UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended May 31, 2016
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 001-33376
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 No.) |
535 Madison Avenue New York, New York | 10022 | |
| (Address of principal executive office) | (Zip Code) |
(212) 906-7800
(Registrant's telephone number, including area code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):
| Large Accelerated Filer | ¨ | Accelerated Filer | ¨ | |||
| Non-Accelerated Filer | x | Smaller Reporting Company | ¨ | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of the registrant's common stock, $0.001 par value, outstanding as of July 12, 2016 was 5,741,913.
TABLE OF CONTENTS
| Page | ||||||
PART I | FINANCIAL INFORMATION | 3 | ||||
Item 1. | Consolidated Financial Statements | 3 | ||||
| Consolidated Statements of Assets and Liabilities as of May 31, 2016 (unaudited) and February 29, 2016 | 3 | |||||
| Consolidated Statements of Operations for the three months ended May 31, 2016 and May 31, 2015 (unaudited) | 4 | |||||
| Consolidated Schedules of Investments as of May 31, 2016 (unaudited) and February 29, 2016 | 5 | |||||
| Consolidated Statements of Changes in Net Assets for the three months ended May 31, 2016 and May 31, 2015 (unaudited) | 7 | |||||
| Consolidated Statements of Cash Flows for the three months ended May 31, 2016 and May 31, 2015 (unaudited) | 8 | |||||
| Notes to Consolidated Financial Statements as of May 31, 2016 (unaudited) | 9 | |||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 53 | ||||
Item 4. | Controls and Procedures | 53 | ||||
PART II | OTHER INFORMATION | 54 | ||||
Item 1. | Legal Proceedings | 54 | ||||
Item 1A. | Risk Factors | 54 | ||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 54 | ||||
Item 3. | Defaults Upon Senior Securities | 54 | ||||
Item 4. | Mine Safety Disclosures | 54 | ||||
Item 5. | Other Information | 54 | ||||
Item 6. | Exhibits | 55 | ||||
Signatures | 56 | |||||
2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities
| As of | ||||||||
| May 31, 2016 | February 29, 2016 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
Investments at fair value | ||||||||
Non-control/non-affiliate investments (amortized cost of $254,888,356 and $268,145,090, respectively) | $ | 251,975,004 | $ | 271,168,186 | ||||
Control investments (cost of $12,072,644 and $13,030,751, respectively) | 12,452,454 | 12,827,980 | ||||||
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Total investments at fair value (amortized cost of $266,961,000 and $281,175,841, respectively) | 264,427,458 | 283,996,166 | ||||||
Cash and cash equivalents | 1,309,111 | 2,440,277 | ||||||
Cash and cash equivalents, reserve accounts | 26,164,331 | 4,594,506 | ||||||
Interest receivable (net of reserve of $0 and $728,519, respectively) | 3,442,047 | 3,195,919 | ||||||
Management fee receivable | 170,494 | 170,016 | ||||||
Other assets | 360,202 | 350,368 | ||||||
Receivable from unsettled trades | - | 300,000 | ||||||
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Total assets | $ | 295,873,643 | $ | 295,047,252 | ||||
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LIABILITIES | ||||||||
Revolving credit facility | $ | - | $ | - | ||||
Deferred debt financing costs, revolving credit facility | (496,064 | ) | (515,906 | ) | ||||
SBA debentures payable | 103,660,000 | 103,660,000 | ||||||
Deferred debt financing costs, SBA debentures payable | (2,669,276 | ) | (2,493,303 | ) | ||||
Notes payable | 61,793,125 | 61,793,125 | ||||||
Deferred debt financing costs, notes payable | (1,589,192 | ) | (1,694,586 | ) | ||||
Dividend payable | - | 875,599 | ||||||
Base management and incentive fees payable | 5,753,045 | 5,593,956 | ||||||
Accounts payable and accrued expenses | 938,257 | 855,873 | ||||||
Interest and debt fees payable | 1,038,923 | 1,552,069 | ||||||
Payable for repurchases of common stock | 36,887 | 20,957 | ||||||
Directors fees payable | 54,000 | 31,500 | ||||||
Due to manager | 225,070 | 218,093 | ||||||
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Total liabilities | $ | 168,744,775 | $ | 169,897,377 | ||||
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Commitments and contingencies (See Note 7) | ||||||||
NET ASSETS | ||||||||
Common stock, par value $.001, 100,000,000 common shares authorized, 5,750,222 and 5,672,227 common shares issued and outstanding, respectively | $ | 5,750 | $ | 5,672 | ||||
Capital in excess of par value | 189,751,969 | 188,714,329 | ||||||
Distribution in excess of net investment income | (26,025,665 | ) | (26,217,902 | ) | ||||
Accumulated net realized loss from investments and derivatives | (34,069,644 | ) | (40,172,549 | ) | ||||
Accumulated net unrealized appreciation (depreciation) on investments and derivatives | (2,533,542 | ) | 2,820,325 | |||||
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Total net assets | 127,128,868 | 125,149,875 | ||||||
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Total liabilities and net assets | $ | 295,873,643 | $ | 295,047,252 | ||||
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NET ASSET VALUE PER SHARE | $ | 22.11 | $ | 22.06 | ||||
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See accompanying notes to consolidated financial statements.
3
Saratoga Investment Corp.
Consolidated Statements of Operations
(unaudited)
| For the three months ended May 31, 2016 | For the three months ended May 31, 2015 | |||||||
INVESTMENT INCOME | ||||||||
Interest from investments | ||||||||
Non-control/Non-affiliate investments | $ | 6,620,113 | $ | 5,648,979 | ||||
Payment-in-kind interest income from Non-control/Non-affiliate investments | 129,090 | 691,152 | ||||||
Control investments | 532,126 | 590,990 | ||||||
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Total interest income | 7,281,329 | 6,931,121 | ||||||
Interest from cash and cash equivalents | 3,786 | 736 | ||||||
Management fee income | 373,684 | 378,746 | ||||||
Other income | 249,596 | 250,564 | ||||||
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Total investment income | 7,908,395 | 7,561,167 | ||||||
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EXPENSES | ||||||||
Interest and debt financing expenses | 2,368,056 | 1,963,865 | ||||||
Base management fees | 1,227,157 | 1,124,098 | ||||||
Professional fees | 359,299 | 333,444 | ||||||
Administrator expenses | 325,000 | 250,000 | ||||||
Incentive management fees | 728,280 | 1,797,833 | ||||||
Insurance | 70,658 | 87,317 | ||||||
Directors fees and expenses | 66,000 | 51,000 | ||||||
General & administrative | 212,209 | 182,920 | ||||||
Other expense | 13,187 | - | ||||||
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Total expenses | 5,369,846 | 5,790,477 | ||||||
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NET INVESTMENT INCOME | 2,538,549 | 1,770,690 | ||||||
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||||||
Net realized gain from investments | 6,102,905 | 73,246 | ||||||
Net unrealized appreciation (depreciation) on investments | (5,353,867 | ) | 5,540,969 | |||||
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Net gain on investments | 749,038 | 5,614,215 | ||||||
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 3,287,587 | $ | 7,384,905 | ||||
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WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE | $ | 0.57 | $ | 1.36 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 5,737,496 | 5,422,491 | ||||||
See accompanying notes to consolidated financial statements.
4
Saratoga Investment Corp.
Consolidated Schedule of Investments
May 31, 2016
(unaudited)
Company | Industry | Investment Interest Rate / Maturity | Principal/ Number of Shares | Cost | Fair Value (c) | % of Net Assets | ||||||||||||||
Non-control/Non-affiliated investments - 198.2% (b) | ||||||||||||||||||||
National Truck Protection Co., Inc. (d), (g) | Automotive Aftermarket | Common Stock | 1,116 | $ | 1,000,000 | $ | 2,004,619 | 1.6 | % | |||||||||||
National Truck Protection Co., Inc. (d) | Automotive Aftermarket | First Lien Term Loan 15.50% Cash, 9/13/2018 | $ | 6,776,770 | 6,776,770 | 6,776,770 | 5.3 | % | ||||||||||||
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| Total Automotive Aftermarket | 7,776,770 | 8,781,389 | 6.9 | % | ||||||||||||||||
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Legacy Cabinets Holdings (d), (g) | Building Products | Common Stock Voting A-1 | 2,535 | 220,900 | 2,198,225 | 1.7 | % | |||||||||||||
Legacy Cabinets Holdings (d), (g) | Building Products | Common Stock Voting B-1 | 1,600 | 139,424 | 1,387,440 | 1.1 | % | |||||||||||||
Polar Holding Company, Ltd. (a), (i) | Building Products | First Lien Term Loan 10.00% Cash, 9/30/2016 | $ | 2,000,000 | 2,000,000 | 2,000,000 | 1.6 | % | ||||||||||||
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| Total Building Products | 2,360,324 | 5,585,665 | 4.4 | % | ||||||||||||||||
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Avionte Holdings, LLC (g) | Business Services | Common Stock | 100,000 | 100,000 | 215,000 | 0.2 | % | |||||||||||||
Avionte Holdings, LLC | Business Services | First Lien Term Loan 9.75% Cash, 1/8/2019 | $ | 2,406,342 | 2,378,598 | 2,406,342 | 1.9 | % | ||||||||||||
Avionte Holdings, LLC (j), (k) | Business Services | Delayed Draw Term Loan A 9.75% Cash, 1/8/2019 | $ | - | - | - | 0.0 | % | ||||||||||||
BMC Software, Inc. (d) | Business Services | Syndicated Loan 5.00% Cash, 9/10/2020 | $ | 5,656,667 | 5,620,832 | 5,062,717 | 4.0 | % | ||||||||||||
Courion Corporation | Business Services | Second Lien Term Loan 11.00% Cash, 6/1/2021 | $ | 15,000,000 | 14,862,224 | 14,850,000 | 11.7 | % | ||||||||||||
Dispensing Dynamics International (d) | Business Services | Senior Secured Note 12.50% Cash, 1/1/2018 | $ | 12,000,000 | 12,021,849 | 11,100,000 | 8.7 | % | ||||||||||||
Easy Ice, LLC (d) | Business Services | First Lien Term Loan 9.50% Cash, 1/15/2020 | $ | 14,000,000 | 13,880,323 | 13,938,400 | 11.0 | % | ||||||||||||
Emily Street Enterprises, L.L.C. | Business Services | Senior Secured Note 10.00% Cash, 1/23/2020 | $ | 3,300,000 | 3,267,411 | 3,346,860 | 2.6 | % | ||||||||||||
Emily Street Enterprises, L.L.C. (g) | Business Services | Warrant Membership Interests | 49,318 | 400,000 | 495,482 | 0.4 | % | |||||||||||||
Finalsite Holdings, Inc. | Business Services | Second Lien Term Loan 10.25% Cash, 5/21/2020 | $ | 7,500,000 | 7,444,463 | 7,500,000 | 5.9 | % | ||||||||||||
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) | Business Services | First Lien Term Loan 6.25% Cash, 10/8/2021 | $ | 4,987,500 | 4,896,207 | 4,879,271 | 3.8 | % | ||||||||||||
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) | Business Services | Second Lien Term Loan 10.50% Cash, 10/8/2022 | $ | 3,000,000 | 2,915,418 | 2,940,000 | 2.3 | % | ||||||||||||
Identity Automation Systems (g) | Business Services | Common Stock Class A Units | 232,616 | 232,616 | 434,992 | 0.3 | % | |||||||||||||
Identity Automation Systems | Business Services | First Lien Term Loan 10.25% Cash, 12/18/2020 | $ | 6,920,476 | 6,866,477 | 6,920,476 | 5.5 | % | ||||||||||||
Identity Automation Systems (j), (k) | Business Services | Delayed Draw Term Loan 10.25% Cash, 12/18/2020 | $ | - | - | - | 0.0 | % | ||||||||||||
Knowland Technology Holdings, L.L.C. | Business Services | First Lien Term Loan 8.00% Cash, 11/29/2017 | $ | 5,259,171 | 5,228,421 | 5,259,171 | 4.1 | % | ||||||||||||
PCF Number 4, Inc. | Business Services | Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021 | $ | 13,033,222 | 12,904,063 | 12,902,890 | 10.2 | % | ||||||||||||
Vector Controls Holding Co., LLC (d) | Business Services | First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018 | $ | 9,005,714 | 8,932,843 | 9,005,714 | 7.1 | % | ||||||||||||
Vector Controls Holding Co., LLC (d), (g) | Business Services | Warrants to Purchase Limited Liability Company Interests | 343 | - | 427,186 | 0.3 | % | |||||||||||||
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| Total Business Services | 101,951,745 | 101,684,501 | 80.0 | % | ||||||||||||||||
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Targus Holdings, Inc. (d), (g) | Consumer Products | Common Stock | 210,456 | 1,791,242 | 8,418 | 0.0 | % | |||||||||||||
Targus Holdings, Inc. (d) | Consumer Products | Second Lien Term Loan A-2 15.00% PIK, 12/31/2019 | $ | 212,845 | 212,845 | 212,845 | 0.2 | % | ||||||||||||
Targus Holdings, Inc. (d) | Consumer Products | Second Lien Term Loan B 15.00% PIK, 12/31/2019 | $ | 638,536 | 638,536 | 638,536 | 0.5 | % | ||||||||||||
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| Total Consumer Products | 2,642,623 | 859,799 | 0.7 | % | ||||||||||||||||
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Expedited Travel L.L.C. | Consumer Services | Common Stock | 1,000,000 | 1,000,000 | 1,776,185 | 1.4 | % | |||||||||||||
Expedited Travel L.L.C. | Consumer Services | First Lien Term Loan 10.00% Cash, 10/10/2019 | $ | 10,733,455 | 10,674,863 | 10,733,455 | 8.5 | % | ||||||||||||
My Alarm Center, LLC | Consumer Services | Second Lien Term Loan 12.00% Cash, 7/9/2019 | $ | 7,500,000 | 7,500,000 | 7,406,250 | 5.8 | % | ||||||||||||
PrePaid Legal Services, Inc. (d) | Consumer Services | First Lien Term Loan 6.50% Cash, 7/1/2019 | $ | 1,519,034 | 1,510,071 | 1,505,970 | 1.2 | % | ||||||||||||
PrePaid Legal Services, Inc. (d) | Consumer Services | Second Lien Term Loan 10.25% Cash, 7/1/2020 | $ | 10,000,000 | 9,963,960 | 9,822,000 | 7.7 | % | ||||||||||||
Prime Security Services, LLC | Consumer Services | Second Lien Term Loan 9.75% Cash, 7/1/2022 | $ | 12,000,000 | 11,835,176 | 12,092,400 | 9.5 | % | ||||||||||||
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| Total Consumer Services | 42,484,070 | 43,336,260 | 34.1 | % | ||||||||||||||||
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M/C Acquisition Corp., L.L.C. (d), (g) | Education | Class A Common Stock | 544,761 | 30,241 | - | 0.0 | % | |||||||||||||
M/C Acquisition Corp., L.L.C. (d) | Education | First Lien Term Loan 1.00% Cash, 3/31/2016 | $ | 2,321,073 | 1,193,790 | 8,087 | 0.0 | % | ||||||||||||
Texas Teachers of Tomorrow, LLC (g), (h) | Education | Common Stock | 750,000 | 750,000 | 884,948 | 0.7 | % | |||||||||||||
Texas Teachers of Tomorrow, LLC. | Education | Second Lien Term Loan 10.75% Cash, 6/2/2021 | $ | 10,000,000 | 9,906,257 | 9,900,000 | 7.8 | % | ||||||||||||
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| Total Education | 11,880,288 | 10,793,035 | 8.5 | % | ||||||||||||||||
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TM Restaurant Group L.L.C. | Food and Beverage | First Lien Term Loan 9.75% Cash, 7/16/2017 | $ | 9,556,413 | 9,477,341 | 9,353,817 | 7.4 | % | ||||||||||||
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| Total Food and Beverage | 9,477,341 | 9,353,817 | 7.4 | % | ||||||||||||||||
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Bristol Hospice, LLC | Healthcare Services | Senior Secured Note 11.00% (10.00% Cash/1.00% PIK), 11/29/2018 | $ | 5,391,235 | 5,331,651 | 5,445,147 | 4.3 | % | ||||||||||||
Censis Technologies, Inc. | Healthcare Services | First Lien Term Loan B 11.00% Cash, 7/24/2019 | $ | 11,475,000 | 11,314,365 | 10,934,527 | 8.6 | % | ||||||||||||
Censis Technologies, Inc. (g), (h) | Healthcare Services | Limited Partner Interests | 999 | 999,000 | 714,565 | 0.5 | % | |||||||||||||
Roscoe Medical, Inc. (d), (g) | Healthcare Services | Common Stock | 5,081 | 508,077 | 474,217 | 0.4 | % | |||||||||||||
Roscoe Medical, Inc. | Healthcare Services | Second Lien Term Loan 11.25% Cash, 9/26/2019 | $ | 4,200,000 | 4,144,752 | 4,036,200 | 3.2 | % | ||||||||||||
Ohio Medical, LLC (g) | Healthcare Services | Common Stock | 5,000 | 500,000 | 503,000 | 0.4 | % | |||||||||||||
Ohio Medical, LLC | Healthcare Services | Senior Subordinated Note 12.00% , 7/15/2021 | $ | 7,300,000 | 7,231,781 | 7,218,240 | 5.7 | % | ||||||||||||
Smile Brands Group Inc. (d) | Healthcare Services | Syndicated Loan 9.00% (7.50% Cash/1.50% PIK), 8/16/2019 | $ | 4,427,968 | 4,373,169 | 3,852,332 | 3.0 | % | ||||||||||||
Zest Holdings, LLC (d) | Healthcare Services | Syndicated Loan 5.25% Cash, 8/16/2020 | $ | 4,136,911 | 4,075,783 | 4,126,569 | 3.2 | % | ||||||||||||
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| Total Healthcare Services | 38,478,578 | 37,304,797 | 29.3 | % | ||||||||||||||||
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HMN Holdco, LLC | Media | First Lien Term Loan 10.00% Cash, 5/16/2019 | $ | 8,819,107 | 8,703,287 | 8,819,107 | 6.9 | % | ||||||||||||
HMN Holdco, LLC | Media | First Lien Term Loan 10.00% Cash, 5/16/2019 | $ | 1,600,000 | 1,574,097 | 1,600,000 | 1.3 | % | ||||||||||||
HMN Holdco, LLC | Media | Class A Series | 4,264 | 61,647 | 288,204 | 0.2 | % | |||||||||||||
HMN Holdco, LLC | Media | Class A Warrant | 30,320 | 438,353 | 1,683,366 | 1.3 | % | |||||||||||||
HMN Holdco, LLC (g) | Media | Warrants to Purchase Limited Liability Company Interests (Common) | 57,872 | - | 2,917,906 | 2.3 | % | |||||||||||||
HMN Holdco, LLC (g) | Media | Warrants to Purchase Limited Liability Company Interests | 8,139 | - | 467,504 | 0.4 | % | |||||||||||||
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| Total Media | 10,777,384 | 15,776,087 | 12.4 | % | ||||||||||||||||
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Elyria Foundry Company, L.L.C. | Metals | Common Stock | 35,000 | 9,217,564 | 582,750 | 0.4 | % | |||||||||||||
Elyria Foundry Company, L.L.C. | Metals | Revolver 10.00% Cash, 3/31/2017 | $ | 8,500,000 | 8,500,000 | 8,500,000 | 6.7 | % | ||||||||||||
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| Total Metals | 17,717,564 | 9,082,750 | 7.1 | % | ||||||||||||||||
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Mercury Network, LLC | Real Estate | First Lien Term Loan 9.75% Cash, 4/24/2020 | $ | 9,004,348 | 8,928,626 | 8,958,426 | 7.0 | % | ||||||||||||
Mercury Network, LLC (g) | Real Estate | Common Stock | 413,043 | 413,043 | 458,478 | 0.4 | % | |||||||||||||
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| Total Real Estate | 9,341,669 | 9,416,904 | 7.4 | % | ||||||||||||||||
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Sub Total Non-control/Non-affiliated investments | 254,888,356 | 251,975,004 | 198.2 | % | ||||||||||||||||
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Control investments - 9.8% (b) | ||||||||||||||||||||
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (d), (e), (f) | Structured Finance Securities | Other/Structured Finance Securities 17.88%, 10/17/2023 | $ | 30,000,000 | 12,072,644 | 12,452,454 | 9.8 | % | ||||||||||||
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Sub Total Control investments | 12,072,644 | 12,452,454 | 9.8 | % | ||||||||||||||||
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TOTAL INVESTMENTS - 208.0% (b) | $ | 266,961,000 | $ | 264,427,458 | 208.0 | % | ||||||||||||||
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| Principal | Cost | Fair Value | % of Net Assets | |||||||||||||
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 21.6% | ||||||||||||||||
U.S. Bank Money Market (l) | $ | 27,473,442 | $ | 27,473,442 | $ | 27,473,442 | 21.6 | % | ||||||||
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Total cash and cash equivalents and cash and cash equivalents, reserve accounts | $ | 27,473,442 | $ | 27,473,442 | $ | 27,473,442 | 21.6 | % | ||||||||
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| (a) | Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.5% 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 $127,128,868 as of May 31, 2016. |
| (c) | Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements). |
| (d) | These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements). |
| (e) | This investment does not have a stated interest rate that is payable thereon. As a result, the 17.88% 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, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows: |
| Sales | Interest | Management | Net Realized | Net Unrealized | ||||||||||||||||||||||||
Company | Purchases | Redemptions | (Cost) | Income | Fee Income | Gains/(Losses) | Appreciation | |||||||||||||||||||||
Saratoga Investment Corp. CLO 2013-1, Ltd. | $ | - | $ | - | $ | - | $ | 532,126 | $ | 373,684 | $ | - | $ | 379,810 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| (g) | Non-income producing at May 31, 2016. |
| (h) | Includes securities issued by an affiliate of the company. |
| (i) | Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada. |
| (j) | The investment has an unfunded commitment as of May 31, 2016 (see Note 7). |
| (k) | The entire commitment was unfunded at May 31, 2016. As such, no interest is being earned on this investment. |
| (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 May 31, 2016. |
5
Saratoga Investment Corp.
Consolidated Schedule of Investments
February 29, 2016
Company | Industry | Investment Interest Rate / Maturity | Principal/ Number of Shares | Cost | Fair Value (c) | % of Net Assets | ||||||||||||||
Non-control/Non-affiliated investments - 216.6% (b) | ||||||||||||||||||||
National Truck Protection Co., Inc. (d), (g) | Automotive Aftermarket | Common Stock | 1,116 | $ | 1,000,000 | $ | 1,695,303 | 1.4 | % | |||||||||||
National Truck Protection Co., Inc. (d) | Automotive Aftermarket | First Lien Term Loan 15.50% Cash, 9/13/2018 | $ | 6,776,770 | 6,776,770 | 6,776,770 | 5.4 | % | ||||||||||||
Take 5 Oil Change, L.L.C. (d), (g) | Automotive Aftermarket | Common Stock | 7,128 | 480,535 | 6,235,209 | 5.0 | % | |||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Automotive Aftermarket | 8,257,305 | 14,707,282 | 11.8 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Legacy Cabinets Holdings (d), (g) | Building Products | Common Stock Voting A-1 | 2,535 | 220,900 | 2,676,909 | 2.1 | % | |||||||||||||
Legacy Cabinets Holdings (d), (g) | Building Products | Common Stock Voting B-1 | 1,600 | 139,424 | 1,689,568 | 1.3 | % | |||||||||||||
Polar Holding Company, Ltd. (a), (i) | Building Products | First Lien Term Loan 10.00% Cash, 9/30/2016 | $ | 2,000,000 | 2,000,000 | 2,000,000 | 1.6 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Building Products | 2,360,324 | 6,366,477 | 5.0 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Avionte Holdings, LLC (g) | Business Services | Common Stock | 100,000 | 100,000 | 169,850 | 0.1 | % | |||||||||||||
Avionte Holdings, LLC | Business Services | First Lien Term Loan 9.75% Cash, 1/8/2019 | $ | 2,406,342 | 2,376,045 | 2,382,844 | 1.9 | % | ||||||||||||
Avionte Holdings, LLC (j), (k) | Business Services | Delayed Draw Term Loan A 9.75% Cash, 1/8/2019 | $ | - | - | - | 0.0 | % | ||||||||||||
BMC Software, Inc. (d) | Business Services | Syndicated Loan 5.00% Cash, 9/10/2020 | $ | 5,671,667 | 5,633,920 | 4,520,318 | 3.6 | % | ||||||||||||
Courion Corporation | Business Services | Second Lien Term Loan 11.00% Cash, 6/1/2021 | $ | 15,000,000 | 14,856,720 | 14,850,000 | 11.9 | % | ||||||||||||
Dispensing Dynamics International (d) | Business Services | Senior Secured Note 12.50% Cash, 1/1/2018 | $ | 12,000,000 | 12,025,101 | 10,950,000 | 8.8 | % | ||||||||||||
Easy Ice, LLC (d) | Business Services | First Lien Term Loan 9.50% Cash, 1/15/2020 | $ | 14,000,000 | 13,873,485 | 13,806,098 | 11.0 | % | ||||||||||||
Emily Street Enterprises, L.L.C. | Business Services | Senior Secured Note 10.00% Cash, 1/23/2020 | $ | 8,400,000 | 8,305,033 | 8,568,000 | 6.8 | % | ||||||||||||
Emily Street Enterprises, L.L.C. (g) | Business Services | Warrant Membership Interests | 49,318 | 400,000 | 577,020 | 0.5 | % | |||||||||||||
Finalsite Holdings, Inc. | Business Services | Second Lien Term Loan 10.25% Cash, 5/21/2020 | $ | 7,500,000 | 7,440,729 | 7,500,000 | 6.0 | % | ||||||||||||
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) | Business Services | First Lien Term Loan 6.25% Cash, 10/8/2021 | $ | 5,000,000 | 4,904,573 | 4,895,000 | 3.9 | % | ||||||||||||
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) | Business Services | Second Lien Term Loan 10.50% Cash, 10/8/2022 | $ | 3,000,000 | 2,912,784 | 2,910,000 | 2.3 | % | ||||||||||||
Identity Automation Systems (g) | Business Services | Common Stock Class A Units | 232,616 | 232,616 | 427,409 | 0.3 | % | |||||||||||||
Identity Automation Systems | Business Services | First Lien Term Loan 10.25% Cash, 12/18/2020 | $ | 6,900,000 | 6,842,573 | 6,900,000 | 5.5 | % | ||||||||||||
Identity Automation Systems (j), (k) | Business Services | Delayed Draw Term Loan 10.25% Cash, 12/18/2020 | $ | - | - | - | 0.0 | % | ||||||||||||
Knowland Technology Holdings, L.L.C. | Business Services | First Lien Term Loan 8.00% Cash, 11/29/2017 | $ | 5,259,171 | 5,224,422 | 5,259,171 | 4.2 | % | ||||||||||||
PCF Number 4, Inc. | Business Services | Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021 | $ | 13,000,000 | 12,870,023 | 12,870,000 | 10.3 | % | ||||||||||||
Vector Controls Holding Co., LLC (d) | Business Services | First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018 | $ | 9,035,515 | 8,952,442 | 9,035,515 | 7.2 | % | ||||||||||||
Vector Controls Holding Co., LLC (d), (g) | Business Services | Warrants to Purchase Limited Liability Company Interests | 343 | - | 354,819 | 0.3 | % | |||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Business Services | 106,950,466 | 105,976,044 | 84.6 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Advanced Air & Heat of Florida, LLC | Consumer Products | First Lien Term Loan 9.50% Cash, 7/17/2020 | $ | 6,800,000 | 6,733,661 | 6,800,000 | 5.4 | % | ||||||||||||
Targus Holdings, Inc. (d), (g) | Consumer Products | Common Stock | 210,456 | 1,791,242 | - | 0.0 | % | |||||||||||||
Targus Holdings, Inc. (d) | Consumer Products | Second Lien Term Loan A-2 15.00% PIK, 12/31/2019 | $ | 210,456 | 210,456 | 210,456 | 0.2 | % | ||||||||||||
Targus Holdings, Inc. (d) | Consumer Products | Second Lien Term Loan B 15.00% PIK, 12/31/2019 | $ | 631,369 | 631,369 | 631,369 | 0.5 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Consumer Products | 9,366,728 | 7,641,825 | 6.1 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Expedited Travel L.L.C. (g) | Consumer Services | Common Stock | 1,000,000 | 1,000,000 | 1,647,767 | 1.3 | % | |||||||||||||
Expedited Travel L.L.C. | Consumer Services | First Lien Term Loan 10.00% Cash, 10/10/2019 | $ | 11,475,490 | 11,401,380 | 11,647,623 | 9.3 | % | ||||||||||||
My Alarm Center, LLC | Consumer Services | Second Lien Term Loan 12.00% Cash, 7/9/2019 | $ | 7,500,000 | 7,500,000 | 7,450,500 | 6.0 | % | ||||||||||||
PrePaid Legal Services, Inc. (d) | Consumer Services | First Lien Term Loan 6.50% Cash, 7/1/2019 | $ | 1,572,921 | 1,562,787 | 1,556,248 | 1.2 | % | ||||||||||||
PrePaid Legal Services, Inc. (d) | Consumer Services | Second Lien Term Loan 10.25% Cash, 7/1/2020 | $ | 10,000,000 | 9,962,104 | 9,827,000 | 7.9 | % | ||||||||||||
Prime Security Services, LLC | Consumer Services | Second Lien Term Loan 9.75% Cash, 7/1/2022 | $ | 12,000,000 | 11,829,030 | 10,980,000 | 8.8 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Consumer Services | 43,255,301 | 43,109,138 | 34.5 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
M/C Acquisition Corp., L.L.C. (d), (g) | Education | Class A Common Stock | 544,761 | 30,241 | - | 0.0 | % | |||||||||||||
M/C Acquisition Corp., L.L.C. (d) | Education | First Lien Term Loan 1.00% Cash, 3/31/2016 | $ | 2,321,073 | 1,193,790 | 8,087 | 0.0 | % | ||||||||||||
Texas Teachers of Tomorrow, LLC (g), (h) | Education | Common Stock | 750 | 750,000 | 785,475 | 0.6 | % | |||||||||||||
Texas Teachers of Tomorrow, LLC | Education | Second Lien Term Loan 10.75% Cash, 6/2/2021 | $ | 10,000,000 | 9,902,816 | 9,900,000 | 7.9 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Education | 11,876,847 | 10,693,562 | 8.5 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
TM Restaurant Group L.L.C. | Food and Beverage | First Lien Term Loan 9.75% Cash, 7/16/2017 | $ | 9,622,319 | 9,527,041 | 9,131,048 | 7.3 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Food and Beverage | 9,527,041 | 9,131,048 | 7.3 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Bristol Hospice, LLC | Healthcare Services | Senior Secured Note 11.00% (10.00% Cash/1.00% PIK), 11/29/2018 | $ | 5,404,747 | 5,339,820 | 5,404,747 | 4.3 | % | ||||||||||||
Censis Technologies, Inc. | Healthcare Services | First Lien Term Loan B 11.00% Cash, 7/24/2019 | $ | 11,550,000 | 11,377,810 | 11,459,418 | 9.2 | % | ||||||||||||
Censis Technologies, Inc. (g), (h) | Healthcare Services | Limited Partner Interests | 999 | 999,000 | 810,642 | 0.7 | % | |||||||||||||
Roscoe Medical, Inc. (d), (g) | Healthcare Services | Common Stock | 5,000 | 500,000 | 334,000 | 0.3 | % | |||||||||||||
Roscoe Medical, Inc. | Healthcare Services | Second Lien Term Loan 11.25% Cash, 9/26/2019 | $ | 4,200,000 | 4,141,519 | 3,822,000 | 3.0 | % | ||||||||||||
Ohio Medical, LLC (g) | Healthcare Services | Common Stock | 5,000 | 500,000 | 500,000 | 0.4 | % | |||||||||||||
Ohio Medical, LLC | Healthcare Services | Senior Subordinated Note 12.00% , 7/15/2021 | $ | 7,300,000 | 7,228,452 | 7,227,000 | 5.8 | % | ||||||||||||
Smile Brands Group Inc. (d) | Healthcare Services | Syndicated Loan 10.50% (9.00% Cash/1.50% PIK), 8/16/2019 | $ | 4,420,900 | 4,362,266 | 3,216,647 | 2.6 | % | ||||||||||||
Zest Holdings, LLC (d) | Healthcare Services | Syndicated Loan 5.25% Cash, 8/16/2020 | $ | 4,207,821 | 4,142,093 | 4,130,692 | 3.3 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Healthcare Services | 38,590,960 | 36,905,146 | 29.6 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
HMN Holdco, LLC | Media | First Lien Term Loan 10.00% Cash, 5/16/2019 | $ | 8,937,982 | 8,812,479 | 8,937,983 | 7.1 | % | ||||||||||||
HMN Holdco, LLC | Media | First Lien Term Loan 10.00% Cash, 5/16/2019 | $ | 1,600,000 | 1,572,821 | 1,600,000 | 1.3 | % | ||||||||||||
HMN Holdco, LLC | Media | Class A Series | 4,264 | 61,647 | 314,683 | 0.3 | % | |||||||||||||
HMN Holdco, LLC | Media | Class A Warrant | 30,320 | 438,353 | 1,889,542 | 1.5 | % | |||||||||||||
HMN Holdco, LLC (g) | Media | Warrants to Purchase Limited Liability Company Interests (Common) | 57,872 | - | 3,309,121 | 2.6 | % | |||||||||||||
HMN Holdco, LLC (g) | Media | Warrants to Purchase Limited Liability Company Interests | 8,139 | - | 523,012 | 0.4 | % | |||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Media | 10,885,300 | 16,574,341 | 13.2 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Elyria Foundry Company, L.L.C. | Metals | Common Stock | 35,000 | 9,217,564 | 2,026,150 | 1.6 | % | |||||||||||||
Elyria Foundry Company, L.L.C. | Metals | Revolver 10.00% Cash, 3/31/2017 | $ | 8,500,000 | 8,500,000 | 8,500,000 | 6.8 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Metals | 17,717,564 | 10,526,150 | 8.4 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Mercury Network, LLC | Real Estate | First Lien Term Loan 9.75% Cash, 4/24/2020 | $ | 9,025,000 | 8,944,211 | 9,025,000 | 7.2 | % | ||||||||||||
Mercury Network, LLC (g) | Real Estate | Common Stock | 413,043 | 413,043 | 512,173 | 0.4 | % | |||||||||||||
|
|
|
|
|
| |||||||||||||||
| Total Real Estate | 9,357,254 | 9,537,173 | 7.6 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Sub Total Non-control/Non-affiliated investments | 268,145,090 | 271,168,186 | 216.6 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Control investments - 10.3% (b) | ||||||||||||||||||||
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (d), (e), (f) | Structured Finance Securities | Other/Structured Finance Securities 16.14%, 10/17/2023 | $ | 30,000,000 | 13,030,751 | 12,827,980 | 10.3 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||
Sub Total Control investments | 13,030,751 | 12,827,980 | 10.3 | % | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
TOTAL INVESTMENTS - 226.9% (b) | $ | 281,175,841 | $ | 283,996,166 | 226.9 | % | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
| Principal | Cost | Fair Value | % of Net Assets | |||||||||||||
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 5.6% | ||||||||||||||||
U.S. Bank Money Market (l) | $ | 7,034,783 | $ | 7,034,783 | $ | 7,034,783 | 5.6 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash and cash equivalents and cash and cash equivalents, reserve accounts | $ | 7,034,783 | $ | 7,034,783 | $ | 7,034,783 | 5.6 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.2% 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 $125,149,875 as of February 29, 2016. |
| (c) | Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements). |
| (d) | These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements). |
| (e) | This investment does not have a stated interest rate that is payable thereon. As a result, the 16.14% 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, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows: |
Company | Purchases | Redemptions | Sales (Cost) | Interest Income | Management Fee Income | Net Realized Gains/(Losses) | Net Unrealized Depreciation | |||||||||||||||||||||
Saratoga Investment Corp. CLO 2013-1, Ltd. | $ | - | $ | - | $ | - | $ | 2,665,648 | $ | 1,494,779 | $ | - | $ | (202,771 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| (g) | Non-income producing at February 29, 2016. |
| (h) | Includes securities issued by an affiliate of the company. |
| (i) | Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada. |
| (j) | The investment has an unfunded commitment as of February 29, 2016 (see Note 7). |
| (k) | The entire commitment was unfunded at February 29, 2016. As such, no interest is being earned on this investment. |
| (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 29, 2016. |
6
Saratoga Investment Corp.
Consolidated Statements of Changes in Net Assets
(unaudited)
| For the three months ended May 31, 2016 | For the three months ended May 31, 2015 | |||||||
INCREASE FROM OPERATIONS: | ||||||||
Net investment income | $ | 2,538,549 | $ | 1,770,690 | ||||
Net realized gain from investments | 6,102,905 | 73,246 | ||||||
Net unrealized appreciation (depreciation) on investments | (5,353,867 | ) | 5,540,969 | |||||
|
|
|
| |||||
Net increase in net assets from operations | 3,287,587 | 7,384,905 | ||||||
|
|
|
| |||||
DECREASE FROM SHAREHOLDER DISTRIBUTIONS: | ||||||||
Distributions declared | (2,346,311 | ) | (6,894,523 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from shareholder distributions | (2,346,311 | ) | (6,894,523 | ) | ||||
|
|
|
| |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Stock dividend distribution | 1,750,901 | 402,200 | ||||||
Repurchases of common stock | (713,184 | ) | - | |||||
|
|
|
| |||||
Net increase in net assets from capital share transactions | 1,037,717 | 402,200 | ||||||
|
|
|
| |||||
Total increase in net assets | 1,978,993 | 892,582 | ||||||
Net assets at beginning of period | 125,149,875 | 122,598,742 | ||||||
|
|
|
| |||||
Net assets at end of period | $ | 127,128,868 | $ | 123,491,324 | ||||
|
|
|
| |||||
Net asset value per common share | $ | 22.11 | $ | 22.75 | ||||
Common shares outstanding at end of period | 5,750,222 | 5,428,758 | ||||||
Distribution in excess of net investment income | $ | (26,025,665 | ) | $ | (29,029,436 | ) | ||
See accompanying notes to consolidated financial statements.
7
Saratoga Investment Corp.
Consolidated Statements of Cash Flows
(unaudited)
| For the three months ended May 31, 2016 | For the three months ended May 31, 2015 | |||||||
Operating activities | ||||||||
NET INCREASE IN NET ASSETS FROM OPERATIONS | $ | 3,287,587 | $ | 7,384,905 | ||||
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: | ||||||||
Paid-in-kind interest income | (134,256 | ) | (597,336 | ) | ||||
Net accretion of discount on investments | (136,568 | ) | (143,205 | ) | ||||
Amortization of deferred debt financing costs | 262,663 | 217,658 | ||||||
Net realized gain from investments | (6,102,905 | ) | (73,246 | ) | ||||
Net unrealized (appreciation) depreciation on investments | 5,353,867 | (5,540,969 | ) | |||||
Proceeds from sales and redemptions of investments | 20,588,570 | 7,323,338 | ||||||
Purchase of investments | - | (23,174,833 | ) | |||||
(Increase) decrease in operating assets: | ||||||||
Cash and cash equivalents, reserve accounts | (21,569,825 | ) | 12,311,321 | |||||
Interest receivable | (246,128 | ) | (324,128 | ) | ||||
Management fee receivable | (478 | ) | (2,614 | ) | ||||
Other assets | (9,834 | ) | (4,847 | ) | ||||
Receivable from unsettled trades | 300,000 | - | ||||||
Increase (decrease) in operating liabilities: | ||||||||
Base management and incentive fees payable | 159,089 | 929,376 | ||||||
Accounts payable and accrued expenses | 82,384 | (167,306 | ) | |||||
Interest and debt fees payable | (513,146 | ) | (492,838 | ) | ||||
Payable for repurchases of common stock | 15,930 | - | ||||||
Directors fees payable | 22,500 | 7,500 | ||||||
Due to manager | 6,977 | 10,000 | ||||||
|
|
|
| |||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 1,366,427 | (2,337,224 | ) | |||||
|
|
|
| |||||
Financing activities | ||||||||
Borrowings on debt | - | 3,200,000 | ||||||
Paydowns on debt | - | (1,000,000 | ) | |||||
Payments of deferred debt financing costs | (313,400 | ) | (152,773 | ) | ||||
Repurchases of common stock | (713,184 | ) | - | |||||
Payments of cash dividends | (1,471,009 | ) | (899,034 | ) | ||||
|
|
|
| |||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (2,497,593 | ) | 1,148,193 | |||||
|
|
|
| |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,131,166 | ) | (1,189,031 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 2,440,277 | 1,888,158 | ||||||
|
|
|
| |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 1,309,111 | $ | 699,127 | ||||
|
|
|
| |||||
Supplemental information: | ||||||||
Interest paid during the period | $ | 2,618,539 | $ | 2,239,045 | ||||
Supplemental non-cash information: | ||||||||
Paid-in-kind interest income | $ | 134,256 | $ | 597,336 | ||||
Net accretion of discount on investments | $ | 136,568 | $ | 143,205 | ||||
Amortization of deferred debt financing costs | $ | 262,663 | $ | 217,658 | ||||
Stock dividend distribution | $ | 1,750,901 | $ | 402,200 | ||||
See accompanying notes to consolidated financial statements.
8
SARATOGA INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016
(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 our 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.".
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 Mercury, Inc., SIA TT, Inc., and SIA Vector, Inc., which are structured as Delaware entities, or tax 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 April 2, 2015, the SBA issued a "green light" or "go forth" letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. If approved, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.
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 subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC). 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 and SBIC LP are both 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 Topic 946"). There have been no changes to the Company or SBIC LP's status as investment companies during the three months ended May 31, 2016.
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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; 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 May 31, 2016, 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 our $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.
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 Measurements 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 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 our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective
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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 our Manager and preliminary valuation conclusions are documented and discussed with the senior management of our Manager; and |
| • | An independent valuation firm, engaged by our board of directors, reviews approximately one quarter 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 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. |
Our 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. 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.
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. Our 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
We account for derivative financial instruments in accordance with 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 and amortization of premiums on investments.
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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.
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.
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.
Paid-in-Kind Interest
The Company holds debt 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.
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 effective yield method over the life of the debentures.
Accounting Standards Update ("ASU") 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03") requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company has adopted the provisions of ASU 2015-03 as of February 28, 2015, by reclassifying deferred debt financing costs from within total assets to within total liabilities as a contra-liability. Prior period amounts were reclassified to conform to the current period presentation.
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.
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 filed an election to be treated, for tax purposes, as a RIC under Subchapter M of 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.
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.
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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, 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.
ASC 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 29, 2016, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2013, 2014 and 2015 federal tax years for the Company remain subject to examination by the IRS. As of May 31, 2016 and February 29, 2016, 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 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 its investment adviser 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 investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company's investment adviser 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.
New Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Amendments to the Leases ("ASC Topic 842"), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance is effective for annual and interim periods beginning after December 15, 2018. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial
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liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact the adoption of this standard has on the Company's consolidated financial statements and disclosures.
In August 2014, the FASB issued new accounting guidance that requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments provide a definition of the term "substantial doubt" and include principles for considering the mitigating effect of management's plans. The amendments also require an evaluation every reporting period, including interim periods for a period of one year after the date that the financial statements are issued (or available to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are effective for reporting periods ending after December 15, 2016. Management does not believe these changes will have a material impact on the Company's consolidated financial statements and disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 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. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016, and early application is not permitted. Management is currently evaluating the impact these changes will have 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.
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-Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable. |
| • | Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 asset, assuming no additional corroborating evidence. |
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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 Company's 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 May 31, 2016 (dollars in thousands), according to the fair value hierarchy:
| Fair Value Measurements | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Syndicated loans | $ | - | $ | - | $ | 13,042 | $ | 13,042 | ||||||||
First lien term loans | - | - | 131,492 | 131,492 | ||||||||||||
Second lien term loans | - | - | 89,519 | 89,519 | ||||||||||||
Structured finance securities | - | - | 12,452 | 12,452 | ||||||||||||
Equity interests | - | - | 17,922 | 17,922 | ||||||||||||
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Total | $ | - | $ | - | $ | 264,427 | $ | 264,427 | ||||||||
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The following table presents fair value measurements of investments, by major class, as of February 29, 2016 (dollars in thousands), according to the fair value hierarchy:
| Fair Value Measurements | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Syndicated loans | $ | - | $ | - | $ | 11,868 | $ | 11,868 | ||||||||
First lien term loans | - | - | 144,643 | 144,643 | ||||||||||||
Second lien term loans | - | - | 88,178 | 88,178 | ||||||||||||
Structured finance securities | - | - | 12,828 | 12,828 | ||||||||||||
Equity interests | - | - | 26,479 | 26,479 | ||||||||||||
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Total | $ | - | $ | - | $ | 283,996 | $ | 283,996 | ||||||||
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The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended May 31, 2016 (dollars in thousands):
| Syndicated loans | First lien term loans | Second lien term loans | Structured finance securities | Equity interests | Total | |||||||||||||||||||
Balance as of February 29, 2016 | $ | 11,868 | $ | 144,643 | $ | 88,178 | $ | 12,828 | $ | 26,479 | $ | 283,996 | ||||||||||||
Net unrealized appreciation (depreciation) on investments | 1,242 | (363 | ) | 1,268 | 583 | (8,084 | ) | (5,354 | ) | |||||||||||||||
Purchases and other adjustments to cost | 26 | 164 | 73 | - | 8 | 271 | ||||||||||||||||||
Sales and redemptions | (95 | ) | (13,078 | ) | - | (959 | ) | (6,457 | ) | (20,589 | ) | |||||||||||||
Net realized gain from investments | 1 | 126 | - | - | 5,976 | 6,103 | ||||||||||||||||||
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Balance as of May 31, 2016 | $ | 13,042 | $ | 131,492 | $ | 89,519 | $ | 12,452 | $ | 17,922 | $ | 264,427 | ||||||||||||
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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 redemptions 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.
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The net change in unrealized appreciation (depreciation) for the three months ended May 31, 2016 on investments still held as of May 31, 2016 is $467,145 and is included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended May 31, 2015 (dollars in thousands):
| Syndicated loans | First lien term loans | Second lien term loans | Unsecured notes | Structured finance securities | Equity interests | Total | ||||||||||||||||||||||
Balance as of February 28, 2015 | $ | 18,302 | $ | 145,207 | $ | 35,603 | $ | 4,230 | $ | 17,031 | $ | 20,165 | $ | 240,538 | ||||||||||||||
Net unrealized appreciation (depreciation) on investments | (240 | ) | 29 | (22 | ) | 1,036 | 609 | 4,129 | 5,541 | |||||||||||||||||||
Purchases and other adjustments to cost | 11 | 17,941 | 5,056 | 494 | - | 413 | 23,915 | |||||||||||||||||||||
Sales and redemptions | (283 | ) | (6,174 | ) | (86 | ) | - | (780 | ) | - | (7,323 | ) | ||||||||||||||||
Net realized gain from investments | 4 | 69 | - | - | - | - | 73 | |||||||||||||||||||||
Restructures in | - | - | - | 101 | - | - | 101 | |||||||||||||||||||||
Restructures out | - | - | - | - | - | (101 | ) | (101 | ) | |||||||||||||||||||
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Balance as of May 31, 2015 | $ | 17,794 | $ | 157,072 | $ | 40,551 | $ | 5,861 | $ | 16,860 | $ | 24,606 | $ | 262,744 | ||||||||||||||
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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 redemptions 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.
The net change in unrealized appreciation (depreciation) for the three months ended May 31, 2015 on investments still held as of May 31, 2015 was $5,493,439 and was included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of May 31, 2016 were as follows (dollars in thousands):
| Fair Value | Valuation Technique | Unobservable Input | Range | |||||||
Syndicated loans | 13,042 | Market Comparables | Third-Party Bid (%) | 86.0% - 99.8% | ||||||
First lien term loans | 131,492 | Market Comparables | Market Yield (%) | 6.8% - 15.5% | ||||||
| EBITDA Multiples (x) | 1.0x | |||||||||
| Third-Party Bid (%) | 92.5% - 99.4% | |||||||||
Second lien term loans | 89,519 | Market Comparables | Market Yield (%) | 10.3% - 15.0% | ||||||
| Third-Party Bid (%) | 98.0% - 100.5% | |||||||||
Structured finance securities | 12,452 | Discounted Cash Flow | Discount Rate (%) | 19.0% | ||||||
Equity interests | 17,922 | Market Comparables | EBITDA Multiples (x) Revenue Multiples | 2.9x - 11.0x 1.8x - 3.0x | ||||||
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The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 29, 2016 were as follows (dollars in thousands):
| Fair Value | Valuation Technique | Unobservable Input | Range | |||||||
Syndicated loans | 11,868 | Market Comparables | Third-Party Bid (%) | 72.5% - 98.2% | ||||||
First lien term loans | 144,643 | Market Comparables | Market Yield (%) | 6.8% - 15.5% | ||||||
| EBITDA Multiples (x) | 1.0x | |||||||||
| Revenue Multiples Third-Party Bid | 91.3 - 98.9 | |||||||||
Second lien term loans | 88,178 | Market Comparables | Market Yield (%) | 0.0% - 15.0% | ||||||
| Third-Party Bid (%) | 91.5% - 98.6% | |||||||||
Structured finance securities | 12,828 | Discounted Cash Flow | Discount Rate (%) | 20.0% | ||||||
Equity interests | 26,479 | Market Comparables | EBITDA Multiples (x) Revenue Multiples | 6.8x - 16.4x | ||||||
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 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, in isolation, would result in a significantly lower (higher) 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.
The composition of our investments as of May 31, 2016, at amortized cost and fair value were 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 | |||||||||||||
Syndicated loans | $ | 14,070 | 5.3 | % | $ | 13,042 | 4.9 | % | ||||||||
First lien term loans | 133,457 | 50.0 | 131,492 | 49.7 | ||||||||||||
Second lien term loans | 89,559 | 33.5 | 89,519 | 33.9 | ||||||||||||
Structured finance securities | 12,073 | 4.5 | 12,452 | 4.7 | ||||||||||||
Equity interests | 17,802 | 6.7 | 17,922 | 6.8 | ||||||||||||
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Total | $ | 266,961 | 100.0 | % | $ | 264,427 | 100.0 | % | ||||||||
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The composition of our investments as of February 29, 2016, at amortized cost and fair value were 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 | |||||||||||||
Syndicated loans | $ | 14,138 | 5.0 | % | $ | 11,868 | 4.2 | % | ||||||||
First lien term loans | 146,246 | 52.0 | 144,643 | 50.9 | ||||||||||||
Second lien term loans | 89,486 | 31.9 | 88,178 | 31.1 | ||||||||||||
Structured finance securities | 13,031 | 4.6 | 12,828 | 4.5 | ||||||||||||
Equity interests | 18,275 | 6.5 | 26,479 | 9.3 | ||||||||||||
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Total | $ | 281,176 | 100.0 | % | $ | 283,996 | 100.0 | % | ||||||||
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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
17
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 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. For the quarter ended November 30, 2013, 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 May 31, 2016. The significant inputs for the valuation model include:
| • | Default rates: 2.0% |
| • | Recovery rates: 35-70% |
| • | Prepayment rate: 20.0% |
| • | Reinvestment rate / price: L+375bps / $99.50 |
Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. ("Saratoga CLO")
On January 22, 2008, we invested $30 million in all of the outstanding subordinated notes of GSC Investment Corp. CLO 2007, Ltd., a collateralized loan obligation fund managed by us that invests primarily in senior secured loans. Additionally, we entered into a collateral management agreement with GSC Investment Corp. CLO 2007, Ltd. pursuant to which we act as collateral manager to it. The Saratoga CLO was refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the fee basis amount at the beginning of the collection period, paid quarterly to the extent of available proceeds. We are also entitled to an incentive management fee equal to 20.0% of the remaining interest proceeds and principal proceeds, if any, after the subordinated notes have realized the incentive management fee target return of 12.0%, in accordance with the priority of payments after making the prior distributions on the relevant payment date. For the three months ended May 31, 2016 and May 31, 2015, we accrued $0.4 million and $0.4 million in management fee income, respectively, and $0.5 million and $0.6 million in interest income, respectively, from Saratoga CLO. We did not accrue any amounts related to the incentive management fee as the 12.0% hurdle rate has not yet been achieved.
At May 31, 2016, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $12.5 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. At May 31, 2016, Saratoga CLO had investments with a principal balance of $305.3 million and a weighted average spread over LIBOR of 4.38%, and had debt with a principal balance of $282.4 million with a weighted average spread over LIBOR of 1.84%. 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. At May 31, 2016, the total "spread", or projected future cash flows of the subordinated notes, over the life of Saratoga CLO was $12.7 million, which had a present value of approximately $12.5 million, using a 19.0% discount rate.
Below is certain financial information from the separate financial statements of Saratoga CLO as of May 31, 2016 (unaudited) and February 29, 2016 and for the three months ended May 31, 2016 and May 31, 2015 (unaudited).
18
Saratoga Investment Corp. CLO 2013-1, Ltd.
Statements of Assets and Liabilities
| As of | ||||||||
| May 31, 2016 | February 29, 2016 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
Investments | ||||||||
Fair Value Loans (amortized cost of $302,165,524 and $300,112,538, respectively) | $ | 296,151,177 | $ | 284,652,926 | ||||
Fair Value Other/Structured finance securities (amortized cost of $3,531,218 and $3,531,218, respectively) | 67,271 | 191,863 | ||||||
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Total investments at fair value (amortized cost of $305,696,742 and $303,643,756, respectively) | 296,218,448 | 284,844,789 | ||||||
Cash and cash equivalents | 2,663,033 | 2,349,633 | ||||||
Receivable from open trades | 4,917,860 | 2,691,831 | ||||||
Interest receivable | 1,732,199 | 1,698,562 | ||||||
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Total assets | $ | 305,531,540 | $ | 291,584,815 | ||||
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LIABILITIES | ||||||||
Interest payable | $ | 661,241 | $ | 626,040 | ||||
Payable from open trades | 11,334,374 | 7,123,854 | ||||||
Accrued base management fee | 85,247 | 85,008 | ||||||
Accrued subordinated management fee | 85,247 | 85,008 | ||||||
Class A-1 Notes - SIC CLO 2013-1, Ltd. | 170,000,000 | 170,000,000 | ||||||
Discount on Class A-1 Notes - SIC CLO 2013-1, Ltd. | (1,274,881 | ) | (1,319,258 | ) | ||||
Class A-2 Notes - SIC CLO 2013-1, Ltd. | 20,000,000 | 20,000,000 | ||||||
Discount on Class A-2 Notes - SIC CLO 2013-1, Ltd. | (132,150 | ) | (136,750 | ) | ||||
Class B Notes - SIC CLO 2013-1, Ltd. | 44,800,000 | 44,800,000 | ||||||
Discount on Class B Notes - SIC CLO 2013-1, Ltd. | (858,446 | ) | (888,328 | ) | ||||
Class C Notes - SIC CLO 2013-1, Ltd. | 16,000,000 | 16,000,000 | ||||||
Discount on Class C Notes - SIC CLO 2013-1, Ltd. | (534,473 | ) | (553,078 | ) | ||||
Class D Notes - SIC CLO 2013-1, Ltd. | 14,000,000 | 14,000,000 | ||||||
Discount on Class D Notes - SIC CLO 2013-1, Ltd. | (693,788 | ) | (717,938 | ) | ||||
Class E Notes - SIC CLO 2013-1, Ltd. | 13,100,000 | 13,100,000 | ||||||
Discount on Class E Notes - SIC CLO 2013-1, Ltd. | (1,307,991 | ) | (1,353,521 | ) | ||||
Class F Notes - SIC CLO 2013-1, Ltd. | 4,500,000 | 4,500,000 | ||||||
Discount on Class F Notes - SIC CLO 2013-1, Ltd. | (475,740 | ) | (492,300 | ) | ||||
Deferred debt financing costs, SIC CLO 2013-1, Ltd. Notes | (1,660,294 | ) | (1,716,554 | ) | ||||
Subordinated Notes | 30,000,000 | 30,000,000 | ||||||
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Total liabilities | $ | 317,628,346 | $ | 313,142,183 | ||||
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Commitments and contingencies | ||||||||
NET ASSETS | ||||||||
Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively | $ | 250 | $ | 250 | ||||
Accumulated loss | (21,557,623 | ) | (5,803,406 | ) | ||||
Net gain/(loss) | 9,460,567 | (15,754,212 | ) | |||||
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Total net assets | (12,096,806 | ) | (21,557,368 | ) | ||||
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Total liabilities and net assets | $ | 305,531,540 | $ | 291,584,815 | ||||
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19
Saratoga Investment Corp. CLO 2013-1, Ltd.
Statements of Operations
(unaudited)
| For the three months ended May 31, 2016 | For the three months ended May 31, 2015 | |||||||
INVESTMENT INCOME | ||||||||
Interest from investments | $ | 3,788,336 | $ | 3,512,587 | ||||
Interest from cash and cash equivalents | 771 | 290 | ||||||
Other income | 243,301 | 164,115 | ||||||
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Total investment income | 4,032,408 | 3,676,992 | ||||||
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EXPENSES | ||||||||
Interest expense | 3,281,015 | 2,846,636 | ||||||
Professional fees | 18,482 | 59,222 | ||||||
Miscellaneous fee expense | 8,244 | 4,925 | ||||||
Base management fee | 186,842 | 189,373 | ||||||
Subordinated management fee | 186,842 | 189,373 | ||||||
Trustee expenses | 26,688 | 31,284 | ||||||
Amortization expense | 239,963 | 239,963 | ||||||
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Total expenses | 3,948,076 | 3,560,776 | ||||||
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NET INVESTMENT INCOME | 84,332 | 116,216 | ||||||
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||||||
Net realized gain on investments | 55,562 | 42,561 | ||||||
Net unrealized appreciation/(depreciation) on investments | 9,320,673 | (85,832 | ) | |||||
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Net gain/(loss) on investments | 9,376,235 | (43,271 | ) | |||||
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 9,460,567 | $ | 72,945 | ||||
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20
Saratoga Investment Corp. CLO 2013-1 Ltd.
Schedule of Investments
May 31, 2016
(unaudited)
Issuer Name | Industry | Asset Name | Asset Type | Current Rate | Maturity Date | Principal/ Number of Shares | Cost | Fair Value | ||||||||||||||||||
Education Management II LLC | Leisure Goods/Activities/Movies | A-1 Preferred Shares | Equity | 0.00 | % | 6,692 | $ | 669,214 | $ | 13,384 | ||||||||||||||||
Education Management II LLC | Leisure Goods/Activities/Movies | A-2 Preferred Shares | Equity | 0.00 | % | 18,975 | 1,897,538 | 190 | ||||||||||||||||||
New Millennium Holdco, Inc. | Healthcare & Pharmaceuticals | Common Stock | Equity | 0.00 | % | 14,813 | 964,466 | 53,697 | ||||||||||||||||||
24 Hour Holdings III LLC | Leisure Goods/Activities/Movies | Term Loan | Loan | 4.75 | % | 5/28/2021 | $ | 491,250 | 487,536 | 472,214 | ||||||||||||||||
Acosta Holdco Inc. | Media | Term Loan B1 | Loan | 4.25 | % | 9/26/2021 | $ | 1,970,100 | 1,957,539 | 1,963,953 | ||||||||||||||||
Aspen Dental Management, Inc. | Healthcare & Pharmaceuticals | Term Loan Initial | Loan | 5.50 | % | 4/29/2022 | $ | 496,250 | 494,069 | 496,250 | ||||||||||||||||
Advantage Sales & Marketing Inc. | Services: Business | Delayed Draw Term Loan | Loan | 4.25 | % | 7/25/2021 | $ | 2,464,975 | 2,461,937 | 2,454,203 | ||||||||||||||||
AgroFresh | Food Services | Term Loan | Loan | 5.75 | % | 7/30/2021 | $ | 1,985,000 | 1,976,192 | 1,940,338 | ||||||||||||||||
Aegis Toxicology Science Corporation | Healthcare & Pharmaceuticals | Term B Loan | Loan | 5.50 | % | 2/24/2021 | $ | 2,482,500 | 2,340,000 | 2,271,488 | ||||||||||||||||
Akorn, Inc. | Healthcare & Pharmaceuticals | Term Loan B | Loan | 6.00 | % | 4/16/2021 | $ | 398,056 | 396,749 | 400,047 | ||||||||||||||||
Albertson's LLC | Retailers (Except Food and Drugs) | Term Loan B-4 | Loan | 5.50 | % | 8/25/2021 | $ | 3,375,900 | 3,359,650 | 3,374,853 | ||||||||||||||||
Alere Inc. (fka IM US Holdings, LLC) | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.25 | % | 6/20/2022 | $ | 924,936 | 922,841 | 922,235 | ||||||||||||||||
Alion Science T/L B (1st Lien) | High Tech Industries | Term Loan B (First Lien) | Loan | 5.50 | % | 8/19/2021 | $ | 2,977,500 | 2,964,159 | 2,873,288 | ||||||||||||||||
Alliance HealthCare T/L B | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.25 | % | 6/3/2019 | $ | 992,284 | 987,715 | 947,632 | ||||||||||||||||
APCO Holdings, Inc. | Automotive | Term Loan | Loan | 7.00 | % | 1/31/2022 | $ | 2,000,000 | 1,945,000 | 1,940,000 | ||||||||||||||||
American Beacon Advisors, Inc. | Financial Intermediaries | Term Loan (First Lien) | Loan | 5.50 | % | 4/30/2022 | $ | 242,690 | 241,617 | 240,263 | ||||||||||||||||
Aramark Corporation | Food Products | U.S. Term F Loan | Loan | 3.25 | % | 2/24/2021 | $ | 3,142,407 | 3,142,407 | 3,146,335 | ||||||||||||||||
Asurion, LLC (fka Asurion Corporation) | Insurance | Incremental Tranche B-1 Term Loan | Loan | 5.00 | % | 5/24/2019 | $ | 2,583,471 | 2,561,885 | 2,585,306 | ||||||||||||||||
Asurion, LLC (fka Asurion Corporation) | Insurance | Term Loan B4 (First Lien) | Loan | 5.00 | % | 8/4/2022 | $ | 2,462,500 | 2,451,257 | 2,454,300 | ||||||||||||||||
Auction.com | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 6.00 | % | 5/13/2019 | $ | 2,516,637 | 2,516,201 | 2,491,471 | ||||||||||||||||
Avantor Performance Materials Holdings, Inc. | Chemicals/Plastics | Term Loan | Loan | 5.25 | % | 6/24/2017 | $ | 2,156,953 | 2,154,428 | 2,146,168 | ||||||||||||||||
Bass Pro Group, LLC | Retailers (Except Food and Drugs) | Term Loan | Loan | 4.00 | % | 6/5/2020 | $ | 1,485,000 | 1,482,309 | 1,460,408 | ||||||||||||||||
Belmond Interfin Ltd. | Lodging & Casinos | Term Loan | Loan | 4.00 | % | 3/19/2021 | $ | 490,000 | 488,188 | 485,713 | ||||||||||||||||
Berry Plastics Corporation | Chemicals/Plastics | Term E Loan | Loan | 3.75 | % | 1/6/2021 | $ | 1,314,499 | 1,305,573 | 1,318,232 | ||||||||||||||||
BJ's Wholesale Club, Inc. | Food/Drug Retailers | New 2013 (November) Replacement Loan (First Lien) | Loan | 4.50 | % | 9/26/2019 | $ | 1,439,716 | 1,439,051 | 1,432,517 | ||||||||||||||||
Blue Coat Systems | Technology | Term Loan B | Loan | 4.50 | % | 5/20/2022 | $ | 995,000 | 992,757 | 990,960 | ||||||||||||||||
BMC Software | Technology | Term Loan | Loan | 5.00 | % | 9/10/2020 | $ | 1,974,747 | 1,923,739 | 1,753,418 | ||||||||||||||||
Brickman Group Holdings, Inc. | Brokers/Dealers/Investment Houses | Initial Term Loan (First Lien) | Loan | 4.00 | % | 12/18/2020 | $ | 1,472,456 | 1,461,156 | 1,467,096 | ||||||||||||||||
Brock Holdings III, Inc. | Industrial Equipment | Term Loan (First Lien) | Loan | 6.00 | % | 3/16/2017 | $ | 1,901,865 | 1,906,959 | 1,800,438 | ||||||||||||||||
Burlington Coat Factory Warehouse Corporation | Retailers (Except Food and Drugs) | Term B-2 Loan | Loan | 4.25 | % | 8/13/2021 | $ | 1,861,667 | 1,853,763 | 1,865,744 | ||||||||||||||||
BWAY Holding Company | Leisure Goods/Activities/Movies | Term Loan B | Loan | 5.50 | % | 8/14/2020 | $ | 982,500 | 974,286 | 982,087 | ||||||||||||||||
Camp International Holding Company | Aerospace and Defense | 2013 Replacement Term Loan (First Lien) | Loan | 4.75 | % | 5/31/2019 | $ | 1,935,132 | 1,935,705 | 1,929,094 | ||||||||||||||||
Capital Automotive L.P. | Conglomerate | Tranche B-1 Term Loan Facility | Loan | 4.00 | % | 4/10/2019 | $ | 1,498,941 | 1,501,133 | 1,504,877 | ||||||||||||||||
Catalent Pharma Solutions, Inc | Drugs | Initial Term B Loan | Loan | 4.25 | % | 5/20/2021 | $ | 491,251 | 489,388 | 492,096 | ||||||||||||||||
Cengage Learning Acquisitions, Inc. | Publishing | Term Loan | Loan | 7.00 | % | 3/31/2020 | $ | 4,146,294 | 4,152,886 | 4,140,365 | ||||||||||||||||
Charter Communications Operating, LLC | Cable and Satellite Television | Term F Loan | Loan | 3.00 | % | 12/31/2020 | $ | 1,622,043 | 1,617,734 | 1,621,540 | ||||||||||||||||
CHS/Community Health Systems, Inc. | Healthcare & Pharmaceuticals | Term G Loan | Loan | 3.75 | % | 12/31/2019 | $ | 1,020,000 | 994,045 | 999,345 | ||||||||||||||||
CHS/Community Health Systems, Inc. | Healthcare & Pharmaceuticals | Term H Loan | Loan | 4.00 | % | 1/27/2021 | $ | 1,876,773 | 1,826,397 | 1,847,551 | ||||||||||||||||
Cinedigm Digital Funding I, LLC | Services: Business | Term Loan | Loan | 3.75 | % | 2/28/2018 | $ | 230,710 | 229,718 | 228,980 | ||||||||||||||||
CITGO Petroleum Corporation | Oil & Gas | Term Loan B | Loan | 4.50 | % | 7/29/2021 | $ | 1,979,950 | 1,958,429 | 1,962,625 | ||||||||||||||||
Communications Sales & Leasing, Inc. | Telecommunications | Term Loan B (First Lien) | Loan | 5.00 | % | 10/24/2022 | $ | 1,985,000 | 1,973,986 | 1,969,497 | ||||||||||||||||
CommScope, Inc. | Telecommunications | Term Loan B | Loan | 3.75 | % | 12/29/2022 | $ | 497,500 | 496,393 | 498,331 | ||||||||||||||||
Consolidated Aerospace Manufacturing, LLC | Aerospace and Defense | Term Loan (First Lien) | Loan | 4.75 | % | 8/11/2022 | $ | 1,437,500 | 1,430,726 | 1,349,453 | ||||||||||||||||
Concordia Healthcare Corp | Healthcare & Pharmaceuticals | Term Loan B | Loan | 5.25 | % | 10/21/2021 | $ | 1,995,000 | 1,893,680 | 1,974,631 | ||||||||||||||||
CPI Acquisition Inc. | Technology | Term Loan B (First Lien) | Loan | 5.50 | % | 8/17/2022 | $ | 1,436,782 | 1,416,649 | 1,394,583 | ||||||||||||||||
CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.) | Electronics/Electric | Term B Loan | Loan | 4.25 | % | 11/17/2017 | $ | 1,560,202 | 1,560,202 | 1,521,197 | ||||||||||||||||
Crosby US Acquisition Corp. | Industrial Equipment | Initial Term Loan (First Lien) | Loan | 4.00 | % | 11/23/2020 | $ | 733,125 | 732,447 | 619,491 | ||||||||||||||||
CT Technologies Intermediate Hldgs, Inc | Healthcare & Pharmaceuticals | Term Loan | Loan | 5.25 | % | 12/1/2021 | $ | 1,481,306 | 1,468,467 | 1,459,087 | ||||||||||||||||
Culligan International Company | Conglomerate | Dollar Loan (First Lien) | Loan | 6.25 | % | 12/19/2017 | $ | 769,620 | 744,691 | 749,418 | ||||||||||||||||
Culligan International Company | Conglomerate | Dollar Loan (Second Lien) | Loan | 9.50 | % | 6/19/2018 | $ | 783,162 | 756,844 | 738,130 | ||||||||||||||||
Cumulus Media Holdings Inc. | Broadcast Radio and Television | Term Loan | Loan | 4.25 | % | 12/23/2020 | $ | 470,093 | 466,844 | 331,711 | ||||||||||||||||
DAE Aviation (StandardAero) | Aerospace and Defense | Term Loan | Loan | 5.25 | % | 7/7/2022 | $ | 1,990,000 | 1,981,064 | 2,000,786 | ||||||||||||||||
DCS Business Services, Inc. | Financial Intermediaries | Term B Loan | Loan | 8.75 | % | 3/19/2018 | $ | 2,401,521 | 2,390,937 | 2,401,521 | ||||||||||||||||
Dell International LLC | Technology | Term Loan B2 | Loan | 4.00 | % | 4/29/2020 | $ | 2,887,413 | 2,875,592 | 2,887,413 | ||||||||||||||||
Delta 2 (Lux) S.a.r.l. | Lodging & Casinos | Term Loan B-3 | Loan | 4.75 | % | 7/30/2021 | $ | 1,000,000 | 996,003 | 985,160 | ||||||||||||||||
Deluxe Entertainment Service Group, Inc. | Leisure Goods/Activities/Movies | Term Loan (First Lien) | Loan | 6.50 | % | 2/28/2020 | $ | 1,882,983 | 1,884,261 | 1,850,030 | ||||||||||||||||
Diamond Resorts International | Lodging & Casinos | Term Loan | Loan | 5.50 | % | 5/7/2021 | $ | 926,971 | 923,352 | 909,590 | ||||||||||||||||
Diamond Resorts International | Lodging & Casinos | Term Loan (Add-On) | Loan | 5.50 | % | 5/7/2021 | $ | 1,000,000 | 981,502 | 987,500 | ||||||||||||||||
Diebold, Inc. | High Tech Industries | Term Loan B | Loan | 5.25 | % | 11/6/2023 | $ | 500,000 | 495,047 | 500,470 | ||||||||||||||||
DJO Finance LLC | Healthcare & Pharmaceuticals | Term Loan | Loan | 4.25 | % | 6/8/2020 | $ | 496,250 | 494,305 | 485,859 | ||||||||||||||||
DPX Holdings B.V. | Healthcare & Pharmaceuticals | Term Loan 2015 Incr Dollar | Loan | 4.25 | % | 3/11/2021 | $ | 2,947,500 | 2,941,280 | 2,895,919 | ||||||||||||||||
Drew Marine Group Inc. | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.25 | % | 11/19/2020 | $ | 2,456,135 | 2,430,978 | 2,357,890 | ||||||||||||||||
DTZ U.S. Borrower LLC | Construction & Building | Term Loan B Add-on | Loan | 4.25 | % | 11/4/2021 | $ | 1,977,500 | 1,968,257 | 1,969,254 | ||||||||||||||||
Edelman Financial Group Inc. | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 6.50 | % | 12/19/2022 | $ | 1,496,250 | 1,467,820 | 1,481,916 | ||||||||||||||||
Education Management LLC | Leisure Goods/Activities/Movies | Term Loan A | Loan | 5.50 | % | 7/2/2020 | $ | 501,970 | 486,197 | 138,042 | ||||||||||||||||
Education Management LLC | Leisure Goods/Activities/Movies | Term Loan B (2.00% Cash/6.50% PIK) | Loan | 8.50 | % | 7/2/2020 | $ | 908,127 | 883,765 | 36,325 | ||||||||||||||||
Emerald Performance Materials, LLC | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.50 | % | 8/1/2021 | $ | 483,409 | 481,525 | 485,826 | ||||||||||||||||
Emerald Performance Materials, LLC | Chemicals/Plastics | Term Loan (Second Lien) | Loan | 7.75 | % | 8/1/2022 | $ | 500,000 | 497,909 | 478,335 | ||||||||||||||||
Emerald 2 Limited | Chemicals/Plastics | Term Loan B1A | Loan | 5.00 | % | 5/14/2021 | $ | 1,000,000 | 992,401 | 940,000 | ||||||||||||||||
Endo International plc | Healthcare & Pharmaceuticals | Term Loan B | Loan | 3.75 | % | 9/26/2022 | $ | 997,500 | 995,176 | 983,425 | ||||||||||||||||
EnergySolutions, LLC | Environmental Industries | Term Loan B | Loan | 6.75 | % | 5/29/2020 | $ | 937,857 | 924,510 | 909,721 | ||||||||||||||||
Evergreen Acqco 1 LP | Retailers (Except Food and Drugs) | New Term Loan | Loan | 5.00 | % | 7/9/2019 | $ | 962,587 | 961,085 | 827,026 | ||||||||||||||||
EWT Holdings III Corp. (fka WTG Holdings III Corp.) | Industrial Equipment | Term Loan (First Lien) | Loan | 4.75 | % | 1/15/2021 | $ | 1,962,387 | 1,958,255 | 1,957,481 | ||||||||||||||||
EWT Holdings III Corp. | Capital Equipment | Term Loan | Loan | 5.50 | % | 1/15/2021 | $ | 1,000,000 | 990,248 | 1,005,000 | ||||||||||||||||
Federal-Mogul Corporation | Automotive | Tranche C Term Loan | Loan | 4.75 | % | 4/15/2021 | $ | 2,947,500 | 2,936,632 | 2,780,966 | ||||||||||||||||
First Data Corporation | Financial Intermediaries | First Data T/L Ext (2021) | Loan | 4.43 | % | 3/24/2021 | $ | 2,111,028 | 2,037,691 | 2,119,831 | ||||||||||||||||
First Eagle Investment Management | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 4.75 | % | 12/1/2022 | $ | 1,496,250 | 1,468,264 | 1,491,582 | ||||||||||||||||
Fitness International, LLC | Leisure Goods/Activities/Movies | Term Loan B | Loan | 5.50 | % | 7/1/2020 | $ | 1,934,146 | 1,905,782 | 1,920,452 | ||||||||||||||||
FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.) | Nonferrous Metals/Minerals | Loan | Loan | 4.25 | % | 6/28/2019 | $ | 1,693,749 | 1,694,391 | 1,574,560 | ||||||||||||||||
Garda World Security Corporation | Services: Business | Term B Delayed Draw Loan | Loan | 4.00 | % | 11/6/2020 | $ | 198,611 | 197,919 | 195,509 | ||||||||||||||||
Garda World Security Corporation | Services: Business | Term B Loan | Loan | 4.00 | % | 11/6/2020 | $ | 776,389 | 773,748 | 764,262 | ||||||||||||||||
Gardner Denver, Inc. | High Tech Industries | Initial Dollar Term Loan | Loan | 4.25 | % | 7/30/2020 | $ | 2,444,868 | 2,439,045 | 2,260,134 | ||||||||||||||||
Gates Global LLC | Leisure Goods/Activities/Movies | Term Loan (First Lien) | Loan | 4.25 | % | 7/5/2021 | $ | 485,406 | 480,552 | 469,023 | ||||||||||||||||
General Nutrition Centers, Inc. | Retailers (Except Food and Drugs) | Amended Tranche B Term Loan | Loan | 3.25 | % | 3/4/2019 | $ | 2,127,277 | 2,122,467 | 2,118,641 | ||||||||||||||||
Global Tel*Link Corporation | Services: Business | Term Loan (First Lien) | Loan | 5.00 | % | 5/26/2020 | $ | 2,690,281 | 2,683,048 | 2,485,147 | ||||||||||||||||
Goodyear Tire & Rubber Company, The | Chemicals/Plastics | Loan (Second Lien) | Loan | 3.75 | % | 4/30/2019 | $ | 2,000,000 | 1,976,119 | 2,000,620 | ||||||||||||||||
Grosvenor Capital Management Holdings, LP | Brokers/Dealers/Investment Houses | Initial Term Loan | Loan | 3.75 | % | 1/4/2021 | $ | 1,236,890 | 1,232,586 | 1,224,521 | ||||||||||||||||
GTCR Valor Companies, Inc. | Services: Business | Term Loan (First Lien) | Loan | 6.00 | % | 6/1/2021 | $ | 1,963,979 | 1,931,757 | 1,959,070 | ||||||||||||||||
GTCR Valor Companies, Inc. | Services: Business | Term Loan B | Loan | 7.00 | % | 5/17/2023 | $ | 1,500,000 | 1,440,000 | 1,446,570 | ||||||||||||||||
Harland Clarke Holdings Corp. (fka Clarke American Corp.) | Publishing | Tranche B-4 Term Loan | Loan | 6.00 | % | 8/2/2019 | $ | 471,875 | 470,370 | 466,864 | ||||||||||||||||
HCA Inc. | Healthcare & Pharmaceuticals | Tranche B-4 Term Loan | Loan | 3.36 | % | 5/1/2018 | $ | 2,114,243 | 2,055,248 | 2,122,171 | ||||||||||||||||
Headwaters Incorporated | Building & Development | Term Loan | Loan | 4.50 | % | 3/24/2022 | $ | 248,125 | 247,040 | 249,986 | ||||||||||||||||
Help/Systems Holdings, Inc. | High Tech Industries | Term Loan | Loan | 6.25 | % | 10/8/2021 | $ | 1,496,250 | 1,437,838 | 1,463,826 | ||||||||||||||||
Hercules Achievement Holdings, Inc. | Retailers (Except Food and Drugs) | Term Loan B | Loan | 5.00 | % | 12/10/2021 | $ | 248,741 | 246,407 | 249,285 | ||||||||||||||||
Hertz Corporation, The | Automotive | Tranche B-1 Term Loan | Loan | 3.75 | % | 3/12/2018 | $ | 2,902,500 | 2,922,871 | 2,899,772 | ||||||||||||||||
Hoffmaster Group, Inc. | Containers/Glass Products | Term Loan | Loan | 5.25 | % | 5/8/2020 | $ | 1,965,000 | 1,951,142 | 1,960,088 | ||||||||||||||||
Hostess Brand, LLC | Beverage, Food & Tobacco | Term Loan B (First Lien) | Loan | 4.50 | % | 8/3/2022 | $ | 995,000 | 992,749 | 998,313 | ||||||||||||||||
Huntsman International LLC | Chemicals/Plastics | Term Loan B (First Lien) | Loan | 3.52 | % | 4/19/2019 | $ | 3,802,135 | 3,777,603 | 3,795,025 | ||||||||||||||||
Husky Injection Molding Systems Ltd. | Services: Business | Term Loan B | Loan | 4.25 | % | 6/30/2021 | $ | 489,952 | 488,140 | 488,522 | ||||||||||||||||
Imagine! Print Solutions, Inc. | Media | Term Loan B | Loan | 7.00 | % | 3/30/2022 | $ | 500,000 | 492,673 | 501,250 | ||||||||||||||||
Infor (US), Inc. (fka Lawson Software Inc.) | Services: Business | Tranche B-5 Term Loan | Loan | 3.75 | % | 6/3/2020 | $ | 2,182,611 | 2,169,384 | 2,138,566 | ||||||||||||||||
Insight Global | Services: Business | Term Loan | Loan | 6.00 | % | 10/29/2021 | $ | 2,474,490 | 2,462,375 | 2,464,592 | ||||||||||||||||
Informatica Corporation | High Tech Industries | Term Loan B | Loan | 4.50 | % | 8/5/2022 | $ | 497,500 | 496,346 | 491,072 | ||||||||||||||||
J. Crew Group, Inc. | Retailers (Except Food and Drugs) | Term B-1 Loan Retired 03/05/2014 | Loan | 4.00 | % | 3/5/2021 | $ | 953,050 | 953,050 | 707,640 | ||||||||||||||||
Jazz Acquisition, Inc | Aerospace and Defense | First Lien 6/14 | Loan | 4.50 | % | 6/19/2021 | $ | 491,515 | 490,563 | 412,873 | ||||||||||||||||
J.Jill Group, Inc. | Retailers (Except Food and Drugs) | Term Loan (First Lien) | Loan | 6.00 | % | 5/9/2022 | $ | 992,500 | 988,013 | 977,613 | ||||||||||||||||
Kinetic Concepts, Inc. | Healthcare & Pharmaceuticals | Dollar Term D-1 Loan | Loan | 4.50 | % | 5/4/2018 | $ | 2,446,330 | 2,431,726 | 2,445,009 | ||||||||||||||||
Koosharem, LLC | Services: Business | Term Loan | Loan | 7.50 | % | 5/15/2020 | $ | 2,957,563 | 2,936,295 | 2,447,383 | ||||||||||||||||
Kraton Polymers, LLC | Chemicals/Plastics | Term Loan (Initial) | Loan | 6.00 | % | 1/6/2022 | $ | 2,500,000 | 2,260,485 | 2,463,275 | ||||||||||||||||
Lannett Company, Inc. | Healthcare & Pharmaceuticals | Term Loan B | Loan | 6.38 | % | 11/25/2022 | $ | 1,975,000 | 1,909,490 | 1,930,563 | ||||||||||||||||
LPL Holdings | Banking, Finance, Insurance & Real Estate | Term Loan B (2022) | Loan | 4.75 | % | 11/21/2022 | $ | 1,995,000 | 1,976,292 | 1,999,988 | ||||||||||||||||
McGraw-Hill Global Education Holdings, LLC | Publishing | Term Loan | Loan | 5.00 | % | 5/4/2022 | $ | 1,000,000 | 995,017 | 1,003,250 | ||||||||||||||||
Mauser Holdings, Inc. | Containers/Glass Products | Term Loan | Loan | 4.50 | % | 7/31/2021 | $ | 492,500 | 490,586 | 488,038 | ||||||||||||||||
Michaels Stores, Inc. | Retailers (Except Food and Drugs) | Term B Loan | Loan | 3.75 | % | 1/28/2020 | $ | 485,000 | 485,000 | 485,684 | ||||||||||||||||
Michaels Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-2 | Loan | 4.00 | % | 1/28/2020 | $ | 1,209,044 | 1,204,541 | 1,212,502 | ||||||||||||||||
Micro Holding Corp. | High Tech Industries | Term Loan | Loan | 4.75 | % | 7/8/2021 | $ | 989,929 | 985,579 | 988,998 | ||||||||||||||||
Microsemi Corporation | Electronics/Electric | Term Loan B | Loan | 5.25 | % | 1/15/2023 | $ | 1,487,647 | 1,444,958 | 1,501,408 | ||||||||||||||||
Midas Intermediate Holdco II, LLC | Automotive | Term Loan (Initial) | Loan | 4.50 | % | 8/18/2021 | $ | 246,250 | 245,220 | 246,558 | ||||||||||||||||
MPH Acquisition Holdings LLC | Healthcare & Pharmaceuticals | Term Loan | Loan | 3.75 | % | 3/31/2021 | $ | 347,727 | 345,989 | 350,120 | ||||||||||||||||
MSC Software Corp. | Services: Business | Term Loan | Loan | 5.00 | % | 5/29/2020 | $ | 982,500 | 975,569 | 940,744 | ||||||||||||||||
National Veterinary Associates, Inc | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.75 | % | 8/14/2021 | $ | 985,030 | 981,980 | 981,750 | ||||||||||||||||
National Vision, Inc. | Retailers (Except Food and Drugs) | Term Loan (Second Lien) | Loan | 6.75 | % | 3/11/2022 | $ | 250,000 | 249,744 | 225,625 | ||||||||||||||||
Neptune Finco (CSC Holdings) | Cable and Satellite Television | Term Loan | Loan | 5.00 | % | 10/7/2022 | $ | 1,000,000 | 986,250 | 1,007,080 | ||||||||||||||||
New Millennium Holdco | Healthcare & Pharmaceuticals | Term Loan | Loan | 7.50 | % | 12/21/2020 | $ | 2,002,025 | 1,816,762 | 1,500,517 | ||||||||||||||||
Nortek, Inc. | Electronics/Electric | Term Loan B | Loan | 3.50 | % | 10/30/2020 | $ | 982,533 | 972,795 | 978,848 | ||||||||||||||||
NorthStar Asset Management Group Inc. | Banking, Finance, Insurance & Real Estate | Term Loan B | Loan | 4.63 | % | 1/30/2023 | $ | 2,000,000 | 1,932,192 | 1,987,500 | ||||||||||||||||
Novelis, Inc. | Conglomerate | Term Loan B | Loan | 4.00 | % | 6/2/2022 | $ | 4,759,070 | 4,738,112 | 4,743,460 | ||||||||||||||||
Novetta Solutions | Aerospace and Defense | Term Loan (200MM) | Loan | 6.00 | % | 10/16/2022 | $ | 1,995,000 | 1,976,309 | 1,977,544 | ||||||||||||||||
Novetta Solutions | Aerospace and Defense | Term Loan (2nd Lien) | Loan | 9.50 | % | 9/29/2023 | $ | 1,000,000 | 990,472 | 980,000 | ||||||||||||||||
NPC International, Inc. | Food Services | Term Loan (2013) | Loan | 4.75 | % | 12/28/2018 | $ | 477,298 | 477,298 | 476,501 | ||||||||||||||||
NRG Energy, Inc. | Utilities | Term Loan (2013) | Loan | 2.75 | % | 7/2/2018 | $ | 3,812,100 | 3,799,998 | 3,808,288 | ||||||||||||||||
Numericable | Broadcast Radio and Television | Term Loan B-5 | Loan | 4.56 | % | 7/31/2022 | $ | 995,000 | 992,749 | 992,821 | ||||||||||||||||
NuSil Technology LLC. | Chemicals/Plastics | Term Loan | Loan | 5.25 | % | 4/7/2017 | $ | 1,786,810 | 1,767,709 | 1,787,561 | ||||||||||||||||
NVA Holdings, Inc. | Services: Consumer | Term Loan B1 | Loan | 5.50 | % | 8/14/2021 | $ | 250,000 | 249,375 | 250,625 | ||||||||||||||||
Om Group | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 7.00 | % | 10/28/2021 | $ | 1,000,000 | 900,249 | 952,500 | ||||||||||||||||
ON Semiconductor Corporation | High Tech Industries | Term Loan B | Loan | 5.25 | % | 3/31/2023 | $ | 500,000 | 492,614 | 503,230 | ||||||||||||||||
Onex Carestream Finance LP | Healthcare & Pharmaceuticals | Term Loan (First Lien 2013) | Loan | 5.00 | % | 6/7/2019 | $ | 3,777,808 | 3,767,299 | 3,700,362 | ||||||||||||||||
OnexYork Acquisition Co | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.75 | % | 10/1/2021 | $ | 492,500 | 489,549 | 434,631 | ||||||||||||||||
OpenLink International LLC | Services: Business | Term B Loan | Loan | 6.25 | % | 10/30/2017 | $ | 2,936,828 | 2,935,776 | 2,922,144 | ||||||||||||||||
P.F. Chang's China Bistro, Inc. (Wok Acquisition Corp.) | Food/Drug Retailers | Term Borrowing | Loan | 4.25 | % | 6/24/2019 | $ | 1,428,962 | 1,423,722 | 1,364,658 | ||||||||||||||||
P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC) | Services: Business | Term Loan (First Lien) | Loan | 5.00 | % | 10/30/2020 | $ | 977,500 | 973,821 | 885,859 | ||||||||||||||||
Penn Products Terminal, LLC | Chemicals/Plastics | Term Loan B | Loan | 4.75 | % | 4/13/2022 | $ | 222,500 | 221,517 | 216,381 | ||||||||||||||||
PetCo Animal Supplies Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-1 | Loan | 5.75 | % | 1/15/2023 | $ | 997,500 | 978,483 | 1,003,734 | ||||||||||||||||
PetCo Animal Supplies Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-2 | Loan | 5.62 | % | 1/15/2023 | $ | 997,500 | 978,480 | 1,003,365 | ||||||||||||||||
Petsmart, Inc. (Argos Merger Sub, Inc.) | Retailers (Except Food and Drugs) | Term Loan B1 | Loan | 4.25 | % | 3/11/2022 | $ | 990,000 | 985,552 | 990,089 | ||||||||||||||||
PGX Holdings, Inc. | Financial Intermediaries | Term Loan | Loan | 5.75 | % | 9/29/2020 | $ | 952,143 | 945,000 | 948,172 | ||||||||||||||||
Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC) | Conglomerate | Term Loan | Loan | 4.25 | % | 8/18/2022 | $ | 1,916,021 | 1,904,545 | 1,917,228 | ||||||||||||||||
Phillips-Medisize Corporation | Healthcare & Pharmaceuticals | Term Loan | Loan | 4.75 | % | 6/16/2021 | $ | 491,250 | 489,366 | 488,794 | ||||||||||||||||
Planet Fitness Holdings LLC | Leisure Goods/Activities/Movies | Term Loan | Loan | 4.75 | % | 3/31/2021 | $ | 2,410,858 | 2,402,881 | 2,416,885 | ||||||||||||||||
PrePaid Legal Services, Inc. | Services: Business | Term Loan B | Loan | 6.50 | % | 7/1/2019 | $ | 699,357 | 696,578 | 694,986 | ||||||||||||||||
Presidio, Inc. | Services: Business | Term Loan | Loan | 5.25 | % | 2/2/2022 | $ | 2,397,498 | 2,339,487 | 2,382,514 | ||||||||||||||||
Prime Security Services (Protection One) | Services: Business | Term Loan | Loan | 5.00 | % | 7/1/2021 | $ | 1,990,000 | 1,981,160 | 2,003,691 | ||||||||||||||||
Ranpak Holdings, Inc. | Services: Business | Term Loan | Loan | 4.25 | % | 10/1/2021 | $ | 500,000 | 497,926 | 435,000 | ||||||||||||||||
Ranpak Holdings, Inc. | Services: Business | Term Loan (Second Lien) | Loan | 8.25 | % | 10/3/2022 | $ | 935,991 | 933,651 | 912,591 | ||||||||||||||||
Redtop Acquisitions Limited | Electronics/Electric | Initial Dollar Term Loan (First Lien) | Loan | 4.50 | % | 12/3/2020 | $ | 488,750 | 486,339 | 487,733 | ||||||||||||||||
Regal Cinemas Corporation | Services: Consumer | Term Loan | Loan | 3.75 | % | 4/1/2022 | $ | 496,250 | 495,112 | 497,104 | ||||||||||||||||
Research Now Group, Inc | Media | Term Loan B | Loan | 5.50 | % | 3/18/2021 | $ | 2,053,260 | 2,043,853 | 2,017,328 | ||||||||||||||||
Rexnord LLC/RBS Global, Inc. | Industrial Equipment | Term B Loan | Loan | 4.00 | % | 8/21/2020 | $ | 1,625,954 | 1,627,152 | 1,616,247 | ||||||||||||||||
Reynolds Group Holdings Inc. | Industrial Equipment | Incremental U.S. Term Loan | Loan | 4.50 | % | 12/1/2018 | $ | 1,910,551 | 1,910,551 | 1,916,627 | ||||||||||||||||
Rocket Software, Inc. | Services: Business | Term Loan (First Lien) | Loan | 5.75 | % | 2/8/2018 | $ | 1,896,888 | 1,886,472 | 1,894,517 | ||||||||||||||||
Rovi Solutions Corporation / Rovi Guides, Inc. | Electronics/Electric | Tranche B-3 Term Loan | Loan | 3.75 | % | 7/2/2021 | $ | 1,473,750 | 1,468,151 | 1,458,276 | ||||||||||||||||
Royal Adhesives and Sealants | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.50 | % | 6/20/2022 | $ | 496,250 | 494,014 | 495,754 | ||||||||||||||||
Royal Adhesives and Sealants | Chemicals/Plastics | Term Loan (Second Lien) | Loan | 8.50 | % | 6/19/2023 | $ | 500,000 | 496,479 | 474,585 | ||||||||||||||||
RPI Finance Trust | Financial Intermediaries | Term B-4 Term Loan | Loan | 3.50 | % | 11/9/2020 | $ | 3,142,175 | 3,142,175 | 3,152,638 | ||||||||||||||||
Russell Investment Management T/L B | Banking, Finance, Insurance & Real Estate | Term Loan B | Loan | 6.75 | % | 6/1/2023 | $ | 2,000,000 | 1,880,000 | 1,880,840 | ||||||||||||||||
Sable International Finance Ltd | Telecommunications | Term Loan B1 | Loan | 5.50 | % | 12/2/2022 | $ | 825,000 | 808,530 | 829,422 | ||||||||||||||||
Sable International Finance Ltd | Telecommunications | Term Loan B2 | Loan | 5.50 | % | 12/2/2022 | $ | 675,000 | 661,524 | 678,618 | ||||||||||||||||
SBP Holdings LP | Industrial Equipment | Term Loan (First Lien) | Loan | 5.00 | % | 3/27/2021 | $ | 980,000 | 976,338 | 735,000 | ||||||||||||||||
Scientific Games International, Inc. | Electronics/Electric | Term Loan B2 | Loan | 6.00 | % | 10/1/2021 | $ | 987,500 | 979,760 | 975,156 | ||||||||||||||||
SCS Holdings (Sirius Computer) | High Tech Industries | Term Loan (First Lien) | Loan | 6.00 | % | 10/30/2022 | $ | 1,977,528 | 1,940,472 | 1,977,528 | ||||||||||||||||
Seadrill Operating LP | Oil & Gas | Term Loan B | Loan | 4.00 | % | 2/21/2021 | $ | 984,887 | 920,503 | 463,714 | ||||||||||||||||
Sensus USA Inc. | Utilities | Term Loan | Loan | 6.50 | % | 4/5/2023 | $ | 1,900,135 | 1,894,683 | 1,900,135 | ||||||||||||||||
ServiceMaster Company, The | Conglomerate | Tranche B Term Loan | Loan | 4.25 | % | 7/1/2021 | $ | 1,970,000 | 1,954,950 | 1,977,388 | ||||||||||||||||
Shearers Foods LLC | Food Services | Term Loan (First Lien) | Loan | 4.94 | % | 6/30/2021 | $ | 985,000 | 983,058 | 966,531 | ||||||||||||||||
Sitel Worldwide | Telecommunications | Term Loan | Loan | 6.50 | % | 9/18/2021 | $ | 1,990,000 | 1,972,076 | 1,977,563 | ||||||||||||||||
Sonneborn, LLC | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.75 | % | 12/10/2020 | $ | 209,637 | 209,216 | 209,287 | ||||||||||||||||
Sonneborn, LLC | Chemicals/Plastics | Initial US Term Loan | Loan | 4.75 | % | 12/10/2020 | $ | 1,187,944 | 1,185,554 | 1,185,960 | ||||||||||||||||
Sophia, L.P. | Electronics/Electric | Term Loan (Closing Date) | Loan | 4.75 | % | 9/30/2022 | $ | 1,990,000 | 1,980,819 | 1,988,348 | ||||||||||||||||
SourceHOV LLC | Services: Business | Term Loan B (First Lien) | Loan | 7.75 | % | 10/31/2019 | $ | 1,912,500 | 1,869,937 | 1,367,438 | ||||||||||||||||
SRAM, LLC | Industrial Equipment | Term Loan (First Lien) | Loan | 4.00 | % | 4/10/2020 | $ | 2,891,200 | 2,883,896 | 2,558,712 | ||||||||||||||||
Steak ‘n Shake Operations, Inc. | Food Services | Term Loan | Loan | 4.75 | % | 3/19/2021 | $ | 930,673 | 923,879 | 912,059 | ||||||||||||||||
SuperMedia Inc. (fka Idearc Inc.) | Publishing | Loan | Loan | 11.60 | % | 12/30/2016 | $ | 221,073 | 219,104 | 90,087 | ||||||||||||||||
Survey Sampling International | Services: Business | Term Loan B | Loan | 6.00 | % | 12/16/2020 | $ | 1,740,000 | 1,730,816 | 1,726,950 | ||||||||||||||||
Sybil Finance BV | High Tech Industries | Term Loan | Loan | 4.25 | % | 3/20/2020 | $ | 1,255,833 | 1,254,607 | 1,254,264 | ||||||||||||||||
Syniverse Holdings, Inc. | Telecommunications | Initial Term Loan | Loan | 4.00 | % | 4/23/2019 | $ | 468,977 | 466,281 | 352,905 | ||||||||||||||||
TaxACT, Inc. | Services: Business | Term Loan B | Loan | 7.00 | % | 1/3/2023 | $ | 1,800,000 | 1,748,381 | 1,800,000 | ||||||||||||||||
TGI Friday's, Inc. | Food Services | Term Loan B | Loan | 5.25 | % | 7/15/2020 | $ | 1,651,816 | 1,648,174 | 1,646,663 | ||||||||||||||||
Townsquare Media, Inc. | Media | Term Loan B | Loan | 4.25 | % | 4/1/2022 | $ | 932,522 | 928,497 | 934,853 | ||||||||||||||||
TPF II Power LLC and TPF II Covert Midco LLC | Utilities | Term Loan B | Loan | 5.50 | % | 10/2/2021 | $ | 1,488,058 | 1,431,660 | 1,487,136 | ||||||||||||||||
TransDigm, Inc. | Aerospace and Defense | Tranche C Term Loan | Loan | 3.75 | % | 2/28/2020 | $ | 4,266,270 | 4,272,377 | 4,267,593 | ||||||||||||||||
Travel Leaders Group, LLC | Hotel, Gaming and Leisure | Term Loan B | Loan | 7.00 | % | 12/7/2020 | $ | 2,705,290 | 2,689,552 | 2,678,237 | ||||||||||||||||
Tricorbraun, Inc. (fka Kranson Industries, Inc.) | Containers/Glass Products | Term Loan | Loan | 4.00 | % | 5/3/2018 | $ | 1,836,625 | 1,831,967 | 1,835,101 | ||||||||||||||||
Trugreen Limited Partnership | Services: Business | Term Loan B | Loan | 6.50 | % | 4/13/2023 | $ | 500,000 | 492,618 | 503,125 | ||||||||||||||||
Twin River Management Group, Inc. | Lodging & Casinos | Term Loan B | Loan | 5.25 | % | 7/10/2020 | $ | 868,969 | 870,550 | 872,775 | ||||||||||||||||
U.S. Security Associates Holdings, Inc. | Services: Business | Delayed Draw Loan | Loan | 6.25 | % | 7/28/2017 | $ | 156,480 | 156,021 | 155,698 | ||||||||||||||||
U.S. Security Associates Holdings, Inc. | Services: Business | Term B Loan | Loan | 6.25 | % | 7/28/2017 | $ | 919,021 | 916,538 | 914,426 | ||||||||||||||||
Univar Inc. | Chemicals/Plastics | Term B Loan | Loan | 4.25 | % | 7/1/2022 | $ | 2,985,000 | 2,971,597 | 2,975,926 | ||||||||||||||||
Univision Communications Inc. | Telecommunications | Replacement First-Lien Term Loan | Loan | 4.00 | % | 3/1/2020 | $ | 2,908,834 | 2,896,976 | 2,908,368 | ||||||||||||||||
Valeant Pharmaceuticals International, Inc. | Drugs | Series D2 Term Loan B | Loan | 3.50 | % | 2/13/2019 | $ | 2,517,614 | 2,507,628 | 2,481,108 | ||||||||||||||||
Verint Systems Inc. | Services: Business | Term Loan | Loan | 3.50 | % | 9/6/2019 | $ | 1,014,058 | 1,011,393 | 1,012,790 | ||||||||||||||||
Vertafore, Inc. | Services: Business | Term Loan (2013) | Loan | 4.25 | % | 10/3/2019 | $ | 2,484,603 | 2,484,603 | 2,482,839 | ||||||||||||||||
Vizient Inc. | Healthcare & Pharmaceuticals | Term Loan | Loan | 6.25 | % | 2/13/2023 | $ | 1,000,000 | 971,245 | 1,011,880 | ||||||||||||||||
Vouvray US Finance | Industrial Equipment | Term Loan | Loan | 4.75 | % | 6/27/2021 | $ | 491,250 | 489,339 | 486,745 | ||||||||||||||||
Washington Inventory Service | Services: Business | U.S. Term Loan (First Lien) | Loan | 5.75 | % | 12/20/2018 | $ | 1,736,392 | 1,748,193 | 972,380 | ||||||||||||||||
West Corporation | Telecommunications | Term B-10 Loan | Loan | 3.25 | % | 6/30/2018 | $ | 2,428,527 | 2,449,004 | 2,425,491 | ||||||||||||||||
Western Digital Corporation | High Tech Industries | Term Loan B (USD) | Loan | 6.25 | % | 5/1/2023 | $ | 2,000,000 | 1,940,138 | 1,993,120 | ||||||||||||||||
Windstream Corporation | Telecommunications | Term Loan B6 | Loan | 5.75 | % | 3/29/2021 | $ | 250,000 | 243,929 | 250,313 | ||||||||||||||||
ZEP Inc. | Chemicals/Plastics | Term Loan B | Loan | 5.50 | % | 6/27/2022 | $ | 2,977,500 | 2,964,086 | 2,975,648 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||||
| $ | 305,696,742 | $ | 296,218,448 | |||||||||||||||||||||||
|
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| |||||||||||||||||||||||
| Principal | Cost | Fair Value | ||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||
U.S. Bank Money Market (a) | $ | 2,663,033 | $ | 2,663,033 | $ | 2,663,033 | ||||||||||||||||||||
|
|
|
|
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| |||||||||||||||||||||
Total cash and cash equivalents | $ | 2,663,033 | $ | 2,663,033 | $ | 2,663,033 | ||||||||||||||||||||
|
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| |||||||||||||||||||||
| (a) | Included within cash and cash equivalents in Saratoga CLO's Statements of Assets and Liabilities as of May 31, 2016. |
21
Saratoga Investment Corp. CLO 2013-1 Ltd.
Schedule of Investments
February 29, 2016
Issuer Name | Industry | Asset Name | Asset Type | Current Rate | Maturity Date | Principal/ Number of Shares | Cost | Fair Value | ||||||||||||||||||
Education Management II LLC | Leisure Goods/Activities/Movies | A-1 Preferred Shares | Equity | 0.00 | % | 6,692 | $ | 669,214 | $ | 1,673 | ||||||||||||||||
Education Management II LLC | Leisure Goods/Activities/Movies | A-2 Preferred Shares | Equity | 0.00 | % | 18,975 | 1,897,538 | 95 | ||||||||||||||||||
New Millennium Holdco, Inc. | Healthcare & Pharmaceuticals | Common Stock | Equity | 0.00 | % | 14,813 | 964,466 | 190,095 | ||||||||||||||||||
24 Hour Holdings III LLC | Leisure Goods/Activities/Movies | Term Loan | Loan | 4.75 | % | 5/28/2021 | $ | 492,500 | 488,586 | 455,154 | ||||||||||||||||
Acosta Holdco Inc. | Media | Term Loan B1 | Loan | 4.25 | % | 9/26/2021 | $ | 1,972,936 | 1,959,834 | 1,855,389 | ||||||||||||||||
Aspen Dental Management, Inc. | Healthcare & Pharmaceuticals | Term Loan Initial | Loan | 5.50 | % | 4/29/2022 | $ | 497,500 | 495,228 | 495,221 | ||||||||||||||||
Advantage Sales & Marketing Inc. | Services: Business | Delayed Draw Term Loan | Loan | 4.25 | % | 7/25/2021 | $ | 2,471,231 | 2,468,039 | 2,342,826 | ||||||||||||||||
AgroFresh | Food Services | Term Loan | Loan | 5.75 | % | 7/30/2021 | $ | 1,990,000 | 1,980,704 | 1,935,275 | ||||||||||||||||
Aegis Toxicology Science Corporation | Healthcare & Pharmaceuticals | Term B Loan | Loan | 5.50 | % | 2/24/2021 | $ | 985,000 | 985,000 | 797,850 | ||||||||||||||||
Akorn, Inc. | Healthcare & Pharmaceuticals | Term Loan B | Loan | 6.00 | % | 4/16/2021 | $ | 398,056 | 396,681 | 396,066 | ||||||||||||||||
Albertson's LLC | Retailers (Except Food and Drugs) | Term Loan B-4 | Loan | 5.50 | % | 8/25/2021 | $ | 3,384,425 | 3,367,410 | 3,302,623 | ||||||||||||||||
Alere Inc. (fka IM US Holdings, LLC) | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.25 | % | 6/20/2022 | $ | 927,265 | 925,091 | 925,365 | ||||||||||||||||
Alion Science T/L B (1st Lien) | High Tech Industries | Term Loan B (First Lien) | Loan | 5.50 | % | 8/19/2021 | $ | 2,985,000 | 2,971,074 | 2,824,555 | ||||||||||||||||
Alliance HealthCare T/L B | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.25 | % | 6/3/2019 | $ | 994,856 | 990,161 | 906,981 | ||||||||||||||||
Alliant Holdings T/L B (1st Lien) | Banking, Finance, Insurance & Real Estate | Term Loan B (First Lien) | Loan | 4.50 | % | 8/12/2022 | $ | 995,000 | 992,679 | 960,921 | ||||||||||||||||
Alvogen Pharma US, Inc | Healthcare & Pharmaceuticals | Term Loan | Loan | 6.00 | % | 4/4/2022 | $ | 480,447 | 478,240 | 456,425 | ||||||||||||||||
American Beacon Advisors, Inc. | Financial Intermediaries | Term Loan (First Lien) | Loan | 5.50 | % | 4/30/2022 | $ | 248,749 | 247,612 | 244,190 | ||||||||||||||||
Aramark Corporation | Food Products | LC-2 Facility | Loan | 0.29 | % | 7/26/2016 | $ | 9,447 | 9,445 | 9,305 | ||||||||||||||||
Aramark Corporation | Food Products | LC-3 Facility | Loan | 0.29 | % | 7/26/2016 | $ | 5,244 | 5,244 | 5,166 | ||||||||||||||||
Aramark Corporation | Food Products | U.S. Term F Loan | Loan | 3.25 | % | 2/24/2021 | $ | 3,150,423 | 3,150,423 | 3,126,133 | ||||||||||||||||
Asurion, LLC (fka Asurion Corporation) | Insurance | Incremental Tranche B-1 Term Loan | Loan | 5.00 | % | 5/24/2019 | $ | 2,596,480 | 2,573,245 | 2,441,237 | ||||||||||||||||
Asurion, LLC (fka Asurion Corporation) | Insurance | Term Loan B4 (First Lien) | Loan | 5.00 | % | 8/4/2022 | $ | 2,478,125 | 2,466,303 | 2,270,582 | ||||||||||||||||
Auction.com | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 6.00 | % | 5/13/2019 | $ | 2,522,992 | 2,522,722 | 2,491,455 | ||||||||||||||||
Avantor Performance Materials Holdings, Inc. | Chemicals/Plastics | Term Loan | Loan | 5.25 | % | 6/24/2017 | $ | 2,156,953 | 2,153,896 | 2,135,384 | ||||||||||||||||
Bass Pro Group, LLC | Retailers (Except Food and Drugs) | Term Loan | Loan | 4.00 | % | 6/5/2020 | $ | 1,488,750 | 1,485,895 | 1,397,564 | ||||||||||||||||
Belmond Interfin Ltd. | Lodging & Casinos | Term Loan | Loan | 4.00 | % | 3/19/2021 | $ | 491,249 | 489,361 | 477,127 | ||||||||||||||||
Berry Plastics Corporation | Chemicals/Plastics | Term E Loan | Loan | 3.75 | % | 1/6/2021 | $ | 1,314,499 | 1,305,069 | 1,291,903 | ||||||||||||||||
BJ's Wholesale Club, Inc. | Food/Drug Retailers | New 2013 (November) Replacement Loan (First Lien) | Loan | 4.50 | % | 9/26/2019 | $ | 1,476,196 | 1,475,409 | 1,401,161 | ||||||||||||||||
Blue Coat Systems | Technology | Term Loan B | Loan | 4.50 | % | 5/20/2022 | $ | 997,500 | 995,159 | 945,131 | ||||||||||||||||
BMC Software | Technology | Term Loan | Loan | 5.00 | % | 9/10/2020 | $ | 1,979,798 | 1,926,080 | 1,571,821 | ||||||||||||||||
Brickman Group Holdings, Inc. | Brokers/Dealers/Investment Houses | Initial Term Loan (First Lien) | Loan | 4.00 | % | 12/18/2020 | $ | 1,476,212 | 1,464,327 | 1,426,390 | ||||||||||||||||
Brock Holdings III, Inc. | Industrial Equipment | Term Loan (First Lien) | Loan | 6.00 | % | 3/16/2017 | $ | 1,917,168 | 1,924,101 | 1,802,138 | ||||||||||||||||
Burlington Coat Factory Warehouse Corporation | Retailers (Except Food and Drugs) | Term B-2 Loan | Loan | 4.25 | % | 8/13/2021 | $ | 1,861,667 | 1,853,426 | 1,845,843 | ||||||||||||||||
BWAY Holding Company | Leisure Goods/Activities/Movies | Term Loan B | Loan | 5.50 | % | 8/14/2020 | $ | 985,000 | 976,335 | 930,826 | ||||||||||||||||
Caesars Entertainment Corp. | Lodging & Casinos | Term B-7 Loan | Loan | 13.25 | % | 3/1/2017 | $ | 995,000 | 991,037 | 814,656 | ||||||||||||||||
Camp International Holding Company | Aerospace and Defense | 2013 Replacement Term Loan (First Lien) | Loan | 4.75 | % | 5/31/2019 | $ | 1,940,113 | 1,940,984 | 1,806,730 | ||||||||||||||||
Capital Automotive L.P. | Conglomerate | Tranche B-1 Term Loan Facility | Loan | 4.00 | % | 4/10/2019 | $ | 2,051,828 | 2,055,060 | 2,044,564 | ||||||||||||||||
Catalent Pharma Solutions, Inc | Drugs | Initial Term B Loan | Loan | 4.25 | % | 5/20/2021 | $ | 492,501 | 490,549 | 487,271 | ||||||||||||||||
Cengage Learning Acquisitions, Inc. | Publishing | Term Loan | Loan | 7.00 | % | 3/31/2020 | $ | 2,647,871 | 2,670,807 | 2,539,758 | ||||||||||||||||
Charter Communications Operating, LLC | Cable and Satellite Television | Term F Loan | Loan | 3.00 | % | 12/31/2020 | $ | 2,628,783 | 2,621,343 | 2,566,823 | ||||||||||||||||
CHS/Community Health Systems, Inc. | Healthcare & Pharmaceuticals | Term G Loan | Loan | 3.75 | % | 12/31/2019 | $ | 1,022,569 | 994,876 | 974,212 | ||||||||||||||||
CHS/Community Health Systems, Inc. | Healthcare & Pharmaceuticals | Term H Loan | Loan | 4.00 | % | 1/27/2021 | $ | 1,881,500 | 1,828,566 | 1,785,920 | ||||||||||||||||
Cinedigm Digital Funding I, LLC | Services: Business | Term Loan | Loan | 3.75 | % | 2/28/2018 | $ | 298,828 | 297,362 | 295,840 | ||||||||||||||||
CITGO Petroleum Corporation | Oil & Gas | Term Loan B | Loan | 4.50 | % | 7/29/2021 | $ | 1,984,975 | 1,962,423 | 1,865,876 | ||||||||||||||||
Communications Sales & Leasing, Inc. | Telecommunications | Term Loan B (First Lien) | Loan | 5.00 | % | 10/24/2022 | $ | 1,990,000 | 1,978,594 | 1,847,596 | ||||||||||||||||
CommScope, Inc. | Telecommunications | Term Loan B | Loan | 3.75 | % | 12/29/2022 | $ | 498,750 | 497,568 | 494,176 | ||||||||||||||||
Consolidated Aerospace Manufacturing, LLC | Aerospace and Defense | Term Loan (First Lien) | Loan | 4.75 | % | 8/11/2022 | $ | 1,437,500 | 1,430,556 | 1,329,688 | ||||||||||||||||
Concordia Healthcare Corp | Healthcare & Pharmaceuticals | Term Loan B | Loan | 5.25 | % | 10/21/2021 | $ | 2,000,000 | 1,894,483 | 1,920,000 | ||||||||||||||||
CPI Acquisition Inc. | Technology | Term Loan B (First Lien) | Loan | 5.50 | % | 8/17/2022 | $ | 1,436,782 | 1,415,977 | 1,396,667 | ||||||||||||||||
CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.) | Electronics/Electric | Term B Loan | Loan | 4.25 | % | 11/17/2017 | $ | 1,564,182 | 1,564,182 | 1,501,615 | ||||||||||||||||
Crosby US Acquisition Corp. | Industrial Equipment | Initial Term Loan (First Lien) | Loan | 4.00 | % | 11/23/2020 | $ | 735,000 | 734,245 | 536,550 | ||||||||||||||||
CT Technologies Intermediate Hldgs, Inc | Healthcare & Pharmaceuticals | Term Loan | Loan | 5.25 | % | 12/1/2021 | $ | 1,485,038 | 1,471,665 | 1,433,061 | ||||||||||||||||
Culligan International Company | Conglomerate | Dollar Loan (First Lien) | Loan | 6.25 | % | 12/19/2017 | $ | 771,625 | 742,910 | 721,469 | ||||||||||||||||
Culligan International Company | Conglomerate | Dollar Loan (Second Lien) | Loan | 9.50 | % | 6/19/2018 | $ | 783,162 | 754,065 | 734,214 | ||||||||||||||||
Cumulus Media Holdings Inc. | Broadcast Radio and Television | Term Loan | Loan | 4.25 | % | 12/23/2020 | $ | 470,093 | 466,690 | 304,973 | ||||||||||||||||
DAE Aviation (StandardAero) | Aerospace and Defense | Term Loan | Loan | 5.25 | % | 7/7/2022 | $ | 1,995,000 | 1,985,759 | 1,970,063 | ||||||||||||||||
DCS Business Services, Inc. | Financial Intermediaries | Term B Loan | Loan | 8.75 | % | 3/19/2018 | $ | 2,409,739 | 2,397,948 | 2,409,739 | ||||||||||||||||
Dell International LLC | Technology | Term Loan B2 | Loan | 4.00 | % | 4/29/2020 | $ | 2,904,989 | 2,892,348 | 2,889,854 | ||||||||||||||||
Delta 2 (Lux) S.a.r.l. | Lodging & Casinos | Term Loan B-3 | Loan | 4.75 | % | 7/30/2021 | $ | 1,000,000 | 995,870 | 925,000 | ||||||||||||||||
Deluxe Entertainment Service Group, Inc. | Leisure Goods/Activities/Movies | Term Loan (First Lien) | Loan | 6.50 | % | 2/28/2020 | $ | 1,882,983 | 1,884,279 | 1,751,174 | ||||||||||||||||
Diamond Resorts International | Lodging & Casinos | Term Loan | Loan | 5.50 | % | 5/7/2021 | $ | 926,971 | 923,222 | 897,614 | ||||||||||||||||
Diamond Resorts International | Lodging & Casinos | Term Loan (Add-On) | Loan | 5.50 | % | 5/7/2021 | $ | 1,000,000 | 980,687 | 968,330 | ||||||||||||||||
DJO Finance LLC | Healthcare & Pharmaceuticals | Term Loan | Loan | 4.25 | % | 6/8/2020 | $ | 497,500 | 495,435 | 478,222 | ||||||||||||||||
DPX Holdings B.V. | Healthcare & Pharmaceuticals | Term Loan 2015 Incr Dollar | Loan | 4.25 | % | 3/11/2021 | $ | 2,955,000 | 2,948,456 | 2,799,863 | ||||||||||||||||
Drew Marine Group Inc. | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.25 | % | 11/19/2020 | $ | 2,472,161 | 2,445,601 | 2,299,110 | ||||||||||||||||
DTZ U.S. Borrower LLC | Construction & Building | Term Loan B Add-on | Loan | 4.25 | % | 11/4/2021 | $ | 2,985,000 | 2,970,317 | 2,869,331 | ||||||||||||||||
Edelman Financial Group Inc. | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 6.50 | % | 12/19/2022 | $ | 1,500,000 | 1,470,617 | 1,459,695 | ||||||||||||||||
Education Management LLC | Leisure Goods/Activities/Movies | Term Loan A | Loan | 5.50 | % | 7/2/2020 | $ | 501,970 | 485,313 | 160,630 | ||||||||||||||||
Education Management LLC | Leisure Goods/Activities/Movies | Term Loan B (2.00% Cash/6.50% PIK) | Loan | 8.50 | % | 7/2/2020 | $ | 893,447 | 867,647 | 56,582 | ||||||||||||||||
Emerald Performance Materials, LLC | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.50 | % | 8/1/2021 | $ | 484,659 | 482,690 | 473,148 | ||||||||||||||||
Emerald Performance Materials, LLC | Chemicals/Plastics | Term Loan (Second Lien) | Loan | 7.75 | % | 8/1/2022 | $ | 500,000 | 497,844 | 468,750 | ||||||||||||||||
Emerald 2 Limited | Chemicals/Plastics | Term Loan B1A | Loan | 5.00 | % | 5/14/2021 | $ | 1,000,000 | 991,762 | 866,670 | ||||||||||||||||
Endo International plc | Healthcare & Pharmaceuticals | Term Loan B | Loan | 3.75 | % | 9/26/2022 | $ | 1,000,000 | 997,602 | 987,780 | ||||||||||||||||
EnergySolutions, LLC | Environmental Industries | Term Loan B | Loan | 6.75 | % | 5/29/2020 | $ | 937,857 | 923,660 | 731,528 | ||||||||||||||||
Evergreen Acqco 1 LP | Retailers (Except Food and Drugs) | New Term Loan | Loan | 5.00 | % | 7/9/2019 | $ | 965,081 | 963,406 | 719,951 | ||||||||||||||||
EWT Holdings III Corp. (fka WTG Holdings III Corp.) | Industrial Equipment | Term Loan (First Lien) | Loan | 4.75 | % | 1/15/2021 | $ | 1,967,406 | 1,962,950 | 1,908,383 | ||||||||||||||||
Federal-Mogul Corporation | Automotive | Tranche C Term Loan | Loan | 4.75 | % | 4/15/2021 | $ | 2,955,000 | 2,943,580 | 2,345,530 | ||||||||||||||||
First Data Corporation | Financial Intermediaries | First Data Corp T/L (2018 New Dollar) | Loan | 3.93 | % | 3/23/2018 | $ | 2,790,451 | 2,748,229 | 2,752,780 | ||||||||||||||||
First Data Corporation | Financial Intermediaries | First Data T/L Ext (2021) | Loan | 4.43 | % | 3/24/2021 | $ | 2,111,028 | 2,034,284 | 2,077,779 | ||||||||||||||||
First Eagle Investment Management | Banking, Finance, Insurance & Real Estate | Term Loan | Loan | 4.75 | % | 12/1/2022 | $ | 1,500,000 | 1,470,946 | 1,412,504 | ||||||||||||||||
Fitness International, LLC | Leisure Goods/Activities/Movies | Term Loan B | Loan | 5.50 | % | 7/1/2020 | $ | 1,976,234 | 1,945,935 | 1,850,249 | ||||||||||||||||
FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.) | Nonferrous Metals/Minerals | Loan | Loan | 4.25 | % | 6/28/2019 | $ | 1,962,387 | 1,962,515 | 1,504,738 | ||||||||||||||||
Garda World Security Corporation | Services: Business | Term B Delayed Draw Loan | Loan | 4.00 | % | 11/6/2020 | $ | 199,120 | 198,391 | 187,344 | ||||||||||||||||
Garda World Security Corporation | Services: Business | Term B Loan | Loan | 4.00 | % | 11/6/2020 | $ | 778,380 | 775,586 | 732,346 | ||||||||||||||||
Gardner Denver, Inc. | High Tech Industries | Initial Dollar Term Loan | Loan | 4.25 | % | 7/30/2020 | $ | 2,451,137 | 2,445,005 | 2,016,452 | ||||||||||||||||
Gates Global LLC | Leisure Goods/Activities/Movies | Term Loan (First Lien) | Loan | 4.25 | % | 7/5/2021 | $ | 493,750 | 488,813 | 433,883 | ||||||||||||||||
Generac Power Systems, Inc. | Industrial Equipment | Term Loan B | Loan | 3.50 | % | 5/31/2020 | $ | 693,858 | 684,537 | 676,511 | ||||||||||||||||
General Nutrition Centers, Inc. | Retailers (Except Food and Drugs) | Amended Tranche B Term Loan | Loan | 3.25 | % | 3/4/2019 | $ | 4,131,271 | 4,121,165 | 4,012,497 | ||||||||||||||||
Global Tel*Link Corporation | Services: Business | Term Loan (First Lien) | Loan | 5.00 | % | 5/26/2020 | $ | 2,725,318 | 2,717,647 | 2,237,023 | ||||||||||||||||
Goodyear Tire & Rubber Company, The | Chemicals/Plastics | Loan (Second Lien) | Loan | 3.75 | % | 4/30/2019 | $ | 2,000,000 | 1,974,077 | 2,005,000 | ||||||||||||||||
Grosvenor Capital Management Holdings, LP | Brokers/Dealers/Investment Houses | Initial Term Loan | Loan | 3.75 | % | 1/4/2021 | $ | 1,264,036 | 1,259,418 | 1,191,354 | ||||||||||||||||
GTCR Valor Companies, Inc. | Services: Business | Term Loan (First Lien) | Loan | 6.00 | % | 6/1/2021 | $ | 1,974,982 | 1,941,456 | 1,959,340 | ||||||||||||||||
Harland Clarke Holdings Corp. (fka Clarke American Corp.) | Publishing | Tranche B-4 Term Loan | Loan | 6.00 | % | 8/2/2019 | $ | 475,000 | 473,378 | 421,561 | ||||||||||||||||
HCA Inc. | Healthcare & Pharmaceuticals | Tranche B-4 Term Loan | Loan | 3.36 | % | 5/1/2018 | $ | 2,119,664 | 2,053,127 | 2,116,294 | ||||||||||||||||
Headwaters Incorporated | Building & Development | Term Loan | Loan | 4.50 | % | 3/24/2022 | $ | 248,750 | 247,628 | 248,285 | ||||||||||||||||
Hercules Achievement Holdings, Inc. | Retailers (Except Food and Drugs) | Term Loan B | Loan | 5.00 | % | 12/10/2021 | $ | 249,370 | 246,940 | 244,929 | ||||||||||||||||
Hertz Corporation, The | Automotive | Tranche B-1 Term Loan | Loan | 3.75 | % | 3/12/2018 | $ | 2,910,000 | 2,933,230 | 2,879,998 | ||||||||||||||||
Hoffmaster Group, Inc. | Containers/Glass Products | Term Loan | Loan | 5.25 | % | 5/8/2020 | $ | 1,970,000 | 1,955,325 | 1,915,825 | ||||||||||||||||
Hostess Brand, LLC | Beverage, Food & Tobacco | Term Loan B (First Lien) | Loan | 4.50 | % | 8/3/2022 | $ | 997,500 | 995,241 | 983,784 | ||||||||||||||||
Huntsman International LLC | Chemicals/Plastics | Term Loan B (First Lien) | Loan | 3.52 | % | 4/19/2019 | $ | 3,840,541 | 3,814,577 | 3,727,245 | ||||||||||||||||
Husky Injection Molding Systems Ltd. | Services: Business | Term Loan B | Loan | 4.25 | % | 6/30/2021 | $ | 491,196 | 489,277 | 465,757 | ||||||||||||||||
Infor (US), Inc. (fka Lawson Software Inc.) | Services: Business | Tranche B-5 Term Loan | Loan | 3.75 | % | 6/3/2020 | $ | 2,188,296 | 2,174,333 | 2,015,049 | ||||||||||||||||
Insight Global | Services: Business | Term Loan | Loan | 6.00 | % | 10/29/2021 | $ | 1,979,592 | 1,971,967 | 1,961,439 | ||||||||||||||||
Informatica Corporation | High Tech Industries | Term Loan B | Loan | 4.50 | % | 8/5/2022 | $ | 498,750 | 497,554 | 468,411 | ||||||||||||||||
J. Crew Group, Inc. | Retailers (Except Food and Drugs) | Term B-1 Loan Retired 03/05/2014 | Loan | 4.00 | % | 3/5/2021 | $ | 955,481 | 955,481 | 639,379 | ||||||||||||||||
Jazz Acquisition, Inc | Aerospace and Defense | First Lien 6/14 | Loan | 4.50 | % | 6/19/2021 | $ | 492,727 | 491,745 | 434,832 | ||||||||||||||||
J.Jill Group, Inc. | Retailers (Except Food and Drugs) | Term Loan (First Lien) | Loan | 6.00 | % | 5/9/2022 | $ | 995,000 | 990,362 | 925,350 | ||||||||||||||||
Kinetic Concepts, Inc. | Healthcare & Pharmaceuticals | Dollar Term D-1 Loan | Loan | 4.50 | % | 5/4/2018 | $ | 2,452,586 | 2,436,004 | 2,392,645 | ||||||||||||||||
Koosharem, LLC | Services: Business | Term Loan | Loan | 7.50 | % | 5/15/2020 | $ | 2,965,050 | 2,942,458 | 2,683,370 | ||||||||||||||||
Kraton Polymers, LLC | Chemicals/Plastics | Term Loan (Initial) | Loan | 6.00 | % | 1/6/2022 | $ | 2,500,000 | 2,252,500 | 2,250,000 | ||||||||||||||||
LPL Holdings | Banking, Finance, Insurance & Real Estate | Term Loan B (2022) | Loan | 4.75 | % | 11/21/2022 | $ | 2,000,000 | 1,980,543 | 1,900,000 | ||||||||||||||||
Mauser Holdings, Inc. | Containers/Glass Products | Term Loan | Loan | 4.50 | % | 7/31/2021 | $ | 493,750 | 491,750 | 475,234 | ||||||||||||||||
Michaels Stores, Inc. | Retailers (Except Food and Drugs) | Term B Loan | Loan | 3.75 | % | 1/28/2020 | $ | 486,250 | 486,250 | 479,792 | ||||||||||||||||
Michaels Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-2 | Loan | 4.00 | % | 1/28/2020 | $ | 1,212,794 | 1,208,220 | 1,201,042 | ||||||||||||||||
Micro Holding Corp. | High Tech Industries | Term Loan | Loan | 4.75 | % | 7/8/2021 | $ | 992,447 | 987,851 | 950,268 | ||||||||||||||||
Microsemi Corporation | Electronics/Electric | Term Loan B | Loan | 5.25 | % | 1/15/2023 | $ | 2,183,824 | 2,119,162 | 2,180,177 | ||||||||||||||||
Midas Intermediate Holdco II, LLC | Automotive | Term Loan (Initial) | Loan | 4.50 | % | 8/18/2021 | $ | 246,875 | 245,802 | 244,098 | ||||||||||||||||
MPH Acquisition Holdings LLC | Healthcare & Pharmaceuticals | Term Loan | Loan | 3.75 | % | 3/31/2021 | $ | 376,136 | 375,400 | 366,500 | ||||||||||||||||
MSC Software Corp. | Services: Business | Term Loan | Loan | 5.00 | % | 5/29/2020 | $ | 985,000 | 977,601 | 886,500 | ||||||||||||||||
National Veterinary Associates, Inc | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.75 | % | 8/14/2021 | $ | 987,526 | 984,296 | 959,549 | ||||||||||||||||
National Vision, Inc. | Retailers (Except Food and Drugs) | Term Loan (Second Lien) | Loan | 6.75 | % | 3/11/2022 | $ | 250,000 | 249,729 | 218,750 | ||||||||||||||||
Neptune Finco (CSC Holdings) | Cable and Satellite Television | Term Loan | Loan | 5.00 | % | 10/7/2022 | $ | 1,000,000 | 985,784 | 989,750 | ||||||||||||||||
New Millennium Holdco | Healthcare & Pharmaceuticals | Term Loan | Loan | 7.50 | % | 12/21/2020 | $ | 2,007,042 | 1,811,375 | 1,822,655 | ||||||||||||||||
Nortek, Inc. | Electronics/Electric | Term Loan B | Loan | 3.50 | % | 10/30/2020 | $ | 985,022 | 974,747 | 939,464 | ||||||||||||||||
NorthStar Asset Management Group Inc. | Banking, Finance, Insurance & Real Estate | Term Loan B | Loan | 4.63 | % | 1/30/2023 | $ | 2,000,000 | 1,930,000 | 1,950,000 | ||||||||||||||||
Novelis, Inc. | Conglomerate | Term Loan B | Loan | 4.00 | % | 6/2/2022 | $ | 4,771,058 | 4,749,389 | 4,440,090 | ||||||||||||||||
Novetta Solutions | Aerospace and Defense | Term Loan (200MM) | Loan | 6.00 | % | 10/16/2022 | $ | 2,000,000 | 1,980,636 | 1,940,000 | ||||||||||||||||
Novetta Solutions | Aerospace and Defense | Term Loan (2nd Lien) | Loan | 9.50 | % | 9/29/2023 | $ | 1,000,000 | 990,269 | 950,000 | ||||||||||||||||
NPC International, Inc. | Food Services | Term Loan (2013) | Loan | 4.75 | % | 12/28/2018 | $ | 481,250 | 481,250 | 472,829 | ||||||||||||||||
NRG Energy, Inc. | Utilities | Term Loan (2013) | Loan | 2.75 | % | 7/2/2018 | $ | 3,821,925 | 3,808,282 | 3,751,449 | ||||||||||||||||
Numericable | Broadcast Radio and Television | Term Loan B-5 | Loan | 4.56 | % | 7/31/2022 | $ | 997,500 | 995,164 | 953,171 | ||||||||||||||||
NuSil Technology LLC. | Chemicals/Plastics | Term Loan | Loan | 5.25 | % | 4/7/2017 | $ | 789,045 | 789,045 | 774,645 | ||||||||||||||||
Onex Carestream Finance LP | Healthcare & Pharmaceuticals | Term Loan (First Lien 2013) | Loan | 5.00 | % | 6/7/2019 | $ | 3,832,558 | 3,821,232 | 3,244,912 | ||||||||||||||||
OnexYork Acquisition Co | Healthcare & Pharmaceuticals | Term Loan B | Loan | 4.75 | % | 10/1/2021 | $ | 493,749 | 490,644 | 459,435 | ||||||||||||||||
OpenLink International LLC | Services: Business | Term B Loan | Loan | 6.25 | % | 10/30/2017 | $ | 2,944,496 | 2,943,282 | 2,811,994 | ||||||||||||||||
P.F. Chang's China Bistro, Inc. (Wok Acquisition Corp.) | Food/Drug Retailers | Term Borrowing | Loan | 4.25 | % | 6/24/2019 | $ | 1,432,750 | 1,427,110 | 1,336,039 | ||||||||||||||||
P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC) | Services: Business | Term Loan (First Lien) | Loan | 5.00 | % | 10/30/2020 | $ | 980,000 | 976,133 | 774,200 | ||||||||||||||||
Penn Products Terminal, LLC | Chemicals/Plastics | Term Loan B | Loan | 4.75 | % | 4/13/2022 | $ | 248,125 | 246,994 | 218,350 | ||||||||||||||||
PetCo Animal Supplies Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-1 | Loan | 5.75 | % | 1/15/2023 | $ | 1,000,000 | 980,217 | 978,590 | ||||||||||||||||
PetCo Animal Supplies Stores, Inc. | Retailers (Except Food and Drugs) | Term Loan B-2 | Loan | 5.62 | % | 1/15/2023 | $ | 1,000,000 | 980,216 | 978,960 | ||||||||||||||||
Petsmart, Inc. (Argos Merger Sub, Inc.) | Retailers (Except Food and Drugs) | Term Loan B1 | Loan | 4.25 | % | 3/11/2022 | $ | 992,500 | 987,862 | 961,176 | ||||||||||||||||
PGX Holdings, Inc. | Financial Intermediaries | Term Loan | Loan | 5.75 | % | 9/29/2020 | $ | 954,643 | 947,123 | 941,917 | ||||||||||||||||
Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC) | Conglomerate | Term Loan | Loan | 4.25 | % | 8/18/2022 | $ | 1,920,848 | 1,911,850 | 1,872,346 | ||||||||||||||||
Phillips-Medisize Corporation | Healthcare & Pharmaceuticals | Term Loan | Loan | 4.75 | % | 6/16/2021 | $ | 492,500 | 490,535 | 458,025 | ||||||||||||||||
Physio-Control International, Inc. | Healthcare & Pharmaceuticals | Term Loan B | Loan | 5.50 | % | 6/6/2022 | $ | 498,750 | 496,371 | 498,127 | ||||||||||||||||
Pinnacle Foods Finance LLC | Food Products | New Term Loan G | Loan | 3.00 | % | 4/29/2020 | $ | 2,581,332 | 2,577,286 | 2,553,737 | ||||||||||||||||
Planet Fitness Holdings LLC | Leisure Goods/Activities/Movies | Term Loan | Loan | 4.75 | % | 3/31/2021 | $ | 2,417,118 | 2,410,079 | 2,368,776 | ||||||||||||||||
PrePaid Legal Services, Inc. | Services: Business | Term Loan B | Loan | 6.50 | % | 7/1/2019 | $ | 724,167 | 721,080 | 716,020 | ||||||||||||||||
Presidio, Inc. | Services: Business | Term Loan | Loan | 5.25 | % | 2/2/2022 | $ | 1,902,292 | 1,846,615 | 1,816,688 | ||||||||||||||||
Prime Security Services (Protection One) | Services: Business | Term Loan | Loan | 5.00 | % | 7/1/2021 | $ | 1,995,000 | 1,985,640 | 1,924,178 | ||||||||||||||||
Ranpak Holdings, Inc. | Services: Business | Term Loan | Loan | 4.25 | % | 10/1/2021 | $ | 938,354 | 936,008 | 886,745 | ||||||||||||||||
Ranpak Holdings, Inc. | Services: Business | Term Loan (Second Lien) | Loan | 8.25 | % | 10/3/2022 | $ | 500,000 | 497,866 | 400,000 | ||||||||||||||||
Redtop Acquisitions Limited | Electronics/Electric | Initial Dollar Term Loan (First Lien) | Loan | 4.50 | % | 12/3/2020 | $ | 490,000 | 487,461 | 482,444 | ||||||||||||||||
Regal Cinemas Corporation | Services: Consumer | Term Loan | Loan | 3.75 | % | 4/1/2022 | $ | 497,500 | 496,320 | 496,256 | ||||||||||||||||
Research Now Group, Inc | Media | Term Loan B | Loan | 5.50 | % | 3/18/2021 | $ | 2,058,445 | 2,048,627 | 1,996,692 | ||||||||||||||||
Rexnord LLC/RBS Global, Inc. | Industrial Equipment | Term B Loan | Loan | 4.00 | % | 8/21/2020 | $ | 1,630,123 | 1,631,387 | 1,557,647 | ||||||||||||||||
Reynolds Group Holdings Inc. | Industrial Equipment | Incremental U.S. Term Loan | Loan | 4.50 | % | 12/1/2018 | $ | 1,910,551 | 1,910,551 | 1,902,946 | ||||||||||||||||
Riverbed Technology, Inc. | Technology | Term Loan B | Loan | 6.00 | % | 2/25/2022 | $ | 992,500 | 988,224 | 970,873 | ||||||||||||||||
Rocket Software, Inc. | Services: Business | Term Loan (First Lien) | Loan | 5.75 | % | 2/8/2018 | $ | 1,901,835 | 1,889,759 | 1,889,150 | ||||||||||||||||
Rovi Solutions Corporation / Rovi Guides, Inc. | Electronics/Electric | Tranche B-3 Term Loan | Loan | 3.75 | % | 7/2/2021 | $ | 1,477,500 | 1,471,640 | 1,422,094 | ||||||||||||||||
Royal Adhesives and Sealants | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.50 | % | 6/20/2022 | $ | 497,500 | 495,187 | 479,675 | ||||||||||||||||
Royal Adhesives and Sealants | Chemicals/Plastics | Term Loan (Second Lien) | Loan | 8.50 | % | 6/19/2023 | $ | 500,000 | 496,388 | 478,335 | ||||||||||||||||
RPI Finance Trust | Financial Intermediaries | Term B-4 Term Loan | Loan | 3.50 | % | 11/9/2020 | $ | 5,155,193 | 5,155,193 | 5,132,665 | ||||||||||||||||
Sable International Finance Ltd | Telecommunications | Term Loan B1 | Loan | 5.50 | % | 12/2/2022 | $ | 825,000 | 808,500 | 800,770 | ||||||||||||||||
Sable International Finance Ltd | Telecommunications | Term Loan B2 | Loan | 5.50 | % | 12/2/2022 | $ | 675,000 | 661,500 | 655,175 | ||||||||||||||||
SBP Holdings LP | Industrial Equipment | Term Loan (First Lien) | Loan | 5.00 | % | 3/27/2021 | $ | 982,500 | 978,645 | 707,400 | ||||||||||||||||
Scientific Games International, Inc. | Electronics/Electric | Term Loan B2 | Loan | 6.00 | % | 10/1/2021 | $ | 990,000 | 981,872 | 904,613 | ||||||||||||||||
SCS Holdings (Sirius Computer) | High Tech Industries | Term Loan (First Lien) | Loan | 6.00 | % | 10/30/2022 | $ | 1,977,528 | 1,939,305 | 1,937,978 | ||||||||||||||||
Seadrill Operating LP | Oil & Gas | Term Loan B | Loan | 4.00 | % | 2/21/2021 | $ | 987,406 | 919,799 | 407,305 | ||||||||||||||||
Sensus USA Inc. (fka Sensus Metering Systems) | Utilities | Term Loan (First Lien) | Loan | 4.50 | % | 5/9/2017 | $ | 1,905,121 | 1,902,477 | 1,826,534 | ||||||||||||||||
ServiceMaster Company, The | Conglomerate | Tranche B Term Loan | Loan | 4.25 | % | 7/1/2021 | $ | 1,975,000 | 1,959,254 | 1,956,889 | ||||||||||||||||
Shearers Foods LLC | Food Services | Term Loan (First Lien) | Loan | 4.94 | % | 6/30/2021 | $ | 987,500 | 985,421 | 952,938 | ||||||||||||||||
Sitel Worldwide | Telecommunications | Term Loan | Loan | 6.50 | % | 9/18/2021 | $ | 1,995,000 | 1,976,131 | 1,931,160 | ||||||||||||||||
Sonneborn, LLC | Chemicals/Plastics | Term Loan (First Lien) | Loan | 4.75 | % | 12/10/2020 | $ | 222,750 | 222,282 | 220,801 | ||||||||||||||||
Sonneborn, LLC | Chemicals/Plastics | Initial US Term Loan | Loan | 4.75 | % | 12/10/2020 | $ | 1,262,250 | 1,259,600 | 1,251,205 | ||||||||||||||||
Sophia, L.P. | Electronics/Electric | Term Loan (Closing Date) | Loan | 4.75 | % | 9/30/2022 | $ | 1,995,000 | 1,985,507 | 1,911,469 | ||||||||||||||||
SourceHOV LLC | Services: Business | Term Loan B (First Lien) | Loan | 7.75 | % | 10/31/2019 | $ | 1,937,500 | 1,891,680 | 1,541,281 | ||||||||||||||||
SRAM, LLC | Industrial Equipment | Term Loan (First Lien) | Loan | 4.00 | % | 4/10/2020 | $ | 2,904,577 | 2,896,630 | 2,207,479 | ||||||||||||||||
Staples, Inc. | Retailers (Except Food and Drugs) | Term Loan 1/16 | Loan | 4.75 | % | 4/23/2021 | $ | 1,000,000 | 990,308 | 992,130 | ||||||||||||||||
Steak ‘n Shake Operations, Inc. | Food Services | Term Loan | Loan | 4.75 | % | 3/19/2021 | $ | 965,341 | 957,952 | 946,034 | ||||||||||||||||
SuperMedia Inc. (fka Idearc Inc.) | Publishing | Loan | Loan | 11.60 | % | 12/30/2016 | $ | 222,900 | 220,105 | 67,520 | ||||||||||||||||
Survey Sampling International | Services: Business | Term Loan B | Loan | 6.00 | % | 12/16/2020 | $ | 992,500 | 990,554 | 970,169 | ||||||||||||||||
Sybil Finance BV | High Tech Industries | Term Loan | Loan | 4.25 | % | 3/20/2020 | $ | 1,272,143 | 1,270,803 | 1,253,061 | ||||||||||||||||
Syniverse Holdings, Inc. | Telecommunications | Initial Term Loan | Loan | 4.00 | % | 4/23/2019 | $ | 479,913 | 476,927 | 311,944 | ||||||||||||||||
TaxACT, Inc. | Services: Business | Term Loan B | Loan | 7.00 | % | 1/3/2023 | $ | 1,860,000 | 1,805,035 | 1,804,200 | ||||||||||||||||
TGI Friday's, Inc. | Food Services | Term Loan B | Loan | 5.25 | % | 7/15/2020 | $ | 1,651,816 | 1,647,936 | 1,636,669 | ||||||||||||||||
Townsquare Media, Inc. | Media | Term Loan B | Loan | 4.25 | % | 4/1/2022 | $ | 932,522 | 928,333 | 915,624 | ||||||||||||||||
TPF II Power LLC and TPF II Covert Midco LLC | Utilities | Term Loan B | Loan | 5.50 | % | 10/2/2021 | $ | 1,491,826 | 1,433,943 | 1,396,722 | ||||||||||||||||
TransDigm, Inc. | Aerospace and Defense | Tranche C Term Loan | Loan | 3.75 | % | 2/28/2020 | $ | 4,277,294 | 4,283,815 | 4,148,975 | ||||||||||||||||
Travel Leaders Group, LLC | Hotel, Gaming and Leisure | Term Loan B | Loan | 7.00 | % | 12/7/2020 | $ | 1,946,300 | 1,939,729 | 1,917,107 | ||||||||||||||||
Tricorbraun, Inc. (fka Kranson Industries, Inc.) | Containers/Glass Products | Term Loan | Loan | 4.00 | % | 5/3/2018 | $ | 1,836,625 | 1,831,636 | 1,776,935 | ||||||||||||||||
Truven Health Analytics Inc. (fka Thomson Reuters (Healthcare) Inc.) | Healthcare & Pharmaceuticals | New Tranche B Term Loan | Loan | 4.50 | % | 6/6/2019 | $ | 482,603 | 476,598 | 480,494 | ||||||||||||||||
Twin River Management Group, Inc. | Lodging & Casinos | Term Loan B | Loan | 5.25 | % | 7/10/2020 | $ | 886,192 | 887,853 | 875,673 | ||||||||||||||||
U.S. Security Associates Holdings, Inc. | Services: Business | Delayed Draw Loan | Loan | 6.25 | % | 7/28/2017 | $ | 156,888 | 156,328 | 155,973 | ||||||||||||||||
U.S. Security Associates Holdings, Inc. | Services: Business | Term B Loan | Loan | 6.25 | % | 7/28/2017 | $ | 921,426 | 918,393 | 916,054 | ||||||||||||||||
Univar Inc. | Chemicals/Plastics | Term B Loan | Loan | 4.25 | % | 7/1/2022 | $ | 2,992,500 | 2,978,573 | 2,840,810 | ||||||||||||||||
Univision Communications Inc. | Telecommunications | Replacement First-Lien Term Loan | Loan | 4.00 | % | 3/1/2020 | $ | 2,916,556 | 2,903,859 | 2,832,705 | ||||||||||||||||
Valeant Pharmaceuticals International, Inc. | Drugs | Series D2 Term Loan B | Loan | 3.50 | % | 2/13/2019 | $ | 2,545,588 | 2,539,315 | 2,385,700 | ||||||||||||||||
Verint Systems Inc. | Services: Business | Term Loan | Loan | 3.50 | % | 9/6/2019 | $ | 1,014,058 | 1,011,203 | 1,005,692 | ||||||||||||||||
Vertafore, Inc. | Services: Business | Term Loan (2013) | Loan | 4.25 | % | 10/3/2019 | $ | 2,484,603 | 2,484,603 | 2,452,775 | ||||||||||||||||
Vizient Inc. | Healthcare & Pharmaceuticals | Term Loan | Loan | 6.25 | % | 2/13/2023 | $ | 1,000,000 | 970,144 | 993,750 | ||||||||||||||||
Vouvray US Finance | Industrial Equipment | Term Loan | Loan | 4.75 | % | 6/27/2021 | $ | 492,500 | 490,508 | 478,134 | ||||||||||||||||
Washington Inventory Service | Services: Business | U.S. Term Loan (First Lien) | Loan | 5.75 | % | 12/20/2018 | $ | 1,736,392 | 1,749,291 | 1,475,934 | ||||||||||||||||
West Corporation | Telecommunications | Term B-10 Loan | Loan | 3.25 | % | 6/30/2018 | $ | 2,534,892 | 2,558,782 | 2,490,861 | ||||||||||||||||
ZEP Inc. | Chemicals/Plastics | Term Loan B | Loan | 5.50 | % | 6/27/2022 | $ | 2,985,000 | 2,971,139 | 2,932,763 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||||
| $ | 303,643,756 | $ | 284,844,789 | |||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||
| Principal | Cost | Fair Value | ||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||
U.S. Bank Money Market (a) | $ | 2,349,633 | $ | 2,349,633 | $ | 2,349,633 | ||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||
Total cash and cash equivalents | $ | 2,349,633 | $ | 2,349,633 | $ | 2,349,633 | ||||||||||||||||||||
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| (a) | Included within cash and cash equivalents in Saratoga CLO's Statements of Assets and Liabilities as of February 29, 2016. |
22
Note 5. 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 7, 2016, 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 fee.
The base management fee of 1.75% 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 incentive 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 (7.5% annualized) 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 (9.376% annualized); and 20.0% of the amount of the our pre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter (9.376% annualized).
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 year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, 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 May 31, 2016 and May 31, 2015, the Company incurred $1.2 million and $1.1 million in base management fees, respectively. For the three months ended May 31, 2016 and May 31, 2015, the Company incurred $0.6 million and $0.7 million in incentive fees related to pre-incentive fee net investment income. For the three months ended May 31, 2016 and May 31, 2015, we accrued $0.1 million and $1.1 million 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 May 31, 2016, the base management fees accrual was $1.2 million and the incentive fees accrual was $4.6 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 29, 2016, the base management fees accrual was $1.2 million and the incentive fees accrual was $4.4 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 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to keep the cap on the payment or reimbursement of expenses by the Company thereunder, unchanged at $1.3 million. In addition, our board of directors intends to review the cap in the next three to six months to determine whether it should be further adjusted in light of differences between our projected and actual expenses and other similar factors.
For the three months ended May 31, 2016 and May 31, 2015, we recognized $0.3 million and $0.3 million, in administrator expenses for the periods, 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 May 31, 2016, $0.2 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of
23
February 29, 2016, $0.2 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. For the three months ended May 31, 2016 and May 31, 2015, the Company neither bought nor sold any investments from the Saratoga CLO.
Note 6. 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. 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.
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 was 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%.
In March 2009, we amended the Revolving Facility to increase the portion of the portfolio that could be invested in "CCC" rated investments in return for an increased interest rate and expedited amortization. As a result of these transactions, we expected to have additional cushion under our borrowing base under the Revolving Facility that would allow us to better manage our capital in times of declining asset prices and market dislocation.
On July 30, 2009, we exceeded the permissible borrowing limit under the Revolving Facility for 30 consecutive days, resulting in an event of default under the Revolving Facility. As a result of this event of default, our lender had the right to accelerate repayment of the outstanding indebtedness under the Revolving Facility and to foreclose and liquidate the collateral pledged thereunder. Acceleration of the outstanding indebtedness and/or liquidation of the collateral could have had a material adverse effect on our liquidity, financial condition and operations.
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 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 Madison Capital Funding LLC. |
On September 17, 2014, we entered into a second amendment to the Credit 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 Credit Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events); |
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| • | 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%. |
As of May 31, 2016 and February 29, 2016, there were no outstanding borrowings under the Credit Facility and the Company was in compliance with all of the limitations and requirements of the Credit Facility. Financing costs of $2.7 million related to the Credit Facility have been capitalized and are being amortized over the term of the facility. For the three months ended May 31, 2016 and May 31, 2015, we recorded $0.1 million and $0.2 million of interest expense, respectively. For the three months ended May 31, 2016 and May 31, 2015, we recorded $0.02 million and $0.02 million of amortization of deferred financing costs related to the Credit Facility and Revolving Facility, respectively. The interest rate during the three months ended May 31, 2015 on the outstanding borrowings under the Credit Facility was 6.00%. During the three months ended May 31, 2016 and May 31, 2015, the average dollar amount of outstanding borrowings under the Credit Facility was $0.0 million and $9.6 million, respectively.
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 LIBOR rate and 2.00%, plus an applicable margin of 5.50%. At the Company's option, funds may be borrowed based on an alternative base rate, which in no event will be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%. In addition, the Company will pay 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.
Our borrowing base under the Credit Facility was $20.4 million subject to the Credit Facility cap of $45.0 million at May 31, 2016. 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 SEC. Accordingly, the May 31, 2016 borrowing base relies upon the valuations set forth in the Annual Report on Form 10-K for the year ended February 29, 2016. 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
SBIC LP is 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. As of May 31, 2016, we have funded SBIC LP with $75.0 million of equity capital, and have $103.7 million of 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 may borrow to a maximum of $150.0 million, 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.
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SBIC LP is 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 LP will receive SBA guaranteed debenture funding, which is dependent upon SBIC LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP's assets over our stockholders and debtholders in the event we liquidate SBIC LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP upon an event of default.
The Company received exemptive relief from the Securities and Exchange Commission to permit it to exclude the debt of SBIC LP guaranteed by the SBA from the definition of senior securities in the 200.0% asset coverage test under the 1940 Act. This allows the Company increased flexibility under the 200.0% 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.
As of May 31, 2016 and February 29, 2016, there was $103.7 million and $103.7 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. $3.9 million of financing costs related to the SBA debentures have been capitalized and are being amortized over the term of the commitment and drawdown. For the three months ended May 31, 2016 and May 31, 2015, we recorded $0.8 million and $0.6 million of interest expense related to the SBA debentures, respectively. For the three months ended May 31, 2016 and May 31, 2015, we recorded $0.1 million and $0.1 million of amortization of deferred financing costs related to the SBA debentures, respectively. The weighted average interest rate during the three months ended May 31, 2016 and May 31, 2015 on the outstanding borrowings of the SBA debentures was 3.09% and 3.15%, respectively. During the three months ended May 31, 2016 and May 31, 2015, the average dollar amount of SBA debentures outstanding was $103.7 million and $79.0 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 currently limit 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. 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.
On April 2, 2015, the SBA issued a "green light" or "go forth" letter inviting us to continue our application process to obtain a license to form and operate its second SBIC subsidiary. If approved, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and we have received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.
Notes
On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the "Notes"). The Notes will mature on May 31, 2020, and may be redeemed in whole or in part at any time or from time to time at the Company's option on or after May 31, 2016. 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 Notes, pursuant to the full exercise of the underwriters' option to purchase additional Notes. 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 Notes through an At-the-Market ("ATM") offering. As of May 31, 2016, the Company sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).
As of May 31, 2016, the carrying amount and fair value of the Notes was $61.8 million and $62.8 million, respectively. The fair value of the Notes, which 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 May 31, 2016, $2.7 million of financing costs related to the Notes (including underwriting commissions and net of issuance premiums) have been capitalized and are being amortized over the term of the Notes. For the three months ended May 31, 2016, we recorded $1.2 million of interest expense and $0.1 million of amortization of deferred financing costs related to the Notes. For the three months ended May 31, 2015, we recorded $0.9 million of interest expense and $0.1 million of amortization of deferred financing costs related to the Notes. During the three months ended May 31, 2016 and May 31, 2015, the average dollar amount of Notes outstanding was $61.8 million and $48.3 million, respectively.
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Note 7. Commitments and contingencies
Contractual obligations
The following table shows our payment obligations for repayment of debt and other contractual obligations at May 31, 2016:
| Payment Due by Period | ||||||||||||||||||||
| Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
Long-Term Debt Obligations | $ | 165,453 | $ | - | $ | - | $ | 61,793 | $ | 103,660 | ||||||||||
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Off-balance sheet arrangements
The Company's off-balance sheet arrangements consisted of $2.0 million and $2.0 million of unfunded commitments to provide debt financing to its portfolio companies or to fund limited partnership interests as of May 31, 2016 and February 29, 2016, respectively. 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 composition of the unfunded commitments as of May 31, 2016 and February 29, 2016 is shown in the table below (dollars in thousands):
| As of | ||||||||
| May 31, 2016 | February 29, 2016 | |||||||
Avionte Holdings, LLC | $ | 1,000 | $ | 1,000 | ||||
Identity Automation | 1,000 | 1,000 | ||||||
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Total | $ | 2,000 | $ | 2,000 | ||||
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Note 8. Directors Fees
The independent directors receive an annual fee of $40,000. 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 $5,000 and the chairman of each other committee receives an annual fee of $2,000 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 May 31, 2016 and May 31, 2015, we incurred $0.07 million and $0.05 million for directors fees and expenses, respectively. As of May 31, 2016 and February 29, 2016, $0.05 million and $0.03 million in directors' fees expense were accrued and unpaid, respectively. As of May 31, 2016, we had not issued any common stock to our directors as compensation for their services.
Note 9. 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 November 13, 2009, we declared a dividend of $18.25 per share payable on December 31, 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 $2.50 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 of newly issued shares of common stock.
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 November 12, 2010, we declared a dividend of $4.40 per share payable on December 29, 2010. 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 $1.2 million or $0.44 per share. Based on shareholder elections, the dividend consisted of approximately $1.2 million in cash and 596,235 shares of common stock.
On November 15, 2011, we declared a dividend of $3.00 per share payable on December 30, 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 approximately $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 599,584 shares of common stock.
On November 9, 2012, the Company declared a dividend of $4.25 per share payable on December 31, 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 approximately $3.3 million in cash and 853,455 shares of common stock.
On October 30, 2013, the Company declared a dividend of $2.65 per share payable on December 27, 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. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock.
On September 24, 2014, the Company declared a dividend of $0.18 per share payable on November 28, 2014. 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 $0.6 million in cash and 22,283 newly issued shares of common stock.
On September 24, 2014, the Company declared a dividend of $0.22 per share payable on February 27, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
On April 9, 2015, the Company declared a dividend of $0.27 per share payable on May 29, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
On May 14, 2015, the Company declared a special dividend of $1.00 per share payable on June 5, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
On July 8, 2015, the Company declared a dividend of $0.33 per share payable on August 31, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
On October 7, 2015, the Company declared a dividend of $0.36 per share payable on November 30, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
On January 12, 2016, the Company declared a dividend of $0.40 per share payable on February 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,764 newly issued shares of common stock.
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On March 31, 2016, the Company declared a dividend of $0.41 per share payable on April 27, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
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. As of May 31, 2016, the Company purchased 70,914 shares of common stock, at the average price of $15.08 for approximately $1.1 million pursuant to this repurchase plan.
Note 10. Earnings Per Share
In accordance with the provisions of FASB ASC 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 per share from operations for the three months ended May 31, 2016 and May 31, 2015 (dollars in thousands except share and per share amounts):
| For the three months ended | ||||||||
Basic and diluted | May 31, 2016 | May 31, 2015 | ||||||
Net increase in net assets from operations | $ | 3,288 | $ | 7,385 | ||||
Weighted average common shares outstanding | 5,737,496 | 5,422,491 | ||||||
Weighted average earnings per common share-basic and diluted | $ | 0.57 | $ | 1.36 | ||||
Note 11. Dividend
On March 31, 2016, the Company declared a dividend of $0.41 per share payable on April 27, 2016, to common stockholders of record on April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
The following tables summarize dividends declared during the three months ended May 31, 2016 (dollars in thousands except per share amounts):
Date Declared | Record Date | Payment Date | Amount Per Share* | Total Amount | ||||||||||||
March 31, 2016 | April 15, 2016 | April 27, 2016 | $ | 0.41 | $ | 2,346 | ||||||||||
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Total dividends declared | $ | 0.41 | $ | 2,346 | ||||||||||||
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| * | Amount per share is calculated based on the number of shares outstanding at the date of declaration. |
The following tables summarize dividends declared during the three months ended May 31, 2015 (dollars in thousands except per share amounts):
Date Declared | Record Date | Payment Date | Amount Per Share* | Total Amount | ||||||||||||
May 14, 2015 | May 26, 2015 | June 5, 2015 | $ | 1.00 | $ | 5,429 | ||||||||||
April 9, 2015 | May 4, 2015 | May 29, 2015 | $ | 0.27 | $ | 1,466 | ||||||||||
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Total dividends declared | $ | 1.27 | $ | 6,895 | ||||||||||||
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| * | Amount per share is calculated based on the number of shares outstanding at the date of declaration. |
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Note 12. Financial Highlights
The following is a schedule of financial highlights for the three months ended May 31, 2016 and May 31, 2015:
| May 31, 2016 | May 31, 2015 | |||||||
Per share data: | ||||||||
Net asset value at beginning of period | $ | 22.06 | $ | 22.70 | ||||
Net investment income(1) | 0.44 | 0.33 | ||||||
Net realized and unrealized gains and losses on investments | 0.13 | 1.03 | ||||||
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Net increase in net assets from operations | 0.57 | 1.36 | ||||||
Distributions declared from net investment income | (0.41 | ) | (1.27 | ) | ||||
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Total distributions to stockholders | (0.41 | ) | (1.27 | ) | ||||
Dilution(4) | (0.11 | ) | (0.04 | ) | ||||
Net asset value at end of period | $ | 22.11 | $ | 22.75 | ||||
Net assets at end of period | $ | 127,128,868 | $ | 123,491,324 | ||||
Shares outstanding at end of period | 5,750,222 | 5,428,758 | ||||||
Per share market value at end of period | $ | 16.39 | $ | 17.42 | ||||
Total return based on market value(2) | 19.71 | % | 10.86 | % | ||||
Total return based on net asset value(3) | 4.10 | % | 1.68 | % | ||||
Ratio/Supplemental data: | ||||||||
Ratio of net investment income to average net assets | 7.98 | % | 5.80 | % | ||||
Ratio of operating expenses to average net assets | 7.15 | % | 6.65 | % | ||||
Ratio of incentive management fees to average net assets(6) | 0.58 | % | 1.48 | % | ||||
Ratio of credit facility related expenses to average net assets | 7.44 | % | 6.43 | % | ||||
Ratio of total expenses to average net assets | 15.17 | % | 18.97 | % | ||||
Portfolio turnover rate(5) | N/A | 2.99 | % | |||||
| (1) | Net investment income per share is calculated using the weighted average shares outstanding during the period. |
| (2) | 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. Total investment returns covering less than a full period are not annualized. |
| (3) | 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. |
| (4) | Represents 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. See Note 11, Dividend. |
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| (5) | 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. |
| (6) | Ratios are not annualized. |
Note 13. 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 disclosures in the consolidated financial statements except for the following:
On July 7, 2016, the Company declared a dividend of $0.43 per share payable for the fiscal quarter ended May 31, 2016 to all stockholders of record at the close of business on July 29, 2016, with a payment date on August 9, 2016. Shareholders will have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company's DRIP.
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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 Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended February 29, 2016.
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; |
| • | our business prospects and the prospects of our portfolio companies; |
| • | the impact of investments that we expect to make; |
| • | 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 treatment, 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; and |
| • | the ability of our investment adviser to locate suitable investments for us and to monitor and effectively administer our investments. |
You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of 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 (the "1940 Act"). Our investment objective is to generate current income and, to a lesser extent, capital appreciation from our investments. We invest primarily in leveraged loans and mezzanine debt issued by private U.S. middle market companies, which we define as companies having 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. 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.
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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.
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% unsecured notes due 2020 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 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 notes mature on May 31, 2020 and may be redeemed in whole or in part at any time or from time to time at our option on or after May 31, 2016. The notes are listed on the NYSE under the trading symbol "SAQ" with a par value of $25.00 per share.
On April 2, 2015, the SBA issued a "green light" or "go forth" letter inviting us to continue our application process to obtain a license to form and operate its second SBIC subsidiary. If approved, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and we have received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.
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 Notes through an At-the-Market ("ATM") offering. As of May 31, 2016, the Company sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).
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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 Measurements 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 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 Advisers, 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 reviews approximately one quarter 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 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. |
Our 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 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.
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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.
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 , 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.
Paid-in-Kind Interest
The Company holds debt 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.
Capital Gains Incentive Fee
The Company records an expense accrual relating to the capital gains incentive fee payable by the Company to its investment adviser 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 investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company's investment adviser 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.
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 investments may provide for a portion of the interest to be PIK. To the extent interest is paid-in-kind, 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 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 refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the fee basis amount at the beginning of the collection period, paid quarterly to the extent of available proceeds. We are also 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 equal to or greater than 12.0%.
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We recognize interest income on our investment in the subordinated notes of Saratoga CLO using the effective interest method, 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.
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; |
| • | 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 SEC and the SBA); |
| • | 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.
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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 (7.5% annualized) 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, 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% (7.5% annualized) 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%. |
| • | 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. |
To the extent that any of our leveraged loans are denominated in a currency other than U.S. Dollars, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of interest rate caps, futures, options and forward contracts. Costs incurred in entering into or settling such contracts will be borne by us.
New Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, Amendments to the Leases ("ASC Topic 842"), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance is effective for annual and interim periods beginning after December 15, 2018. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.
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In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact the adoption of this standard has on our consolidated financial statements and disclosures.
In August 2014, the FASB issued new accounting guidance that requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments provide a definition of the term "substantial doubt" and include principles for considering the mitigating effect of management's plans. The amendments also require an evaluation every reporting period, including interim periods for a period of one year after the date that the financial statements are issued (or available to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are effective for reporting periods ending after December 15, 2016. Management does not believe these changes will have a material impact on the Company's consolidated financial statements and disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 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. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016, and early application is not permitted. Management is currently evaluating the impact these changes will have on the Company's consolidated financial statements and disclosures.
Portfolio and investment activity
Corporate Debt Portfolio Overview
| At May 31, 2016 | At February 29, 2016 | |||||||
| ($ in millions) | ($ in millions) | |||||||
Number of investments(1) | 55 | 59 | ||||||
Number of portfolio companies(1) | 32 | 34 | ||||||
Average investment size(1) | $ | 4.6 | $ | 4.6 | ||||
Weighted average maturity(1) | 3.6yrs | 3.8yrs | ||||||
Number of industries(1) | 11 | 11 | ||||||
Average investment per portfolio company(1) | $ | 7.9 | $ | 8.0 | ||||
Non-performing or delinquent investments(1) | $ | 0.0 | $ | 0.0 | ||||
Fixed rate debt (% of interest bearing portfolio)(2) | $ | 86.3(36.9)% | $ | 97.9(40.0)% | ||||
Weighted average current coupon(2) | 11.5% | 11.5% | ||||||
Floating rate debt (% of interest bearing portfolio)(2) | $ | 147.8(63.1)% | $ | 146.8(60.0)% | ||||
Weighted average current spread over LIBOR(2) | 9.1% | 9.1% | ||||||
| (1) | Excludes our investment in the subordinated notes of Saratoga CLO. |
| (2) | Excludes our investment in the subordinated notes of Saratoga CLO and investments in equity interests. |
During the three months ended May 31, 2016, we did not invest in any new or existing portfolio companies and had $20.6 million in aggregate amount of exits and repayments resulting in net repayments of $20.6 million for the period.
During the three months ended May 31, 2015, we invested $23.2 million in new or existing portfolio companies and had $7.3 million in aggregate amount of exits and repayments resulting in net investments of $15.9 million for the period.
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Our portfolio composition at May 31, 2016 and February 29, 2016 at fair value was as follows:
Portfolio composition
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
| Percentage of Total Portfolio | Weighted Average Current Yield | Percentage of Total Portfolio | Weighted Average Current Yield | |||||||||||||
Syndicated loans | 4.9 | % | 6.9 | % | 4.2 | % | 8.2 | % | ||||||||
First lien term loans | 49.7 | 10.7 | 50.9 | 10.6 | ||||||||||||
Second lien term loans | 33.9 | 11.3 | 31.1 | 11.5 | ||||||||||||
Saratoga CLO subordinated notes | 4.7 | 17.3 | 4.5 | 16.4 | ||||||||||||
Equity interests | 6.8 | N/A | 9.3 | N/A | ||||||||||||
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Total | 100.0 | % | 11.1 | % | 100.0 | % | 11.1 | % | ||||||||
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Our investment in the subordinated notes of Saratoga CLO represents a first loss position in a portfolio that, at May 31, 2016 and February 29, 2016 was composed of $305.3 million and $302.7 million, respectively, in aggregate principal amount of predominantly senior secured first lien term loans. This investment is subject to unique risks. (See "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 29, 2016). 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 May 31, 2016, $293.7 million or 99.2% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and there were no Saratoga CLO portfolio investments in default. At February 29, 2016, $283.3 million or 99.4% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and one Saratoga CLO portfolio investment was in default with a fair value of $0.8 million.
Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system ("CMR"). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)-strong credit; (Yellow)-satisfactory credit; (Red)-payment default risk, in payment default and/or significant restructuring activity.
The CMR distribution of our investments at May 31, 2016 and February 29, 2016 was as follows:
Portfolio CMR distribution
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
Color Score | Investments at Fair Value | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | ||||||||||||
| ($ in thousands) | ||||||||||||||||
Green | $ | 230,192 | 87.0 | % | $ | 240,623 | 84.7 | % | ||||||||
Yellow | 3,852 | 1.5 | 4,058 | 1.4 | ||||||||||||
Red | 8 | 0.0 | 8 | 0.0 | ||||||||||||
N/A(1) | 30,375 | 11.5 | 39,307 | 13.9 | ||||||||||||
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Total | $ | 264,427 | 100.0 | % | $ | 283,996 | 100.0 | % | ||||||||
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| (1) | Comprised of our investment in the subordinated notes of Saratoga CLO and equity interests. |
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The CMR distribution of Saratoga CLO investments at May 31, 2016 and February 29, 2016 was as follows:
Portfolio CMR distribution
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
Color Score | Investments at Fair Value | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | ||||||||||||
| ($ in thousands) | ||||||||||||||||
Green | $ | 262,409 | 88.6 | % | $ | 251,570 | 88.3 | % | ||||||||
Yellow | 31,334 | 10.6 | 31,752 | 11.1 | ||||||||||||
Red | 2,408 | 0.8 | 1,331 | 0.5 | ||||||||||||
N/A(1) | 67 | 0.0 | 192 | 0.1 | ||||||||||||
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Total | $ | 296,218 | 100.0 | % | $ | 284,845 | 100.0 | % | ||||||||
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| (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 May 31, 2016 and February 29, 2016:
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
| Investments at Fair Value | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | |||||||||||||
| ($ in thousands) | ||||||||||||||||
Business Services | $ | 101,685 | 38.5 | % | $ | 105,976 | 37.3 | % | ||||||||
Consumer Services | 43,336 | 16.4 | 43,109 | 15.2 | ||||||||||||
Healthcare Services | 37,305 | 14.1 | 36,905 | 13.0 | ||||||||||||
Media | 15,776 | 6.0 | 16,574 | 5.8 | ||||||||||||
Structured Finance (1) | 12,452 | 4.7 | 12,828 | 4.5 | ||||||||||||
Education | 10,793 | 4.1 | 10,694 | 3.8 | ||||||||||||
Real Estate | 9,417 | 3.6 | 9,537 | 3.4 | ||||||||||||
Food and Beverage | 9,354 | 3.5 | 9,131 | 3.2 | ||||||||||||
Metals | 9,083 | 3.4 | 10,526 | 3.7 | ||||||||||||
Automotive Aftermarket | 8,781 | 3.3 | 14,707 | 5.2 | ||||||||||||
Building Products | 5,585 | 2.1 | 6,367 | 2.2 | ||||||||||||
Consumer Products | 860 | 0.3 | 7,642 | 2.7 | ||||||||||||
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| |||||||||
Total | $ | 264,427 | 100.0 | % | $ | 283,996 | 100.0 | % | ||||||||
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| |||||||||
| (1) | Comprised of our investment in the subordinated notes of Saratoga CLO. |
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The following table shows Saratoga CLO's portfolio composition by industry grouping at fair value at May 31, 2016 and February 29, 2016:
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
| Investments at Fair Value | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | |||||||||||||
| ($ in thousands) | ||||||||||||||||
Services: Business | $ | 41,080 | 14.0 | % | $ | 37,308 | 13.1 | % | ||||||||
Healthcare & Pharmaceuticals | 30,703 | 10.5 | 28,339 | 9.9 | ||||||||||||
Chemicals/Plastics | 26,306 | 8.9 | 24,714 | 8.7 | ||||||||||||
Retailers (Except Food and Drugs) | 16,502 | 5.6 | 18,898 | 6.6 | ||||||||||||
High Tech Industries | 14,306 | 4.8 | 9,451 | 3.3 | ||||||||||||
Aerospace and Defense | 12,917 | 4.4 | 12,580 | 4.4 | ||||||||||||
Banking, Finance, Insurance & Real Estate | 12,286 | 4.1 | 10,175 | 3.6 | ||||||||||||
Telecommunications | 11,891 | 4.0 | 11,364 | 4.0 | ||||||||||||
Industrial Equipment | 11,691 | 3.9 | 11,777 | 4.1 | ||||||||||||
Conglomerate | 11,630 | 3.9 | 11,770 | 4.1 | ||||||||||||
Electronics/Electric | 8,911 | 3.0 | 9,342 | 3.3 | ||||||||||||
Financial Intermediaries | 8,862 | 3.0 | 13,559 | 4.8 | ||||||||||||
Leisure Goods/Activities/Movies | 8,299 | 2.8 | 8,009 | 2.8 | ||||||||||||
Automotive | 7,867 | 2.7 | 5,470 | 1.9 | ||||||||||||
Utilities | 7,196 | 2.4 | 6,975 | 2.4 | ||||||||||||
Technology | 7,026 | 2.4 | 7,774 | 2.7 | ||||||||||||
Food Services | 5,942 | 2.0 | 5,944 | 2.1 | ||||||||||||
Publishing | 5,701 | 1.9 | 3,029 | 1.1 | ||||||||||||
Media | 5,417 | 1.8 | 4,768 | 1.7 | ||||||||||||
Insurance | 5,040 | 1.7 | 4,712 | 1.7 | ||||||||||||
Containers/Glass Products | 4,283 | 1.4 | 4,168 | 1.5 | ||||||||||||
Lodging and Casinos | 4,241 | 1.4 | 4,958 | 1.8 | ||||||||||||
Food Products | 3,146 | 1.1 | 5,694 | 2.0 | ||||||||||||
Drugs | 2,973 | 1.0 | 2,873 | 1.0 | ||||||||||||
Food/Drug Retailers | 2,797 | 0.9 | 2,737 | 1.0 | ||||||||||||
Brokers/Dealers/Investment Houses | 2,692 | 0.9 | 2,618 | 0.9 | ||||||||||||
Hotel, Gaming and Leisure | 2,678 | 0.9 | 1,917 | 0.7 | ||||||||||||
Cable and Satellite Television | 2,629 | 0.9 | 3,557 | 1.2 | ||||||||||||
Oil & Gas | 2,426 | 0.8 | 2,273 | 0.8 | ||||||||||||
Construction & Building | 1,969 | 0.7 | 2,869 | 1.0 | ||||||||||||
Nonferrous Metals/Minerals | 1,575 | 0.5 | 1,505 | 0.5 | ||||||||||||
Broadcast Radio and Television | 1,325 | 0.4 | 1,258 | 0.4 | ||||||||||||
Capital Equipment | 1,005 | 0.3 | - | - | ||||||||||||
Beverage, Food & Tobacco | 998 | 0.3 | 984 | 0.3 | ||||||||||||
Environmental Industries | 910 | 0.3 | 732 | 0.3 | ||||||||||||
Services: Consumer | 748 | 0.3 | 496 | 0.2 | ||||||||||||
Building and Development | 250 | 0.1 | 248 | 0.1 | ||||||||||||
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Total | $ | 296,218 | 100.0 | % | $ | 284,845 | 100.0 | % | ||||||||
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Portfolio composition by geographic location at fair value
The following table shows our portfolio composition by geographic location at fair value at May 31, 2016 and February 29, 2016. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
| Investments at Fair Value | Percentage of Total Portfolio | Investments at Fair Value | Percentage of Total Portfolio | |||||||||||||
| ($ in thousands) | ||||||||||||||||
Southeast | $ | 88,795 | 33.6 | % | $ | 108,661 | 38.3 | % | ||||||||
Midwest | 57,786 | 21.8 | 57,553 | 20.3 | ||||||||||||
Northeast | 52,375 | 19.8 | 52,875 | 18.6 | ||||||||||||
Southwest | 25,635 | 9.7 | 25,535 | 9.0 | ||||||||||||
West | 25,384 | 9.6 | 24,544 | 8.6 | ||||||||||||
Other(1) | 12,452 | 4.7 | 12,828 | 4.5 | ||||||||||||
International | 2,000 | 0.8 | 2,000 | 0.7 | ||||||||||||
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| |||||||||
Total | $ | 264,427 | 100.0 | % | $ | 283,996 | 100.0 | % | ||||||||
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| (1) | Comprised of our investment in the subordinated notes of Saratoga CLO. |
Results of operations
Operating results for the three months ended May 31, 2016 and May 31, 2015 were as follows:
| For the three months ended | ||||||||
| May 31, 2016 | May 31, 2015 | |||||||
| ($ in thousands) | ||||||||
Total investment income | $ | 7,908 | $ | 7,561 | ||||
Total expenses | 5,369 | 5,790 | ||||||
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| |||||
Net investment income | 2,539 | 1,771 | ||||||
Net realized gains from investments | 6,103 | 73 | ||||||
Net unrealized appreciation (depreciation) on investments | (5,354 | ) | 5,541 | |||||
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Net increase in net assets resulting from operations | $ | 3,288 | $ | 7,385 | ||||
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Investment income
The composition of our investment income for the three months ended May 31, 2016 and May 31, 2015 were as follows:
| For the three months ended | ||||||||
| May 31, 2016 | May 31, 2015 | |||||||
| ($ in thousands) | ||||||||
Interest from investments | $ | 7,281 | $ | 6,931 | ||||
Management fee income | 374 | 379 | ||||||
Interest from cash and cash equivalents and other income | 253 | 251 | ||||||
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Total | $ | 7,908 | $ | 7,561 | ||||
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For the three months ended May 31, 2016, total investment income increased $0.3 million, or 4.6% compared to the three months ended May 31, 2015. Interest income from investments increased $0.4 million, or 5.1%, to $7.3 million for the three months
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ended May 31, 2016 from $6.9 million for the three months ended May 31, 2015. This reflects an increase of 0.6% in total investments to $264.4 million at May 31, 2016 from $262.7 million at May 31, 2015, offset by the weighted average current coupon reducing from 11.9% to 11.5%.
For the three months ended May 31, 2016 and May 31, 2015, total PIK income was $0.1 million and $0.7 million, respectively.
Operating expenses
The composition of our operating expenses for the three months ended May 31, 2016 and May 31, 2015 were as follows:
Operating Expenses
| For the three months ended | ||||||||
| May 31, 2016 | May 31, 2015 | |||||||
| ($ in thousands) | ||||||||
Interest and debt financing expenses | $ | 2,368 | $ | 1,964 | ||||
Base management fees | 1,227 | 1,124 | ||||||
Professional fees | 359 | 333 | ||||||
Incentive management fees | 728 | 1,798 | ||||||
Administrator expenses | 325 | 250 | ||||||
Insurance | 71 | 87 | ||||||
Directors fees and expenses | 66 | 51 | ||||||
General and administrative and other expenses | 225 | 183 | ||||||
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| |||||
Total expenses | $ | 5,369 | $ | 5,790 | ||||
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For the three months ended May 31, 2016, total operating expenses decreased $0.4 million, or 7.3% compared to the three months ended May 31, 2015.
For the three months ended May 31, 2016 and May 31, 2015, the increase in interest and debt financing expenses is primarily attributable to an increase in outstanding debt as compared to the prior year, with increased levels of outstanding SBA debentures, as well as additional notes being issued. Although the Credit Facility decreased from $11.8 million outstanding at May 31, 2015 to $0.0 million at May 31, 2016, this was more than offset by our SBA debentures increasing from $79.0 million to $103.7 million, and the notes payable increasing from $48.3 million outstanding to $61.8 million outstanding for these same periods. For the three months ended May 31, 2016, the weighted average interest rate on our outstanding indebtedness was 5.36% compared to 4.88% for the three months ended May 31, 2015. This increase was primarily driven by an increase in notes payable that carry a higher interest rate that offsets the increase in SBA debentures that carry a lower interest rate and now makes up a higher proportion of our overall debt. SBA debentures increased from 56.8% of overall debt as of May 31, 2015 to 62.7% as of May 31, 2016.
For the three months ended May 31, 2016, base management fees increased $0.1 million, or 9.2% compared to the three months ended May 31, 2015. The increase in base management fees results from the increase in the average value of our total assets, less cash and cash equivalents, from $254.8 million as of May 31, 2015 to $278.2 million as of May 31, 2016.
For the three months ended May 31, 2016, professional fees increased $0.03 million, or 7.8% compared to the three months ended May 31, 2015.
For the three months ended May 31, 2016, incentive management fees decreased $1.1 million, or 59.5% compared to the three months ended May 31, 2015. The first part of the incentive management fees decreased this year from $0.71 million to $0.65 million as relatively unchanged total assets but higher net assets has led to decreased net investment income above the hurdle rate pursuant to the investment advisory and management agreement. However, for the three months ended May 31, 2016, incentive management fees in total decreased $1.1 million as the incentive management fees related to capital gains decreased from $1.1 million to $0.1 million compared to the three months ended May 31, 2015, reflecting the $5.6 million net gain on investments for the three months ended May 31, 2015.
As discussed above, the increase in interest and debt financing expenses for the three months ended May 31, 2016 as compared to the three months ended May 31, 2015 is primarily attributable to an increase in the amount of outstanding debt. For the three
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months ended May 31, 2016, there were no outstanding borrowings under the Credit Facility. For the three months ended May 31, 2015, the weighted average interest rate on the outstanding borrowings under the Credit Facility was 6.00%. For the three months ended May 31, 2016 and May 31, 2015, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.09% and 3.15%, respectively.
Net realized gains/(losses) on sales of investments
For the three months ended May 31, 2016, the Company had $20.6 million of sales, repayments, exits or restructurings resulting in $6.1 million of net realized gains. The most significant realized gains during the three months ended May 31, 2016 were as follows (dollars in thousands):
Three Months ended May 31, 2016
Issuer | Asset Type | Gross Proceeds | Cost | Net Realized Gain | ||||||||||
Take 5 Oil Change, L.L.C | Common Stock | $ | 6,457 | $ | 481 | $ | 5,976 | |||||||
Advanced Air & Heat of Florida, LLC | First Lien Term Loan | 7,100 | 7,037 | 63 | ||||||||||
The $6.0 million of realized gain on our investment in Take 5 Oil Change, L.L.C. was due to the completion of a sales transaction with a strategic acquirer.
For the three months ended May 31, 2015, the Company had $7.3 million of sales, repayments, exits or restructurings resulting in $0.1 million of net realized gains. The most significant realized gains during the three months ended May 31, 2015 were as follows (dollars in thousands):
Three Months ended May 31, 2015
Issuer | Asset Type | Gross Proceeds | Cost | Net Realized Gain | ||||||||||
PrePaid Legal Services, Inc. | First Lien Term Loan | $ | 2,091 | $ | 2,065 | $ | 26 | |||||||
Expedited Travel, LLC | First Lien Term Loan | 732 | 722 | 10 | ||||||||||
Net unrealized appreciation/depreciation on investments
For the three months ended May 31, 2016, our investments had net unrealized depreciation of $5.4 million versus net unrealized appreciation of $5.5 million for the three months ended May 31, 2015. The most significant cumulative changes in unrealized appreciation and depreciation for the three months ended May 31, 2016, were the following (dollars in thousands):
Three Months ended May 31, 2016
Issuer | Asset Type | Cost | Fair Value | Total Unrealized Appreciation/ (Depreciation) | YTD Change in Unrealized Appreciation/ (Depreciation) | |||||||||||||
Take 5 Oil Change, L.L.C | Common Stock | $ | - | $ | - | $ | - | $ | (5,755 | ) | ||||||||
Elyria Foundry Company, L.L.C. | Common Stock | 9,218 | 583 | (8,635 | ) | (1,443 | ) | |||||||||||
Prime Security Services, LLC. | Second Lien Term Loan | 11,835 | 12,092 | 257 | 1,106 | |||||||||||||
The $5.8 million of change in unrealized depreciation in our investment in Take 5 Oil Change, L.L.C. was driven by the completion of a sales transaction with a strategic acquirer. In realizing this gain as a result of the sale, unrealized appreciation was adjusted to zero, which resulted in a $5.8 million change in unrealized depreciation for the quarter.
The $1.4 million of change in unrealized depreciation in our investment in Elyria Foundry Company, L.L.C. was driven by a continued decline in oil and gas end markets since quarter end, negatively impacting the company's performance.
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The $1.1 million of change in unrealized appreciation in our investment in Prime Security Services, LLC was driven by a narrowing of credit spreads since quarter end.
The most significant cumulative changes in unrealized appreciation and depreciation for the three months ended May 31, 2015, were the following (dollars in thousands):
Three Months ended May 31, 2015
Issuer | Asset Type | Cost | Fair Value | Total Unrealized Appreciation/ (Depreciation) | YTD Change in Unrealized Appreciation/ (Depreciation) | |||||||||||||
Saratoga CLO | Other/Structured Finance Securities | $ | 15,173 | $ | 16,860 | $ | 1,687 | $ | 609 | |||||||||
Network Communications, Inc. | Common Stock | - | 3,206 | 3,206 | 2,906 | |||||||||||||
Network Communications, Inc. | Unsecured Notes | 2,868 | 3,214 | 346 | 1,297 | |||||||||||||
Smile Brands Group, Inc. | Syndicated Loan | 4,366 | 3,745 | (621 | ) | (406 | ) | |||||||||||
The $2.9 million and $1.3 million of unrealized appreciation in our investments in Network Communications, Inc. is due to the sale of the company to a third party and reflects the realization value pursuant to that transaction.
The $0.6 million unrealized appreciation in our investment in the Saratoga CLO was primarily due to a decline in the discount rate based on prevailing market conditions.
Changes in net assets resulting from operations
For the three months ended May 31, 2016 and May 31, 2015, we recorded a net increase in net assets resulting from operations of $3.3 million and $7.4 million, respectively. Based on 5,737,496 weighted average common shares outstanding as of May 31, 2016, our per share net increase in net assets resulting from operations was $0.57 for the three months ended May 31, 2016. This compares to a per share net increase in net assets resulting from operations of $1.36 for the three months ended May 31, 2015 (based on 5,422,491 weighted average common shares outstanding as of May 31, 2015).
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 SBA debenture drawdowns and future equity offerings, including our dividend reinvestment plan, 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 Subchapter M of the Code. In satisfying this distribution requirement, we have in the past relied on 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% 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%. This requirement limits the amount that we may borrow. Our asset coverage ratio, as defined in the 1940 Act, was 305.7% as of May 31, 2016 and 302.5% as of February 29, 2016. 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.
45
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 (the "Credit Facility") on June 30, 2010.
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 (b) 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 2.00%, plus an applicable margin of 5.50%. At the Company's option, funds may be borrowed based on an alternative base rate, which in no event will be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%. 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%. |
| • | 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%. |
46
| • | 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%; |
| • | 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 $5,000,000 at any time prior to the third anniversary of the closing date; |
47
| • | 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 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 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%. |
As of May 31, 2016, we had no outstanding borrowings under the Credit Facility and $103.7 million SBA-guaranteed debentures outstanding (which are discussed below). As of February 29, 2016, we had no outstanding borrowings under the Credit Facility and $103.7 million SBA-guaranteed debentures outstanding. Our borrowing base under the Credit Facility at May 31, 2016 and February 29, 2016 was $20.4 million and $21.8 million, respectively.
Our asset coverage ratio, as defined in the 1940 Act, was 305.7% as of May 31, 2016 and 302.5% as of February 29, 2016.
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SBA-guaranteed debentures
In addition, we, through a wholly-owned subsidiary, sought and obtained a license 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. 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 license allows our SBIC subsidiary 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 10-year maturities.
SBA regulations currently limit 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. As of May 31, 2016, our SBIC subsidiary had $75.0 million in regulatory capital and $103.7 million SBA-guaranteed debentures outstanding.
We received exemptive relief from the Securities and Exchange Commission to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities in the 200% asset coverage test under the 1940 Act. This allows us increased flexibility under the 200% 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 2, 2015, the SBA issued a "green light" or "go forth" letter inviting us to continue our application process to obtain a license to form and operate its second SBIC subsidiary. If approved, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and we have received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.
Unsecured notes
In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% unsecured notes due 2020 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 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 notes mature on May 31, 2020 and may be redeemed in whole or in part at any time or from time to time at our option on or after May 31, 2016. In connection with the issuance of the 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. 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% 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 Subchapter M of the Internal Revenue Code of 1986. 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% 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 Notes are listed on the NYSE under the trading symbol "SAQ" with a par value of $25.00 per share.
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 Notes through an ATM offering. As of May 31, 2016, we sold 539,725 bonds with a principal of $13,493,125 at an average price of $25.31 for aggregate net proceeds of $13,385,766 (net of transaction costs).
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At May 31, 2016 and February 29, 2016, the fair value of investments, cash and cash equivalents and cash and cash equivalents, reserve accounts were as follows:
| At May 31, 2016 | At February 29, 2016 | |||||||||||||||
| Fair Value | Percent of Total | Fair Value | Percent of Total | |||||||||||||
| ($ in thousands) | ||||||||||||||||
Cash and cash equivalents | $ | 1,309 | 0.4 | % | $ | 2,440 | 0.8 | % | ||||||||
Cash and cash equivalents, reserve accounts | 26,164 | 9.0 | 4,595 | 1.6 | ||||||||||||
Syndicated loans | 13,042 | 4.5 | 11,868 | 4.1 | ||||||||||||
First lien term loans | 131,492 | 45.0 | 144,643 | 49.7 | ||||||||||||
Second lien term loans | 89,519 | 30.7 | 88,178 | 30.3 | ||||||||||||
Structured finance securities | 12,452 | 4.3 | 12,828 | 4.4 | ||||||||||||
Equity interests | 17,922 | 6.1 | 26,479 | 9.1 | ||||||||||||
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Total | $ | 291,900 | 100.0 | % | $ | 291,031 | 100.0 | % | ||||||||
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On September 24, 2014, we announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of our common stock at prices below our NAV as reported in its then most recently published consolidated financial statements. As of May 31, 2016, we purchased 70,914 shares of common stock, at the average price of $15.08 for approximately $1.1 million pursuant to this repurchase plan. On October 7, 2015, our board of directors extended the open market share repurchase plan for another year and increased the number of shares we are permitted to repurchase at prices below our NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of our common stock.
On July 7, 2016, our board of directors declared a dividend of $0.43 per share payable for the fiscal quarter ended May 31, 2016 to all stockholders of record at the close of business on July 29, 2016, with a payment date on August 9, 2016. Shareholders will have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP.
On March 31, 2016, our board of directors declared a dividend of $0.41 per share payable on April 27, 2016, to common stockholders of record on April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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 payable on February 29, 2016, to common stockholders of record on February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant our DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,764 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 payable on November 30, 2015, to common stockholders of record on November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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 payable on August 31, 2015, to common stockholders of record on August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
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On May 14, 2015, our board of directors declared a special dividend of $1.00 per share payable on June 5, 2015, to common stockholders of record on May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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 payable on May 29, 2015, to common stockholders of record on May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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 payable on February 27, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant 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.
Also on September 24, 2014, our board of directors declared a dividend of $0.18 per share payable on November 28, 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 payable on December 27, 2013, to common stockholders of record on 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 payable on December 31, 2012, to common stockholders of record on 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.
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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 payable on December 30, 2011, to common stockholders of record on 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 payable on December 31, 2009, to common stockholders of record on 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 8,648,725 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 $1.5099 per share, which equaled the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.
We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.
Contractual obligations
The following table shows our payment obligations for repayment of debt and other contractual obligations at May 31, 2016:
| Payment Due by Period | ||||||||||||||||||||
| Total | Less Than 1 Year | 1 -3 Years | 3 -5 Years | More Than 5 Years | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
Long-Term Debt Obligations | $ | 165,453 | $ | - | $ | - | $ | 61,793 | $ | 103,660 | ||||||||||
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Off-balance sheet arrangements
The Company's off-balance sheet arrangements consisted of $2.0 million and $2.0 million of unfunded commitments to provide debt financing to its portfolio companies or to fund limited partnership interests as of May 31, 2016 and February 29, 2016, respectively. 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 statement of assets and liabilities and are not reflected in the Company's consolidated statements of assets and liabilities.
A summary of the composition of the unfunded commitments as of May 31, 2016 and February 29, 2016 is shown in the table below (dollars in thousands):
| As of | ||||||||
| May 31, 2016 | February 29, 2016 | |||||||
Avionte Holdings, LLC | $ | 1,000 | $ | 1,000 | ||||
Identity Automation | 1,000 | 1,000 | ||||||
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Total | $ | 2,000 | $ | 2,000 | ||||
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risks have not changed materially from the risks reported in our Form 10-K for the year ended February 29, 2016.
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. |
| (b) | There have been no changes in our internal control over financial reporting that occurred during the quarter ended May 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On August 31, 2012, a complaint was filed in the United States Bankruptcy Court for the Southern District of New York by GSC Acquisition Holdings, LLC against us to recover, among other things, approximately $2.6 million for the benefit of the estates and the general unsecured creditors of GSC Group, Inc. and its affiliates, including the Company's former investment adviser, GSCP (NJ), L.P. The complaint alleges that the former investment adviser made a constructively fraudulent transfer of $2.6 million in deferred incentive fees by waiving them in connection with the termination of the Management Agreement with us, and that the termination of the Management Agreement was itself a fraudulent transfer. These transfers, the complaint alleges, were made without receipt of reasonably equivalent value and while the former investment adviser was insolvent. The complaint has not yet been served, and the plaintiff's motion for authority to prosecute the case on behalf of the estates was taken under advisement by the court on October 1, 2012. We opposed that motion. We believe that the claims in this lawsuit are without merit and, if the plaintiff is authorized to proceed, intend to vigorously defend against this action.
Except as discussed above, neither we nor our wholly-owned subsidiaries, Saratoga Investment Funding LLC and Saratoga Investment Corp. SBIC 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 annual report on Form 10-K for the year ended February 29, 2016, which could materially affect our business, financial condition and/or operating results. 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
Not applicable.
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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 Number | Description of Document | |
| 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) | |
| * | Submitted 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: July 13, 2016 | 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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