30, 2019, the fair value of its investment in the Class F-R-2 Notes and G-R-2 Notes of Saratoga CLO was $2.5 million and $7.4 million, respectively. As of November 30, 2019, Saratoga CLO had investments with a principal balance of $510.9 million and a weighted average spread over LIBOR of 4.08% and had debt with a principal balance of $470.0 million with a weighted average spread over LIBOR of 2.0%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. As of November 30, 2019, the present value of the projected future cash flows of the subordinated notes was approximately $24.9 million, using a 18.0% discount rate. The Company’s total investment in the subordinate notes of Saratoga CLO is $43.8 million, which is comprised of the initial investment of $30.0 million in January 2008 plus the additional investment of $13.8 million in December 2018, and to date the Company has since received distributions of $58.7 million, management fees of $21.5 million and incentive fees of $1.2 million. In conjunction with the third refinancing of the 2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO.

 

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Table of Contents

As of February 28, 2019, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $25.4 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of February 28, 2019, the fair value of its investment in the Class F-R-2 Notes and G-R-2 Notes of Saratoga CLO was $2.5 million and $7.5 million, respectively. As of February 28, 2019, Saratoga CLO had investments with a principal balance of $510.3 million and a weighted average spread over LIBOR of 4.0% and had debt with a principal balance of $470.0 million with a weighted average spread over LIBOR of 2.3%. As of February 28, 2019, the present value of the projected future cash flows of the subordinated notes was approximately $26.6 million, using a 15.0% discount rate.

Below is certain financial information from the separate financial statements of Saratoga CLO as of November 30, 2019 (unaudited) and February 28, 2019 and for the three and nine months ended November 30, 2019 (unaudited) and November 30, 2018 (unaudited).

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

 

     November 30, 2019     February 28, 2019  
     (unaudited)        

ASSETS

    

Investments at fair value

    

Loans at fair value (amortized cost of $505,796,917 and $506,145,483, respectively)

   $ 485,195,070     $ 498,389,369  

Equities at fair value (amortized cost of $2,566,752 and $3,531,218, respectively)

     151       15,691  
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $508,363,669 and $509,676,701, respectively)

     485,195,221       498,405,060  

Cash and cash equivalents

     18,983,511       18,495,653  

Receivable from open trades

     4,326,089       7,855,309  

Interest receivable (net of reserve of $488,210 and $168,443, respectively)

     1,560,238       2,104,495  
  

 

 

   

 

 

 

Total assets

   $ 510,065,059     $ 526,860,517  
  

 

 

   

 

 

 

LIABILITIES

    

Interest payable

   $ 2,259,612     $ 4,963,472  

Payable from open trades

     26,007,050       26,232,247  

Accrued base management fee

     57,344       108,419  

Accrued subordinated management fee

     229,376       433,675  

Due to affiliate

     —         1,673,747  

Accounts payable and accrued expenses

     95,650       1,221,110  

Saratoga Investment Corp. CLO 2013-1, Ltd. Notes:

    

Class  A-1FL-R-2 Senior Secured Floating Rate Notes

     255,000,000       255,000,000  

Class  A-1FXD-R-2 Senior Secured Fixed Rate Notes

     25,000,000       25,000,000  

Class-A-2-R-2 Senior Secured Floating Rate Notes

     40,000,000       40,000,000  

Class B-R-2 Senior Secured Floating Rate Notes

     59,500,000       59,500,000  

Class C-R-2 Deferrable Mezzanine Floating Rate Notes

     22,500,000       22,500,000  

Discount on Class C-R-2 Notes

     (544,026     (585,059

Class D-R-2 Deferrable Mezzanine Floating Rate Notes

     31,000,000       31,000,000  

Discount on Class D-R-2 Notes

     (989,967     (1,064,636

Class  E-1-R-2 Deferrable Mezzanine Floating Rate Notes

     27,000,000       27,000,000  

Class  E-2-R-2 Deferrable Mezzanine Fixed Rate Notes

     —         —    

Class F-R-2 Deferrable Junior Floating Rate Notes

     2,500,000       2,500,000  

Class G-R-2 Deferrable Junior Floating Rate Notes

     7,500,000       7,500,000  

Deferred debt financing costs

     (2,295,245     (2,465,897

Subordinated Notes

     69,500,000       69,500,000  

Discount on Subordinated Notes

     (23,485,495     (25,256,892
  

 

 

   

 

 

 

Total liabilities

   $ 540,834,299     $ 544,760,186  
  

 

 

   

 

 

 

NET ASSETS

    

Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively

   $ 250     $ 250  

Total distributable earnings (loss)

     (30,769,490     (17,899,919
  

 

 

   

 

 

 

Total net assets (deficit)

     (30,769,240     (17,899,669
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 510,065,059     $ 526,860,517  
  

 

 

   

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

(unaudited)

 

     For the three months ended     For the nine months ended  
     November 30, 2019     November 30, 2018     November 30, 2019     November 30, 2018  

INVESTMENT INCOME

        

Interest from investments

   $ 8,052,668     $ 5,797,031     $ 24,560,867     $ 15,686,270  

Interest from cash and cash equivalents

     39,788       4,502       73,591       12,591  

Other income

     54,333       182,243       235,301       355,414  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     8,146,789       5,983,776       24,869,759       16,054,275  
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

        

Interest and debt financing expenses

     8,136,345       4,826,166       21,303,661       12,926,780  

Base management fee

     125,934       76,153       377,786       225,984  

Subordinated management fee

     503,737       304,612       1,511,146       903,937  

Incentive fees

     —         146,220       —         497,427  

Professional fees

     37,967       136,219       250,679       249,665  

Trustee expenses

     56,810       15,396       194,825       76,092  

Miscellaneous fee expense

     (1,606     6,885       42,128       36,692  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     8,859,187       5,511,651       23,680,225       14,916,577  
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INVESTMENT INCOME (LOSS)

     (712,398     472,125       1,189,534       1,137,698  
  

 

 

   

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

        

Net realized gain (loss) on investments

     —         11,948       (2,162,298     (1,143,744

Net change in unrealized appreciation (depreciation) on investments

     (7,516,752     (4,467,273     (11,896,807     (5,017,702
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss) on investments

     (7,516,752     (4,455,325     (14,059,105     (6,161,446
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

   $ (8,229,150   $ (3,983,200   $ (12,869,571   $ (5,023,748
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Schedule of Investments

November 30, 2019

(unaudited)

 

Issuer Name

 

Industry

 

Asset Name

  Asset
Type
    Reference Rate/Spread     LIBOR
Floor
    Current
Rate
(All In)
    Maturity
Date
    Principal/
Number of
Shares
    Cost     Fair Value  

Education Management II LLC

  Services: Consumer   Education Management II A-2 Preferred Shares     Equity       —         0.00     0.00     0.00     —         1,897,538     $ 1,897,538     $ 17  

Education Management II LLC

  Services: Consumer   Education Management II A-1 Preferred Shares     Equity       —         0.00     0.00     0.00     —         6,692       669,214       134  

1011778 B.C. Unlimited Liability Company

  Beverage Food & Tobacco   Term Loan B4     Loan       1M USD LIBOR+       1.75     0.00     3.45     11/19/2026     $ 500,000       498,750       499,750  

24 Hour Fitness Worldwide Inc.

  Services: Consumer   Term Loan (5/18)     Loan       1M USD LIBOR+       3.50     0.00     5.20     5/30/2025       2,967,462       2,956,896       2,192,213  

ABB Con-Cise Optical Group LLC

  Consumer goods: Non-durable   Term Loan B     Loan       6M USD LIBOR+       5.00     1.00     6.89     6/15/2023       2,087,306       2,066,066       1,967,286  

Acosta Inc. (a)

  Media: Advertising Printing & Publishing   Term Loan B (1st Lien)     Loan       Prime+       0.00     0.00     4.75     9/27/2021       1,905,425       1,900,726       336,422  

ADMI Corp.

  Services: Consumer   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     4.45     4/30/2025       1,975,000       1,966,906       1,952,781  

Advantage Sales & Marketing Inc.

  Services: Business   First Lien Term Loan     Loan       1M USD LIBOR+       3.25     1.00     4.95     7/23/2021       2,377,387       2,376,188       2,238,310  

Advantage Sales & Marketing Inc.

  Services: Business   Term Loan B Incremental     Loan       1M USD LIBOR+       3.25     1.00     4.95     7/23/2021       491,206       486,073       461,940  

Aegis Toxicology Sciences Corporation

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       5.50     1.00     7.41     5/9/2025       3,960,000       3,928,328       3,766,950  

Agiliti Health Inc.

  Healthcare & Pharmaceuticals   Term Loan (1/19)     Loan       1M USD LIBOR+       3.00     0.00     4.70     1/5/2026       497,500       497,503       496,256  

Agrofresh Inc.

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       4.75     1.00     6.45     7/30/2021       2,897,051       2,893,850       2,513,192  

AI Mistral (Luxembourg) Subco Sarl

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       3.00     1.00     4.70     3/11/2024       487,500       487,500       382,995  

AIS Holdco LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       5.00     0.00     6.91     8/15/2025       2,437,500       2,426,780       2,291,250  

Albertson’s LLC

  Retail   Term Loan B7 (08/19)     Loan       1M USD LIBOR+       2.75     0.75     4.45     11/17/2025       1,572,385       1,565,059       1,582,778  

Alchemy US Holdco 1 LLC

  Metals & Mining   Term Loan     Loan       1M USD LIBOR+       5.50     0.00     7.20     10/10/2025       1,962,500       1,936,691       1,929,393  

Alera Group Intermediate Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.20     8/1/2025       495,000       493,961       496,237  

Alion Science and Technology Corporation

  Aerospace & Defense   Term Loan B (1st Lien)     Loan       1M USD LIBOR+       4.50     1.00     6.20     8/19/2021       3,607,276       3,602,472       3,607,276  

Allen Media LLC

  Media: Diversified & Production   Term Loan B     Loan       3M USD LIBOR+       6.50     1.00     8.41     8/30/2023       2,885,693       2,828,522       2,755,837  

Altisource S.a r.l.

  Banking Finance Insurance & Real Estate   Term Loan B (03/18)     Loan       3M USD LIBOR+       4.00     1.00     5.91     4/3/2024       1,454,005       1,445,993       1,377,670  

Altra Industrial Motion Corp.

  Capital Equipment   Term Loan     Loan       1M USD LIBOR+       2.00     0.00     3.70     10/1/2025       1,805,969       1,801,994       1,800,894  

American Dental Partners Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       3M USD LIBOR+       4.25     1.00     6.16     3/24/2023       992,500       983,902       977,613  

American Greetings Corporation

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.50     1.00     6.20     4/5/2024       4,944,799       4,941,922       4,774,846  

American Residential Services LLC

  Services: Consumer   Term Loan B     Loan       1M USD LIBOR+       4.00     1.00     5.70     6/30/2022       3,936,046       3,925,777       3,827,805  

Amynta Agency Borrower Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.20     2/28/2025       3,471,143       3,432,963       3,228,163  

Anastasia Parent LLC

  Consumer goods: Non-durable   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     5.45     8/11/2025       990,000       985,752       805,197  

Anchor Glass Container Corporation

  Containers Packaging & Glass   Term Loan (07/17)     Loan       1M USD LIBOR+       2.75     1.00     4.45     12/7/2023       486,306       484,707       336,310  

Api Group DE Inc

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       2.50     0.00     4.20     10/1/2026       1,000,000       995,052       1,004,380  

Arctic Glacier U.S.A. Inc.

  Beverage Food & Tobacco   Term Loan (3/18)     Loan       1M USD LIBOR+       3.50     1.00     5.20     3/20/2024       3,350,967       3,331,589       3,163,883  

Aretec Group Inc.

  Banking Finance Insurance & Real Estate   Term Loan (10/18)     Loan       1M USD LIBOR+       4.25     0.00     5.95     10/1/2025       1,985,000       1,980,601       1,877,076  

Arnott’s Biscuits Limited

  Beverage Food & Tobacco   Term Loan     Loan       3M USD LIBOR+       4.00     0.00     5.91     10/16/2026       1,000,000       990,000       998,130  

ASG Technologies Group Inc.

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.20     7/31/2024       490,022       488,249       483,284  

AssetMark Financial Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       3M USD LIBOR+       3.25     0.00     5.16     11/14/2025       1,237,500       1,235,491       1,243,688  

Astoria Energy LLC

  Energy: Electricity   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     5.70     12/24/2021       1,394,701       1,388,193       1,393,390  

Asurion LLC

  Banking Finance Insurance & Real Estate   Term Loan B-4 (Replacement)     Loan       1M USD LIBOR+       3.00     0.00     4.70     8/4/2022       1,882,889       1,877,550       1,886,033  

Asurion LLC

  Banking Finance Insurance & Real Estate   Term Loan B6     Loan       1M USD LIBOR+       3.00     0.00     4.70     11/3/2023       494,068       490,915       494,607  

Athenahealth Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       3M USD LIBOR+       4.50     0.00     6.41     2/11/2026       1,990,000       1,953,563       1,986,020  

Avaya Inc.

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     5.95     12/16/2024       3,169,156       3,137,037       3,010,698  

Avison Young (Canada) Inc.

  Services: Business   Term Loan     Loan       3M USD LIBOR+       5.00     0.00     6.91     1/30/2026       3,485,000       3,425,613       3,412,407  

B&G Foods Inc.

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       2.50     0.00     4.20     10/10/2026       250,000       248,767       251,458  

Ball Metalpack Finco LLC

  Containers Packaging & Glass   Term Loan     Loan       3M USD LIBOR+       4.50     0.00     6.41     7/31/2025       3,954,950       3,937,748       3,355,103  

Bausch Health Companies Inc.

  Healthcare & Pharmaceuticals   Term Loan B (05/18)     Loan       1M USD LIBOR+       3.00     0.00     4.70     6/2/2025       25,765       25,677       25,872  

Berry Global Inc.

  Chemicals Plastics & Rubber   Term Loan U     Loan       1M USD LIBOR+       2.50     0.00     4.20     7/1/2026       4,987,500       4,975,486       5,007,749  

Blount International Inc.

  Forest Products & Paper   Term Loan B (09/18)     Loan       6M USD LIBOR+       3.75     1.00     5.64     4/12/2023       3,462,525       3,459,415       3,461,452  

Blucora Inc.

  Services: Consumer   Term Loan (11/17)     Loan       1M USD LIBOR+       3.00     1.00     4.70     5/22/2024       956,667       954,009       957,862  

Bombardier Recreational Products Inc.

  Consumer goods: Durable   Incremental Term Loan B2     Loan       1M USD LIBOR+       2.50     0.00     4.20     5/23/2025       997,500       987,909       998,498  

Boxer Parent Company Inc.

  Services: Business   Term Loan     Loan       1M USD LIBOR+       4.25     0.00     5.95     10/2/2025       2,481,250       2,459,852       2,382,000  

Bracket Intermediate Holding Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       4.25     0.00     6.16     9/5/2025       990,000       985,761       972,675  

Broadstreet Partners Inc.

  Banking Finance Insurance & Real Estate   Term Loan B2     Loan       1M USD LIBOR+       3.25     1.00     4.95     11/8/2023       1,027,255       1,025,361       1,025,971  

Brookfield WEC Holdings Inc.

  Energy: Electricity   Term Loan     Loan       1M USD LIBOR+       3.50     0.75     5.20     8/1/2025       498,744       497,531       499,058  

Buckeye Partners L.P.

  Utilities: Oil & Gas   Term Loan     Loan       1M USD LIBOR+       2.75     0.00     4.45     11/2/2026       1,000,000       995,080       1,007,500  

BW Gas & Convenience Holdings LLC

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       6.25     0.00     7.95     11/18/2024       3,000,000       2,880,000       2,917,500  

Cable & Wireless Communications Limited

  Telecommunications   Term Loan B4     Loan       1M USD LIBOR+       3.25     0.00     4.95     1/30/2026       2,186,667       2,184,527       2,190,778  

Calceus Acquisition Inc.

  Consumer goods: Non-durable   Term Loan B     Loan       1M USD LIBOR+       5.50     0.00     7.20     2/12/2025       981,250       970,154       978,797  

Callaway Golf Company

  Retail   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.20     1/2/2026       699,375       686,170       705,495  

Canyon Valor Companies Inc.

  Media: Advertising Printing & Publishing   Term Loan B     Loan       3M USD LIBOR+       2.75     0.00     4.66     6/16/2023       931,691       929,520       932,045  

CareerBuilder LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       6.75     1.00     8.66     7/31/2023       2,266,211       2,229,942       2,246,382  

CareStream Health Inc.

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       5.50     1.00     7.20     2/28/2021       2,369,831       2,362,759       2,297,266  

Casa Systems Inc.

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     5.70     12/20/2023       1,458,750       1,449,364       1,152,413  

CCS-CMGC Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       5.50     0.00     7.41     10/1/2025       2,481,250       2,459,195       2,378,898  

Cengage Learning Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     5.95     6/7/2023       1,451,208       1,438,133       1,326,448  

CenturyLink Inc.

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     4.45     1/31/2025       3,939,924       3,919,349       3,939,373  

Citadel Securities LP

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.50     0.00     5.20     2/27/2026       995,000       993,778       998,731  

Clarios Global LP

  Automotive   Term Loan B     Loan       1M USD LIBOR+       3.50     0.00     5.20     4/30/2026       1,500,000       1,485,484       1,499,070  

Compass Power Generation L.L.C.

  Utilities: Electric   Term Loan B (08/18)     Loan       1M USD LIBOR+       3.50     1.00     5.20     12/20/2024       1,938,014       1,933,301       1,936,405  

Compuware Corporation

  High Tech Industries   Term Loan (08/18)     Loan       1M USD LIBOR+       4.00     0.00     5.70     8/22/2025       496,250       495,170       498,111  

Concentra Inc.

  Healthcare & Pharmaceuticals   Term Loan B-1     Loan       6M USD LIBOR+       2.50     0.00     4.39     6/1/2022       250,000       248,839       249,895  

Concordia International Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan      
1W USD
LIBOR+
 
 
    5.50     1.00     7.03     9/6/2024       1,189,720       1,134,822       1,102,573  

Connect US Finco LLC

  Telecommunications   Term Loan B     Loan       3M USD LIBOR+       4.50     1.00     6.41     9/23/2026       2,000,000       1,960,000       1,991,260  

Consolidated Aerospace Manufacturing LLC

  Aerospace & Defense   Term Loan (1st Lien)     Loan       1M USD LIBOR+       3.75     1.00     5.45     8/11/2022       2,414,796       2,409,385       2,399,703  

Consolidated Communications Inc.

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       3.00     1.00     4.70     10/5/2023       1,479,196       1,467,949       1,364,100  

Covia Holdings Corporation

  Metals & Mining   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     5.91     6/2/2025       987,500       987,500       691,477  

CPI Acquisition Inc.

  Banking Finance Insurance & Real Estate   Term Loan B (1st Lien)     Loan       3M USD LIBOR+       4.50     1.00     6.41     8/17/2022       1,436,782       1,426,941       1,081,580  

Crown Subsea Communications Holding Inc

  Construction & Building   Term Loan     Loan       1M USD LIBOR+       6.00     0.00     7.70     11/3/2025       2,231,270       2,209,380       2,222,902  

CSC Holdings LLC

  Media: Broadcasting & Subscription   Term Loan B (03/17)     Loan       1M USD LIBOR+       2.25     0.00     3.95     7/17/2025       1,979,696       1,956,428       1,972,549  

CSC Holdings LLC

  Media: Broadcasting & Subscription   Term Loan B-5     Loan       1M USD LIBOR+       2.50     0.00     4.20     4/15/2027       500,000       500,000       500,250  

CSC Holdings LLC

  Media: Broadcasting & Subscription   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     3.95     1/15/2026       496,250       495,163       494,761  

CT Technologies Intermediate Hldgs Inc.

  Healthcare & Pharmaceuticals   New Term Loan     Loan       1M USD LIBOR+       4.25     1.00     5.95     12/1/2021       1,429,069       1,424,005       1,321,889  

Daseke Companies Inc.

  Transportation: Cargo   Replacement Term Loan     Loan       1M USD LIBOR+       5.00     1.00     6.70     2/27/2024       1,960,683       1,951,299       1,833,239  

DaVita Inc.

  High Tech Industries   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     3.95     8/12/2026       1,000,000       997,535       1,004,730  

DCert Buyer Inc.

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       4.00     0.00     5.70     10/16/2026       1,500,000       1,496,274       1,491,000  

Dealer Tire LLC

  Automotive   Term Loan B     Loan       1M USD LIBOR+       5.50     0.00     7.20     12/12/2025       2,985,000       2,880,466       2,981,269  

Delek US Holdings Inc.

  Utilities: Oil & Gas   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     3.95     3/31/2025       6,462,334       6,392,397       6,371,861  

Dell International L.L.C.

  High Tech Industries   Term Loan B-1     Loan       1M USD LIBOR+       2.00     0.75     3.70     9/19/2025       3,823,990       3,819,277       3,844,066  

Delta 2 (Lux) SARL

  Hotel Gaming & Leisure   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.20     2/1/2024       1,318,289       1,315,764       1,310,050  

DHX Media Ltd.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     5.95     12/29/2023       279,282       277,960       274,627  

Diamond Sports Group LLC

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       3.25     0.00     4.95     8/24/2026       1,000,000       995,125       996,560  

Digital Room Holdings Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       5.00     0.00     6.70     5/21/2026       2,992,500       2,950,572       2,693,250  

Dole Food Company Inc.

  Beverage Food & Tobacco   Term Loan B     Loan       1M USD LIBOR+       2.75     1.00     4.45     4/8/2024       471,875       470,357       465,844  

DRW Holdings LLC

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     5.95     11/27/2026       5,000,000       4,950,000       4,962,500  

DTZ U.S. Borrower LLC

  Construction & Building   Term Loan B     Loan       1M USD LIBOR+       3.25     0.00     4.95     8/21/2025       3,955,038       3,938,212       3,959,981  

DynCorp International Inc.

  Aerospace & Defense   Term Loan B     Loan       1M USD LIBOR+       6.00     1.00     7.70     8/18/2025       3,000,000       2,912,737       2,970,000  

Eagletree-Carbide Acquisition Corp.

  Consumer goods: Durable   Term Loan     Loan       3M USD LIBOR+       4.25     1.00     6.16     8/28/2024       3,937,408       3,920,581       3,838,973  

EIG Investors Corp.

  High Tech Industries   Term Loan (06/18)     Loan       3M USD LIBOR+       3.75     1.00     5.66     2/9/2023       2,290,552       2,276,129       2,151,698  

Encapsys LLC

  Chemicals Plastics & Rubber   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.20     11/7/2024       498,714       493,972       499,547  

Endo Luxembourg Finance Company I S.a.r.l.

  Healthcare & Pharmaceuticals   Term Loan B (4/17)     Loan       1M USD LIBOR+       4.25     0.75     5.95     4/29/2024       3,947,120       3,924,139       3,618,049  

Energy Acquisition LP

  Capital Equipment   Term Loan (6/18)     Loan       3M USD LIBOR+       4.25     0.00     6.16     6/26/2025       1,975,000       1,960,754       1,738,000  

Envision Healthcare Corporation

  Healthcare & Pharmaceuticals   Term Loan B (06/18)     Loan       1M USD LIBOR+       3.75     0.00     5.45     10/10/2025       4,962,500       4,951,919       3,877,648  

FinCo I LLC

  Banking Finance Insurance & Real Estate   2018 Term Loan B     Loan       1M USD LIBOR+       2.00     0.00     3.70     12/27/2022       360,538       359,875       361,338  

First Eagle Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B (10/18)     Loan       3M USD LIBOR+       2.75     0.00     4.66     12/2/2024       4,962,500       4,938,670       4,953,220  

Fitness International LLC

  Services: Consumer   Term Loan B (4/18)     Loan       1M USD LIBOR+       3.25     0.00     4.95     4/18/2025       2,205,656       2,193,336       2,185,673  

Franklin Square Holdings L.P.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       2.50     0.00     4.20     8/1/2025       4,455,000       4,424,012       4,474,513  

Fusion Connect
Inc.(a)

  Telecommunications   Non-Consenting Term Loan B     Loan       Prime+       4.75     0.00     5.75     10/3/2019       2,031,731       1,975,959       1,069,688  

Fusion Connect Inc.

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       10.00     0.00     11.70     10/3/2019       132,539       132,059       130,551  

GBT Group Services B.V.

  Hotel Gaming & Leisure   Term Loan     Loan       3M USD LIBOR+       2.50     0.00     4.41     8/13/2025       4,455,000       4,453,928       4,466,138  

GC EOS Buyer Inc.

  Automotive   Term Loan B (06/18)     Loan       1M USD LIBOR+       4.50     0.00     6.20     8/1/2025       2,970,000       2,947,515       2,871,634  

General Nutrition Centers Inc.

  Retail   Term Loan B2     Loan       2M USD LIBOR+       8.75     0.75     10.57     3/4/2021       930,446       928,627       885,673  

General Nutrition Centers Inc.

  Retail   FILO Term Loan     Loan       1M USD LIBOR+       7.00     0.00     8.70     1/3/2023       585,849       584,624       584,220  

Genesee & Wyoming Inc.

  Transportation: Cargo   Term Loan     Loan       3M USD LIBOR+       2.00     0.00     3.91     11/6/2026       1,500,000       1,492,500       1,509,915  

GI Chill Acquisition LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       4.00     0.00     5.91     8/6/2025       2,475,000       2,464,298       2,437,875  

GI Revelation Acquisition LLC

  Services: Business   Term Loan     Loan       1M USD LIBOR+       5.00     0.00     6.70     4/16/2025       1,234,994       1,229,701       1,148,544  

Gigamon Inc.

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       4.25     1.00     5.95     12/27/2024       1,965,000       1,949,434       1,940,438  

Global Tel*Link Corporation

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     5.95     11/28/2025       3,047,426       3,047,426       2,590,312  

Go Wireless Inc.

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       6.50     1.00     8.20     12/22/2024       3,247,078       3,203,537       3,117,195  

Goodyear Tire & Rubber Company The

  Chemicals Plastics & Rubber   Second Lien Term Loan     Loan       3M USD LIBOR+       2.00     0.00     3.91     3/7/2025       2,000,000       2,000,000       1,985,000  

Greenhill & Co. Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.25     0.00     4.95     4/12/2024       3,825,000       3,784,189       3,691,125  

Grosvenor Capital Management Holdings LLLP

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       2.75     1.00     4.45     3/28/2025       898,530       894,749       901,342  

Guidehouse LLP

  Aerospace & Defense   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.20     5/1/2025       3,975,000       3,951,121       3,890,531  

Harland Clarke Holdings Corp.

  Media: Advertising Printing & Publishing   Term Loan     Loan       3M USD LIBOR+       4.75     1.00     6.66     11/3/2023       1,750,615       1,742,814       1,304,208  

HD Supply Waterworks Ltd.

  Construction & Building   Term Loan     Loan       3M USD LIBOR+       2.75     1.00     4.66     8/1/2024       490,000       489,045       483,263  

Helix Acquisition Holdings Inc.

  Capital Equipment   Term Loan (2019 Incremental)     Loan       3M USD LIBOR+       3.75     0.00     5.66     9/30/2024       2,985,000       2,930,173       2,790,975  

Helix Gen Funding LLC

  Energy: Electricity   Term Loan B (02/17)     Loan       1M USD LIBOR+       3.75     1.00     5.45     6/3/2024       264,030       263,663       252,550  

HLF Financing SaRL LLC

  Consumer goods: Non-durable   Term Loan B (08/18)     Loan       1M USD LIBOR+       3.25     0.00     4.95     8/18/2025       3,960,000       3,944,544       3,973,187  

Holley Purchaser Inc.

  Automotive   Term Loan B     Loan       3M USD LIBOR+       5.00     0.00     6.91     10/24/2025       2,481,250       2,459,539       2,344,781  

Hudson River Trading LLC

  Banking Finance Insurance & Real Estate   Term Loan B (10/18)     Loan       1M USD LIBOR+       3.50     0.00     5.20     4/3/2025       4,447,587       4,426,283       4,444,830  

Hyperion Refinance S.a.r.l.

  Banking Finance Insurance & Real Estate   Tem Loan (12/17)     Loan       1M USD LIBOR+       3.50     1.00     5.20     12/20/2024       1,714,143       1,705,912       1,713,183  

Idera Inc.

  High Tech Industries   Term Loan B     Loan       1M USD LIBOR+       4.50     1.00     6.20     6/28/2024       2,947,277       2,926,110       2,933,779  

IG Investments Holdings LLC

  Services: Business   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     5.70     5/23/2025       1,382,717       1,376,723       1,361,396  

Inmar Inc.

  Services: Business   Term Loan B     Loan       3M USD LIBOR+       4.00     1.00     5.91     5/1/2024       3,465,907       3,382,305       3,280,689  

ION Media Networks Inc.

  Media: Broadcasting & Subscription   Term Loan B     Loan       1M USD LIBOR+       3.00     0.00     4.70     12/18/2024       1,000,000       995,154       999,060  

Isagenix International LLC

  Beverage Food & Tobacco   Term Loan     Loan       3M USD LIBOR+       5.75     1.00     7.66     6/16/2025       2,835,730       2,787,207       2,115,455  

Jefferies Finance LLC / JFIN Co-Issuer Corp

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     5.45     6/3/2026       2,995,000       2,976,354       2,962,564  

Jill Holdings LLC

  Retail   Term Loan (1st Lien)     Loan       3M USD LIBOR+       5.00     1.00     6.91     5/9/2022       1,843,480       1,839,511       1,623,793  

JP Intermediate B LLC

  Consumer goods: Non-durable   Term Loan     Loan       3M USD LIBOR+       5.50     1.00     7.41     11/20/2025       4,750,000       4,700,788       3,948,438  

KAR Auction Services Inc.

  Automotive   Term Loan B (09/19)     Loan       1M USD LIBOR+       2.25     0.00     3.95     9/19/2026       250,000       249,388       251,250  

Lakeland Tours LLC

  Hotel Gaming & Leisure   Term Loan B     Loan       3M USD LIBOR+       4.25     1.00     6.16     12/16/2024       2,463,735       2,456,430       2,434,983  

Lannett Company Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       5.38     1.00     7.08     11/25/2022       2,418,790       2,393,517       2,355,732  

Learfield Communications LLC

  Media: Advertising Printing & Publishing   Initial Term Loan (A-L Parent)     Loan       1M USD LIBOR+       3.25     1.00     4.95     12/1/2023       486,250       484,757       486,979  

Lifetime Brands Inc.

  Consumer goods: Non-durable   Term Loan B     Loan       1M USD LIBOR+       3.50     1.00     5.20     2/28/2025       3,000,000       2,961,083       2,940,000  

Lighthouse Network LLC

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       3M USD LIBOR+       4.50     1.00     6.41     12/2/2024       4,139,625       4,125,152       4,118,927  

Lightstone Holdco LLC

  Energy: Electricity   Term Loan B     Loan       1M USD LIBOR+       3.75     1.00     5.45     1/30/2024       1,322,520       1,320,584       1,180,349  

Lightstone Holdco LLC

  Energy: Electricity   Term Loan C     Loan       1M USD LIBOR+       3.75     1.00     5.45     1/30/2024       74,592       74,488       66,574  

Lindblad Expeditions Inc.

  Hotel Gaming & Leisure   US 2018 Term Loan     Loan       1M USD LIBOR+       3.25     0.00     4.95     3/27/2025       395,000       394,203       395,000  

Lindblad Expeditions Inc.

  Hotel Gaming & Leisure   Cayman Term Loan     Loan       1M USD LIBOR+       3.25     0.00     4.95     3/27/2025       98,750       98,551       98,750  

Liquidnet Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.25     1.00     4.95     7/15/2024       2,514,896       2,508,683       2,414,300  

LPL Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B1     Loan       1M USD LIBOR+       1.75     0.00     3.45     11/11/2026       1,245,213       1,242,118       1,248,326  

Marriott Ownership Resorts Inc.

  Hotel Gaming & Leisure   Term Loan (11/19)     Loan       1M USD LIBOR+       1.75     0.00     3.45     8/29/2025       1,500,000       1,500,000       1,504,380  

McAfee LLC

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       3.75     0.00     5.45     9/30/2024       3,167,416       3,137,896       3,169,792  

McDermott International Inc. (a)

  Construction & Building   Term Loan B     Loan       3M USD LIBOR+       5.00     1.00     6.91     5/12/2025       1,970,000       1,937,573       969,614  

McGraw-Hill Global Education Holdings LLC

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     5.70     5/4/2022       959,313       957,149       873,455  

Meredith Corporation

  Media: Advertising Printing & Publishing   Term Loan B (10/18)     Loan       1M USD LIBOR+       2.75     0.00     4.45     1/31/2025       578,738       577,635       581,319  

Messer Industries GMBH

  Chemicals Plastics & Rubber   Term Loan B     Loan       3M USD LIBOR+       2.50     0.00     4.41     3/2/2026       2,985,000       2,978,001       2,990,224  

Michaels Stores Inc.

  Retail   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.20     1/30/2023       2,606,576       2,597,144       2,466,942  

Midwest Physician Administrative Services LLC

  Healthcare & Pharmaceuticals   Term Loan (2/18)     Loan       1M USD LIBOR+       2.75     0.75     4.45     8/15/2024       973,387       969,608       954,892  

Milk Specialties Company

  Beverage Food & Tobacco   Term Loan (2/17)     Loan       1M USD LIBOR+       4.00     1.00     5.70     8/16/2023       3,910,233       3,855,346       3,538,761  

MKS Instruments Inc.

  High Tech Industries   Term Loan B6     Loan       1M USD LIBOR+       1.75     0.00     3.45     2/2/2026       942,463       933,825       943,170  

MLN US HoldCo LLC

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.20     11/28/2025       992,500       990,427       873,757  

MMM Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       3M USD LIBOR+       5.75     1.00     7.66     10/30/2026       5,000,000       4,800,000       4,800,000  

MRC Global (US) Inc.

  Metals & Mining   Term Loan B2     Loan       1M USD LIBOR+       3.00     0.00     4.70     9/20/2024       491,250       490,261       491,250  

NAI Entertainment Holdings LLC

  Hotel Gaming & Leisure   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.20     5/8/2025       990,000       987,986       988,149  

Natgasoline LLC

  Chemicals Plastics & Rubber   Term Loan     Loan       6M USD LIBOR+       3.50     0.00     5.39     11/14/2025       496,250       494,090       498,729  

National Mentor Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       1M USD LIBOR+       4.25     0.00     5.95     3/9/2026       1,873,626       1,856,003       1,876,305  

National Mentor Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan C     Loan       1M USD LIBOR+       4.25     0.00     5.95     3/9/2026       116,959       115,877       117,126  

NeuStar Inc.

  Telecommunications   Term Loan B4 (03/18)     Loan       1M USD LIBOR+       3.50     1.00     5.20     8/8/2024       2,969,697       2,924,403       2,773,697  

NeuStar Inc.

  Telecommunications   Term Loan B-5     Loan       1M USD LIBOR+       4.50     0.00     6.20     8/8/2024       995,000       977,172       970,951  

Nexstar Broadcasting Inc.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       2.75     0.00     4.45     9/18/2026       250,000       248,791       250,868  

NMI Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       6M USD LIBOR+       4.75     1.00     6.64     5/23/2023       3,463,675       3,466,974       3,455,016  

NorthPole Newco S.a r.l

  Aerospace & Defense   Term Loan     Loan       3M USD LIBOR+       7.00     0.00     8.91     3/3/2025       4,875,000       4,412,060       4,192,500  

Novetta Solutions LLC

  Aerospace & Defense   Term Loan     Loan       1M USD LIBOR+       5.00     1.00     6.70     10/17/2022       1,924,870       1,915,505       1,885,776  

Novetta Solutions LLC

  Aerospace & Defense   Second Lien Term Loan     Loan       1M USD LIBOR+       8.50     1.00     10.20     10/16/2023       1,000,000       993,922       970,000  

NPC International Inc.

  Beverage Food & Tobacco   Term Loan     Loan       3M USD LIBOR+       3.50     1.00     5.41     4/19/2024       488,750       488,353       237,860  

Office Depot Inc.

  Retail   Term Loan B     Loan       1M USD LIBOR+       5.25     1.00     6.95     11/8/2022       2,569,738       2,557,649       2,580,454  

Owens & Minor Distribution Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.20     4/30/2025       493,750       485,553       441,413  

PCI Gaming Authority

  Hotel Gaming & Leisure   Term Loan     Loan       1M USD LIBOR+       3.00     0.00     4.70     5/29/2026       905,192       900,773       910,623  

Peraton Corp.

  Aerospace & Defense   Term Loan     Loan       1M USD LIBOR+       5.25     1.00     6.95     4/29/2024       2,453,724       2,443,268       2,441,456  

PerForce Software Inc.

  High Tech Industries   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.20     7/1/2026       1,000,000       995,093       995,000  

PGX Holdings Inc.

  Services: Consumer   Term Loan     Loan       1M USD LIBOR+       5.25     1.00     6.95     9/29/2020       3,592,080       3,579,772       2,694,060  

PI UK Holdco II Limited

  Services: Business   Term Loan B1 (PI UK Holdco II)     Loan       1M USD LIBOR+       3.25     1.00     4.95     1/3/2025       1,477,500       1,470,641       1,471,959  

Plastipak Packaging Inc

  Containers Packaging & Glass   Term Loan B (04/18)     Loan       1M USD LIBOR+       2.50     0.00     4.20     10/15/2024       980,000       976,117       969,592  

Polymer Process Holdings Inc

  Containers Packaging & Glass   Term Loan     Loan       1M USD LIBOR+       6.00     0.00     7.70     4/30/2026       2,992,500       2,935,987       2,932,650  

Presidio Inc.

  Services: Business   Term Loan B 2017     Loan       3M USD LIBOR+       2.75     1.00     4.66     2/2/2024       1,569,741       1,542,463       1,571,044  

Prime Security Services Borrower LLC

  Services: Consumer   Term Loan (Protection One/ADT)     Loan       1M USD LIBOR+       3.25     1.00     4.95     9/23/2026       3,000,000       2,982,458       2,966,250  

Priority Payment Systems Holdings LLC

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       5.00     1.00     6.70     1/3/2023       2,479,089       2,467,560       2,404,717  

Project Accelerate Parent LLC

  Services: Business   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     5.95     1/2/2025       1,970,000       1,962,058       1,950,300  

Prometric Holdings Inc.

  Services: Consumer   Term Loan     Loan       1M USD LIBOR+       3.00     1.00     4.70     1/29/2025       492,525       490,595       483,290  

Rackspace Hosting Inc.

  High Tech Industries   Term Loan B     Loan       3M USD LIBOR+       3.00     1.00     4.91     11/3/2023       1,479,848       1,470,969       1,386,529  

Radio Systems Corporation

  Consumer goods: Durable   Term Loan     Loan       1M USD LIBOR+       2.75     1.00     4.45     5/2/2024       1,466,250       1,466,250       1,440,591  

Radiology Partners Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       6M USD LIBOR+       4.75     0.00     6.64     7/9/2025       1,489,969       1,483,083       1,465,295  

Research Now Group Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       3M USD LIBOR+       5.50     1.00     7.41     12/20/2024       3,937,424       3,821,136       3,938,645  

Resolute Investment Managers Inc.

  Banking Finance Insurance & Real Estate   Term Loan (10/17)     Loan       3M USD LIBOR+       3.25     1.00     5.16     4/29/2022       2,687,765       2,689,306       2,681,045  

Revspring Inc.

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       4.00     0.00     5.70     10/10/2025       992,500       990,325       981,960  

Rexnord LLC

  Capital Equipment   Term Loan (11/19)     Loan       1M USD LIBOR+       1.75     0.00     3.45     8/21/2024       1,000,000       1,000,000       1,002,270  

RGIS Services LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       7.50     1.00     9.41     3/31/2023       482,554       477,506       404,540  

Robertshaw US Holding Corp.

  Consumer goods: Durable   Term Loan B     Loan       1M USD LIBOR+       3.25     1.00     4.95     2/28/2025       985,000       982,894       859,413  

Rocket Software Inc.

  High Tech Industries   Term Loan (11/18)     Loan       1M USD LIBOR+       4.25     0.00     5.95     11/28/2025       3,980,000       3,962,969       3,574,279  

Russell Investments US Institutional Holdco Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.25     1.00     4.95     6/1/2023       4,152,593       4,052,046       4,121,449  

Sahara Parent Inc.

  High Tech Industries   Term Loan B (11/18)     Loan       3M USD LIBOR+       4.50     0.00     6.41     8/16/2024       1,960,200       1,943,203       1,810,735  

Sally Holdings LLC

  Retail   Term Loan (Fixed)     Loan       FIXED       0.00     0.00     0.00     7/5/2024       1,000,000       996,615       973,330  

Sally Holdings LLC

  Retail   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     3.95     7/5/2024       770,909       767,961       763,200  

Savage Enterprises LLC

  Energy: Oil & Gas   Term Loan     Loan       1M USD LIBOR+       4.00     0.00     5.70     8/1/2025       3,340,506       3,300,827       3,371,539  

SCS Holdings I Inc.

  High Tech Industries   Term Loan     Loan       3M USD LIBOR+       4.25     0.00     6.16     7/1/2026       1,995,000       1,990,233       1,993,205  

Seadrill Operating LP

  Energy: Oil & Gas   Term Loan B     Loan       3M USD LIBOR+       6.00     1.00     7.91     2/21/2021       907,687       890,648       359,235  

SG Acquisition Inc.

  Banking Finance Insurance & Real Estate   Term Loan (Safe-Guard)     Loan       3M USD LIBOR+       5.00     1.00     6.91     3/29/2024       1,240,000       1,231,634       1,229,150  

Shutterfly Inc.

  Media: Advertising Printing & Publishing   Term Loan B     Loan       3M USD LIBOR+       6.00     1.00     7.91     9/25/2026       1,000,000       950,811       897,500  

Sirva Worldwide Inc.

  Transportation: Cargo   Term Loan B     Loan       3M USD LIBOR+       5.50     0.00     7.41     8/4/2025       2,453,125       2,425,682       2,361,133  

SMB Shipping Logistics LLC

  Transportation: Consumer   Term Loan B     Loan       6M USD LIBOR+       4.00     1.00     5.89     2/2/2024       1,952,882       1,950,993       1,916,265  

Sotheby’s

  Services: Business   Term Loan     Loan       1M USD LIBOR+       5.50     1.00     7.20     1/15/2027       2,333,922       2,287,763       2,269,739  

SP PF Buyer LLC

  Consumer goods: Durable   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.20     12/19/2025       1,990,000       1,914,191       1,795,975  

SRAM LLC

  Consumer goods: Durable   Term Loan     Loan       Prime+       0.00     0.00     4.75     3/15/2024       1,906,088       1,897,901       1,908,471  

SS&C European Holdings S.A.R.L.

  Services: Business   Term Loan B4     Loan       1M USD LIBOR+       2.25     0.00     3.95     4/16/2025       209,924       209,504       210,973  

SS&C Technologies Inc.

  Services: Business   Term Loan B-5     Loan       1M USD LIBOR+       2.25     0.00     3.95     4/16/2025       494,942       493,874       497,357  

SS&C Technologies Inc.

  Services: Business   Term Loan B3     Loan       1M USD LIBOR+       2.25     0.00     3.95     4/16/2025       322,486       321,831       324,098  

SSH Group Holdings Inc.

  Consumer goods: Non-durable   Term Loan     Loan       1M USD LIBOR+       4.25     0.00     5.95     7/30/2025       2,377,990       2,371,257       2,356,445  

Staples Inc.

  Wholesale   Term Loan (03/19)     Loan       1M USD LIBOR+       5.00     0.00     6.70     4/16/2026       1,965,125       1,965,125       1,939,539  

Stats Intermediate Holdings LLC

  Hotel Gaming & Leisure   Term Loan     Loan       6M USD LIBOR+       5.25     0.00     7.14     7/10/2026       2,000,000       1,951,779       1,930,000  

Steak N Shake Operations Inc.

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       3.75     1.00     5.45     3/19/2021       827,491       825,563       513,044  

Sybil Software LLC

  High Tech Industries   Term Loan B (4/18)     Loan       3M USD LIBOR+       2.25     1.00     4.16     9/29/2023       268,005       267,025       269,436  

Teneo Holdings LLC

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       5.25     1.00     6.95     7/11/2025       2,500,000       2,404,169       2,325,000  

Tenneco Inc

  Capital Equipment   Term Loan B     Loan       1M USD LIBOR+       3.00     0.00     4.70     10/1/2025       1,488,750       1,475,947       1,421,756  

Ten-X LLC

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     5.70     9/30/2024       1,965,000       1,963,156       1,910,963  

Terex Corporation

  Capital Equipment   Term Loan     Loan       1M USD LIBOR+       2.75     0.75     4.45     1/31/2024       995,000       990,682       998,313  

TGG TS Acquisition Company

  Media: Diversified & Production   Term Loan (12/18)     Loan       1M USD LIBOR+       6.50     0.00     8.20     12/15/2025       2,795,833       2,662,912       2,718,948  

The Edelman Financial Center LLC

  Banking Finance Insurance & Real Estate   Term Loan B (06/18)     Loan       1M USD LIBOR+       3.25     0.00     4.95     7/21/2025       1,240,625       1,235,435       1,234,943  

The Knot Worldwide Inc

  Services: Consumer   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.20     12/19/2025       3,970,000       3,962,681       3,970,000  

Thor Industries Inc.

  Automotive   Term Loan (USD)     Loan       1M USD LIBOR+       3.75     0.00     5.45     2/2/2026       2,051,617       2,028,211       2,038,795  

Tivity Health Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       5.25     0.00     6.95     3/6/2026       2,368,224       2,313,025       2,368,224  

Tivity Health Inc.

  Healthcare & Pharmaceuticals   Term Loan A     Loan       1M USD LIBOR+       4.25     0.00     5.95     3/8/2024       1,650,000       1,635,115       1,650,000  

Transdigm Inc.

  Aerospace & Defense   Term Loan G     Loan       1M USD LIBOR+       2.50     0.00     4.20     8/22/2024       4,116,768       4,122,116       4,111,622  

Travel Leaders Group LLC

  Hotel Gaming & Leisure   Term Loan B (08/18)     Loan       1M USD LIBOR+       4.00     0.00     5.70     1/25/2024       2,468,750       2,464,770       2,468,750  

TRC Companies Inc.

  Services: Business   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.20     6/21/2024       3,385,455       3,374,819       3,351,597  

Trico Group LLC

  Containers Packaging & Glass   Incremental Term Loan     Loan       3M USD LIBOR+       7.00     1.00     8.91     2/2/2024       4,820,156       4,699,418       4,687,602  

Truck Hero Inc.

  Transportation: Cargo   First Lien Term Loan     Loan       1M USD LIBOR+       3.75     1.00     5.45     4/22/2024       2,934,950       2,917,636       2,744,178  

Trugreen Limited Partnership

  Services: Consumer   Term Loan (03/19)     Loan       1M USD LIBOR+       3.75     1.00     5.45     3/19/2026       983,868       974,782       985,718  

Twin River Worldwide Holdings Inc.

  Hotel Gaming & Leisure   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     4.45     5/11/2026       997,500       992,721       994,118  

United Natural Foods Inc.

  Beverage Food & Tobacco   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     5.95     10/22/2025       3,473,750       3,271,977       2,856,083  

Univar Solutions Inc.

  Chemicals Plastics & Rubber   Term Loan B3 (11/17)     Loan       1M USD LIBOR+       2.25     0.00     3.95     7/1/2024       1,851,592       1,844,716       1,855,555  

Univar Solutions Inc.

  Chemicals Plastics & Rubber   Term Loan B-4     Loan       1M USD LIBOR+       2.50     0.00     4.20     7/1/2024       1,633,588       1,626,187       1,637,165  

Univision Communications Inc.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       2.75     1.00     4.45     3/15/2024       2,746,369       2,734,782       2,686,416  

UOS LLC

  Capital Equipment   Term Loan B     Loan       1M USD LIBOR+       5.50     1.00     7.20     4/18/2023       586,745       588,733       587,478  

URS Holdco Inc.

  Transportation: Cargo   Term Loan (10/17)     Loan       1M USD LIBOR+       5.75     1.00     7.45     8/30/2024       992,084       981,249       873,034  

US Ecology Inc.

  Environmental Industries   Term Loan B     Loan       1M USD LIBOR+       2.50     0.00     4.20     11/2/2026       500,000       498,764       503,122  

VeriFone Systems Inc.

  Banking Finance Insurance & Real Estate   Term Loan (7/18)     Loan       3M USD LIBOR+       4.00     0.00     5.91     8/20/2025       5,445,000       5,416,181       5,248,490  

Verra Mobility Corp.

  Construction & Building   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     5.45     3/3/2025       492,500       490,479       494,140  

VFH Parent LLC

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       3M USD LIBOR+       3.50     0.00     5.41     3/2/2026       3,801,266       3,786,831       3,794,462  

Victory Capital Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       3M USD LIBOR+       3.25     0.00     5.16     7/1/2026       441,818       437,667       443,661  

Virtus Investment Partners Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       2.25     0.75     3.95     6/3/2024       3,228,782       3,228,228       3,232,011  

Vistra Operations Company LLC

  Utilities: Electric   2018 Incremental Term Loan     Loan       1M USD LIBOR+       1.75     0.00     3.45     12/31/2025       927,500       926,548       930,106  

Vizient Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     4.45     5/6/2026       497,500       496,430       497,654  

Weight Watchers International Inc.

  Services: Consumer   Term Loan B     Loan       3M USD LIBOR+       4.75     0.75     6.66     11/29/2024       1,695,130       1,668,786       1,694,198  

West Corporation

  Telecommunications   Term Loan B     Loan       3M USD LIBOR+       3.50     1.00     5.41     10/10/2024       2,968,687       2,893,356       2,367,528  

West Corporation

  Telecommunications   Term Loan B (Olympus Merger)     Loan       3M USD LIBOR+       4.00     1.00     5.91     10/10/2024       1,240,530       1,163,729       1,003,279  

Western Dental Services Inc.

  Retail   Term Loan (12/18)     Loan       1M USD LIBOR+       5.25     1.00     6.95     6/30/2023       2,444,975       2,429,817       2,429,694  

Western Digital Corporation

  High Tech Industries   Term Loan B-4     Loan       1M USD LIBOR+       1.75     0.00     3.45     4/29/2023       1,156,468       1,131,977       1,153,577  

Winter Park Intermediate Inc.

  Automotive   Term Loan     Loan       1M USD LIBOR+       4.75     0.00     6.45     4/4/2025       1,989,969       1,971,188       1,951,821  

Wirepath LLC

  Consumer goods: Non-durable   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     5.91     8/5/2024       2,962,600       2,938,057       2,547,836  

WP CityMD Bidco LLC

  Services: Consumer   Term Loan B     Loan      
1W USD
LIBOR+
 
 
    4.50     1.00     6.20     8/13/2026       3,500,000       3,466,389       3,470,460  

YS Garments LLC

  Retail   Term Loan     Loan      
1W USD
LIBOR+
 
 
    6.00     1.00     7.53     8/9/2024       1,950,000       1,933,390       1,925,625  

Zep Inc.

  Chemicals Plastics & Rubber   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     5.91     8/12/2024       2,450,000       2,440,818       1,886,500  

Zest Acquisition Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan       2M USD LIBOR+       3.50     0.00     5.32     3/14/2025       985,000       981,055       920,975  
                   

 

 

   

 

 

 
                    $ 508,363,669     $ 485,195,221  
                   

 

 

   

 

 

 
                                                Number
of Shares
    Cost     Fair Value  

Cash and cash equivalents

                     

U.S. Bank Money Market (b)

                    18,983,511     $ 18,983,511     $ 18,983,511  
                 

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

                    18,983,511     $ 18,983,511     $ 18,983,511  
                 

 

 

   

 

 

   

 

 

 

(a)    Security is in default as of November 30, 2019.

(b)    Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of November 30, 2019.

LIBOR—London Interbank Offered Rate

1W USD LIBOR—The 1 week USD LIBOR rate as of November 30, 2019 was 1.53%.

1M USD LIBOR—The 1 month USD LIBOR rate as of November 30, 2019 was 1.70%.

2M USD LIBOR—The 2 month USD LIBOR rate as of November 30, 2019 was 1.82%.

3M USD LIBOR—The 3 month USD LIBOR rate as of November 30, 2019 was 1.91%.

6M USD LIBOR—The 6 month USD LIBOR rate as of November 30, 2019 was 1.89%.

Prime—The Prime Rate as of November 30, 2019 was 4.75%.

 

24


Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Schedule of Investments

February 28, 2019

 

Issuer Name

 

Industry

 

Asset Name

  Asset
Type
    Reference Rate/Spread     LIBOR
Floor
    Current
Rate
(All In)
    Maturity
Date
    Principal/
Number of
Shares
    Cost     Fair Value  

Education Management II LLC

  Services: Consumer   A-1 Preferred Shares     Equity                 6,692     $ 669,214     $ 13,384  

Education Management II LLC

  Services: Consumer   A-2 Preferred Shares     Equity                 18,975       1,897,538       1,670  

New Millennium Holdco, Inc.

  Healthcare & Pharmaceuticals   Common Stock     Equity                 14,813       964,466       637  

24 Hour Fitness Worldwide Inc.

  Services: Consumer   Term Loan (5/18)     Loan       1M USD LIBOR+       3.50     0.00     5.99     5/30/2025     $ 2,990,000       2,978,426       2,987,518  

ABB Con-Cise Optical Group LLC

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       5.00     1.00     7.49     6/15/2023       2,103,445       2,080,167       2,037,712  

Achilles Acquisition LLC

  Banking Finance Insurance & Real Estate   Term Loan (09/18)     Loan       1M USD LIBOR+       4.00     0.00     6.49     10/13/2025       6,000,000       5,985,885       5,962,500  

Acosta Inc.

  Media: Advertising Printing & Publishing   Term Loan B (1st Lien)     Loan       1M USD LIBOR+       3.25     1.00     5.74     9/27/2021       1,915,375       1,909,171       957,687  

ADMI Corp.

  Services: Consumer   Term Loan B     Loan       1M USD LIBOR+       3.00     0.00     5.49     4/30/2025       1,990,000       1,981,204       1,968,607  

Advantage Sales & Marketing Inc.

  Services: Business   First Lien Term Loan     Loan       1M USD LIBOR+       3.25     1.00     5.74     7/23/2021       2,396,156       2,394,791       2,098,889  

Advantage Sales & Marketing Inc.

  Services: Business   Term Loan B Incremental     Loan       1M USD LIBOR+       3.25     1.00     5.74     7/23/2021       494,975       487,610       431,247  

Aegis Toxicology Sciences Corporation

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       5.50     1.00     8.11     5/9/2025       3,990,000       3,954,925       3,850,350  

Agiliti Health Inc.

  Healthcare & Pharmaceuticals   Delayed Draw Term Loan     Loan       1M USD LIBOR+       3.00     0.00     5.49     1/5/2026       500,000       500,000       499,375  

Agrofresh Inc.

  Beverage Food & Tobacco   Term Loan     Loan       3M USD LIBOR+       4.75     1.00     7.36     7/30/2021       2,919,744       2,915,422       2,883,247  

AI Mistral (Luxembourg) Subco Sarl

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       3.00     1.00     5.49     3/11/2024       491,250       491,250       455,020  

AIS Holdco LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       5.00     0.00     7.61     8/15/2025       2,484,375       2,472,344       2,422,266  

Akorn Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       5.50     1.00     7.99     4/16/2021       398,056       397,485       316,455  

Albertson’s LLC

  Retail   Term Loan B7     Loan       1M USD LIBOR+       3.00     0.75     5.49     11/17/2025       4,151,511       4,140,731       4,124,733  

Alchemy US Holdco 1 LLC

  Metals & Mining   Term Loan     Loan       6M USD LIBOR+       5.50     0.00     8.19     10/10/2025       2,000,000       1,971,432       1,990,000  

Alera Group Intermediate Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.99     8/1/2025       498,750       497,585       499,997  

Alion Science and Technology Corporation

  Aerospace & Defense   Term Loan B (1st Lien)     Loan       1M USD LIBOR+       4.50     1.00     6.99     8/19/2021       3,626,521       3,620,261       3,614,445  

Allen Media LLC

  Media: Diversified & Production   Term Loan B     Loan       3M USD LIBOR+       6.50     1.00     7.50     8/30/2023       3,000,000       2,931,901       2,872,500  

Altisource S.a r.l.

  Banking Finance Insurance & Real Estate   Term Loan B (03/18)     Loan       3M USD LIBOR+       4.00     1.00     6.61     4/3/2024       1,677,030       1,666,628       1,639,296  

Altra Industrial Motion Corp.

  Capital Equipment   Term Loan     Loan       1M USD LIBOR+       2.00     0.00     4.49     10/1/2025       1,955,223       1,950,844       1,930,783  

American Greetings Corporation

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.50     1.00     6.99     4/5/2024       4,982,450       4,979,868       4,929,536  

American Residential Services LLC

  Services: Consumer   Term Loan B     Loan       1M USD LIBOR+       4.00     1.00     6.49     6/30/2022       3,966,883       3,954,749       3,907,380  

Amynta Agency Borrower Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       4.00     0.00     6.49     2/28/2025       3,497,500       3,455,778       3,410,063  

Anastasia Parent LLC

  Consumer goods: Non-durable   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     6.24     8/11/2025       997,500       992,909       944,732  

Anchor Glass Container Corporation

  Containers Packaging & Glass   Term Loan (07/17)     Loan       1M USD LIBOR+       2.75     1.00     5.24     12/7/2023       490,038       488,206       392,520  

AqGen Ascensus Inc.

  Services: Consumer   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.99     12/5/2022       408,906       408,242       405,839  

Aramark Services Inc.

  Services: Consumer   Term Loan B-2     Loan       1M USD LIBOR+       1.75     0.00     4.24     3/28/2024       1,294,904       1,294,904       1,287,212  

Arctic Glacier U.S.A. Inc.

  Beverage Food & Tobacco   Term Loan (3/18)     Loan       1M USD LIBOR+       3.50     1.00     5.99     3/20/2024       3,350,967       3,329,140       3,283,948  

Aretec Group Inc.

  Banking Finance Insurance & Real Estate   Term Loan (10/18)     Loan       1M USD LIBOR+       4.25     0.00     6.74     10/1/2025       2,000,000       1,995,758       1,975,000  

ASG Technologies Group Inc.

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.99     7/31/2024       493,763       491,798       485,739  

AssetMark Financial Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       3M USD LIBOR+       3.50     0.00     6.11     11/14/2025       2,500,000       2,496,120       2,490,625  

Astoria Energy LLC

  Energy: Electricity   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     6.49     12/24/2021       1,406,149       1,397,673       1,407,612  

Asurion LLC

  Banking Finance Insurance & Real Estate   Term Loan B-4 (Replacement)     Loan       1M USD LIBOR+       3.00     0.00     5.49     8/4/2022       2,084,268       2,077,055       2,082,788  

Asurion LLC

  Banking Finance Insurance & Real Estate   Term Loan B6     Loan       1M USD LIBOR+       3.00     0.00     5.49     11/3/2023       497,955       494,277       497,512  

Athenahealth Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       3M USD LIBOR+       4.50     0.00     7.11     2/11/2026       2,000,000       1,960,211       1,988,760  

Avaya Inc.

  Telecommunications   Term Loan B     Loan       2M USD LIBOR+       4.25     0.00     6.82     12/16/2024       1,990,000       1,974,743       1,987,015  

Avolon TLB Borrower 1 US LLC

  Capital Equipment   Term Loan B3     Loan       1M USD LIBOR+       2.00     0.75     4.49     1/15/2025       913,731       909,648       912,763  

Ball Metalpack Finco LLC

  Containers Packaging & Glass   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.99     7/31/2025       3,984,987       3,966,751       3,970,044  

Bausch Health Companies Inc.

  Healthcare & Pharmaceuticals   Term Loan B (05/18)     Loan       1M USD LIBOR+       3.00     0.00     5.49     6/2/2025       1,752,582       1,745,304       1,752,144  

Bausch Health Companies Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       1M USD LIBOR+       2.75     0.00     5.24     11/27/2025       481,250       476,571       479,310  

Blackboard Inc.

  High Tech Industries   Term Loan B4     Loan       3M USD LIBOR+       5.00     1.00     7.61     6/30/2021       2,932,500       2,919,562       2,818,866  

Blount International Inc.

  Forest Products & Paper   Term Loan B (09/18)     Loan       1M USD LIBOR+       3.75     1.00     6.24     4/12/2023       3,488,756       3,485,266       3,484,395  

Blucora Inc.

  High Tech Industries   Term Loan (11/17)     Loan       1M USD LIBOR+       3.00     1.00     5.49     5/22/2024       706,667       703,725       704,900  

Boxer Parent Company Inc.

  Services: Business   Term Loan     Loan       3M USD LIBOR+       4.25     0.00     6.86     10/2/2025       2,500,000       2,476,591       2,484,150  

Bracket Intermediate Holding Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       4.25     0.00     6.86     9/5/2025       997,500       992,812       985,031  

Broadstreet Partners Inc.

  Banking Finance Insurance & Real Estate   Term Loan B2     Loan       1M USD LIBOR+       3.25     1.00     5.74     11/8/2023       1,035,177       1,032,997       1,032,589  

Brookfield WEC Holdings Inc.

  Energy: Electricity   Term Loan     Loan       1M USD LIBOR+       3.75     0.75     6.24     8/1/2025       2,000,000       1,990,924       2,001,880  

Cable & Wireless Communications Limited

  Telecommunications   Term Loan B4     Loan       1M USD LIBOR+       3.25     0.00     5.74     1/30/2026       2,500,000       2,497,271       2,488,200  

Cable One Inc.

  Media: Broadcasting & Subscription   Term Loan B     Loan       1M USD LIBOR+       1.75     0.00     4.24     5/1/2024       492,500       492,049       490,348  

Calceus Acquisition Inc.

  Consumer goods: Non-durable   Term Loan B     Loan       1M USD LIBOR+       5.50     0.00     7.99     2/12/2025       1,000,000       987,601       995,420  

Callaway Golf Company

  Retail   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.99     1/2/2026       750,000       735,504       753,127  

Canyon Valor Companies Inc.

  Media: Advertising Printing & Publishing   Term Loan B     Loan       3M USD LIBOR+       2.75     0.00     5.36     6/16/2023       939,191       936,843       929,019  

Capital Automotive L.P.

  Banking Finance Insurance & Real Estate   First Lien Term Loan     Loan       1M USD LIBOR+       2.50     1.00     4.99     3/25/2024       478,053       476,166       470,284  

CareerBuilder LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       6.75     1.00     9.36     7/31/2023       2,266,211       2,224,216       2,257,713  

Casa Systems Inc.

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     6.49     12/20/2023       1,470,000       1,459,340       1,451,625  

CCS-CMGC Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       1M USD LIBOR+       5.50     0.00     7.99     10/1/2025       2,500,000       2,476,183       2,393,750  

Cengage Learning Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     6.74     6/7/2023       1,462,458       1,450,545       1,343,999  

CenturyLink Inc.

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     5.24     1/31/2025       3,970,000       3,946,810       3,904,813  

CEOC LLC

  Hotel Gaming & Leisure   Term Loan     Loan       1M USD LIBOR+       2.00     0.00     4.49     10/4/2024       990,000       990,000       980,734  

Charter Communications Operating LLC.

  Media: Broadcasting & Subscription   Term Loan (12/17)     Loan       1M USD LIBOR+       2.00     0.00     4.49     4/30/2025       1,584,000       1,582,488       1,578,773  

Compass Power Generation L.L.C.

  Utilities: Electric   Term Loan B (08/18)     Loan       1M USD LIBOR+       3.50     1.00     5.99     12/20/2024       1,953,052       1,948,283       1,948,775  

Compuware Corporation

  High Tech Industries   Term Loan (08/18)     Loan       1M USD LIBOR+       3.50     0.00     5.99     8/22/2025       500,000       498,788       501,250  

Concordia International Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan       1M USD LIBOR+       5.50     1.00     7.99     9/6/2024       1,207,930       1,145,627       1,145,190  

Consolidated Aerospace Manufacturing LLC

  Aerospace & Defense   Term Loan (1st Lien)     Loan       1M USD LIBOR+       3.75     1.00     6.24     8/11/2022       2,418,750       2,412,445       2,409,680  

Consolidated Communications Inc.

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       3.00     1.00     5.49     10/5/2023       1,490,574       1,477,850       1,451,133  

Covia Holdings Corporation

  Metals & Mining   Term Loan     Loan       3M USD LIBOR+       3.75     1.00     6.36     6/2/2025       995,000       995,000       844,685  

CPI Acquisition Inc

  Banking Finance Insurance & Real Estate   Term Loan B (1st Lien)     Loan       6M USD LIBOR+       4.50     1.00     7.19     8/17/2022       1,436,782       1,424,775       894,396  

Crown Subsea Communications Holding Inc

  Construction & Building   Term Loan     Loan       1M USD LIBOR+       6.00     0.00     8.49     11/3/2025       4,000,000       3,957,810       3,975,000  

CSC Holdings LLC

  Media: Broadcasting & Subscription   Term Loan B (03/17)     Loan       1M USD LIBOR+       2.25     0.00     4.74     7/17/2025       1,994,924       1,970,647       1,967,853  

CSC Holdings LLC

  Media: Broadcasting & Subscription   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     4.74     1/15/2026       500,000       498,804       493,250  

CT Technologies Intermediate Hldgs Inc

  Healthcare & Pharmaceuticals   New Term Loan     Loan       1M USD LIBOR+       4.25     1.00     6.74     12/1/2021       1,440,263       1,433,574       1,229,984  

Cumulus Media New Holdings Inc.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       4.50     1.00     6.99     5/13/2022       335,864       333,061       329,006  

Daseke Companies Inc.

  Transportation: Cargo   Replacement Term Loan     Loan       1M USD LIBOR+       5.00     1.00     7.49     2/27/2024       1,975,651       1,965,011       1,965,772  

Dealer Tire LLC

  Automotive   Term Loan B     Loan       1M USD LIBOR+       5.50     0.00     7.99     12/12/2025       3,000,000       2,892,107       3,000,000  

Delek US Holdings Inc.

  Utilities: Oil & Gas   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     4.74     3/31/2025       2,992,462       2,956,032       2,952,572  

Dell International L.L.C.

  High Tech Industries   Term Loan B     Loan       1M USD LIBOR+       2.00     0.75     4.49     9/7/2023       3,974,937       3,922,161       3,960,031  

Delta 2 (Lux) SARL

  Hotel Gaming & Leisure   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.99     2/1/2024       1,318,289       1,315,251       1,289,036  

DHX Media Ltd.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       3.75     1.00     6.24     12/29/2023       332,042       330,546       320,005  

Digital Room Holdings Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       5.00     1.00     7.49     12/29/2023       3,101,339       3,074,510       3,070,325  

Dole Food Company Inc.

  Beverage Food & Tobacco   Term Loan B     Loan       Prime+       2.75     1.00     3.75     4/8/2024       481,250       479,436       473,733  

Drew Marine Group Inc.

  Transportation: Consumer   First Lien Term Loan     Loan       1M USD LIBOR+       3.25     1.00     5.74     11/19/2020       2,841,040       2,828,735       2,819,732  

DTZ U.S. Borrower LLC

  Construction & Building   Term Loan B     Loan       1M USD LIBOR+       3.25     0.00     5.74     8/21/2025       5,985,000       5,957,110       5,936,402  

Dynatrace LLC

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       3.25     0.00     5.74     8/22/2025       1,000,000       1,000,000       994,580  

Eagletree-Carbide Acquisition Corp.

  High Tech Industries   Term Loan     Loan       3M USD LIBOR+       4.25     1.00     6.86     8/28/2024       3,967,480       3,948,716       3,927,805  

Education Management II LLC (a)

  Services: Consumer   Term Loan A     Loan       Prime+       5.50     1.00     6.50     7/2/2020       423,861       419,105       8,477  

Education Management II LLC (a)

  Services: Consumer   Term Loan B     Loan       Prime+       8.50     1.00     9.50     7/2/2020       954,307       945,813       840  

EIG Investors Corp.

  High Tech Industries   Term Loan (06/18)     Loan       3M USD LIBOR+       3.75     1.00     6.36     2/9/2023       2,410,685       2,394,658       2,397,282  

Emerald 2 Ltd. (Eagle US / Emerald Newco / ERM Canada / ERM US)

  Environmental Industries   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     6.61     5/14/2021       988,553       985,300       978,745  

Emerald Performance Materials LLC

  Chemicals Plastics & Rubber   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.99     7/30/2021       475,777       474,869       469,682  

Endo Luxembourg Finance Company I S.a.r.l.

  Healthcare & Pharmaceuticals   Term Loan B (4/17)     Loan       1M USD LIBOR+       4.25     0.75     6.74     4/29/2024       3,977,405       3,952,044       3,978,240  

Energy Acquisition LP

  Capital Equipment   Term Loan (6/18)     Loan       3M USD LIBOR+       4.25     0.00     6.86     6/26/2025       1,990,000       1,971,730       1,910,400  

Envision Healthcare Corporation

  Healthcare & Pharmaceuticals   Term Loan B (06/18)     Loan       1M USD LIBOR+       3.75     0.00     6.24     10/10/2025       5,000,000       4,988,764       4,807,800  

Evergreen AcqCo 1 LP

  Retail   Term Loan C     Loan       3M USD LIBOR+       3.75     1.25     6.36     7/9/2019       935,156       934,453       883,723  

EWT Holdings III Corp.

  Capital Equipment   Term Loan     Loan       1M USD LIBOR+       3.00     1.00     5.49     12/20/2024       2,809,641       2,798,064       2,806,129  

Extreme Reach Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       6.25     1.00     8.74     2/7/2020       5,492,555       5,432,541       5,351,836  

Fastener Acquisition Inc.

  Construction & Building   Term Loan B     Loan       3M USD LIBOR+       4.25     1.00     6.86     3/28/2025       496,250       493,979       486,325  

FinCo I LLC

  Banking Finance Insurance & Real Estate   2018 Term Loan B     Loan       1M USD LIBOR+       2.00     0.00     4.49     12/27/2022       415,611       414,701       412,236  

First Eagle Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B (10/18)     Loan       3M USD LIBOR+       2.75     0.00     5.36     12/2/2024       5,000,000       4,973,959       4,987,500  

Fitness International LLC

  Services: Consumer   Term Loan B (4/18)     Loan       1M USD LIBOR+       3.25     0.00     5.74     4/18/2025       2,776,214       2,759,824       2,755,392  

Franklin Square Holdings L.P.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       2M USD LIBOR+       2.50     0.00     5.07     8/1/2025       4,488,750       4,457,527       4,474,745  

Fusion Connect Inc.

  Telecommunications   Term Loan B     Loan       3M USD LIBOR+       7.50     1.00     10.11     5/4/2023       1,925,000       1,857,064       1,732,500  

GBT Group Services B.V.

  Hotel Gaming & Leisure   Term Loan     Loan       3M USD LIBOR+       2.50     0.00     5.11     8/13/2025       4,488,750       4,487,571       4,466,306  

GC EOS Buyer Inc.

  Automotive   Term Loan B (06/18)     Loan       1M USD LIBOR+       4.50     0.00     6.99     8/1/2025       2,992,500       2,964,056       2,955,094  

General Nutrition Centers Inc.

  Retail   FILO Term Loan     Loan       1M USD LIBOR+       7.00     0.00     9.49     1/3/2023       585,849       585,849       593,172  

General Nutrition Centers Inc.

  Retail   Term Loan B2     Loan       Prime+       9.16     0.75     9.91     3/4/2021       1,035,789       1,035,789       1,008,341  

GI Chill Acquisition LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       4.00     0.00     6.61     8/6/2025       2,493,750       2,482,280       2,487,516  

GI Revelation Acquisition LLC

  Services: Business   Term Loan     Loan       1M USD LIBOR+       5.00     0.00     7.49     4/16/2025       1,244,373       1,238,702       1,231,930  

Gigamon Inc.

  Services: Business   Term Loan B     Loan       3M USD LIBOR+       4.25     1.00     6.86     12/27/2024       1,980,000       1,962,889       1,952,775  

Global Tel*Link Corporation

  Telecommunications   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     6.74     11/28/2025       3,070,455       3,070,455       3,070,455  

Go Wireless Inc.

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       6.50     1.00     8.99     12/22/2024       3,380,519       3,331,962       3,250,944  

GoodRX Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       3.00     0.00     5.49     10/10/2025       3,000,000       2,992,953       2,976,570  

Goodyear Tire & Rubber Company The

  Chemicals Plastics & Rubber   Second Lien Term Loan     Loan       1M USD LIBOR+       2.00     0.00     4.49     3/7/2025       2,000,000       2,000,000       1,956,660  

Grosvenor Capital Management Holdings LLLP

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       2.75     1.00     5.24     3/28/2025       920,941       916,777       916,337  

Guidehouse LLP

  Aerospace & Defense   Term Loan     Loan    

 

1M USD LIBOR+

 

    3.00     0.00     5.49     5/1/2025       1,990,000       1,985,566       1,965,125  

Hargray Communications Group Inc.

  Media: Broadcasting & Subscription   Term Loan B     Loan       1M USD LIBOR+       3.00     1.00     5.49     5/16/2024       985,000       983,012       973,308  

Harland Clarke Holdings Corp.

  Media: Advertising Printing & Publishing   Term Loan     Loan       3M USD LIBOR+       4.75     1.00     7.36     11/3/2023       1,833,245       1,824,008       1,741,583  

HD Supply Waterworks Ltd.

  Construction & Building   Term Loan     Loan       6M USD LIBOR+       3.00     1.00     5.69     8/1/2024       493,750       492,687       489,430  

Helix Gen Funding LLC

  Energy: Electricity   Term Loan B (02/17)     Loan       1M USD LIBOR+       3.75     1.00     6.24     6/3/2024       264,030       263,460       256,204  

HLF Financing SaRL LLC

  Consumer goods: Non-durable   Term Loan B (08/18)     Loan       1M USD LIBOR+       3.25     0.00     5.74     8/18/2025       3,990,000       3,973,021       3,990,000  

Hoffmaster Group Inc.

  Forest Products & Paper   Term Loan B1     Loan       1M USD LIBOR+       4.00     1.00     6.49     11/21/2023       1,074,390       1,077,199       1,070,361  

Holley Purchaser Inc.

  Automotive   Term Loan B     Loan       3M USD LIBOR+       5.00     0.00     7.61     10/24/2025       2,500,000       2,475,886       2,450,000  

Hostess Brands LLC

  Beverage Food & Tobacco   Cov-Lite Term Loan B     Loan       3M USD LIBOR+       2.25     0.75     4.86     8/3/2022       1,467,734       1,464,418       1,448,169  

Hudson River Trading LLC

  Banking Finance Insurance & Real Estate   Term Loan B (10/18)     Loan       1M USD LIBOR+       3.50     0.00     5.99     4/3/2025       3,980,025       3,958,223       3,960,125  

Hyland Software Inc.

  High Tech Industries   Term Loan 3     Loan       1M USD LIBOR+       3.50     0.75     5.99     7/1/2024       1,586,222       1,584,204       1,588,205  

Hyperion Refinance S.a.r.l.

  Banking Finance Insurance & Real Estate   Tem Loan (12/17)     Loan       1M USD LIBOR+       3.50     1.00     5.99     12/20/2024       2,229,370       2,219,751       2,225,647  

Idera Inc.

  High Tech Industries   Term Loan B     Loan       1M USD LIBOR+       4.50     1.00     6.99     6/28/2024       1,964,786       1,947,430       1,962,330  

IG Investments Holdings LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       3.50     1.00     6.11     5/23/2025       3,398,256       3,380,175       3,382,115  

Inmar Inc.

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       3.50     1.00     5.99     5/1/2024       3,492,500       3,398,589       3,389,471  

Isagenix International LLC

  Beverage Food & Tobacco   Term Loan     Loan       3M USD LIBOR+       5.75     1.00     8.36     6/16/2025       2,950,000       2,895,451       2,787,750  

Jill Holdings LLC

  Retail   Term Loan (1st Lien)     Loan       3M USD LIBOR+       5.00     1.00     7.61     5/9/2022       1,859,387       1,854,837       1,830,343  

JP Intermediate B LLC

  Consumer goods: Non-durable   Term Loan     Loan       3M USD LIBOR+       5.50     1.00     8.11     11/20/2025       4,937,500       4,883,059       4,702,969  

Kinetic Concepts Inc.

  Healthcare & Pharmaceuticals   1/17 USD Term Loan     Loan       3M USD LIBOR+       3.25     1.00     5.86     2/2/2024       2,364,000       2,355,394       2,357,499  

KUEHG Corp.

  Services: Consumer   Term Loan B-3     Loan       3M USD LIBOR+       3.75     1.00     6.36     2/21/2025       497,500       496,313       493,023  

Lakeland Tours LLC

  Hotel Gaming & Leisure   Term Loan B     Loan       3M USD LIBOR+       4.00     1.00     6.61     12/16/2024       2,482,494       2,474,016       2,458,836  

Lannett Company Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       5.38     1.00     7.87     11/25/2022       2,546,382       2,513,728       2,338,419  

Learfield Communications LLC

  Media: Advertising Printing & Publishing   Initial Term Loan (A-L Parent)     Loan       1M USD LIBOR+       3.25     1.00     5.74     12/1/2023       490,000       488,374       488,775  

Lighthouse Network LLC

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       3M USD LIBOR+       4.50     1.00     7.11     12/2/2024       3,415,500       3,402,695       3,402,692  

Lightstone Holdco LLC

  Energy: Electricity   Term Loan B     Loan       1M USD LIBOR+       3.75     1.00     6.24     1/30/2024       1,353,009       1,350,840       1,320,199  

Lightstone Holdco LLC

  Energy: Electricity   Term Loan C     Loan       1M USD LIBOR+       3.75     1.00     6.24     1/30/2024       74,592       74,478       72,783  

Lindblad Expeditions Inc.

  Hotel Gaming & Leisure   US 2018 Term Loan     Loan       1M USD LIBOR+       3.50     0.00     5.99     3/27/2025       398,000       397,117       397,005  

Lindblad Expeditions Inc.

  Hotel Gaming & Leisure   Cayman Term Loan     Loan       1M USD LIBOR+       3.50     0.00     5.99     3/27/2025       99,500       99,279       99,251  

Liquidnet Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.25     1.00     5.74     7/15/2024       3,154,276       3,144,386       3,150,333  

LPL Holdings Inc.

  Banking Finance Insurance & Real Estate   Incremental Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     4.74     9/23/2024       1,723,805       1,720,511       1,708,721  

McAfee LLC

  Services: Business   Term Loan B     Loan       1M USD LIBOR+       3.75     0.00     6.24     9/30/2024       2,690,156       2,661,137       2,694,810  

McDermott International Inc.

  Construction & Building   Term Loan B     Loan       1M USD LIBOR+       5.00     1.00     7.49     5/12/2025       1,985,000       1,948,934       1,907,625  

McGraw-Hill Global Education Holdings LLC

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     6.49     5/4/2022       974,920       972,268       897,229  

MedPlast Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan (06/18)     Loan       3M USD LIBOR+       3.75     0.00     6.36     7/2/2025       498,750       496,426       500,620  

Meredith Corporation

  Media: Advertising Printing & Publishing   Term Loan B (10/18)     Loan       1M USD LIBOR+       2.75     0.00     5.24     1/31/2025       681,944       680,552       681,563  

Messer Industries LLC

  Chemicals Plastics & Rubber   Term Loan     Loan       3M USD LIBOR+       2.50     0.00     5.11     2/5/2026       3,000,000       2,992,500       2,977,500  

Michaels Stores Inc.

  Retail   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.99     1/30/2023       2,628,816       2,617,545       2,600,898  

Midwest Physician Administrative Services LLC

  Healthcare & Pharmaceuticals   Term Loan (2/18)     Loan       1M USD LIBOR+       2.75     0.75     5.24     8/15/2024       977,985       973,790       958,836  

Milk Specialties Company

  Beverage Food & Tobacco   Term Loan (2/17)     Loan       1M USD LIBOR+       4.00     1.00     6.49     8/16/2023       3,969,672       3,905,366       3,946,529  

MKS Instruments Inc.

  High Tech Industries   Term Loan B-5     Loan       1M USD LIBOR+       2.25     0.00     4.74     2/2/2026       1,000,000       990,327       998,750  

MLN US HoldCo LLC

  Telecommunications   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.99     11/28/2025       1,000,000       997,824       992,500  

MRC Global (US) Inc.

  Metals & Mining   Term Loan B2     Loan       1M USD LIBOR+       3.00     0.00     5.49     9/20/2024       495,000       493,864       495,000  

NAI Entertainment Holdings LLC

  Hotel Gaming & Leisure   Term Loan B     Loan       1M USD LIBOR+       2.50     1.00     4.99     5/8/2025       997,500       995,282       989,600  

Natgasoline LLC

  Chemicals Plastics & Rubber   Term Loan     Loan       3M USD LIBOR+       3.50     0.00     6.11     11/14/2025       500,000       497,720       500,625  

National Mentor Holdings Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       4.25     0.00     6.86     2/5/2026       2,000,000       1,980,000       2,005,840  

Navistar Financial Corporation

  Automotive   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     6.24     7/30/2025       1,990,000       1,980,604       1,982,538  

NeuStar Inc.

  Telecommunications   Term Loan B4 (03/18)     Loan       1M USD LIBOR+       3.50     1.00     5.99     8/8/2024       3,992,424       3,925,243       3,822,746  

New Media Holdings II LLC

  Media: Diversified & Production   Term Loan     Loan       1M USD LIBOR+       6.25     1.00     8.74     7/14/2022       5,973,699       5,959,159       5,921,430  

NMI Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       4.75     1.00     7.24     5/23/2023       3,489,981       3,494,699       3,489,981  

Novetta Solutions LLC

  Aerospace & Defense   Term Loan     Loan       1M USD LIBOR+       5.00     1.00     7.49     10/17/2022       1,939,870       1,928,782       1,898,648  

Novetta Solutions LLC

  Aerospace & Defense   Second Lien Term Loan     Loan       1M USD LIBOR+       8.50     1.00     10.99     10/16/2023       1,000,000       993,349       945,000  

NPC International Inc.

  Beverage Food & Tobacco   Term Loan     Loan       2M USD LIBOR+       3.50     1.00     6.07     4/19/2024       492,500       492,068       461,719  

Ocean Bidco Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       2M USD LIBOR+       4.75     1.00     7.32     3/21/2025       473,186       470,976       464,115  

OCI Partners LP

  Chemicals Plastics & Rubber   Term Loan B (2/18)     Loan       3M USD LIBOR+       4.00     0.00     6.61     3/13/2025       3,067,196       3,045,069       3,059,528  

Office Depot Inc.

  Retail   Term Loan B     Loan       1M USD LIBOR+       5.25     1.00     7.74     11/8/2022       2,909,851       2,888,913       2,971,685  

Onex Carestream Finance LP

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       5.75     1.00     8.24     2/28/2021       2,834,110       2,822,053       2,780,970  

Outcomes Group Holdings Inc.

  Banking Finance Insurance & Real Estate   Term Loan     Loan       3M USD LIBOR+       3.50     0.00     6.11     10/24/2025       500,000       498,833       493,125  

Owens & Minor Distribution Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       4.50     0.00     6.99     4/30/2025       497,500       488,393       420,800  

P2 Upstream Acquisition Co.

  High Tech Industries   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     6.61     10/30/2020       945,558       943,988       929,011  

Peraton Corp.

  Aerospace & Defense   Term Loan     Loan       3M USD LIBOR+       5.25     1.00     7.86     4/29/2024       1,970,000       1,962,137       1,915,825  

PGX Holdings Inc.

  Services: Consumer   Term Loan     Loan       1M USD LIBOR+       5.25     1.00     7.74     9/29/2020       2,674,370       2,667,939       2,614,197  

PI UK Holdco II Limited

  Services: Business   Term Loan B1 (PI UK Holdco II)     Loan       1M USD LIBOR+       3.50     1.00     5.99     1/3/2025       1,488,750       1,481,083       1,473,237  

Plastipak Packaging Inc

  Containers Packaging & Glass   Term Loan B (04/18)     Loan       1M USD LIBOR+       2.50     0.00     4.99     10/15/2024       987,500       983,130       974,100  

Presidio Inc.

  Services: Business   Term Loan B 2017     Loan       3M USD LIBOR+       2.75     1.00     5.36     2/2/2024       1,697,600       1,663,332       1,678,078  

Prime Security Services Borrower LLC

  Services: Consumer   Refi Term Loan B-1     Loan       1M USD LIBOR+       2.75     1.00     5.24     5/2/2022       1,950,361       1,943,928       1,943,925  

Priority Payment Systems Holdings LLC

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       5.00     1.00     7.49     1/3/2023       1,150,910       1,145,156       1,145,881  

Priority Payment Systems Holdings LLC

  High Tech Industries   Delayed Draw Term Loan     Loan       3M USD LIBOR+       5.00     1.00     7.61     1/3/2023                    

Project Accelerate Parent LLC

  Services: Business   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     6.74     1/2/2025       1,985,000       1,976,356       1,985,000  

Prometric Holdings Inc.

  Services: Business   Term Loan     Loan       1M USD LIBOR+       3.00     1.00     5.49     1/29/2025       496,250       494,124       492,528  

Quad/Graphics Inc.

  Media: Advertising Printing & Publishing   Term Loan B (12/18)     Loan       1M USD LIBOR+       5.00     0.00     7.49     2/2/2026       4,500,000       4,434,606       4,483,125  

Rackspace Hosting Inc.

  High Tech Industries   Term Loan B     Loan       3M USD LIBOR+       3.00     1.00     5.61     11/3/2023       1,491,203       1,480,810       1,418,969  

Radio Systems Corporation

  Consumer goods: Durable   Term Loan     Loan       1M USD LIBOR+       2.75     1.00     5.24     5/2/2024       1,477,500       1,477,500       1,457,184  

Radiology Partners Inc.

  Healthcare & Pharmaceuticals   Term Loan     Loan       3M USD LIBOR+       4.75     0.00     7.36     7/9/2025       1,000,000       995,568       1,005,000  

Research Now Group Inc.

  Media: Advertising Printing & Publishing   Term Loan     Loan       1M USD LIBOR+       5.50     1.00     7.99     12/20/2024       3,967,481       3,836,608       3,942,684  

Resolute Investment Managers Inc.

  Banking Finance Insurance & Real Estate   Term Loan (10/17)     Loan       3M USD LIBOR+       3.25     1.00     5.86     4/29/2022       2,709,661       2,712,126       2,713,049  

Restaurant Technologies Inc.

  Beverage Food & Tobacco   Term Loan (9/18)     Loan       1M USD LIBOR+       3.25     0.00     5.74     10/1/2025       1,000,000       997,720       999,380  

Revspring Inc.

  Services: Business   Term Loan B     Loan       3M USD LIBOR+       4.25     0.00     6.86     10/10/2025       1,000,000       997,767       985,000  

Reynolds Group Holdings Inc.

  Metals & Mining   Term Loan (01/17)     Loan       1M USD LIBOR+       2.75     0.00     5.24     2/6/2023       1,725,912       1,725,912       1,718,369  

RGIS Services LLC

  Services: Business   Term Loan     Loan       3M USD LIBOR+       7.50     1.00     10.11     3/31/2023       486,033       480,179       415,558  

Robertshaw US Holding Corp.

  Consumer goods: Durable   Term Loan B     Loan       1M USD LIBOR+       3.50     1.00     5.99     2/28/2025       992,500       990,321       929,228  

Rocket Software Inc.

  High Tech Industries   Term Loan (11/18)     Loan       1M USD LIBOR+       4.25     0.00     6.74     11/28/2025       4,000,000       3,982,916       4,000,000  

Rovi Solutions Corporation

  Media: Diversified & Production   Term Loan B     Loan       1M USD LIBOR+       2.50     0.75     4.99     7/2/2021       1,332,669       1,330,256       1,311,013  

Russell Investments US Institutional Holdco Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       3.25     1.00     5.74     6/1/2023       4,184,784       4,064,980       4,142,936  

Sahara Parent Inc.

  High Tech Industries   Term Loan B (11/18)     Loan       1M USD LIBOR+       4.50     0.00     6.99     8/16/2024       1,975,050       1,956,153       1,967,031  

Sally Holdings LLC

  Retail   Term Loan B     Loan       1M USD LIBOR+       2.25     0.00     4.74     7/5/2024       987,455       983,210       973,877  

Sally Holdings LLC

  Retail   Term Loan (Fixed)     Loan       Fixed       4.50     0.00     4.50     7/5/2024       1,000,000       996,030       963,750  

Savage Enterprises LLC

  Transportation: Cargo   Term Loan     Loan       1M USD LIBOR+       4.50     0.00     6.99     8/1/2025       3,823,951       3,774,062       3,836,684  

SCS Holdings I Inc.

  High Tech Industries   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     6.74     10/31/2022       3,393,482       3,378,749       3,401,966  

Seadrill Operating LP

  Energy: Oil & Gas   Term Loan B     Loan       3M USD LIBOR+       6.00     1.00     8.61     2/21/2021       915,243       888,341       763,084  

SG Acquisition Inc.

  Banking Finance Insurance & Real Estate   Term Loan (Safe-Guard)     Loan       3M USD LIBOR+       5.00     1.00     7.61     3/29/2024       1,660,000       1,647,194       1,647,550  

Shearer’s Foods LLC

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       4.25     1.00     6.74     6/30/2021       2,925,531       2,916,771       2,898,704  

Shutterfly Inc.

  Media: Advertising Printing & Publishing   Term Loan B2     Loan       1M USD LIBOR+       2.75     0.00     5.24     8/19/2024       3,017,873       2,966,805       2,981,417  

Sirva Worldwide Inc.

  Transportation: Cargo   Term Loan B     Loan       3M USD LIBOR+       5.50     0.00     8.11     8/4/2025       2,500,000       2,471,352       2,443,750  

SMB Shipping Logistics LLC

  Transportation: Consumer   Term Loan B     Loan       6M USD LIBOR+       4.00     1.00     6.69     2/2/2024       1,969,937       1,968,013       1,953,528  

SP PF Buyer LLC

  Consumer goods: Durable   Term Loan B     Loan       3M USD LIBOR+       4.50     0.00     7.11     12/19/2025       2,000,000       1,921,772       1,970,000  

SRAM LLC

  Consumer goods: Durable   Term Loan     Loan       Prime+       2.73     1.00     3.73     3/15/2024       1,984,685       1,970,345       1,967,319  

SS&C Technologies Inc.

  Services: Business   Term Loan B3     Loan       1M USD LIBOR+       2.25     0.00     4.74     4/16/2025       616,068       614,712       612,815  

SS&C Technologies Inc.

  Services: Business   Term Loan B4     Loan       1M USD LIBOR+       2.25     0.00     4.74     4/16/2025       235,988       235,469       234,742  

SS&C Technologies Inc.

  Services: Business   Term Loan B-5     Loan       1M USD LIBOR+       2.25     0.00     4.74     4/16/2025       498,743       497,588       496,189  

SSH Group Holdings Inc.

  Consumer goods: Non-durable   Term Loan     Loan       2M USD LIBOR+       4.25     0.00     6.82     7/30/2025       1,995,000       1,990,196       1,970,063  

Staples Inc.

  Retail   Term Loan B (07/17)     Loan       1M USD LIBOR+       4.00     1.00     6.49     9/12/2024       1,975,000       1,970,996       1,959,240  

Starfruit US Holdco LLC

  Chemicals Plastics & Rubber   Term Loan B     Loan       1M USD LIBOR+       3.25     0.00     5.74     10/1/2025       500,000       497,640       496,375  

Steak N Shake Operations Inc.

  Beverage Food & Tobacco   Term Loan     Loan       1M USD LIBOR+       3.75     1.00     6.24     3/19/2021       834,991       832,242       638,768  

Sybil Software LLC

  High Tech Industries   Term Loan B (4/18)     Loan       3M USD LIBOR+       2.50     1.00     5.11     9/29/2023       677,351       674,400       676,220  

Tenneco Inc

  Capital Equipment   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     5.24     10/1/2025       1,500,000       1,485,848       1,484,070  

Ten-X LLC

  Banking Finance Insurance & Real Estate   Term Loan     Loan       1M USD LIBOR+       4.00     1.00     6.49     9/30/2024       1,980,000       1,978,059       1,955,250  

TGG TS Acquisition Company

  Media: Diversified & Production   Term Loan (12/18)     Loan       3M USD LIBOR+       6.50     0.00     9.11     12/15/2025       3,000,000       2,854,156       2,981,250  

The Edelman Financial Center LLC

  Banking Finance Insurance & Real Estate   Term Loan B (06/18)     Loan       3M USD LIBOR+       3.25     0.00     5.86     7/21/2025       1,250,000       1,244,166       1,247,138  

Thor Industries Inc.

  Automotive   Term Loan (USD)     Loan       1M USD LIBOR+       3.75     0.00     6.24     2/2/2026       2,830,276       2,797,635       2,734,754  

Topgolf International Inc.

  Hotel Gaming & Leisure   Term Loan (02/19)     Loan       1M USD LIBOR+       5.50     0.00     7.99     2/6/2026       500,000       495,177       499,375  

Townsquare Media Inc.

  Media: Broadcasting & Subscription   Term Loan B (02/17)     Loan       1M USD LIBOR+       3.00     1.00     5.49     4/1/2022       881,975       879,219       868,745  

Transdigm Inc.

  Aerospace & Defense   Term Loan G     Loan       1M USD LIBOR+       2.50     0.00     4.99     8/22/2024       4,148,194       4,154,661       4,087,381  

Travel Leaders Group LLC

  Hotel Gaming & Leisure   Term Loan B (08/18)     Loan       1M USD LIBOR+       4.00     0.00     6.49     1/25/2024       2,487,500       2,482,802       2,493,719  

TRC Companies Inc.

  Services: Business   Term Loan     Loan       1M USD LIBOR+       3.50     1.00     5.99     6/21/2024       3,411,364       3,399,559       3,368,722  

Trico Group LLC

  Containers Packaging & Glass   Incremental Term Loan     Loan       Prime+       6.00     1.00     7.00     2/2/2024       4,943,750       4,804,906       4,696,562  

Truck Hero Inc.

  Transportation: Cargo   First Lien Term Loan     Loan       1M USD LIBOR+       3.75     1.00     6.24     4/22/2024       2,957,469       2,937,874       2,890,926  

Trugreen Limited Partnership

  Services: Consumer   Term Loan B (07/17)     Loan       1M USD LIBOR+       4.00     1.00     6.49     4/13/2023       488,813       483,230       490,034  

Twin River Management Group Inc.

  Hotel Gaming & Leisure   Term Loan     Loan       3M USD LIBOR+       3.50     1.00     6.11     7/10/2020       713,415       713,888       712,223  

United Natural Foods Inc.

  Beverage Food & Tobacco   Term Loan B     Loan       1M USD LIBOR+       4.25     0.00     6.74     10/22/2025       3,500,000       3,278,105       3,119,375  

Univar USA Inc.

  Chemicals Plastics & Rubber   Term Loan B3 (11/17)     Loan       1M USD LIBOR+       2.25     0.00     4.74     7/1/2024       4,250,492       4,231,419       4,241,183  

Univision Communications Inc.

  Media: Broadcasting & Subscription   Term Loan     Loan       1M USD LIBOR+       2.75     1.00     5.24     3/15/2024       2,746,369       2,733,489       2,557,556  

UOS LLC

  Capital Equipment   Term Loan B     Loan       1M USD LIBOR+       5.50     1.00     7.99     4/18/2023       591,247       593,692       594,203  

UPC Financing Partnership

  Media: Broadcasting & Subscription   Term Loan (10/17)     Loan       1M USD LIBOR+       2.50     0.00     4.99     1/15/2026       832,911       832,042       831,687  

VeriFone Systems Inc.

  Banking Finance Insurance & Real Estate   Term Loan (7/18)     Loan       3M USD LIBOR+       4.00     0.00     6.61     8/20/2025       5,486,250       5,456,319       5,464,689  

Verra Mobility Corp.

  Construction & Building   Term Loan     Loan       1M USD LIBOR+       3.75     0.00     6.24     3/3/2025       496,250       494,043       497,903  

VFH Parent LLC

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       3M USD LIBOR+       3.50     0.00     6.11     1/30/2026       3,000,000       2,985,000       3,006,570  

Virtus Investment Partners Inc.

  Banking Finance Insurance & Real Estate   Term Loan B     Loan       1M USD LIBOR+       2.25     0.75     4.74     6/3/2024       3,836,368       3,834,675       3,820,371  

Vistra Operations Company LLC

  Utilities: Electric   2018 Incremental Term Loan     Loan       1M USD LIBOR+       2.00     0.00     4.49     12/31/2025       995,000       993,884       992,095  

Vizient Inc.

  Healthcare & Pharmaceuticals   Term Loan B     Loan       1M USD LIBOR+       2.75     1.00     5.24     2/13/2023       296,814       291,350       295,923  

Wand NewCo 3 Inc.

  Automotive   Term Loan B     Loan       1M USD LIBOR+       3.50     0.00     5.99     2/5/2026       250,000       247,562       250,625  

Web.Com Group Inc.

  High Tech Industries   Term Loan B (08/18)     Loan       1M USD LIBOR+       3.75     0.00     6.24     10/10/2025       500,000       498,856       496,250  

WeddingWire Inc.

  Services: Consumer   Term Loan     Loan       3M USD LIBOR+       4.50     0.00     7.11     12/19/2025       4,000,000       3,993,119       3,995,000  

WEI Sales LLC

  Beverage Food & Tobacco   Term Loan B     Loan       1M USD LIBOR+       2.75     0.00     5.24     3/31/2025       496,250       495,108       495,009  

Weight Watchers International Inc.

  Services: Consumer   Term Loan B     Loan       3M USD LIBOR+       4.75     0.75     7.36     11/29/2024       1,900,000       1,867,434       1,839,827  

West Corporation

  Telecommunications   Term Loan B     Loan       3M USD LIBOR+       3.50     1.00     6.11     10/10/2024       4,241,234       4,068,929       4,003,830  

Western Dental Services Inc.

  Retail   Term Loan (12/18)     Loan       1M USD LIBOR+       5.25     1.00     7.74     6/30/2023       2,463,734       2,446,863       2,402,141  

Western Digital Corporation

  High Tech Industries   Term Loan B-4     Loan       1M USD LIBOR+       1.75     0.00     4.24     4/29/2023       1,299,622       1,266,499       1,274,605  

Wirepath LLC

  Consumer goods: Non-durable   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     6.61     8/5/2024       2,985,044       2,957,351       2,925,343  

Wynn Resorts Limited

  Hotel Gaming & Leisure   Term Loan B     Loan      
1M USD
LIBOR+
 
    2.25     0.00     4.74     10/30/2024       1,000,000       997,579       986,500  

YS Garments LLC

  Retail   Term Loan     Loan       1W USD LIBOR+       6.00     1.00     8.41     8/9/2024       1,987,500       1,969,194       1,952,719  

Zep Inc.

  Chemicals Plastics & Rubber   Term Loan     Loan       3M USD LIBOR+       4.00     1.00     6.61     8/12/2024       2,468,750       2,458,786       2,139,592  

Zest Acquisition Corp.

  Healthcare & Pharmaceuticals   Term Loan     Loan       1M USD LIBOR+       3.50     0.00     5.99     3/14/2025       992,500       988,123       918,062  
                   

 

 

   

 

 

 
                    $ 509,676,701     $ 498,405,060  
                   

 

 

   

 

 

 
                                                Number of
Shares
    Cost     Fair Value  

Cash and cash equivalents

                     

U.S. Bank Money Market (b)

                    18,495,653     $ 18,495,653     $ 18,495,653  
                 

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

                    18,495,653     $ 18,495,653     $ 18,495,653  
                 

 

 

   

 

 

   

 

 

 

(a)    Security is in default as of February 28, 2019.

(b)    Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of February 28, 2019.

LIBOR - London Interbank Offered Rate

1W USD LIBOR - The 1 week USD LIBOR rate as of February 28, 2019 was 2.41%.

1M USD LIBOR - The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.

2M USD LIBOR - The 2 month USD LIBOR rate as of February 28, 2019 was 2.57%.

3M USD LIBOR - The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.

6M USD LIBOR - The 6 month USD LIBOR rate as of February 28, 2019 was 2.69%.

Prime - The Prime Rate as of February 28, 2019 was 5.50%.

 

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Note 5. Income Taxes

SIA-Avionte, Inc., SIA-Easy Ice, LLC, SIA-GH, Inc., SIA-HT, Inc., SIA-MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc., each 100% owned by the Company, are each filing standalone C Corporation tax returns for federal and state purposes. As separately regarded entities for tax purposes, these entities are taxed at normal corporate rates. For tax purposes, any distributions by the entities to the parent company would generally need to be distributed to the Company’s shareholders. Generally, such distributions of the entities’ income to the Company’s shareholders will be considered as qualified dividends for tax purposes. The entities taxable net income will differ from U.S. GAAP net income because of deferred tax temporary differences adjustments arising from net operating losses and unrealized appreciation and deprecation of securities held. Deferred tax assets and liabilities are measured using enacted corporate federal and state tax rates expected to apply to taxable income in the years in which those net operating losses are utilized and the unrealized gains and losses are realized. Deferred tax assets and deferred tax liabilities are netted off by entity, as allowed. The recoverability of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized on the basis of a history of operating losses combined with insufficient projected taxable income or other taxable events in the taxable blockers.

Deferred tax assets and liabilities, and related valuation allowance as of November 30, 2019 and February 28, 2019 were as follows:

 

     November 30, 2019      February 28, 2019  

Total deferred tax assets

   $ 4,861,426      $ 2,533,426  

Total deferred tax liabilities

     (3,553,636      (1,766,835

Valuation allowance on net deferred tax assets

     (2,369,430      (1,506,307
  

 

 

    

 

 

 

Net deferrred tax liability

   $ (1,061,640    $ (739,716
  

 

 

    

 

 

 

As of November 30, 2019, the valuation allowance on deferred tax assets was $2.4 million, which represents the federal and state tax effect of net operating losses and unrealized losses that we do not believe we will realize through future taxable income. Any adjustments to the Company’s valuation allowance will depend on estimates of future taxable income and will be made in the period such determination is made.

Net deferred tax (benefit) expense for the three months ended November 30, 2019 includes $1.1 million net change in unrealized appreciation (depreciation) on investments and $(1.0) million net change in total operating expense, in the consolidated statement of operations, respectively. Net deferred tax (benefit) expense for the three months ended November 30, 2018 includes $0.4 million net change in unrealized appreciation (depreciation) on investments and $(0.08) million net change in total operating expense, in the consolidated statement of operations, respectively.

Net deferred tax (benefit) expense for the nine months ended November 30, 2019 includes $1.8 million net change in unrealized appreciation (depreciation) on investments and $(1.5) million net change in total operating expense, in the consolidated statement of operations, respectively. Net deferred tax (benefit) expense for the nine months ended November 30, 2018 includes $1.2 million change in unrealized appreciation (depreciation) on investments and $(0.7) million net change in total operating expense, in the consolidated statement of operations, respectively.

Deferred tax temporary differences may include differences for state taxes and joint venture interests.

 

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Federal and state income tax provisions (benefits) on investments for three and nine months ended November 30, 2019 and November 30, 2018:

 

     For the three months ended      For the nine months ended  
     November 30, 2019      November 30, 2018      November 30, 2019      November 30, 2018  

Current

           

Federal

   $ —        $ —        $ —        $ —    

State

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net current expense

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Deferred

           

Federal

     38,486        274,316        252,303        440,850  

State

     22,033        21,287        69,621        34,211  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net deferred expense

     60,519        295,603        321,924        475,061  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net tax provision

   $ 60,519      $ 295,603      $ 321,924      $ 475,061  
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 6. Agreements and Related Party Transactions

On July 30, 2010, the Company entered into the Management Agreement with our Manager. The initial term of the Management Agreement was two years, with automatic, one-year renewals at the end of each year, subject to certain approvals by our board of directors and/or the Company’s stockholders. On July 9, 2019, our board of directors approved the renewal of the Management Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive management fee.

The base management fee of 1.75% per year is calculated based on the average value of our gross assets (other than cash or cash equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters. The base management fee is paid quarterly following the filing of the most recent 10-Q.

The incentive management fee consists of the following two parts:

The first, payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter, subject to a “catch-up” provision. Under this provision, in any fiscal quarter, our Manager receives no incentive fee unless our pre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter; and 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter. There is no accumulation of amounts on the hurdle rate from quarter to quarter, and accordingly there is no claw back of amounts previously paid if subsequent quarters are below the quarterly hurdle rate, and there is no delay of payment if prior quarters are below the quarterly hurdle rate.

The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Importantly, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the “incentive fee capital gains” calculations, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.

For the three months ended November 30, 2019 and November 30, 2018, the Company incurred $2.1 million and $1.8 million in base management fees, respectively. For the three months ended November 30, 2019 and November 30, 2018, the Company incurred $1.5 million and $1.2 million in incentive fees related to pre-incentive fee net investment income, respectively. For the three months ended November 30, 2019 and November 30, 2018, the Company accrued $1.6 million in expense and a reduction of $0.3 million, respectively, in incentive fees related to capital gains.

 

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For the nine months ended November 30, 2019 and November 30, 2018, the Company incurred $6.0 million and $5.0 million in base management fees, respectively. For the nine months ended November 30, 2019 and November 30, 2018, the Company incurred $4.1 million and $3.4 million in incentive fees related to pre-incentive fee net investment income, respectively. For the nine months ended November 30, 2019 and November 30, 2018, the Company accrued $3.2 million in expense and a reduction of $0.6 million, respectively, in incentive fees related to capital gains, respectively.

The accrual is calculated using both realized and unrealized capital gains for the period. The actual incentive fee related to capital gains will be determined and payable in arrears at the end of the fiscal year and will include only realized capital gains for the period. As of November 30, 2019, the base management fees accrual was $2.1 million and the incentive fees accrual was $8.3 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 28, 2019, the base management fees accrual was $1.9 million and the incentive fees accrual was $4.8 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.

On July 30, 2010, the Company entered into a separate administration agreement (the “Administration Agreement”) with our Manager, pursuant to which our Manager, as our administrator, has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide managerial assistance on our behalf to those portfolio companies to which we are required to provide such assistance. The initial term of the Administration Agreement was two years, with automatic, one-year renewals at the end of each year subject to certain approvals by our board of directors and/or our stockholders. The amount of expenses payable or reimbursable thereunder by the Company was capped at $1.0 million for the initial two-year term of the Administration Agreement and subsequent renewals. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additional one-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016. On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019.

For the three months ended November 30, 2019 and November 30, 2018, we recognized $0.6 million and $0.5 million in administrator expenses, respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. For the nine months ended November 30, 2019 and November 30, 2018, we recognized $1.6 million and $1.4 million in administrator expenses, respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of November 30, 2019, $0.4 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 28, 2019, $0.3 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. For the nine months ended November 30, 2019 and November 30, 2018, the Company neither bought nor sold any investments from the Saratoga CLO.

For the three months ended November 30, 2019 and November 30, 2018, we recognized management fee income of $0.6 million and $0.4 million, respectively, related to the Saratoga CLO.

For the nine months ended November 30, 2019 and November 30, 2018, we recognized management fee income of $1.9 million and $1.1 million, respectively, related to the Saratoga CLO.

On December 14, 2018, the Company completed the third refinancing and issuance of the Saratoga CLO’s 2013-1 Reset CLO Notes (the “2013-1 Reset CLO Notes”). This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period ending January 2020 was also added. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes were repaid. The Company also paid $2.0 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. During the nine months ended November 30, 2019, the Company received full payment of $1.7 million from the Saratoga CLO for such transaction costs.

In conjunction with the third refinancing and issuance of the 2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information. For the three and nine months ended November 30, 2018, we recognized incentive fee income of $0.1 million and $0.5 million, respectively, related to the Saratoga CLO.

 

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Note 7. Borrowings

Credit Facility

As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after giving effect to such leverage, or, if we obtain the required approvals from our independent directors and/or stockholders, 150.0%. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing. Our asset coverage ratio, as defined in the 1940 Act, was 309.9% as of November 30, 2019 and 234.5% as of February 28, 2019. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.

On April 11, 2007, we entered into a $100.0 million revolving securitized credit facility (the “Revolving Facility”). On May 1,

2007, we entered into a $25.7 million term securitized credit facility (the “Term Facility” and, together with the Revolving Facility, the “Facilities”), which was fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively affected the value of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced a two-year amortization period during which all principal proceeds from the collateral were used to repay outstanding borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable monthly at the greater of the commercial paper rate and our lender’s prime rate plus 4.00% plus a default rate of 2.00% or, if the commercial paper market was unavailable, the greater of the prevailing LIBOR rates and our lender’s prime rate plus 6.00% plus a default rate of 3.00%.

On July 30, 2010, we used the net proceeds from (i) the stock purchase transaction and (ii) a portion of the funds available to us under the $45.0 million senior secured revolving credit facility (the “Credit Facility”) with Madison Capital Funding LLC, in each case, to pay the full amount of principal and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets, other than those held by SBIC LP, have been pledged under the Credit Facility to secure our obligations thereunder.

On February 24, 2012, we amended the Credit Facility to, among other things:

 

   

expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

 

   

extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

 

   

remove the condition that we may not acquire additional loan assets without the prior written consent of Madison Capital Funding LLC.

On September 17, 2014, we entered into a second amendment to the Credit Facility to, among other things:

 

   

extend the commitment termination date from February 24, 2015 to September 17, 2017;

 

   

extend the maturity date of the Credit Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

 

   

reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

 

   

reduce the floor on base rate borrowings from 3.00% to 2.25%, and on LIBOR borrowings from 2.00% to 1.25%.

On May 18, 2017, we entered into a third amendment to the Credit Facility to, among other things:

 

   

extend the commitment termination date from September 17, 2017 to September 17, 2020;

 

   

extend the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025 (unless terminated sooner upon certain events);

 

   

reduce the floor on base rate borrowings from 2.25% to 2.00%;

 

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reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and

 

   

reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.

In addition to any fees or other amounts payable under the terms of the Credit Facility agreement with Madison Capital Funding

LLC, an administrative agent fee per annum equal to $0.1 million is payable in equal monthly installments in arrears.

As of November 30, 2019 and February 28, 2019, there were no outstanding borrowings under the Credit Facility. During the applicable periods, the Company was in compliance with all of the limitations and requirements of the Credit Facility. Financing costs of $3.1 million related to the Credit Facility have been capitalized and are being amortized over the term of the facility.

For the three months ended November 30, 2019 and November 30, 2018, we recorded $0.1 million and $0.2 million of interest expense related to the Credit Facility, respectively, which includes commitment and administrative agent fees. For the three months ended November 30, 2019 and November 30, 2018, we recorded $0.02 million and $0.02 million of amortization of deferred financing costs related to the Credit Facility, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended November 30, 2019, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 6.72%, and the average dollar amount of outstanding borrowings under the Credit Facility was $2.1 million. During the three months ended November 30, 2018, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 7.21%, and the average dollar amount of outstanding borrowings under the Credit Facility was $7.2 million.

For the nine months ended November 30, 2019 and November 30, 2018, we recorded $0.4 million and $0.5 million of interest expense related to the Credit Facility, respectively, which includes commitment and administrative agent fees. For the nine months ended November 30, 2019 and November 30, 2018, we recorded $0.07 million and $0.1 million of amortization of deferred financing costs related to the Credit Facility, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the nine months ended November 30, 2019, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 6.67%, and the average dollar amount of outstanding borrowings under the Credit Facility was $0.8 million. During the nine months ended November 30, 2018, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 7.22%, and the average dollar amount of outstanding borrowings under the Credit Facility was $3.2 million.

The Credit Facility contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Credit Facility also includes certain requirements relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. The Credit Facility has an eight-year term, consisting of a three-year period (the “Revolving Period”), under which the Company may make and repay borrowings, and a final maturity five years from the end of the Revolving Period. Availability on the Credit Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain “eligible” loan assets included as part of the Borrowing Base. Funds may be borrowed at the greater of the prevailing one-month LIBOR rate and 1.00%, plus an applicable margin of 4.75%. At the Company’s option, funds may be borrowed based on an alternative base rate, which in no event will be less than 2.00%, and the applicable margin over such alternative base rate is 3.75%. In addition, the Company will pay the lenders a commitment fee of 0.75% per year (or 0.50% if the ratio of advances outstanding to aggregate commitments is greater than or equal to 50%) on the unused amount of the Credit Facility for the duration of the Revolving Period.

Our borrowing base under the Credit Facility was $41.0 million subject to the Credit Facility cap of $45.0 million at November 30, 2019. For purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the November 30, 2019 borrowing base relies upon the valuations set forth in the Quarterly Report on Form 10-Q for the period ended August 31, 2019. The valuations presented in this Quarterly Report on Form 10-Q will not be incorporated into the borrowing base until after this Quarterly Report on Form 10-Q is filed with the SEC.

SBA Debentures

Our wholly-owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA.

On August 14, 2019, the Company’s wholly-owned subsidiary, SBIC II LP, received an SBIC license from the SBA. The new license provides up to $175.0 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 $225.0 million to $350.0 million. With this license approval, Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital.

 

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As of November 30, 2019, we have funded SBIC LP with an aggregate total of $75.0 million of equity capital and have $150.0 million of SBA-guaranteed debentures outstanding and have funded SBIC II LP with an aggregate total of $50.0 million of equity capital and do not have any SBA-guaranteed debentures outstanding. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP and SBIC II LP may borrow to a maximum of $150.0 million and $175.0 million, respectively, which is up to twice its potential regulatory capital.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to ‘‘smaller’’ concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

SBIC LP and SBIC II LP are subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC II LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC II LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP and SBIC II LP assets over our stockholders and debtholders in the event we liquidate SBIC LP and SBIC II LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP and SBIC II LP upon an event of default.

The Company received exemptive relief from the SEC to permit it to exclude the debt of SBIC LP and SBIC II LP guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows the Company increased flexibility under the asset coverage test by permitting it to borrow up to $150.0 million more than it would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, the non-interested board of directors of the Company approved of the Company becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.

As of November 30, 2019 and February 28, 2019, there was $150.0 million and $150.0 million outstanding of SBA debentures, respectively. The carrying amount of the amount outstanding of SBA debentures approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy. Financing costs of $5.0 million and $0.7 million related to the SBA debentures issued by SBIC LP and SBIC II LP, respectively, have been capitalized and are being amortized over the term of the commitment and drawdown.

For the three months ended November 30, 2019 and November 30, 2018, we recorded $1.2 million and $1.2 million of interest expense related to the SBA debentures, respectively. For the three months ended November 30, 2019 and November 30, 2018, we recorded $0.1 million and $0.1 million of amortization of deferred financing costs related to the SBA debentures, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. The weighted average interest rate during the three months ended November 30, 2019 and November 30, 2018 on the outstanding borrowings of the SBA debentures was 3.21% and 3.20%, respectively. During the three months ended November 30, 2019 and November 30, 2018, the average dollar amount of SBA debentures outstanding was $150.0 million and $150.0 million, respectively.

For the nine months ended November 30, 2019 and November 30, 2018, we recorded $3.6 million and $3.5 million of interest expense related to the SBA debentures, respectively. For the nine months ended November 30, 2019 and November 30, 2018, we recorded $0.4 million and $0.4 million of amortization of deferred financing costs related to the SBA debentures, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. The weighted average interest rate during the nine months ended November 30, 2019 and November 30, 2018 on the outstanding borrowings of the SBA debentures was 3.24% and 3.20%, respectively. During the nine months ended November 30, 2019 and November 30, 2018, the average dollar amount of SBA debentures outstanding was $150.0 million and $144.6 million, respectively.

In December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million, subject to SBA approval. SBA regulations previously limited the amount of SBA-guaranteed debentures that an SBIC may issue to $150.0 million when it has at least $75.0 million in regulatory capital but this has increased to $175.0 million for new licenses when it has at least $87.5 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum amount of $350.0 million in SBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.

 

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Notes

On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”). The 2020 Notes will mature on May 31, 2020, and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at the Company’s option. Interest will be payable quarterly beginning August 15, 2013. On May 17, 2013, the Company closed an additional $6.3 million in aggregate principal amount of the 2020 Notes, pursuant to the full exercise of the underwriters’ option to purchase additional 2020 Notes. The 2020 Notes were redeemed in full on January 13, 2017.

On May 29, 2015, the Company entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, the Company issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 30, 2023 and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes, which amounted to $61.8 million, and for general corporate purposes in accordance with our investment objective and strategies. The 2023 Notes are listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share. The remaining unamortized deferred debt financing costs of $1.5 million (including underwriting commissions and net of issuance premiums), was recorded within loss on debt extinguishment in the consolidated statements of operations in the fourth quarter of the fiscal year ended February 28, 2017, when the related 2020 Notes were extinguished. As of November 30, 2019, $2.8 million of financing costs related to the 2023 Notes have been capitalized and are being amortized over the term of the 2023 Notes.

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were 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 our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million of financing costs related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

On February 5, 2019, the Company 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 million aggregate 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. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

As of November 30, 2019, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

As of November 30, 2019, the carrying amount and fair value of the 2025 Notes was $60.0 million and $61.9 million, respectively, and the carrying amount and fair value of the 2023 Notes was $74.5 million and $76.2 million, respectively. The fair value of the 2025 Notes and 2023 Notes, which both are publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy. As of February 28, 2019, the carrying amount and fair value of the 2025 Notes was $60.0 million and $59.9 million, respectively, and the carrying amount and fair value of the 2023 Notes was $74.5 million and $76.4 million, respectively.

For the three months ended November 30, 2019 and November 30, 2018, we recorded $0.9 million and $0.6 million, respectively, of interest expense and $0.1 million and $0.1 million, respectively, of amortization of deferred financing costs related to the 2025 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended November 30, 2019 and November 30, 2018, the average dollar amount of 2025 Notes outstanding was $60.0 million and $40.0 million, respectively.

 

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For the nine months ended November 30, 2019 and November 30, 2018, we recorded $2.8 million and $0.7 million, respectively, of interest expense and $0.3 million and $0.1 million, respectively, of amortization of deferred financing costs related to the 2025 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the nine months ended November 30, 2019 and November 30, 2018, the average dollar amount of 2025 Notes outstanding was $60.0 million and $13.8 million, respectively.

For the three months ended November 30, 2019 and November 30, 2018, we recorded $1.3 million and $1.3 million, respectively, of interest expense and $0.1 million and $0.1 million, respectively, of amortization of deferred financing costs related to the 2023 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended November 30, 2019 and November 30, 2018, the average dollar amount of 2023 Notes outstanding was $74.5 million and $74.5 million, respectively.

For the nine months ended November 30, 2019 and November 30, 2018, we recorded $3.8 million and $3.8 million, respectively, of interest expense and $0.3 million and $0.3 million, respectively, of amortization of deferred financing costs related to the 2023 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the nine months ended November 30, 2019 and November 30, 2018, the average dollar amount of 2023 Notes outstanding was $74.5 million and $74.5 million respectively.

Note 8. Commitments and contingencies

Contractual obligations

The following table shows our payment obligations for the repayment of debt and other contractual obligations at November 30, 2019:

 

            Payment Due by Period  

Long-Term Debt Obligations

   Total      Less Than
1 Year
     1 - 3
Years
     3 - 5
Years
     More Than
5 Years
 
     ($ in thousands)  

Revolving credit facility

   $ —        $ —        $ —        $ —        $ —    

SBA debentures

     150,000        —          —          79,000        71,000  

2023 Notes (1)

     74,451        —          —          74,451        —    

2025 Notes

     60,000        —          —          —          60,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Long-Term Debt Obligations

   $ 284,451      $ —        $ —        $ 153,451      $ 131,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

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

Off-balance sheet arrangements

As of November 30, 2019 and February 28, 2019, the Company’s off-balance sheet arrangements consisted of $41.5 million and $4.5 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

 

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A summary of the unfunded commitments outstanding as of November 30, 2019 and February 28, 2019 is shown in the table below (dollars in thousands):

 

     November 30, 2019      February 28, 2019  

At Company’s discretion

     

inMotionNow, Inc.

   $ 3,000      $ —    

Omatic Software, LLC

     1,000        1,000  

PDDS Buyer, LLC

     5,000        —    

Top Gun Pressure Washing, LLC

     5,000        —    

Village Realty

     10,000     
  

 

 

    

 

 

 
     24,000        1,000  
  

 

 

    

 

 

 

At portfolio company’s discretion - satisfaction of certain financial and nonfinancial covenants required

 

Axiom Purchaser, Inc.

     1,000        1,000  

CoConstruct, LLC

     3,500        —    

Davisware

     2,000        —    

Destiny Solutions, Inc.

     —          1,500  

Fancy Chap, Inc.

     —          —    

GDS Holdings US, Inc.

     —          1,000  

Hema Terra Holding Company, LLC

     4,000        —    

inMotionNow, Inc.

     2,000        —    

Village Realty

     5,000        —    
  

 

 

    

 

 

 
     17,500        3,500  
  

 

 

    

 

 

 

Total

   $ 41,500      $ 4,500  
  

 

 

    

 

 

 

Note 9. Directors Fees

The independent directors receive an annual fee of $60,000. They also receive $2,500 plus reimbursement of reasonable out-of- pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonable out-of- pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $10,000 and the chairman of each other committee receives an annual fee of $5,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors’ fees in the form of our common stock issued at a price per share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are “interested persons” of the Company (as such term is defined in the 1940 Act). For the three months ended November 30, 2019 and November 30, 2018, we incurred $0.06 million and $0.06 million for directors’ fees and expenses, respectively. For the nine months ended November 30, 2019 and November 30, 2018, we incurred $0.2 million and $0.2 million for directors’ fees and expenses, respectively. As of November 30, 2019 and February 28, 2019, $0.002 million and $0.06 million in directors’ fees and expenses were accrued and unpaid, respectively. As of November 30, 2019, we had not issued any common stock to our directors as compensation for their services.

Note 10. Stockholders’ Equity

On May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.

On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC Group in the LLC were exchanged for 6.7 shares of the Company.

On March 28, 2007, the Company completed its IPO of 725,000 shares of common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriter’s discount and commissions, and $1.0 million in offering costs, were $100.7 million.

 

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On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total proceeds received from this sale were $15.0 million.

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed 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 consolidated financial statements. On October 7, 2015, the Company’s board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. 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.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our 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 the common stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was 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).

For the three months ended November 30, 2019, the Company sold 1,952,367 shares for gross proceeds of $49.4 million at an average price of $25.28 for aggregate net proceeds of $48.7 million (net of transaction costs).

For the nine months ended November 30, 2019, the Company sold 3,400,481 shares for gross proceeds of $85.2 million at an average price of $25.06 for aggregate net proceeds of $84.0 million (net of transaction costs).

On July 13, 2018, the Company 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.

 

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The Company elected early adoption of Rule 3-04/Rule 8-03(a)(5) under Regulation S-X (Note 2). Pursuant to the regulation, the Company has presented a reconciliation of the changes in each significant caption of stockholders’ equity as shown in the table below:

 

                   Capital     Total        
     Common Stock      in Excess     Distributable        
     Shares      Amount      of Par Value     Earnings (Loss)     Net Assets  

Balance at February 28, 2018

     6,257,029      $ 6,257      $ 188,975,590     $ (45,290,480   $ 143,691,367  

Cumulative effect of the adoption of ASC 606 (Note 2)

     —          —          —         (65,300     (65,300
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at March 1, 2018

     6,257,029        6,257        188,975,590       (45,355,780     143,626,067  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         3,927,648       3,927,648  

Net realized gain (loss) from investments

     —          —          —         212,008       212,008  

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         643,205       643,205  

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (940,546     (940,546

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (3,128,513     (3,128,513

Capital Share Transactions:

            

Proceeds from issuance of common stock

     —          —          —         —         —    

Stock dividend distribution

     25,355        25        504,853       —         504,878  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at May 31, 2018

     6,282,384        6,282        189,480,443       (44,641,978     144,844,747  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         5,144,228       5,144,228  

Net realized gain (loss) from investments

     —          —          —         163       163  

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         (2,154,521     (2,154,521

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         152,546       152,546  

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (3,204,014     (3,204,014

Capital Share Transactions:

            

Proceeds from issuance of common stock

     1,150,000        1,150        28,748,850       —         28,750,000  

Stock dividend distribution

     21,563        22        511,523       —         511,545  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (1,386,667     —         (1,386,667
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at August 31, 2018

     7,453,947        7,454        217,354,149       (44,703,576     172,658,027  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         5,138,941       5,138,941  

Net realized gain (loss) from investments

     —          —          —         (67,164     (67,164

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         (1,031,113     (1,031,113

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (371,581     (371,581

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (3,876,050     (3,876,050

Capital Share Transactions:

            

Proceeds from issuance of common stock

     10,373        10        241,228       —         241,238  

Stock dividend distribution

     25,863        26        578,057       —         578,083  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (1,290     —         (1,290
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at November 30, 2018

     7,490,183        7,490        218,172,144       (44,910,543     173,269,091  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         4,091,392       4,091,392  

Net realized gain (loss) from investments

     —          —          —         4,729,298       4,729,298  

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         (357,880     (357,880

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (607,254     (607,254

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (3,980,011     (3,980,011

Capital Share Transactions:

            

Proceeds from issuance of common stock

     136,176        136        3,158,783       —         3,158,919  

Stock dividend distribution

     30,797        31        581,356       —         581,387  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (9,755     —         (9,755

Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles

     —          —          (18,349,728     18,349,728       —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at February 28, 2019

     7,657,156      $ 7,657      $ 203,552,800     $ (22,685,270   $ 180,875,187  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         3,680,788       3,680,788  

Net realized gain (loss) from investments

     —          —          —         —         —    

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         3,989,130       3,989,130  

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (20,930     (20,930

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (4,176,132     (4,176,132

Capital Share Transactions:

            

Proceeds from issuance of common stock

     76,448        77        1,772,557       —         1,772,634  

Stock dividend distribution

     31,240        31        667,358       —         667,389  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (4,365     —         (4,365
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at May 31, 2019

     7,764,844      $ 7,765      $ 205,988,350     $ (19,212,414   $ 186,783,701  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         4,956,074       4,956,074  

Net realized gain (loss) from investments

     —          —          —         1,870,089       1,870,089  

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         1,457,872       1,457,872  

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (704,263     (704,263

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (4,336,226     (4,336,226

Capital Share Transactions:

            

Proceeds from issuance of common stock

     1,371,667        1,371        34,101,012       —         34,102,383  

Stock dividend distribution

     31,545        32        714,497       —         714,529  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (507,592     —         (507,592
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at August 31, 2019

     9,168,056      $ 9,168      $ 240,296,267     $ (15,968,868   $ 224,336,567  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Increase (Decrease) from Operations:

            

Net investment income

     —          —          —         4,575,303       4,575,303  

Net realized gain (loss) from investments

     —          —          —         10,739,678       10,739,678  

Net change in unrealized appreciation (depreciation) on investments

     —          —          —         (536,151     (536,151

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     —          —          —         (1,061,608     (1,061,608

Decrease from Shareholder Distributions:

            

Distributions of investment income – net

     —          —          —         (5,323,383     (5,323,383

Capital Share Transactions:

            

Proceeds from issuance of common stock

     1,952,367        1,951        49,351,357       —         49,353,308  

Stock dividend distribution

     34,575        36        806,857       —         806,893  

Repurchases of common stock

     —          —          —         —         —    

Offering costs

     —          —          (710,257     —         (710,257
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at November 30, 2019

     11,154,998      $ 11,155      $ 289,744,224     $ (7,575,029   $ 282,180,350  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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Note 11. Earnings Per Share

In accordance with the provisions of FASB ASC Topic 260, “Earnings per Share” (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The following information sets forth the computation of the weighted average basic and diluted net increase in net assets resulting from operations per share for the three and nine months ended November 30, 2019 and November 30, 2018 (dollars in thousands except share and per share amounts):

 

     For the three months ended      For the nine months ended  

Basic and Diluted

   November 30,
2019
     November 30,
2018
     November 30,
2019
     November 30,
2018
 

Net increase in net assets resulting from operations

   $ 13,717      $ 3,669      $ 28,946      $ 10,654  

Weighted average common shares outstanding

     10,036,086        7,480,134        8,702,190        6,887,544  

Weighted average earnings per common share

   $ 1.37      $ 0.49      $ 3.33      $ 1.55  

Note 12. Dividend

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

On May 28, 2019, the Company declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record on June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

The following table summarizes dividends declared for the nine months ended November 30, 2019 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date      Payment Date      Amount
Per Share
     Total
Amount*
 

August 27, 2019

     September 13, 2019        September 26, 2019      $ 0.56      $ 5,323  

May 28, 2019

     June 13, 2019        June 27, 2019        0.55        4,336  

February 26, 2019

     March 14, 2019        March 28, 2019        0.54        4,176  
        

 

 

    

 

 

 

Total dividends declared

         $ 1.65      $ 13,835  
        

 

 

    

 

 

 

 

*

Total amount is calculated based on the number of shares outstanding at the date of record.

 

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The following table summarizes dividends declared for the nine months ended November 30, 2018 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date      Payment Date      Amount
Per Share
     Total
Amount*
 

August 28, 2018

     September 17, 2018        September 27, 2018      $ 0.52      $ 3,876  

May 30, 2018

     June 15, 2018        June 27, 2018        0.51        3,204  

February 26, 2018

     March 14, 2018        March 26, 2018        0.50        3,129  
        

 

 

    

 

 

 

Total dividends declared

         $ 1.53      $ 10,209  
        

 

 

    

 

 

 

 

*

Total amount is calculated based on the number of shares outstanding at the date of record.

 

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Note 13. Financial Highlights

The following is a schedule of financial highlights as of and for the nine months ended November 30, 2019 and November 30, 2018:

 

Per share data    November 30, 2019     November 30, 2018  

Net asset value at beginning of period

   $ 23.62     $ 22.96  

Adoption of ASC 606

     —         (0.01
  

 

 

   

 

 

 

Net asset value at beginning of period, as adjusted

     23.62       22.95  

Net investment income(1)

     1.52       2.06  

Net realized and unrealized gains and losses on investments(1)

     1.81       (0.51
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     3.33       1.55  

Distributions declared from net investment income

     (1.65     (1.53
  

 

 

   

 

 

 

Total distributions to stockholders

     (1.65     (1.53

Issuance of common stock above net asset value(2)

     —         0.16  
  

 

 

   

 

 

 

Net asset value at end of period

   $ 25.30     $ 23.13  
  

 

 

   

 

 

 

Net assets at end of period

   $ 282,180,350     $ 173,269,091  

Shares outstanding at end of period

     11,154,998       7,490,183  

Per share market value at end of period

   $ 25.10     $ 22.06  

Total return based on market value(3)(4)

     17.15     8.13

Total return based on net asset value(3)(5)

     15.17     7.94

Ratio/Supplemental data:

    

Ratio of net investment income to average net assets(6)

     9.15     12.37

Expenses:

    

Ratio of operating expenses to average net assets(7)

     5.30     7.12

Ratio of incentive management fees to average net assets(3)

     3.34     1.77

Ratio of interest and debt financing expenses to average net assets(7)

     7.08     7.70
  

 

 

   

 

 

 

Ratio of total expenses to average net assets(6)

     15.72     16.59

Portfolio turnover rate(3)(8)

     21.77     15.99

Asset coverage ratio per unit(9)

     3,099       2,373  

Average market value per unit

    

Credit Facility(10)

     N/A       N/A  

SBA Debentures(10)

     N/A       N/A  

2023 Notes

   $ 25.64     $ 25.79  

2025 Notes

   $ 25.67     $ 25.08  

 

 

(1)

Per share amounts are calculated using the weighted average shares outstanding during the period.

(2)

The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date, offset by the dilutive effect of issuing common stock below net asset value per share during the period in connection with the satisfaction of the Company’s annual RIC distribution requirement and may include the impact of the different share amounts used for different items (weighted average basic common shares outstanding for the corresponding year and actual common shares outstanding at the end of the year) in the per common share data calculation and rounding impacts. See Note 12, Dividend.

(3)

Ratios are not annualized.

(4)

Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(5)

Total investment return is calculated assuming a purchase of common shares at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

(6)

Ratios are annualized. Incentive management fees included within the ratio are not annualized.

(7)

Ratios are annualized.

(8)

Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value.

(9)

Asset coverage ratio per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage ratio per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. Asset coverage ratio per unit does not include unfunded commitments. The inclusion of unfunded commitments in the calculation of the asset coverage ratio per unit would not cause us to be below the required amount of regulatory coverage.

(10)

The Credit Facility and SBA Debentures are not registered for public trading.

 

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Note 14. Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company’s consolidated financial statements and disclosures in the consolidated financial statements except for the following:

On January 7, 2020, the Company declared a dividend of $0.56 per share payable on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP.

On November 15, 2019, the Company caused notices to be issued to the holders of its 6.75% 2023 Notes regarding the Company’s exercise of its option to redeem, in part, the issued and outstanding 2023 Notes. The Company redeemed $50.0 million in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes on December 21, 2019 (the “Redemption Date”). The Notes were redeemed at 100% of their principal amount ($25 per Note), 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 December 31, 2019, the Company’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, the Company 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 the Company’s 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 the Company’s 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 the Company’s Net Investment Income and NAV will be reflected in its financial statements for the quarter and fiscal year ending February 29, 2020.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Note about Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.

The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

 

   

our future operating results;

 

   

the introduction, withdrawal, success and timing of business initiatives and strategies;

 

   

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

   

the relative and absolute investment performance and operations of our Investment Adviser;

 

   

the impact of increased competition;

 

   

our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

 

   

the unfavorable resolution of any future legal proceedings;

 

   

our business prospects and the prospects of our portfolio companies;

 

   

the impact of investments that we expect to make and future acquisitions and divestitures;

 

   

our contractual arrangements and relationships with third parties;

 

   

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

   

the ability of our portfolio companies to achieve their objectives;

 

   

our expected financings and investments;

 

   

our regulatory structure and tax status, including our ability to operate as a business development company (“BDC”), or to operate our small business investment company (“SBIC”) subsidiary, and to continue to qualify to be taxed as a regulated investment company (“RIC”);

 

   

the adequacy of our cash resources and working capital;

 

   

the timing of cash flows, if any, from the operations of our portfolio companies;

 

   

the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;

 

   

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;

 

   

the impact of changes to tax legislation and, generally, our tax position;

 

   

our ability to access capital and any future financings by us;

 

   

the ability of our Investment Adviser to attract and retain highly talented professionals; and

 

   

the ability of our Investment Adviser to locate suitable investments for us and to monitor and effectively administer our investments.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

 

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We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this quarterly report on Form 10-Q.

OVERVIEW

We are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle market companies, which we define as companies having earnings before interest, tax, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, which may include securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of its net assets. We have elected and qualified to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

Corporate History and Recent Developments

We commenced operations, at the time known as GSC Investment Corp., on March 23, 2007 and completed an initial public offering of shares of common stock on March 28, 2007. Prior to July 30, 2010, we were externally managed and advised by GSCP (NJ), L.P., an entity affiliated with GSC Group, Inc. In connection with the consummation of a recapitalization transaction on July 30, 2010, as described below we engaged Saratoga Investment Advisors (“SIA”) to replace GSCP (NJ), L.P. as our investment adviser and changed our name to Saratoga Investment Corp.

As a result of the event of default under a revolving securitized credit facility with Deutsche Bank we previously had in place, in December 2008 we engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate strategic transaction opportunities and consider alternatives for us. On April 14, 2010, GSC Investment Corp. entered into a stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates and an assignment, assumption and novation agreement with Saratoga Investment Advisors, pursuant to which GSC Investment Corp. assumed certain rights and obligations of Saratoga Investment Advisors under a debt commitment letter Saratoga Investment Advisors received from Madison Capital Funding LLC, which indicated Madison Capital Funding’s willingness to provide GSC Investment Corp. with a $40.0 million senior secured revolving credit facility, subject to the satisfaction of certain terms and conditions. In addition, GSC Investment Corp. and GSCP (NJ), L.P. entered into a termination and release agreement, to be effective as of the closing of the transaction contemplated by the stock purchase agreement, pursuant to which GSCP (NJ), L.P., among other things, agreed to waive any and all accrued and unpaid deferred incentive management fees up to and as of the closing of the transaction contemplated by the stock purchase agreement but continued to be entitled to receive the base management fees earned through the date of the closing of the transaction contemplated by the stock purchase agreement.

On July 30, 2010, the transactions contemplated by the stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates were completed, the private sale of 986,842 shares of our common stock for $15.0 million in aggregate purchase price to Saratoga Investment Advisors and certain of its affiliates closed, the Company entered into the Credit Facility, and the Company began doing business as Saratoga Investment Corp.

We used the net proceeds from the private sale transaction and a portion of the funds available to us under the Credit Facility to pay the full amount of principal and accrued interest, including default interest, outstanding under our revolving securitized credit facility with Deutsche Bank. The revolving securitized credit facility with Deutsche Bank was terminated in connection with our payment of all amounts outstanding thereunder on July 30, 2010.

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse

stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

 

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In January 2011, we registered for public resale of the 986,842 shares of our common stock issued to Saratoga Investment Advisors and certain of its affiliates.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received an SBIC license from the Small Business Administration (“SBA”).

In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% fixed-rate unsecured notes due 2020 (the “2020 Notes”) for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters’ full exercise of their overallotment option. The 2020 Notes were listed on the NYSE under the trading symbol “SAQ” with a par value of $25.00 per share. The 2020 Notes were redeemed in full on January 13, 2017.

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate unsecured notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 20, 2023, and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our option. The 2023 Notes are listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our 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 the common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was 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).

For the three months ended November 30, 2019, the Company sold 1,952,367 shares for gross proceeds of $49.4 million at an average price of $25.28 for aggregate net proceeds of $48.7 million (net of transaction costs).

For the nine months ended November 30, 2019, the Company sold 3,400,481 shares for gross proceeds of $85.2 million at an average price of $25.06 for aggregate net proceeds of $84.0 million (net of transaction costs).

On July 13, 2018, the Company 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, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were 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 our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

On December 14, 2018, the Company completed the third refinancing of the Saratoga CLO (the “2013-1 Reset CLO Notes”). This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period of January 2020 was also added. In addition to and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes were repaid.

 

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On February 5, 2019, the Company 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 million aggregate 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. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

At November 30, 2019, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol “SAF” with a par value of $25.00 per share.

On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form of SBA debentures.

Critical Accounting Policies

Basis of Presentation

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make certain estimates and assumptions affecting amounts reported in the Company’s consolidated financial statements. We have identified investment valuation, revenue recognition and the recognition of capital gains incentive fee expense as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Investment Valuation

The Company accounts for its investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be transferred at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from Saratoga Investment Advisors, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

 

   

Each investment is initially valued by the responsible investment professionals of Saratoga Investment Advisors and preliminary valuation conclusions are documented and discussed with our senior management; and

 

   

An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year. We use a third-party independent valuation firm to value our investment in the subordinated notes of Saratoga CLO and the Class F-R-2 Notes and Class G-R-2 Notes tranches of the Saratoga CLOs every quarter.

In addition, all our investments are subject to the following valuation process:

 

   

The audit committee of our board of directors reviews and approves each preliminary valuation and Saratoga Investment Advisors and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

 

   

Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of Saratoga Investment Advisors, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

 

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Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by SIA and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

Revenue Recognition

Income Recognition

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums on investments.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

Payment-in-Kind Interest

The Company holds debt and preferred equity investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

Revenues

We generate revenue in the form of interest income and capital gains on the debt investments that we hold and capital gains, if any, on equity interests that we may acquire. We expect our debt investments, whether in the form of leveraged loans or mezzanine debt, to have terms of up to ten years, and to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either quarterly or semi-annually. In some cases, our debt or preferred equity investments may provide for a portion or all of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned. We may also invest in preferred equity or common equity securities that pay dividends on a current basis.

On January 22, 2008, we entered into a collateral management agreement with Saratoga CLO, pursuant to which we act as its collateral manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, we completed a second refinancing of the Saratoga CLO with its reinvestment period extended to October 2018.

On December 14, 2018, we completed a third refinancing and upsize of the Saratoga CLO. The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period of January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, we invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million in aggregate principal amount of the Class G-R-2 notes tranches at par, with a coupon of LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. As part of this refinancing, we also redeemed our existing $4.5 million aggregate amount of the Class F notes tranche at par.

 

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The Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the 2013-1 Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds.

Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

ASC 606

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which supersedes the revenue recognition requirements in Revenue Recognition (ASC 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In May 2016, ASU 2016-12 amended ASU 2014-09 and deferred the effective period for annual periods beginning after December 15, 2017. Management has concluded that the majority of its revenues associated with financial instruments are scoped out of ASC 606, and has concluded that the only significant impact relates to the timing of the recognition of the CLO incentive fee income. We adopted ASC 606 under the modified retrospective approach using the practical expedient provided for, therefore the presentation of prior periods has not been adjusted.

Expenses

Our primary operating expenses include the payment of investment advisory and management fees, professional fees, directors and officers insurance, fees paid to independent directors and administrator expenses, including our allocable portion of our administrator’s overhead. Our investment advisory and management fees compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions, including those relating to:

 

   

organization;

 

   

calculating our net asset value (including the cost and expenses of any independent valuation firm);

 

   

expenses incurred by our Investment Adviser payable to third parties, including agents, consultants or other advisers, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

 

   

expenses incurred by our Investment Adviser payable for travel and due diligence on our prospective portfolio companies;

 

   

interest payable on debt, if any, incurred to finance our investments;

 

   

offerings of our common stock and other securities;

 

   

investment advisory and management fees;

 

   

fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with, evaluating and making investments;

 

   

transfer agent and custodial fees;

 

   

federal and state registration fees;

 

   

all costs of registration and listing our common stock on any securities exchange;

 

   

federal, state and local taxes;

 

   

independent directors’ fees and expenses;

 

   

costs of preparing and filing reports or other documents required by governmental bodies (including the U.S. Securities and Exchange Commission (“SEC”) and the SBA);

 

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costs of any reports, proxy statements or other notices to common stockholders including printing costs;

 

   

our fidelity bond, directors and officers errors and omissions liability insurance, and any other insurance premiums;

 

   

direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs; and

 

   

administration fees and all other expenses incurred by us or, if applicable, the administrator in connection with administering our business (including payments under the Administration Agreement based upon our allocable portion of the administrator’s overhead in performing its obligations under an Administration Agreement, including rent and the allocable portion of the cost of our officers and their respective staffs (including travel expenses)).

Pursuant to the investment advisory and management agreement that we had with GSCP (NJ), L.P., our former investment adviser and administrator, we had agreed to pay GSCP (NJ), L.P. as investment adviser a quarterly base management fee of 1.75% of the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters and an incentive fee.

The incentive fee had two parts:

 

   

A fee, payable quarterly in arrears, equal to 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of the net assets at the end of the immediately preceding quarter, that exceeded a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter. Under this provision, in any fiscal quarter, our investment adviser received no incentive fee unless our pre-incentive fee net investment income exceeded the hurdle rate of 1.875%. Amounts received as a return of capital were not included in calculating this portion of the incentive fee. Since the hurdle rate was based on net assets, a return of less than the hurdle rate on total assets could still have resulted in an incentive fee.

 

   

A fee, payable at the end of each fiscal year, equal to 20.0% of our net realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation, in each case on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of capital gains incentive fees paid to the investment adviser through such date.

We deferred cash payment of any incentive fee otherwise earned by our former investment adviser if, during the then most recent four full fiscal quarters ending on or prior to the date such payment was to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less liabilities) (before taking into account any incentive fees payable during that period) was less than 7.5% of our net assets at the beginning of such period. These calculations were appropriately pro-rated for the first three fiscal quarters of operation and adjusted for any share issuances or repurchases during the applicable period. Such incentive fee would become payable on the next date on which such test had been satisfied for the most recent four full fiscal quarters or upon certain terminations of the investment advisory and management agreement. We commenced deferring cash payment of incentive fees during the quarterly period ended August 31, 2007 and continued to defer such payments through the quarterly period ended May 31, 2010. As of July 30, 2010, the date on which GSCP (NJ), L.P. ceased to be our investment adviser and administrator, we owed GSCP (NJ), L.P. $2.9 million in fees for services previously provided to us; of which $0.3 million has been paid by us. GSCP (NJ), L.P. agreed to waive payment by us of the remaining $2.6 million in connection with the consummation of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates described elsewhere in this Quarterly Report.

The terms of the investment advisory and management agreement with Saratoga Investment Advisors, our current investment adviser, are substantially similar to the terms of the investment advisory and management agreement we had entered into with GSCP (NJ), L.P., our former investment adviser, except for the following material distinctions in the fee terms:

 

   

The capital gains portion of the incentive fee was reset with respect to gains and losses from May 31, 2010, and therefore losses and gains incurred prior to such time will not be taken into account when calculating the capital gains fee payable to Saratoga Investment Advisors and, as a result, Saratoga Investment Advisors will be entitled to 20.0% of net gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 equal the fair value of such investment as of such date. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P., the capital gains fee was calculated from March 21, 2007, and the gains were substantially outweighed by losses.

 

   

Under the “catch up” provision, 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income that exceeds 1.875% but is less than or equal to 2.344% in any fiscal quarter is payable to Saratoga Investment Advisors. This will enable Saratoga Investment Advisors to receive 20.0% of all net investment income as such amount approaches 2.344% in any quarter, and Saratoga Investment Advisors will receive 20.0% of any additional net investment income. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P. only received 20.0% of the excess net investment income over 1.875%.

 

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We will no longer have deferral rights regarding incentive fees in the event that the distributions to stockholders and change in net assets is less than 7.5% for the preceding four fiscal quarters.

Capital Gains Incentive Fee

The Company records an expense accrual relating to the capital gains incentive fee payable by the Company to its Manager when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.

Regulatory Matters

In August 2018, the SEC issued Final Rule Release No.33-10532, Disclosure Update and Simplification, which in part amends certain disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The effective date for these disclosures was November 5, 2018, effective for the first quarter that begins after the effective date. Management has adopted these amendments as currently required and these are reflected in the Company’s consolidated financial statements and related disclosures. The presentation of certain prior year information has been adjusted to conform with these amendments.

In March 2019, the SEC issued the Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends certain SEC disclosure requirements. The amendments are intended to simplify certain disclosure requirements and to provide for a consistent set of rules to govern incorporating information by reference and hyperlinking, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019. Management has adopted these amendments as currently required and these are reflected in the Company’s filings.

New Accounting Pronouncements

In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has assessed these changes and does not believe they would have a material impact on the Company’s consolidated financial statements and disclosures.

 

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Portfolio and Investment Activity

Investment Portfolio Overview

 

     November 30, 2019     February 28, 2019  
     ($ in millions)  

Number of investments(1)

     67       58  

Number of portfolio companies(2)

     38       31  

Average investment per portfolio company(2)

   $ 11.9     $ 11.8  

Average investment size(1)

   $ 6.9     $ 6.5  

Weighted average maturity(3)

     3.4yrs       3.6yrs  

Number of industries

     9       8  

Non-performing or delinquent investments (fair value)

   $ 4.0     $ 5.7  

Fixed rate debt (% of interest earning portfolio)(3)

   $ 57.4(13.8 %)    $ 55.7(16.3 %) 

Fixed rate debt (weighted average current coupon)(3)

     10.3     10.4

Floating rate debt (% of interest earning portfolio)(3)

   $ 358.3(86.2 %)    $ 285.0(83.7 %) 

Floating rate debt (weighted average current spread over LIBOR)(3)(4)

     8.1     8.6

 

(1)

Excludes our investment in the subordinated notes of Saratoga CLO.

(2)

Excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-2 Notes and Class G-R-2 Notes tranches of Saratoga CLO.

(3)

Excludes our investment in the subordinated notes of Saratoga CLO and equity interests.

(4)

Calculation uses either 1-month or 3-month LIBOR, depending on the contractual terms, and after factoring in any existing LIBOR floors.

During the three months ended November 30, 2019, we 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 period. During the three months ended November 30, 2018, we invested $73.7 million in new or existing portfolio companies and had $23.3 million in aggregate amount of exits and repayments resulting in net investments of $50.4 million for the period.

During the nine months ended November 30, 2019, we invested $160.7 million in new or existing portfolio companies and had $97.2 million in aggregate amount of exits and repayments resulting in net investments of $63.5 million for the period. During the nine months ended November 30, 2018, we invested $160.7 million in new or existing portfolio companies and had $60.9 million in aggregate amount of exits and repayments resulting in net investments of $99.8 million for the period.

Portfolio Composition

Our portfolio composition at November 30, 2019 and February 28, 2019 at fair value was as follows:

 

     November 30, 2019     February 28, 2019  
     Percentage
of Total
Portfolio
    Weighted
Average
Current
Yield
    Percentage
of Total
Portfolio
    Weighted
Average
Current
Yield
 

First lien term loans

     62.2     10.0     50.5     10.9

Second lien term loans

     20.8       11.4       31.3       11.7  

Unsecured term loans

     0.4       0.0       0.5       0.0  

Structured finance securities

     7.0       14.9       8.8       14.6  

Equity interests

     9.6       2.2       8.9       3.1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     9.8     100.0     10.7
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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At November 30, 2019, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $24.5 million and constituted 5.0% of our portfolio.

This investment constitutes a first loss position in a portfolio that, as of November 30, 2019 and February 28, 2019, was composed of $510.9 million and $510.3 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of November 30, 2019, we also own $2.5 million in aggregate principal of the F-R-2 Notes and $7.5 million in aggregate principal of the G-R-2 Notes in the Saratoga CLO, that only rank senior to the subordinated notes.

This investment is subject to unique risks. (See “Part 1. Item 1A. Risk Factors—Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of predominantly senior secured first lien term loans and is subject to additional risks and volatility” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019).

We do not consolidate the Saratoga CLO portfolio in our consolidated financial statements. Accordingly, the metrics below do not include the underlying Saratoga CLO portfolio investments. However, at November 30, 2019, $479.0 million or 98.7% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and three Saratoga CLO portfolio investments were in default with a fair value of $2.4 million. At February 28, 2019, $491.0 million or 98.5% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and two Saratoga CLO portfolio investments were in default with a fair value of $0.01 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019.

Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system (“CMR”). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)—performing credit; (Yellow)—underperforming credit; (Red)—in principal payment default and/or expected loss of principal.

Portfolio CMR distribution

The CMR distribution for our investments at November 30, 2019 and February 28, 2019 was as follows:

Saratoga Investment Corp.

 

     November 30, 2019     February 28, 2019  

Color Score

   Investments
at
Fair Value
     Percentage
of Total
Portfolio
    Investments
at
Fair Value
     Percentage
of Total
Portfolio
 
     ($ in thousands)  

Green

   $ 411,788        84.6   $ 336,061        83.6

Yellow

     2,073        0.4       4,600        1.1  

Red

     1,893        0.4       6        0.0  

N/A(1)

     71,277        14.6       61,353        15.3  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 487,031        100.0   $ 402,020        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Comprised of our investment in the subordinated notes of Saratoga CLO and equity interests.

The change in reserve from $0.6 million as of February 28, 2019 to $1.3 million as of November 30, 2019 was primarily related to the additional interest accruals reserved on M/C Acquisition Corp., L.L.C., My Alarm Center, LLC, Roscoe Medical, Inc. and TMAC Acquisition Co., LLC.

 

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The CMR distribution of Saratoga CLO investments at November 30, 2019 and February 28, 2019 was as follows:

Saratoga CLO

 

     November 30, 2019     February 28, 2019  

Color Score

   Investments
at
Fair Value
     Percentage
of Total
Portfolio
    Investments
at
Fair Value
     Percentage
of Total
Portfolio
 
     ($ in thousands)  

Green

   $ 434,326        89.5   $ 462,171        92.7

Yellow

     44,653        9.2       28,839        5.8  

Red

     6,216        1.3       7,379        1.5  

N/A(1)

     0        0.0       16        0.0  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 485,195        100.0   $ 498,405        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Comprised of Saratoga CLO’s equity interests.

Portfolio composition by industry grouping at fair value

The following table shows our portfolio composition by industry grouping at fair value at November 30, 2019 and February 28, 2019:

Saratoga Investment Corp.

 

     November 30, 2019     February 28, 2019  
     Investments
At
Fair Value
     Percentage
of Total
Portfolio
    Investments
At
Fair Value
     Percentage
of Total
Portfolio
 
     ($ in thousands)  

Business Services

   $ 296,956        61.0   $ 252,676        62.8

Education

     72,430        14.9       48,076        12.0  

Healthcare Services

     68,165        14.0       57,342        14.3  

Structured Finance Securities(1)

     34,306        7.0       35,328        8.8  

Property Management

     7,516        1.5       —          —    

Metals

     3,184        0.7       2,827        0.7  

Food and Beverage

     2,073        0.4       2,100        0.5  

Consumer Services

     1,997        0.4       3,166        0.8  

Consumer Products

     404        0.1       505        0.1  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 487,031        100.0   $ 402,020        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Comprised of our investment in the subordinated notes, Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO.

 

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The following table shows Saratoga CLO’s portfolio composition by industry grouping at fair value at November 30, 2019 and February 28, 2019:

Saratoga CLO

 

     November 30, 2019     February 28, 2019  
     Investments
at
Fair Value
     Percentage
of Total
Portfolio
    Investments
at
Fair Value
     Percentage
of Total
Portfolio
 
     ($ in thousands)  

Banking Finance Insurance & Real Estate

   $ 79,632        16.4   $ 74,638        15.0

Services: Business

     40,409        8.3       36,575        7.3  

Healthcare & Pharmaceuticals

     38,222        7.9       39,242        7.9  

High Tech Industries

     29,618        6.1       38,886        7.8  

Telecommunications

     28,546        5.9       28,156        5.6  

Services: Consumer

     27,380        5.7       24,712        5.0  

Aerospace & Defense

     26,469        5.5       16,836        3.4  

Beverage Food & Tobacco

     20,071        4.1       23,436        4.7  

Consumer goods: Non-durable

     19,517        4.0       15,528        3.1  

Media: Advertising Printing & Publishing

     18,145        3.7       31,799        6.4  

Hotel Gaming & Leisure

     17,501        3.6       15,373        3.1  

Retail

     16,521        3.4       23,018        4.6  

Chemicals Plastics & Rubber

     16,360        3.4       15,841        3.2  

Automotive

     13,939        2.9       13,373        2.7  

Containers Packaging & Glass

     12,281        2.5       10,033        2.0  

Consumer goods: Durable

     10,842        2.2       6,324        1.3  

Capital Equipment

     10,340        2.1       9,638        1.9  

Transportation: Cargo

     9,321        1.9       11,137        2.2  

Media: Broadcasting & Subscription

     8,175        1.7       10,410        2.1  

Construction & Building

     8,130        1.7       13,293        2.7  

Utilities: Oil & Gas

     7,379        1.5       2,953        0.6  

Media: Diversified & Production

     5,475        1.1       13,086        2.6  

Energy: Oil & Gas

     3,731        0.8       763        0.1  

Forest Products & Paper

     3,461        0.7       4,555        0.9  

Energy: Electricity

     3,392        0.7       5,059        1.0  

Metals & Mining

     3,112        0.7       5,048        1.0  

Utilities: Electric

     2,867        0.6       2,941        0.6  

Wholesale

     1,940        0.4       —          —    

Transportation: Consumer

     1,916        0.4       4,773        1.0  

Environmental Industries

     503        0.1       979        0.2  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 485,195        100.0   $ 498,405        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

Portfolio composition by geographic location at fair value

The following table shows our portfolio composition by geographic location at fair value at November 30, 2019 and February 28, 2019. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

 

     November 30, 2019     February 28, 2019  
     Investments
at
Fair Value
     Percentage
of Total
Portfolio
    Investments
at
Fair Value
     Percentage
of Total
Portfolio
 
     ($ in thousands)  

Southeast

   $ 158,437        32.5   $ 130,604        32.5

Midwest

     116,475        23.9       116,388        29.0  

West

     68,155        14.0       10,777        2.7  

Southwest

     61,194        12.6       50,236        12.5  

Northeast

     18,012        3.7       19,061        4.7  

Northwest

     9,232        1.9       8,636        2.1  

Other(1)

     55,526        11.4       66,318        16.5  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 487,031        100.0   $ 402,020        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Comprised of our investment in the subordinated notes, Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO.

Results of operations

Operating results for the three and nine months ended November 30, 2019 and November 30, 2018 was as follows:

 

     For the three months ended      For the nine months ended  
     November 30,
2019
     November 30,
2018
     November 30,
2019
     November 30,
2018
 
     ($ in thousands)  

Total investment income

   $ 14,196      $ 12,833      $ 40,835      $ 34,724  

Total operating expenses

     9,621        7,694        27,623        20,513  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income

     4,575        5,139        13,212        14,211  

Net realized gain (loss) from investments

     10,740        (67      12,610        145  

Net change in unrealized appreciation (depreciation) on investments

     (536      (1,031      4,911        (2,542

Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments

     (1,062      (372      (1,787      (1,160
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in net assets resulting from operations

   $ 13,717      $ 3,669      $ 28,946      $ 10,654  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Investment income

The composition of our investment income for three and nine months ended November 30, 2019 and November 30, 2018 was as follows:

 

     For the three months ended      For the nine months ended  
     November 30,
2019
     November 30,
2018
     November 30,
2019
     November 30,
2018
 
     ($ in thousands)  

Interest from investments

   $ 12,899      $ 11,844      $ 36,244      $ 31,766  

Management fee income

     630        381        1,889        1,130  

Incentive fee income

     —          148        —          494  

Interest from cash and cash equivalents and other income

     667        460        2,702        1,334  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

   $ 14,196      $ 12,833      $ 40,835      $ 34,724  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three months ended November 30, 2019, total investment income increased $1.4 million, or 10.6% to $14.2 million from $12.8 million for the three months ended November 30, 2018. Interest income from investments increased $1.1 million, or 8.9%, to $12.9 million for the three months ended November 30, 2019 from $11.8 million for the three months ended November 30, 2018. This reflects the impact of the increase of $43.2 million, or 9.7% in total investments at November 30, 2019 from $443.8 million at November 30, 2018. At November 30, 2019, the weighted average current yield on investments was 9.8% compared to 10.8% at November 30, 2018, which offset some of the increase.

For the nine months ended November 30, 2019, total investment income increased $6.1 million, or 17.6% to $40.8 million from $34.7 million for the nine months ended November 30, 2018. Interest income from investments increased $4.4 million, or 14.1%, to $36.2 million for the nine months ended November 30, 2019 from $31.8 million for the nine months ended November 30, 2018. This reflects the impact of the increase of $43.2 million, or 9.7% in total investments at November 30, 2019 from $443.8 million at November 30, 2018.

For the three months ended November 30, 2019 and November 30, 2018, total PIK income was $1.5 million and $1.4 million, respectively. For the nine months ended November 30, 2019 and November 30, 2018, total PIK income was $3.9 million and $3.0 million, respectively. This increase was primarily due to the increase in the investment in Easy Ice, LLC, which primarily generates PIK income.

Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended November 30, 2019, total management fee income increased $0.2 million, or 65.4% to $0.6 million from $0.4 million for the three months ended November 30, 2018. For the nine months ended November 30, 2019, total management fee income increased $0.8 million, or 67.2% to $1.9 million from $1.1 million for the nine months ended November 30, 2018. This reflects the increase in Saratoga CLO assets being managed by the Company following the third refinancing of the Saratoga CLO.

Following the third refinancing of the Saratoga CLO on December 14, 2018, the Company is no longer entitled to receive the incentive fee. For the three and nine months ended November 30, 2018, incentive fee income of $0.1 million and $0.5 million, respectively, was recognized related to the Saratoga CLO, reflecting the 12.0% hurdle rate that has been achieved.

 

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Operating expenses

The composition of our operating expenses for the three and nine months ended November 30, 2019 and November 30, 2018 was as follows:

 

     For the three months ended      For the nine months ended  
     November 30, 2019      November 30, 2018      November 30, 2019      November 30, 2018  
     ($ in thousands)  

Interest and debt financing expenses

   $ 3,897      $ 3,614      $ 11,628      $ 9,203  

Base management fees

     2,147        1,849        5,956        5,027  

Incentive management fees

     3,102        924        7,301        2,804  

Professional fees

     401        407        1,181        1,418  

Administrator expenses

     556        500        1,575        1,396  

Insurance

     64        62        193        190  

Directors fees and expenses

     60        60        218        231  

General and administrative and other expenses

     395        354        1,036        929  

Income tax benefit

     (1,001      (76      (1,465      (685

Excise tax credit

     —          —          —          0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

   $ 9,621      $ 7,694      $ 27,623      $ 20,513  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three months ended November 30, 2019, total operating expenses increased $1.9 million, or 25.0% compared to the three months ended November 30, 2018. For the nine months ended November 30, 2019, total operating expenses increased $7.1 million, or 34.7% compared to the nine months ended November 30, 2018.

For the three months ended November 30, 2019 and November 30, 2018, the increase in interest and debt financing expenses is primarily attributable to an increase in average outstanding debt from $271.6 million for the three months ended November 30, 2018 to $286.6 million for the three months ended November 30, 2019.

For the nine months ended November 30, 2019 and November 30, 2018, the increase in interest and debt financing expenses is primarily attributable to an increase in average outstanding debt from $236.2 million for the nine months ended November 30, 2018 to $284.6 million for the nine months ended November 30, 2019.

For the three months ended November 30, 2019, the weighted average interest rate on our outstanding indebtedness was 4.79% compared to 4.73% for the three months ended November 30, 2018. The increase in weighted average interest rate was primarily driven by the issuance of the 2025 Notes which carry a fixed rate of 6.25%, versus the SBA debentures that carry a lower interest rate.

For the nine months ended November 30, 2019, the weighted average interest rate on our outstanding indebtedness was 4.81% compared to 4.55% for the nine months ended November 30, 2018. The increase in weighted average interest rate was primarily driven by the issuance of the 2025 Notes which carry a fixed rate of 6.25%, versus the SBA debentures that carry a lower interest rate.

As of November 30, 2019 and February 28, 2019, the SBA debentures represented 52.7% and 52.7% of overall debt, respectively.

For the three months ended November 30, 2019, base management fees increased $0.3 million, or 16.1% compared to the three months ended November 30, 2018. The increase in base management fees results from the 16.4% increase in the average value of our total assets, less cash and cash equivalents, from $423.8 million for the three months ended November 30, 2018 to $493.3 million for the three months ended November 30, 2019. For the nine months ended November 30, 2019, base management fees increased $0.9 million, or 18.5% compared to the nine months ended November 30, 2018. The increase in base management fees results from the 18.8% increase in the average value of our total assets, less cash and cash equivalents, from $381.3 million for the nine months ended November 30, 2018 to $452.9 million for the nine months ended November 30, 2019.

For the three months ended November 30, 2019, incentive management fees increased $2.2 million, or 235.9%, compared to the three months ended November 30, 2018. The first part of the incentive management fees increased from $1.2 million for the three months ended November 30, 2018 to $1.5 million for the three months ended November 30, 2019, as higher average total assets led to increased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. The incentive management fees related to capital gains increased from a $0.3 million benefit for the three months ended November 30, 2018 to a $1.6 million expense for the three months ended November 30, 2019, reflecting net realized gains on investments this period, including the impact of the deferred taxes on unrealized appreciation.

 

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For the nine months ended November 31, 2019, incentive management fees increased $4.5 million, or 160.4%, compared to the nine months ended November 30, 2018. The first part of the incentive management fees increased from $3.4 million for the nine months ended November 30, 2018 to $4.1 million for the nine months ended November 30, 2019, as higher average total assets led to increased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. The incentive management fees related to capital gains increased from a $0.6 million benefit for the nine months ended November 30, 2018 to a $3.2 million expense for the nine months ended November 30, 2019, reflecting net realized gains on investments this period, including the impact of the deferred taxes on unrealized appreciation.

Professional fees were relatively unchanged, reporting $0.4 million in each of the three month periods ended November 30, 2019 and November 30, 2018, respectively.

For the nine months ended November 30, 2019, professional fees decreased $0.2 million, or 16.7% compared to the nine months ended November 30, 2018. This decrease primarily relates to decreased legal and accounting fees this year, as the shelf registration statement last year led to higher fees.

For the three and nine months ended November 30, 2019, administrator expenses increased $0.06 million, or 11.3%, and increased $0.2 million, or 12.8%, respectively, compared to the three and nine months ended November 30, 2018. These increases during the period are attributable to an increase to the cap on the payment or reimbursements of expenses by the Company from $2.0 million to $2.225 million, effective August 1, 2019.

As discussed above, the increase in interest and debt financing expenses for the three months ended November 30, 2019 compared to the three months ended November 30, 2018 is primarily attributable to an increase in the average dollar amount of outstanding debt. During the three months ended November 30, 2019 and November 30, 2018, the average borrowings outstanding under the Credit Facility was $2.1 million and $7.2 million, respectively. For the three months ended November 30, 2019 and November 30, 2018, the average borrowings outstanding of SBA debentures was $150.0 million and $150.0 million, respectively. For the three months ended November 30, 2019 and November 30, 2018, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.21% and 3.20%, respectively. During the three months ended November 30, 2019 and November 30, 2018, the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was $60.0 million and $40.0 million, respectively. During the three months ended November 30, 2019 and November 30, 2018, the average dollar amount of our 6.75% fixed-rate 2023 Notes outstanding was $74.5 million and $74.5 million, respectively.

As discussed above, the increase in interest and debt financing expenses for the nine months ended November 30, 2019 compared to the nine months ended November 30, 2018 is primarily attributable to an increase in the average dollar amount of outstanding debt. During the nine months ended November 30, 2019 and November 30, 2018, the average borrowings outstanding under the Credit Facility was $0.8 million and $3.2 million, respectively. For the nine months ended November 30, 2019 and November 30, 2018, the average borrowings outstanding of SBA debentures was $150.0 million and $144.6 million, respectively. For the nine months ended November 30, 2019 and November 30, 2018, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.24% and 3.20%, respectively. During the nine months ended November 30, 2019 and November 30, 2018, the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was $60.0 million and $13.8 million, respectively. During the nine months ended November 30, 2019 and November 30, 2018, the average dollar amount of our 6.75% fixed-rate 2023 Notes outstanding was $74.5 million and $74.5 million, respectively.

For the three months ended November 30, 2019 and November 30, 2018, there were income tax benefits of $1.0 million and $0.1 million, respectively. For the nine months ended November 30, 2019 and November 30, 2018, there were income tax benefits of $1.5 million and $0.7 million, respectively. This relates to net deferred federal and state income tax benefits with respect to operating losses and income derived from equity investments held in taxable blockers.

 

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Net realized gains (losses) on sales of investments

For the three months ended November 30, 2019, the Company had $51.2 million of sales, repayments, exits or restructurings resulting in $10.7 million of net realized gains. For the nine months ended November 30, 2019, the Company had $97.2 million of sales, repayments, exits or restructurings resulting in $12.6 million of net realized gains. The most significant realized gains and losses during the nine months ended November 30, 2019 were as follows (dollars in thousands):

 

Nine Months ended November 30, 2019  

Issuer

   Asset Type    Gross Proceeds      Cost      Net
Realized
Gain (Loss)
 

Censis Technologies, Inc.

   Equity Interests    $ 12,280      $ 999      $ 11,281  

Fancy Chap, Inc.

   First Lien Term Loan & Equity Interests      8,175        6,865        1,310  

For the three months ended November 30, 2018, the Company had $23.3 million of sales, repayments, exits or restructurings. For the nine months ended November 30, 2018, the Company had $60.9 million of sales, repayments, exits or restructurings resulting in $0.1 million of net realized gains. The most significant realized gains (losses) during the nine months ended November 30, 2018 was as follows (dollars in thousands):

 

Nine Months ended November 30, 2018  

Issuer

  

Asset Type

   Gross Proceeds      Cost      Net
Realized
Gain (Loss)
 

Take 5 Oil Change, L.L.C.

   Equity Interests    $ 319      $ —        $ 319  

TM Restaurant Group L.L.C.

   First Lien Term Loan      11,124        11,298        (174

Net change in unrealized appreciation (depreciation) on investments

For the three months ended November 30, 2019, our investments had a net change in unrealized depreciation of $0.5 million versus a net change in unrealized depreciation of $1.0 million for the three months ended November 30, 2018. For the nine months ended November 30, 2019, our investments had a net change in unrealized appreciation of $4.9 million versus a net change in unrealized depreciation of $2.5 million for the nine months ended November 30, 2018. The most significant cumulative net change in unrealized appreciation (depreciation) for the nine months ended November 30, 2019 were the following (dollars in thousands):

 

Nine Months ended November 30, 2019  

Issuer

  

Asset Type

   Cost      Fair Value      Total
Unrealized
Appreciation
(Depreciation)
     YTD Change
in Unrealized
Appreciation
(Depreciation)
 

Easy Ice, LLC

   Second Term Lien Loan & Equity Interests    $ 37,822      $ 47,316      $ 9,494      $ 5,626  

Saratoga Investment Corp. CLO 2013-1, Ltd.

   Structured Finance Securities      24,268        24,497        229        (1,648

The $5.6 million net change in unrealized appreciation in our investment in Easy Ice, LLC was driven by a continued increase in the scale and earnings of the business.

The $1.6 million net change in unrealized depreciation in our investment in Saratoga Investment Corp., CLO 2013-1, Ltd. was driven by the actual cash distribution received by the Company in the quarter ended November 30, 2019, coupled with an increase in the discount rate.

 

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The most significant cumulative net change in unrealized appreciation (depreciation) for the nine months ended November 30, 2018 were the following (dollars in thousands):

 

Nine Months ended November 30, 2018  

Issuer

  

Asset Type

   Cost      Fair Value      Total
Unrealized
Appreciation
(Depreciation)
    YTD Change in
Unrealized
Appreciation
(Depreciation)
 

Easy Ice LLC

   Second Lien Term Loan & Equity Interests    $ 33,569      $ 37,223      $ 3,654     $ 1,557  

Elyria Foundry, L.L.C.

   Second Lien Term Loan & Equity Interests      10,670        2,782        (7,888     (1,637

My Alarm Center, LLC

   Equity Interrests      4,811        3,033        (1,778     (1,492

Saratoga Investment Corp. CLO 2013-1, Ltd.

   Structured Finance Securities      9,523        10,814        1,291       (1,288

Vector Controls Holding Co., LLC

   First Lien Term Loan & Equity Interests      9,730        11,584        1,854       788  

The $1.6 million net change in unrealized appreciation in our investment in Easy Ice LLC was driven by the completion of a strategic acquisition that increased the scale and earnings of the business.

The $1.6 million net change in unrealized depreciation in our investment in Elyria Foundry, L.L.C. was driven by changes in oil and gas end markets since year-end and increased labor costs, negatively impacting the Company’s performance.

The $1.5 million net change in unrealized depreciation in our investment in My Alarm Center, LLC was driven by the issuance of new securities senior to existing investments.

The $1.3 million net change in unrealized depreciation in our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. was driven by the projected refinancing of the Saratoga CLO and the deal costs incurred up front related to the transaction.

The $0.8 million net change in unrealized appreciation in our investment in Vector Controls Holdings Co., LLC was driven by the continued strength of the underlying operating performance of the business.

Changes in net assets resulting from operations

For the three months ended November 30, 2019 and November 30, 2018, we recorded a net increase in net assets resulting from operations of $13.7 million and $3.7 million, respectively. Based on 10,036,086 weighted average common shares outstanding during the three month period ending November 30, 2019, our per share net increase in net assets resulting from operations was $1.37 for the three months ended November 30, 2019. This compares to a per share net increase in net assets resulting from operations of $0.49 for the three months ended November 30, 2018 based on 7,480,134 weighted average common shares outstanding for the three months ended November 30, 2018.

For the nine months ended November 30, 2019 and November 30, 2018, we recorded a net increase in net assets resulting from operations of $28.9 million and $10.7 million, respectively. Based on 8,702,190 weighted average common shares outstanding during the nine month period ending November 30, 2019, our per share net increase in net assets resulting from operations was $3.33 for the nine months ended November 30, 2019. This compares to a per share net increase in net assets resulting from operations of $1.55 for the nine months ended November 30, 2018 based on 6,887,544 weighted average common shares outstanding for the nine months ended November 30, 2018.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We intend to continue to generate cash primarily from cash flows from operations, including interest earned from our investments in debt in middle market companies, interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less, future borrowings and future offerings of securities.

Although we expect to fund the growth of our investment portfolio through the net proceeds from future equity offerings, including our dividend reinvestment plan (“DRIP”), and issuances of senior securities or future borrowings, to the extent permitted by the 1940 Act, we cannot assure you that our plans to raise capital will be successful. In this regard, because our common stock has historically traded at a price below our current net asset value per share and we are limited in our ability to sell our common stock at a price below net asset value per share, we have been and may continue to be limited in our ability to raise equity capital.

In addition, we intend to distribute to our stockholders substantially all of our taxable income in order to satisfy the distribution requirement applicable to RICs under the Code. In satisfying this distribution requirement, we have in the past relied on Internal Revenue

 

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Service (“IRS”) issued private letter rulings concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. We may rely on these IRS private letter rulings in future periods to satisfy our RIC distribution requirement.

Also, as a BDC, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200.0%, reduced to 150.0% effective April 16, 2019 following the approval received from the non-interested board of directors on April 16, 2018. This requirement limits the amount that we may borrow. Our asset coverage ratio, as defined in the 1940 Act, was 309.9% as of November 30, 2019 and 234.5% as of February 28, 2019. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources, including the equity markets and other debt-related markets, which may or may not be available on favorable terms, if at all.

Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies or to repay borrowings. Also, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

Madison revolving credit facility

Below is a summary of the terms of the senior secured revolving credit facility we entered into with Madison Capital Funding LLC (the “Credit Facility”) on June 30, 2010, which was most recently amended on May 18, 2017.

Availability. The Company can draw up to the lesser of (i) $40.0 million (the “Facility Amount”) and (ii) the product of the applicable advance rate (which varies from 50.0% to 75.0% depending on the type of loan asset) and the value, determined in accordance with the Credit Facility (the “Adjusted Borrowing Value”), of certain “eligible” loan assets pledged as security for the loan (the “Borrowing Base”), in each case less (a) the amount of any undrawn funding commitments the Company has under any loan asset and which are not covered by amounts in the Unfunded Exposure Account referred to below (the “Unfunded Exposure Amount”) and outstanding borrowings. Each loan asset held by the Company as of the date on which the Credit Facility was closed was valued as of that date and each loan asset that the Company acquires after such date will be valued at the lowest of its fair value, its face value (excluding accrued interest) and the purchase price paid for such loan asset. Adjustments to the value of a loan asset will be made to reflect, among other things, changes in its fair value, a default by the obligor on the loan asset, insolvency of the obligor, acceleration of the loan asset, and certain modifications to the terms of the loan asset.

The Credit Facility contains limitations on the type of loan assets that are “eligible” to be included in the Borrowing Base and as to the concentration level of certain categories of loan assets in the Borrowing Base such as restrictions on geographic and industry concentrations, asset size and quality, payment frequency, status and terms, average life, and collateral interests. In addition, if an asset is to remain an “eligible” loan asset, the Company may not make changes to the payment, amortization, collateral and certain other terms of the loan assets without the consent of the administrative agent that will either result in subordination of the loan asset or be materially adverse to the lenders.

Collateral. The Credit Facility is secured by substantially all of the assets of the Company (other than assets held by our SBIC subsidiary) and includes the subordinated notes (“CLO Notes”) issued by Saratoga CLO and the Company’s rights under the CLO Management Agreement (as defined below).

Interest Rate and Fees. Under the Credit Facility, funds are borrowed from or through certain lenders at the greater of the prevailing LIBOR rate and 1.00%, plus an applicable margin of 4.75%. At the Company’s option, funds may be borrowed based on an alternative base rate, which in no event will be less than 2.00%, and the applicable margin over such alternative base rate is 3.75%. In addition, the Company pays the lenders a commitment fee of 0.75% per year on the unused amount of the Credit Facility for the duration of the Revolving Period (defined below). Accrued interest and commitment fees are payable monthly. The Company was also obligated to pay certain other fees to the lenders in connection with the closing of the Credit Facility.

Revolving Period and Maturity Date. The Company may make and repay borrowings under the Credit Facility for a period of three years following the closing of the Credit Facility (the “Revolving Period”). The Revolving Period may be terminated at an earlier time by the Company or, upon the occurrence of an event of default, by action of the lenders or automatically. All borrowings and other amounts payable under the Credit Facility are due and payable in full five years after the end of the Revolving Period.

Collateral Tests. It is a condition precedent to any borrowing under the Credit Facility that the principal amount outstanding under the Credit Facility, after giving effect to the proposed borrowings, not exceed the lesser of the Borrowing Base or the Facility Amount (the “Borrowing Base Test”). In addition to satisfying the Borrowing Base Test, the following tests must also be satisfied (together with Borrowing Base Test, the “Collateral Tests”):

 

   

Interest Coverage Ratio. The ratio (expressed as a percentage) of interest collections with respect to pledged loan assets, less certain fees and expenses relating to the Credit Facility, to accrued interest and commitment fees and any breakage costs payable to the lenders under the Credit Facility for the last 6 payment periods must equal at least 175.0%.

 

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Overcollateralization Ratio. The ratio (expressed as a percentage) of the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets plus the fair value of certain ineligible pledged loan assets and the CLO Notes (in each case, subject to certain adjustments) to outstanding borrowings under the Credit Facility plus the Unfunded Exposure Amount must equal at least 200.0%.

 

   

Weighted Average FMV Test. The aggregate adjusted or weighted value of “eligible” pledged loan assets as a percentage of the aggregate outstanding principal balance of “eligible” pledged loan assets must be equal to or greater than 72.0% and 80.0% during the one-year periods prior to the first and second anniversary of the closing date, respectively, and 85.0% at all times thereafter.

The Credit Facility also requires payment of outstanding borrowings or replacement of pledged loan assets upon the Company’s breach of its representation and warranty that pledged loan assets included in the Borrowing Base are “eligible” loan assets. Such payments or replacements must equal the lower of the amount by which the Borrowing Base is overstated as a result of such breach or any deficiency under the Collateral Tests at the time of repayment or replacement. Compliance with the Collateral Tests is also a condition to the discretionary sale of pledged loan assets by the Company.

Priority of Payments. During the Revolving Period, the priority of payments provisions of the Credit Facility require, after payment of specified fees and expenses and any necessary funding of the Unfunded Exposure Account, that collections of principal from the loan assets and, to the extent that these are insufficient, collections of interest from the loan assets, be applied on each payment date to payment of outstanding borrowings if the Borrowing Base Test, the Overcollateralization Ratio and the Interest Coverage Ratio would not otherwise be met. Similarly, following termination of the Revolving Period, collections of interest are required to be applied, after payment of certain fees and expenses, to cure any deficiencies in the Borrowing Base Test, the Interest Coverage Ratio and the Overcollateralization Ratio as of the relevant payment date.

Reserve Account. The Credit Facility requires the Company to set aside an amount equal to the sum of accrued interest, commitment fees and administrative agent fees due and payable on the next succeeding three payment dates (or corresponding to three payment periods). If for any monthly period during which fees and other payments accrue, the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets which do not pay cash interest at least quarterly exceeds 15.0% of the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets, the Company is required to set aside such interest and fees due and payable on the next succeeding six payment dates. Amounts in the reserve account can be applied solely to the payment of administrative agent fees, commitment fees, accrued and unpaid interest and any breakage costs payable to the lenders.

Unfunded Exposure Account. With respect to revolver or delayed draw loan assets, the Company is required to set aside in a designated account (the “Unfunded Exposure Account”) 100.0% of its outstanding and undrawn funding commitments with respect to such loan assets. The Unfunded Exposure Account is funded at the time the Company acquires a revolver or delayed draw loan asset and requests a related borrowing under the Credit Facility. The Unfunded Exposure Account is funded through a combination of proceeds of the requested borrowing and other Company funds, and if for any reason such amounts are insufficient, through application of the priority of payment provisions described above.

Operating Expenses. The priority of payments provision of the Credit Facility provides for the payment of certain operating expenses of the Company out of collections on principal and interest during the Revolving Period and out of collections on interest following the termination of the Revolving Period in accordance with the priority established in such provision. The operating expenses payable pursuant to the priority of payment provisions is limited to $350,000 for each monthly payment date or $2.5 million for the immediately preceding period of twelve consecutive monthly payment dates. This ceiling can be increased by the lesser of 5.0% or the percentage increase in the fair market value of all the Company’s assets only on the first monthly payment date to occur after each one-year anniversary following the closing of the Credit Facility. Upon the occurrence of a Manager Event (described below), the consent of the administrative agent is required in order to pay operating expenses through the priority of payments provision.

Events of Default. The Credit Facility contains certain negative covenants, customary representations and warranties and affirmative covenants and events of default. The Credit Facility does not contain grace periods for breach by the Company of certain covenants, including, without limitation, preservation of existence, negative pledge, change of name or jurisdiction and separate legal entity status of the Company covenants and certain other customary covenants. Other events of default under the Credit Facility include, among other things, the following:

 

   

an Interest Coverage Ratio of less than 150.0%;

 

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an Overcollateralization Ratio of less than 175.0%;

 

   

the filing of certain ERISA or tax liens;

 

   

the occurrence of certain “Manager Events” such as:

 

   

failure by Saratoga Investment Advisors and its affiliates to maintain collectively, directly or indirectly, a cash equity investment in the Company in an amount equal to at least $5.0 million at any time prior to the third anniversary of the closing date;

 

   

failure of the Management Agreement between Saratoga Investment Advisors and the Company to be in full force and effect;

 

   

indictment or conviction of Saratoga Investment Advisors or any “key person” for a felony offense, or any fraud, embezzlement or misappropriation of funds by Saratoga Investment Advisors or any “key person” and, in the case of “key persons,” without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed to replace such key person within 30 days;

 

   

resignation, termination, disability or death of a “key person” or failure of any “key person” to provide active participation in Saratoga Investment Advisors’ daily activities, all without a reputable, experienced individual reasonably satisfactory to Madison Capital Funding appointed within 30 days; or

 

   

occurrence of any event constituting “cause” under the Collateral Management Agreement between the Company and Saratoga CLO (the “CLO Management Agreement”), delivery of a notice under Section 12(c) of the CLO Management Agreement with respect to the removal of the Company as collateral manager or the Company ceases to act as collateral manager under the CLO Management Agreement.

Conditions to Acquisitions and Pledges of Loan Assets. The Credit Facility imposes certain additional conditions to the acquisition and pledge of additional loan assets. Among other things, the Company may not acquire additional loan assets without the prior written consent of the administrative agent until such time that the administrative agent indicates in writing its satisfaction with Saratoga Investment Advisors’ policies, personnel and processes relating to the loan assets.

Fees and Expenses. The Company paid certain fees and reimbursed Madison Capital Funding LLC for the aggregate amount of all documented, out-of-pocket costs and expenses, including the reasonable fees and expenses of lawyers, incurred by Madison Capital Funding LLC in connection with the Credit Facility and the carrying out of any and all acts contemplated thereunder up to and as of the date of closing of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates. These amounts totaled $2.0 million.

On February 24, 2012, we amended our senior secured revolving credit facility with Madison Capital Funding LLC to, among other things:

 

   

expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;

 

   

extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit Facility are due and payable five years after the end of the Revolving Period; and

 

   

remove the condition that we may not acquire additional loan assets without the prior written consent of the administrative agent.

On September 17, 2014, we entered into a second amendment to the Revolving Facility with Madison Capital Funding LLC to, among other things:

 

   

extend the commitment termination date from February 24, 2015 to September 17, 2017;

 

   

extend the maturity date of the Revolving Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

 

   

reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

 

   

reduce the floor on base rate borrowings from 3.00% to 2.25%; and on LIBOR borrowings from 2.00% to 1.25%.

 

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On May 18, 2017, we entered into a third amendment to the Credit Facility with Madison Capital Funding LLC to, among other things:

 

   

extend the commitment termination date from September 17, 2017 to September 17, 2020;

 

   

extend the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025;

 

   

reduce the floor on base rate borrowings from 2.25% to 2.00%;

 

   

reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and

 

   

reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.

As of November 30, 2019, we had no outstanding borrowings under the Credit Facility and $150.0 million of SBA-guaranteed debentures outstanding (which are discussed below). As of February 28, 2019, we had no outstanding borrowings under the Credit Facility and $150.0 million of SBA-guaranteed debentures outstanding. Our borrowing base under the Credit Facility at November 30, 2019 and February 28, 2019 was $41.0 million and $30.6 million, respectively.

Our asset coverage ratio, as defined in the 1940 Act, was 309.9% as of November 30, 2019 and 234.5% as of February 28, 2019.

SBA-guaranteed debentures

In addition, we, through two wholly-owned subsidiaries, sought and obtained licenses from the SBA to operate an SBIC. In this regard, on March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC LP, received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958 and on August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP, also received a license. SBICs are designated to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses.

The SBIC licenses allows our SBIC subsidiaries to obtain leverage by issuing SBA-guaranteed debentures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten-year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with ten-year maturities.

SBA regulations previously limited the amount that our SBIC subsidiary may borrow to a maximum of $150.0 million when it has at least $75.0 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. This maximum has been increased by SBA regulators for new licenses to $175.0 million of SBA debentures when it has at least $87.5 million in regulatory capital. As of November 30, 2019, our SBIC I subsidiary had $75.0 million in regulatory capital and $150.0 million SBA-guaranteed debentures outstanding and our SBIC II subsidiary had $50.0 million in regulatory capital and no outstanding SBA-guaranteed debentures.

We received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiaries guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows us increased flexibility under the asset coverage test by permitting us to borrow up to $150.0 million more than we would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested board of directors approved of our becoming subject to a minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150.0% asset coverage ratio became effective on April 16, 2019.

Unsecured notes

In May 2013, we issued $48.3 million in aggregate principal amount of our 2020 Notes for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters’ full exercise of their overallotment option. Interest on these 2020 Notes is paid quarterly in arrears on February 15, May 15, August 15 and November 15, at a rate of 7.50% per year, beginning August 15, 2013. The 2020 Notes mature on May 31, 2020 and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at our option. In connection with the issuance of the 2020

 

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Notes, we agreed to the following covenants for the period of time during which the 2020 Notes are outstanding:

 

   

we will not violate (whether or not we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200.0% after such borrowings.

 

   

we will not violate (regardless of whether we are subject to) Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to (i) any exemptive relief granted to us by the SEC and (ii) no-action relief granted by the SEC to another 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 Section 61(a)(1) of the 1940 Act in order to maintain the BDC’s status as a regulated investment company under the Code. Currently these provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, is below 200.0% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase.

The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the NYSE.

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an ATM offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 2023 Notes for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters’ option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 30, 2023, and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes on January 13, 2017, which amounted to $61.8 million, and for general corporate purposes in accordance with our investment objective and strategies. The 2023 Notes are listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share.

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were 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 our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes. 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, the Company 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 million aggregate 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. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.

On November 15, 2019, the Company caused notices to be issued to the holders of its 6.75% 2023 Notes regarding the Company’s exercise of its option to redeem, in part, the issued and outstanding 2023 Notes. The Company redeemed $50.0 million in aggregate principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes on December 21, 2019 (the “Redemption Date”). The Notes were redeemed at 100% of their principal amount ($25 per Note), 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.

At November 30, 2019, the total 2023 Notes and 2025 Notes outstanding was $74.5 million and $60.0 million, respectively.

 

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In connection with the issuance of the 2023 Notes and 2025 Notes, we agreed to the following covenants for the period of time during which the notes are outstanding:

 

   

we will not violate (whether or not we are subject to) Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC. These provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings, or, if we obtain the required approvals from our independent directors and/or stockholders, 150% (after deducting the amount of such dividend, distribution or purchase price, as the case may be).

 

   

we 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, we have an asset coverage (as defined in the 1940 Act) of at least 150.0%, 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 us by the SEC, and (ii) any SEC no-action relief granted by the SEC to another BDC (or to us if we determine 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) of the 1940 Act as may be applicable to us from time to time, as such obligation may be amended or superseded, in order to maintain such BDC’s status as a regulated investment company under Subchapter M of the Code.

 

   

if, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, to file any periodic reports with the SEC, we agree to furnish to holders of the 2023 Notes and 2025 Notes and the Trustee, for the period of time during which the 2023 Notes and/or the 2025 Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

At November 30, 2019 and February 28, 2019, the fair value of investments, cash and cash equivalents and cash and cash equivalents, reserve accounts were as follows:

 

     November 30, 2019     February 28, 2019  
     Fair Value      Percentage of
Total
    Fair Value      Percentage of
Total
 
     ($ in thousands)  

Cash and cash equivalents

   $ 51,647        9.1   $ 30,799        6.6

Cash and cash equivalents, reserve accounts

     29,466        5.2       31,295        6.7  

First lien term loans

     302,773        53.3       202,846        43.7  

Second lien term loans

     101,099        17.8       125,786        27.1  

Unsecured term loans

     2,073        0.4       2,100        0.5  

Structured finance securities

     34,306        6.0       35,328        7.6  

Equity interests

     46,780        8.2       35,960        7.8  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 568,144        100.0   $ 464,114        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

On July 13, 2018, the Company 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 March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our 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 the common stock to be offered was 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).

For the three months ended November 30, 2019, the Company sold 1,952,367 shares for gross proceeds of $49.4 million at an average price of $25.28 for aggregate net proceeds of $48.7 million (net of transaction costs).

 

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For the nine months ended November 30, 2019, the Company sold 3,400,481 shares for gross proceeds of $85.2 million at an average price of $25.06 for aggregate net proceeds of $84.0 million (net of transaction costs).

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed 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 consolidated financial statements. On October 7, 2015, the Company’s board of directors extended the open market share repurchase plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Company’s board of directors extended the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. 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.

On January 7, 2020, the Company declared a dividend of $0.56 per share payable on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP.

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

On May 28, 2019, our board of directors declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record as of June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

On November 27, 2018, our board of directors declared a dividend of $0.53 per share, which was paid on January 2, 2019, to common stockholders of record on December 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 30,796 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $18.88 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28, 31, 2018 and January 2, 2019.

On August 28, 2018, our board of directors declared a dividend of $0.52 per share, which was paid on September 27, 2018, to common stockholders of record as of September 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 25,862 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.35 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2018.

On May 30, 2018, our board of directors declared a dividend of $0.51 per share, which was paid on June 27, 2018, to common stockholders of record as of June 15, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of

 

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common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.7 million in cash and 21,562 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.72 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2018.

On February 26, 2018, our board of directors declared a dividend of $0.50 per share, which was paid on March 26, 2018, to common stockholders of record as of March 14, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.6 million in cash and 25,354 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $19.91 per share, which equaled the volume weighted average trading price per share of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.

On November 29, 2017, our board of directors declared a dividend of $0.49 per share, which was paid on December 27, 2017, to common stockholders of record on December 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 25,435 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.14 per share, which equaled the volume weighted average trading price per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and 27, 2017.

On August 28, 2017, our board of directors declared a dividend of $0.48 per share, which was paid on September 26, 2017, to common stockholders of record on September 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.2 million in cash and 33,551 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.19 per share, which equaled the volume weighted average trading price per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22, 25 and 26, 2017.

On May 30, 2017, our board of directors declared a dividend of $0.47 per share, which was paid on June 27, 2017, to common stockholders of record on June 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.3 million in cash and 26,222 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.04 per share, which equaled the volume weighted average trading price per share of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.

On February 28, 2017, our board of directors declared a dividend of $0.46 per share, which was paid on March 28, 2017, to common stockholders of record as of March 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.38 per share, which equaled the volume weighted average trading price per share of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.

On January 12, 2017, our board of directors declared a dividend of $0.45 per share, which was paid on February 9, 2017, to common stockholders of record as of January 31, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.6 million in cash and 50,453 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.25 per share, which equaled the volume weighted average trading price per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7, 8 and 9, 2017.

On October 5, 2016, our board of directors declared a dividend of $0.44 per share, which was paid on November 9, 2016, to common stockholders of record as of October 31, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,548 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.12 per share, which equaled the volume weighted average trading price per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7, 8 and 9, 2016.

On August 8, 2016, our board of directors declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

 

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On July 7, 2016, our board of directors declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

On March 31, 2016, our board of directors declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record as of April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled the volume weighted average trading price per share of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.

On January 12, 2016, our board of directors declared a dividend of $0.40 per share, which was paid on February 29, 2016, to common stockholders of record as of February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock, or 1.2% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.11 per share, which equaled the volume weighted average trading price per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and 29, 2016.

On October 7, 2015, our board of directors declared a dividend of $0.36 per share, which was paid on November 30, 2015, to common stockholders of record as of November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock, or 1.1% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.53 per share, which equaled the volume weighted average trading price per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and 30, 2015.

On July 8, 2015, our board of directors declared a dividend of $0.33 per share, which was paid on August 31, 2015, to common stockholders of record as of August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.28 per share, which equaled the volume weighted average trading price per share of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.

On May 14, 2015, our board of directors declared a special dividend of $1.00 per share, which was paid on June 5, 2015, to common stockholders of record on as of May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock, or 2.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.47 per share, which equaled the volume weighted average trading price per share of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4 and 5, 2015.

On April 9, 2015, our board of directors declared a dividend of $0.27 per share, which was paid on May 29, 2015, to common stockholders of record as of May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.78 per share, which equaled the volume weighted average trading price per share of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.

On September 24, 2014, our board of directors declared a dividend of $0.22 per share, which was paid on February 27, 2015, to common stockholders of record on February 2, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.97 per share, which equaled the volume weighted average trading price per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and 27, 2015.

 

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Also, on September 24, 2014, our board of directors declared a dividend of $0.18 per share, which was paid on November 28, 2014, to common stockholders of record on November 3, 2014. Shareholders had the option to receive payment of the dividend in cash or receive shares of common stock pursuant to our DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.37 per share, which equaled the volume weighted average trading price per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and 28, 2014.

On October 30, 2013, our board of directors declared a dividend of $2.65 per share, which was paid on December 27, 2013, to common stockholders of record as of November 13, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. This dividend was declared in reliance on certain private letter rulings issued by the IRS concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which equaled the volume weighted average trading price per share of the common stock on December 11, 13, and 16, 2013.

On November 9, 2012, our board of directors declared a dividend of $4.25 per share, which was paid on December 31, 2012, to common stockholders of record as of November 20, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled the volume weighted average trading price per share of the common stock on December 14, 17 and 19, 2012.

On November 15, 2011, our board of directors declared a dividend of $3.00 per share, which was paid on December 30, 2011, to common stockholders of record as of November 25, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.117067 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

On November 12, 2010, our board of directors declared a dividend of $4.40 per share to shareholders payable in cash or shares of our common stock, in accordance with the provisions of the IRS Revenue Procedure 2010-12, which allows a publicly-traded regulated investment company to satisfy its distribution requirements with a distribution paid partly in common stock provided that at least 10.0% of the distribution is payable in cash. The dividend was paid on December 29, 2010 to common shareholders of record on November 19, 2010. Based on shareholder elections, the dividend consisted of $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010.

On November 13, 2009, our board of directors declared a dividend of $18.25 per share, which was paid on December 31, 2009, to common stockholders of record as of November 25, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $0.25 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock, or 104.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 13.7% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $1.5099 per share, which equaled the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.

 

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We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.

 

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Contractual obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at November 30, 2019:

 

            Payment Due by Period  

Long-Term Debt Obligations

   Total      Less Than
1 Year
     1 - 3
Years
     3 - 5
Years
     More Than
5 Years
 
     ($ in thousands)  

Revolving credit facility

   $ —        $ —        $ —        $ —        $ —    

SBA debentures

     150,000        —          —          79,000        71,000  

2023 Notes (1)

     74,451        —          —          74,451        —    

2025 Notes

     60,000        —          —          —          60,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Long-Term Debt Obligations

   $ 284,451      $ —        $ —        $ 153,451      $ 131,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

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

Off-balance sheet arrangements

As of November 30, 2019 and February 28, 2019, the Company’s off-balance sheet arrangements consisted of $41.5 million and $4.5 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

A summary of the unfunded commitments outstanding as of November 30, 2019 and February 28, 2019 is shown in the table below (dollars in thousands):

 

     November 30, 2019      February 28, 2019  

At Company’s discretion

     

inMotionNow, Inc.

   $ 3,000      $ —    

Omatic Software, LLC

     1,000        1,000  

PDDS Buyer, LLC

     5,000        —    

Top Gun Pressure Washing, LLC

     5,000        —    

Village Realty

     10,000     
  

 

 

    

 

 

 
     24,000        1,000  
  

 

 

    

 

 

 

At portfolio company’s discretion - satisfaction of certain financial and nonfinancial covenants required

     

Axiom Purchaser, Inc.

     1,000        1,000  

CoConstruct, LLC

     3,500        —    

Davisware

     2,000        —    

Destiny Solutions, Inc.

     —          1,500  

Fancy Chap, Inc.

     —          —    

GDS Holdings US, Inc.

     —          1,000  

Hema Terra Holding Company, LLC

     4,000        —    

inMotionNow, Inc.

     2,000        —    

Village Realty

     5,000        —    
  

 

 

    

 

 

 
     17,500        3,500  
  

 

 

    

 

 

 

Total

   $ 41,500      $ 4,500  
  

 

 

    

 

 

 

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business activities contain elements of market risk. We consider our principal market risk to be the fluctuation in interest rates. Managing this risk is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor this risk and thresholds by means of administrative and information technology systems and other policies and processes.

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, including relative changes in different interest rates, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio.

Our investment income is affected by fluctuations in various interest rates, including LIBOR and the prime rate. A large portion of our portfolio is, and we expect will continue to be, comprised of floating rate investments that utilize LIBOR. Our interest expense is affected by fluctuations in LIBOR only on our revolving credit facility. At November 30, 2019, there were no borrowings outstanding on the revolving credit facility.

We have analyzed the potential impact of changes in interest rates on interest income from investments. Assuming that our investments as of November 30, 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 a 1.0% increase in interest rates would cause a corresponding increase of approximately $3.1 million to our interest income. Conversely, a hypothetical change of a 1.0% decrease in interest rates would cause a corresponding decrease of approximately $1.5 million to our interest income.

Changes in interest rates would have no impact to our current interest and debt financing expense, as all our borrowings except for our credit facility are fixed rate, and our credit facility is currently undrawn.

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the statements of assets and liabilities and other business developments that could magnify or diminish our sensitivity to interest rate changes, nor does it account for divergences in LIBOR and the commercial paper rate, which have historically moved in tandem but, in times of unusual credit dislocations, have experienced periods of divergence. Accordingly, no assurances can be given that actual results would not materially differ from the potential outcome simulated by this estimate.

For further information, the following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of November 30, 2019.

 

Basis

Point

Change

  Increase
(Decrease)
in Interest
Income
    (Increase)
Decrease
in Interest
Expense
    Increase
(Decrease) in Net
Investment
Income
    Increase
(Decrease) in Net
Investment
Income per Share
 
    ($ in thousands)        
-100   $ (1,525   $ —       $ (1,525   $ (0.18
-50     (1,006     —         (1,006     (0.12
-25     (538     —         (538     (0.06
25     644       —         644       0.07  
50     1,351       —         1,351       0.16  
100     3,067       —         3,067       0.35  
200     6,664       —         6,664       0.77  
300     10,260       —         10,260       1.18  
400     13,857       —         13,857       1.59  

 

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ITEM 4. CONTROLS AND PROCEDURES

 

(a)

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, our chief executive officer and our chief financial officer have concluded that our current disclosure controls and procedures are effective in facilitating timely decisions regarding required disclosure of any material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

(b)

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of Exchange Act) that occurred during the quarter ended November 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither we nor our wholly-owned subsidiaries, Saratoga Investment Funding LLC, Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, are currently subject to any material legal proceedings.

Item 1A. Risk Factors

In addition to information set forth in this report, you should carefully consider the “Risk Factors” discussed in our most recent Annual Report on Form 10-K filed with the SEC, which could materially affect our business, financial condition and/or operating results. Other than as set forth below, there have been no material changes during the nine months ended November 30, 2019 to the risk factors discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K. Additional risks or uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On January 8, 2020, the Company caused notices to be issued to the holders of its 6.75% Notes due 2023 (CUSIP No. 80349A 406; NYSE: SAB) (the “Notes”) regarding the Company’s exercise of its option to redeem the remaining issued and outstanding Notes, pursuant to Section 1104 of the Indenture dated as of May 10, 2013, between the Company and U.S. Bank National Association, as trustee, and Section 101(h) of the Second Supplemental Indenture dated as of December 21, 2016. The Company will redeem the remaining $24,450,500 in aggregate principal amount of issued and outstanding Notes on February 7, 2020 (the “Second Redemption Date”). The Notes will be redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from December 30, 2019, through, but excluding, the Second Redemption Date.

 

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ITEM 6. EXHIBITS

Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

EXHIBIT INDEX

 

Exhibit

Number

 

Description

  3.1(a)   Articles of Incorporation of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007).
  3.1(b)   Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 3, 2010).
  3.1(c)   Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 13, 2010).
  3.2   Second Amended and Restated Bylaws of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on June 14, 2011).
  4.1   Specimen certificate of Saratoga Investment Corp.’s common stock, par value $0.001 per share. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-169135, filed on September 1, 2010).
  4.2   Registration Rights Agreement dated July  30, 2010 between GSC Investment Corp., GSC CDO III L.L.C., and the investors party thereto (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August  3, 2010).
  4.3   Dividend Reinvestment Plan (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on September 24, 2014).
  4.4   Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Saratoga Investment Corp.’s Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2, File No. 333-186323 filed April 30, 2013).
  4.5   Form of Second Supplemental Indenture between the Company and U.S. Bank National Association (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-214182, filed on December 12, 2016).
  4.6   Form of Global Note (incorporated by reference to Exhibit 4.5 hereto, and Exhibit A therein).
  4.7   Form of Third Supplemental Indenture between the Company and U.S. Bank National Association (incorporated by reference to Post-Effective Amendment No. 9 to the Registrant’s Registration Statement on Form N-2, File No. 333-216344, filed on August 28, 2018). 
  4.8   Form of Global Note (incorporated by reference to Exhibit 4.7 hereto, and Exhibit A therein). 
  4.9   Form of Articles Supplementary Establishing and Fixing the Rights and Preferences of Preferred Stock (incorporated by reference to Saratoga Investment Corp.’s registration statement on Form N-2 Pre-Effective Amendment No. 1, File No. 333-196526, filed on December 5, 2014). 
10.1   Investment Advisory and Management Agreement dated July  30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
10.2   Custodian Agreement dated March  21, 2007 between GSC Investment LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007).
10.3   Administration Agreement dated July  30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
10.4   Trademark License Agreement dated July  30, 2010 between Saratoga Investment Advisors, LLC and GSC Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
10.5   Credit, Security and Management Agreement dated July  30, 2010 by and among GSC Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
10.6   Form of Indemnification Agreement between Saratoga Investment Corp. and each officer and director of Saratoga Investment Corp. (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on Form N-2 filed on January 12, 2007).

 

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Exhibit

Number

  

Description

10.7    Amendment No. 1 to Credit, Security and Management Agreement dated February  24, 2012 by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on February 29, 2012).
10.8    Amended and Restated Indenture, dated as of November  15, 2016, among Saratoga Investment Corp. CLO 2013-1, Ltd., Saratoga Investment Corp. CLO 2013-1, Inc. and U.S. Bank National Association. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-216344, filed on February 28, 2017).
10.9    Amended and Restated Collateral Management Agreement, dated October  17, 2013, by and between Saratoga Investment Corp. and Saratoga Investment Corp. CLO 2013-1, Ltd. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-196526, filed on December 5, 2014).
10.10    Amendment No. 2 to Credit, Security and Management Agreement dated September  17, 2014 by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on September 18, 2014).
10.11    Amendment No. 3 to Credit, Security and Management Agreement, dated May  18, 2017, by and among Saratoga Investment Funding LLC, Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Madison Capital Funding LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on May 18, 2017).
10.12    Equity Distribution Agreement dated March  16, 2017, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc. and BB&T Capital Markets, a division of BB&T Securities, LLC (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 1 to the Registration Statement on Form N-2, File No. 333-216344, filed on March 16, 2017).
10.13    Amendment No. 1 to the Equity Distribution Agreement dated October  12, 2017, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and FBR Capital Markets  & Co. (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2, File No.  333-216344, filed on October 12, 2017).
10.14    Amendment No. 2 to the Equity Distribution Agreement dated January  11, 2018, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and FBR Capital Markets  & Co. (incorporated by reference to Saratoga Investment Corp.’s Post-Effective Amendment No. 3 to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-216344, filed on January 11, 2018).
10.15    Amendment No. 3 to the Equity Distribution Agreement dated October  16, 2018, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Post-Effective Amendment No. 1 to the registrant’s Registration Statement on Form N-2, File No. 333-227116, filed on October 16, 2018).
10.16    Amendment No. 4 to the Equity Distribution Agreement dated July  11, 2019, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Post-Effective Amendment No. 5 to the registrant’s Registration Statement on Form N-2, File No. 333-227116, filed on July 12, 2019).
10.17    Amendment No. 5 to the Equity Distribution Agreement dated October  10, 2019, by and among Saratoga Investment Corp., Saratoga Investment Advisors, LLC, Ladenburg Thalmann and Co. Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, and B. Riley FBR, Inc. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on October 10, 2019).
11    Computation of Per Share Earnings (included in Note 11 to the consolidated financial statements contained in this report).
14    Code of Ethics of the Company adopted under Rule 17j-1 (incorporated by reference to Amendment No.7 to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-138051, filed on March 22, 2007).
21.1    List of Subsidiaries and jurisdiction of incorporation/organization: Saratoga Investment Funding LLC—Delaware; Saratoga Investment Corp. SBIC, LP—Delaware; Saratoga Investment Corp. SBIC II LP— Delaware; and Saratoga Investment Corp. GP, LLC—Delaware.
31.1*    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32.2*    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

 

*

Filed herewith

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   

SARATOGA INVESTMENT CORP.

 

Date: January 8, 2020     By:  

/s/ CHRISTIAN L. OBERBECK

      Christian L. Oberbeck
     

Chief Executive Officer

 

    By:  

/s/ HENRI J. STEENKAMP

      Henri J. Steenkamp
      Chief Financial Officer and Chief Compliance Officer

 

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