10-Q
1
d944424d10q.htm
FORM 10-Q
Form 10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended May 31, 2020
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No. 814-00732
SARATOGA INVESTMENT CORP.
(Exact name of registrant as specified in its charter)
Maryland
20-8700615
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
535 Madison Avenue
New York, New York 10022
(Address of principal executive offices)
(212) 906-7800
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.001 per share
SAR
The New York Stock Exchange
6.25% Notes due 2025
SAF
The New York Stock Exchange
7.25% Notes due 2025
SAK
The New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days: Yes ☒ No ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☐ No ☐
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated
filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes ☐ No ☒
The number of outstanding common shares
of the registrant as of July 8, 2020 was 11,217,545.
Table of Contents
TABLE OF CONTENTS
Page
PART I.
FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements
3
Consolidated Statements of Assets and Liabilities as of May 31, 2020 (unaudited) and February 29, 2020
3
Consolidated Statements of Operations for the three months ended May 31, 2020 (unaudited) and May 31, 2019 (unaudited)
4
Consolidated Statements of Changes in Net Assets for three months ended May 31, 2020 (unaudited) and May 31, 2019 (unaudited)
5
Consolidated Statements of Cash Flows for the three months ended May 31, 2020 (unaudited) and May 31, 2019 (unaudited)
6
Consolidated Schedules of Investments as of May 31, 2020 (unaudited) and February 29, 2020
7
Notes to Consolidated Financial Statements as of May 31, 2020 (unaudited)
11
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
49
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
76
Item 4.
Controls and Procedures
77
PART II.
OTHER INFORMATION
78
Item 1.
Legal Proceedings
78
Item 1A.
Risk Factors
78
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
78
Item 3.
Defaults Upon Senior Securities
78
Item 4.
Mine Safety Disclosures
78
Item 5.
Other Information
78
Item 6.
Exhibits
79
Signatures
81
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities
May 31, 2020
February 29, 2020
(unaudited)
ASSETS
Investments at fair value
Non-control/Non-affiliate investments (amortized cost of $442,916,804 and $418,006,725,
respectively)
$
420,930,113
$
420,442,928
Affiliate investments (amortized cost of $25,998,569 and $23,998,917, respectively)
18,041,254
18,485,854
Control investments (amortized cost of $46,649,515 and $44,293,619, respectively)
43,975,865
46,703,192
Total investments at fair value (amortized cost of $515,564,888 and $486,299,261,
respectively)
482,947,232
485,631,974
Cash and cash equivalents
12,842,608
24,598,905
Cash and cash equivalents, reserve accounts
12,952,393
14,851,447
Interest receivable (net of reserve of $1,500,123 and $1,238,049, respectively)
4,308,981
4,810,456
Management fee receivable
285,588
272,207
Other assets
660,775
701,007
Total assets
$
513,997,577
$
530,865,996
LIABILITIES
Revolving credit facility
$
$
Deferred debt financing costs, revolving credit facility
(489,361
)
(512,628
)
SBA debentures payable
170,000,000
150,000,000
Deferred debt financing costs, SBA debentures payable
(2,892,760
)
(2,561,495
)
2025 Notes payable
60,000,000
60,000,000
Deferred debt financing costs, 2025 notes payable
(1,953,054
)
(2,046,735
)
Base management and incentive fees payable
3,552,457
15,800,097
Deferred tax liability
1,070,678
1,347,363
Accounts payable and accrued expenses
1,580,913
1,713,157
Interest and debt fees payable
994,956
2,234,042
Directors fees payable
63,000
61,500
Due to manager
439,730
543,842
Total liabilities
232,366,559
226,579,143
Commitments and contingencies (See Note 8)
NET ASSETS
Common stock, par value $0.001, 100,000,000 common shares authorized, 11,217,545 and 11,217,545
common shares issued and outstanding, respectively
11,218
11,218
Capital in excess of par value
289,476,991
289,476,991
Total distributable earnings (loss)
(7,857,191
)
14,798,644
Total net assets
281,631,018
304,286,853
Total liabilities and net assets
$
513,997,577
$
530,865,996
NET ASSET VALUE PER SHARE
$
25.11
$
27.13
See accompanying notes to
consolidated financial statements.
3
Table of Contents
Saratoga Investment Corp.
Consolidated Statements of Operations
(unaudited)
For the three months ended
May 31, 2020
May 31, 2019
INVESTMENT INCOME
Interest from investments
Interest income:
Non-control/Non-affiliate investments
$
9,955,562
$
8,527,740
Affiliate investments
398,370
249,325
Control investments
1,133,584
1,648,146
Payment-in-kind interest income:
Non-control/Non-affiliate investments
581,946
151,897
Affiliate investments
46,223
40,150
Control investments
34,782
985,869
Total interest from investments
12,150,467
11,603,127
Interest from cash and cash equivalents
11,796
51,359
Management fee income
634,572
629,516
Structuring and advisory fee income*
313,306
316,375
Other income*
187,000
150,807
Total investment income
13,297,141
12,751,184
OPERATING EXPENSES
Interest and debt financing expenses
2,563,876
3,864,576
Base management fees
2,160,528
1,812,169
Incentive management fees expense (benefit)
(1,858,310
)
2,113,169
Professional fees
386,888
395,126
Administrator expenses
556,250
500,000
Insurance
67,726
64,619
Directors fees and expenses
60,000
60,000
General & administrative
350,814
258,601
Income tax expense (benefit)
(8,945
)
2,136
Total operating expenses
4,278,827
9,070,396
NET INVESTMENT INCOME
9,018,314
3,680,788
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from investments:
Non-control/Non-affiliate investments
8,480
Net realized gain (loss) from investments
8,480
Net change in unrealized appreciation (depreciation) on investments:
Non-control/Non-affiliate investments
(24,422,894
)
2,393,191
Affiliate investments
(2,444,252
)
169,944
Control investments
(5,083,223
)
1,425,995
Net change in unrealized appreciation (depreciation) on investments
(31,950,369
)
3,989,130
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
267,740
(20,930
)
Net realized and unrealized gain (loss) on investments
(31,674,149
)
3,968,200
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$
(22,655,835
)
$
7,648,988
WEIGHTED AVERAGEBASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE
$
(2.02
)
$
0.99
WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBASIC AND DILUTED
11,217,545
7,746,187
*
Certain prior period amounts have been reclassified to conform to current period presentation.
See accompanying notes to
consolidated financial statements.
4
Table of Contents
Saratoga Investment Corp.
Consolidated Statements of Changes in Net Assets
(unaudited)
For the three months ended
May 31, 2020
May 31, 2019
INCREASE (DECREASE) FROM OPERATIONS:
Net investment income
$
9,018,314
$
3,680,788
Net realized gain from investments
8,480
Net change in unrealized appreciation (depreciation) on investments
(31,950,369
)
3,989,130
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
267,740
(20,930
)
Net increase (decrease) in net assets resulting from operations
(22,655,835
)
7,648,988
DECREASE FROM SHAREHOLDER DISTRIBUTIONS:
Total distributions to shareholders
(4,176,132
)
Net decrease in net assets from shareholder distributions
(4,176,132
)
CAPITAL SHARE TRANSACTIONS:
Proceeds from issuance of common stock
1,772,634
Stock dividend distribution
667,389
Offering costs
(4,365
)
Net increase in net assets from capital share transactions
2,435,658
Total increase (decrease) in net assets
(22,655,835
)
5,908,514
Net assets at beginning of period
304,286,853
180,875,187
Net assets at end of period
$
281,631,018
$
186,783,701
See accompanying notes to consolidated financial statements.
5
Table of Contents
Saratoga Investment Corp.
Consolidated Statements of Cash Flows
(unaudited)
For the three months ended
May 31, 2020
May 31, 2019
Operating activities
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
$
(22,655,835
)
$
7,648,988
ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Payment-in-kind and other adjustments to cost
703,636
(2,672,834
)
Net accretion of discount on investments
(312,430
)
(318,260
)
Amortization of deferred debt financing costs
272,683
341,688
Income tax expense (benefit)
(8,945
)
2,136
Net realized (gain) loss from investments
(8,480
)
Net change in unrealized (appreciation) depreciation on investments
31,950,369
(3,989,130
)
Net change in provision for deferred taxes on unrealized appreciation (depreciation) on
investments
(267,740
)
20,930
Proceeds from sales and repayments of investments
9,350,378
26,917,351
Purchases of investments
(38,998,731
)
(27,368,748
)
(Increase) decrease in operating assets:
Interest receivable
501,475
(68,898
)
Due from affiliate
430,550
Management and incentive fee receivable
(13,381
)
262,266
Other assets
40,232
45,304
Increase (decrease) in operating liabilities:
Base management and incentive fees payable
(12,247,640
)
837,285
Accounts payable and accrued expenses
(132,244
)
(184,742
)
Interest and debt fees payable
(1,239,086
)
(1,246,177
)
Directors fees payable
1,500
1,500
Due to manager
(104,112
)
22,661
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
(33,168,351
)
681,870
Financing activities
Borrowings on debt
20,000,000
Payments of deferred debt financing costs
(487,000
)
(39,689
)
Proceeds from issuance of common stock
1,772,634
Payments of cash dividends
(3,508,743
)
Payments of offering costs
(4,219
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
19,513,000
(1,780,017
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE
ACCOUNTS
(13,655,351
)
(1,098,147
)
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, BEGINNING OF
PERIOD
39,450,352
62,094,394
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, END OF PERIOD
$
25,795,001
$
60,996,247
Supplemental information:
Interest paid during the period
$
3,530,278
$
4,769,065
Cash paid for taxes
1,006
5,761
Supplemental non-cash information:
Payment-in-kind interest income
(703,636
)
2,672,834
Net accretion of discount on investments
312,430
318,260
Amortization of deferred debt financing costs
272,683
341,688
Stock dividend distribution
667,389
See accompanying notes to consolidated financial statements.
6
Table of Contents
Saratoga Investment Corp.
Consolidated Schedule of Investments
May 31, 2020
(unaudited)
Company
Industry
Investment Interest Rate/
Maturity
Original
Acquisition
Date
Principal/
Number of
Shares
Cost
Fair Value
(c)
% of
Net Assets
Non-control/Non-affiliate investments149.5% (b)
Apex Holdings Software Technologies, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.00% Cash, 9/21/2021
9/21/2016
$
18,000,000
$
17,958,108
$
17,220,600
6.1
%
Apex Holdings Software Technologies, LLC
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+8.00%),
9.00% Cash, 9/21/2021
10/1/2018
$
1,500,000
1,493,070
1,435,050
0.5
%
ArbiterSports, LLC (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+6.50%),
8.25% Cash, 2/21/2025
2/21/2020
$
26,000,000
25,776,666
24,195,600
8.6
%
Arbiter Sports, LLC (d)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+6.50%),
8.25% Cash, 2/21/2025
2/21/2020
$
1,000,000
1,000,000
930,600
0.3
%
Avionte Holdings, LLC (h)
Business Services
Class A Units
1/8/2014
100,000
100,000
652,755
0.2
%
CLEO Communications Holding, LLC (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.00% Cash/2.00% PIK, 3/31/2022
3/31/2017
$
13,862,297
13,845,633
13,748,626
4.9
%
CLEO Communications Holding, LLC (d)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+8.00%),
9.00% Cash/2.00% PIK, 3/31/2022
3/31/2017
$
20,144,170
20,036,042
19,978,987
7.1
%
CoConstruct, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+7.50%),
10.00% Cash, 7/5/2024
7/5/2019
$
4,200,000
4,163,653
4,082,400
1.4
%
CoConstruct, LLC
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.50%),
10.00% Cash, 7/5/2024
7/5/2019
$
3,500,000
3,467,047
3,402,000
1.2
%
Davisware, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
9.00% Cash, 7/31/2024
9/6/2019
$
3,000,000
2,973,420
2,844,300
1.0
%
Davisware, LLC (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
9.00% Cash, 7/31/2024
9/6/2019
$
977,790
968,436
873,990
0.3
%
Destiny Solutions Inc. (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+7.25%),
9.25% Cash, 10/23/2024
5/16/2018
$
36,000,000
35,709,234
34,311,600
12.2
%
Destiny Solutions Inc. (h), (i)
Business Services
Limited Partner Interests
5/16/2018
2,342
2,468,464
2,765,313
1.0
%
Emily Street Enterprises, L.L.C.
Business Services
Senior Secured Note
(3M USD LIBOR+8.50%),
10.00% Cash, 12/31/2020
12/28/2012
$
3,300,000
3,299,985
3,230,700
1.1
%
Emily Street Enterprises, L.L.C. (h)
Business Services
Warrant Membership Interests
Expires
12/28/2022
12/28/2012
49,318
400,000
307,450
0.1
%
Erwin, Inc. (d)
Business Services
Second Lien Term Loan
(3M USD LIBOR+11.50%),
12.50% Cash/1.00% PIK, 8/28/2021
2/29/2016
$
16,090,374
16,042,089
16,021,185
5.7
%
FMG Suite Holdings, LLC (d)
Business Services
Second Lien Term Loan
(1M USD LIBOR+8.00%),
9.00% Cash, 11/16/2023
5/16/2018
$
23,000,000
22,875,335
22,896,500
8.1
%
GDS Software Holdings, LLC (h)
Business Services
Common Stock Class A Units
8/23/2018
250,000
250,000
416,431
0.1
%
Identity Automation Systems (h)
Business Services
Common Stock Class A-2 Units
8/25/2014
232,616
232,616
697,848
0.2
%
Identity Automation Systems (h)
Business Services
Common Stock Class A-1 Units
3/6/2020
43,715
171,571
174,870
0.1
%
Identity Automation Systems (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+9.24%),
10.99% Cash, 5/8/2024
8/25/2014
$
17,378,750
17,338,112
16,673,173
5.9
%
inMotionNow, Inc.
Business Services
First Lien Term Loan
(3M USD LIBOR+7.25),
9.75% Cash, 5/15/2024
5/15/2019
$
12,200,000
12,100,642
11,403,340
4.0
%
inMotionNow, Inc. (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.25)
9.75% Cash, 5/15/2024
5/15/2019
$
2,000,000
1,982,887
1,869,400
0.7
%
Knowland Group, LLC
Business Services
Second Lien Term Loan
(3M USD LIBOR+8.00%),
10.00% Cash, 5/9/2024
11/9/2018
$
15,379,167
15,379,167
11,445,176
4.1
%
LogicMonitor, Inc.
Business Services
First Lien Term Loan
(3M USD LIBOR+5.00),
6.00% Cash, 5/17/2023
3/20/2020
$
18,000,000
17,872,544
17,305,200
6.1
%
National Waste Partners (d)
Business Services
Second Lien Term Loan
10.00% Cash,
2/13/2022
2/13/2017
$
9,000,000
8,965,278
8,805,600
3.1
%
Omatic Software, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.75% Cash, 5/29/2023
5/29/2018
$
5,500,000
5,463,118
5,358,650
2.0
%
Passageways, Inc.
Business Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
8.75% Cash, 7/5/2023
7/5/2018
$
5,000,000
4,963,510
4,849,500
1.8
%
Passageways, Inc. (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
8.75% Cash, 7/5/2023
1/3/2020
$
2,000,000
1,991,661
1,849,500
0.7
%
Passageways, Inc. (h)
Business Services
Series A Preferred Stock
7/5/2018
2,027,205
1,000,000
2,105,112
0.8
%
Sceptre Hospitality Resources, LLC
Business Services
First Lien Term Loan
(1M USD LIBOR+9.00%),
10.00% Cash, 4/27/2025
4/27/2020
$
3,000,000
2,970,794
2,970,000
1.1
%
Vector Controls Holding Co., LLC (d)
Business Services
First Lien Term Loan 10.50% (9.00% Cash/1.50% PIK), 3/6/2022
3/6/2013
$
7,849,846
7,849,770
7,649,675
2.7
%
Vector Controls Holding Co., LLC (d), (h)
Business Services
Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027
5/31/2015
343
2,289,966
0.8
%
Total Business Services
271,108,852
264,761,097
94.0
%
Targus Holdings, Inc. (d), (h)
Consumer Products
Common Stock
12/31/2009
210,456
1,589,630
409,172
0.1
%
Total Consumer Products
1,589,630
409,172
0.1
%
My Alarm Center, LLC (k)
Consumer Services
Preferred Equity Class A Units
8.00%
PIK
7/14/2017
2,227
2,357,879
0.0
%
My Alarm Center, LLC (h)
Consumer Services
Preferred Equity Class B Units
7/14/2017
1,797
1,796,880
0.0
%
My Alarm Center, LLC (h)
Consumer Services
Preferred Equity Class Z Units
9/12/2018
676
712,343
1,997,158
0.6
%
My Alarm Center, LLC (h)
Consumer Services
Common Stock
7/14/2017
96,224
0.0
%
Total Consumer Services
4,867,102
1,997,158
0.6
%
C2 Educational Systems (d)
Education
First Lien Term Loan
(3M USD LIBOR+7.00%),
8.50% Cash, 5/31/2020
5/31/2017
$
16,000,000
15,987,433
12,872,000
4.6
%
EMS LINQ, Inc.
Education
First Lien Term Loan
(1M USD LIBOR+8.50%),
9.75% Cash, 8/9/2024
8/9/2019
$
14,887,500
14,771,175
13,875,150
4.9
%
GoReact
Education
First Lien Term Loan
(3M USD LIBOR+7.50%),
9.50% Cash, 1/17/2025
1/17/2020
$
5,000,000
4,934,208
4,709,000
1.7
%
GoReact (j)
Education
Delayed Draw Term Loan
(3M USD LIBOR+7.50%),
9.50% Cash, 1/17/2025
1/17/2020
$
(116,400
)
0.0
%
Kev Software Inc. (a)
Education
First Lien Term Loan
(1M USD LIBOR+8.63%),
9.63% Cash, 9/13/2023
9/13/2018
$
21,178,171
21,046,716
20,210,328
7.2
%
Texas Teachers of Tomorrow, LLC (h), (i)
Education
Common Stock
12/2/2015
750,000
750,000
648,428
0.2
%
Texas Teachers of Tomorrow, LLC (d)
Education
First Lien Term Loan
(3M USD LIBOR+7.25%),
9.75% Cash, 6/28/2024
6/28/2019
$
18,945,824
18,782,577
17,871,596
6.3
%
Total Education
76,272,109
70,070,102
24.9
%
TMAC Acquisition Co., LLC (k)
Food and Beverage
Unsecured Term Loan
8.00% PIK,
9/01/2023
3/1/2018
$
2,261,017
2,261,017
1,848,422
0.7
%
Total Food and Beverage
2,261,017
1,848,422
0.7
%
Axiom Parent Holdings, LLC (h)
Healthcare Services
Common Stock Class A Units
6/19/2018
400,000
400,000
331,445
0.1
%
Axiom Purchaser, Inc. (d)
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+6.00%),
7.75% Cash, 6/19/2023
6/19/2018
$
10,000,000
9,940,487
9,488,000
3.4
%
Axiom Purchaser, Inc. (d)
Healthcare Services
Delayed Draw Term Loan
(3M USD LIBOR+6.00%),
7.75% Cash, 6/19/2023
6/19/2018
$
4,000,000
3,970,740
3,795,200
1.3
%
ComForCare Health Care
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+7.50%),
8.50% Cash, 1/31/2022
1/31/2017
$
15,000,000
14,936,996
14,737,500
5.2
%
HemaTerra Holding Company, LLC
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+6.75%),
9.25% Cash, 4/15/2024
4/15/2019
$
6,000,000
5,947,515
5,868,000
2.1
%
HemaTerra Holding Company, LLC (d), (j)
Healthcare Services
Delayed Draw Term Loan
(3M USD LIBOR+6.75%),
9.25% Cash, 4/15/2024
4/15/2019
$
12,000,000
11,896,667
11,692,000
4.2
%
TRC HemaTerra, LLC (h)
Healthcare Services
Class D Membership Interests
4/15/2019
2,000,000
2,000,000
2,289,018
0.8
%
Ohio Medical, LLC (h)
Healthcare Services
Common Stock
1/15/2016
5,000
500,000
743,607
0.3
%
Ohio Medical, LLC
Healthcare Services
Senior Subordinated Note
12.00% Cash,
6/30/2022
1/15/2016
$
7,300,000
7,279,283
7,300,000
2.6
%
PDDS Buyer, LLC
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
9.50% Cash, 7/15/2024
7/15/2019
$
12,000,000
11,894,752
11,648,400
4.1
%
See accompanying notes to
consolidated financial statements.
7
Table of Contents
Company
Industry
Investment Interest Rate/
Maturity
Original
Acquisition
Date
Principal/
Number of
Shares
Cost
Fair Value
(c)
% of
Net Assets
PDDS Buyer, LLC (j)
Healthcare Services
Delayed Draw Term Loan(3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024
7/15/2019
$
2,000,000
1,980,790
1,941,400
0.7
%
Roscoe Medical, Inc. (d), (h)
Healthcare Services
Common Stock
3/26/2014
5,081
508,077
0.0
%
Roscoe Medical, Inc. (k)
Healthcare Services
Second Lien Term Loan
11.25% Cash,
3/28/2021
3/26/2014
$
4,200,000
4,200,000
2,029,020
0.7
%
Total Healthcare Services
75,455,307
71,863,590
25.5
%
Village Realty Holdings LLC
Property Management
First Lien Term Loan
(3M USD LIBOR+6.75%),
9.00% Cash, 10/8/2024
10/8/2019
$
7,250,000
7,183,577
6,443,075
2.3
%
Village Realty Holdings LLC (j)
Property Management
Delayed Draw Term Loan
(3M USD LIBOR+6.75%),
9.00% Cash, 10/8/2024
10/8/2019
$
3,876,322
3,840,981
3,319,822
1.3
%
V Rental Holdings LLC (h)
Property Management
Class A-1 Membership Units
10/8/2019
116,700
338,229
217,675
0.1
%
Total Property Management
11,362,787
9,980,572
3.7
%
Sub Total Non-control/Non-affiliate investments
442,916,804
420,930,113
149.5
%
Affiliate investments - 6.4% (b)
GreyHeller LLC (f)
Business Services
First Lien Term Loan
(3M USD LIBOR+11.00%),
12.00% Cash, 11/16/2021
11/17/2016
$
7,000,000
6,975,912
6,930,000
2.5
%
GreyHeller LLC (f), (h)
Business Services
Series A Preferred Units
11/17/2016
850,000
850,000
2,693,054
1.0
%
Top Gun Pressure Washing, LLC (f)
Business Services
First Lien Term Loan(3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024
8/12/2019
$
5,000,000
4,955,507
4,828,000
1.7
%
Top Gun Pressure Washing, LLC (f), (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
9.50% Cash, 8/12/2024
8/12/2019
$
1,825,000
1,807,719
1,762,220
0.6
%
TG Pressure Washing Holdings, LLC (f), (h)
Business Services
Preferred Equity
8/12/2019
488,148
488,148
410,913
0.1
%
Total Business Services
15,077,286
16,624,187
5.9
%
Elyria Foundry Company, L.L.C. (d), (f), (h)
Metals
Common Stock
7/30/2010
60,000
9,685,028
427,692
0.2
%
Elyria Foundry Company, L.L.C. (d), (f)
Metals
Second Lien Term Loan
15.00% PIK,
8/10/2022
7/30/2010
$
1,236,255
1,236,255
989,375
0.3
%
Total Metals
10,921,283
1,417,067
0.5
%
Sub Total Affiliate investments
25,998,569
18,041,254
6.4
%
Control investments - 15.6% (b)
Netreo Holdings, LLC (g)
Business Services
First Lien Term Loan
(3M USD LIBOR +6.25%),
9.00% Cash/2.75% PIK,
7/3/2023
7/3/2018
$
5,188,591
5,151,190
5,178,733
1.8
%
Netreo Holdings, LLC (g)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR +6.25%),
9.00% Cash/2.75% PIK,
7/3/2023
5/26/2020
$
1,200,000
1,188,071
1,197,720
0.4
%
Netreo Holdings, LLC (g), (h)
Business Services
Common Stock Class A Unit
7/3/2018
3,150,000
3,150,000
6,330,311
2.3
%
Total Business Services
9,489,261
12,706,764
4.5
%
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)
Structured Finance
Securities
Other/Structured Finance Securities
9.85%,
1/20/2030
1/22/2008
$
69,500,000
22,160,254
18,084,700
6.4
%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g)
Structured Finance
Securities
Other/Structured Finance Securities
(3M USD
LIBOR+8.75%), 9.09%, 1/20/2030
12/14/2018
$
2,500,000
2,500,000
2,303,000
0.8
%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g)
Structured Finance
Securities
Other/Structured Finance Securities
(3M USD
LIBOR+10.00%), 10.34%, 1/20/2030
12/14/2018
$
7,500,000
7,500,000
6,918,750
2.5
%
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (a), (g), (j)
Structured Finance
Securities
Unsecured Loan
(3M USD LIBOR+7.50%), 7.84%,
8/20/2021
2/18/2020
$
5,000,000
5,000,000
3,962,651
1.4
%
Total Structured Finance Securities
37,160,254
31,269,101
11.1
%
Sub Total Control investments
46,649,515
43,975,865
15.6
%
TOTAL INVESTMENTS - 171.5% (b)
$
515,564,888
$
482,947,232
171.5
%
Number of
Shares
Cost
Fair Value
% of
Net Assets
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 9.2%
(b)
U.S. Bank Money Market (l)
25,795,001
$
25,795,001
$
25,795,001
9.2
%
Total cash and cash equivalents and cash and cash equivalents, reserve
accounts
25,795,001
$
25,795,001
$
25,795,001
9.2
%
(a)
Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of
1940, as amended. As of May 31, 2020, non-qualifying assets represent 10.7% of the Companys 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 $281,631,018 as of May 31, 2020.
(c)
Because there is no readily available market value for these investments, the fair values of these investments
were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements).
(d)
These securities are either fully or partially pledged as collateral under a senior secured revolving credit
facility (see Note 7 to the consolidated financial statements).
(e)
This investment does not have a stated interest rate that is payable thereon. As a result, the 9.85% interest
rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f)
As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and
25.0% of the voting securities. Transactions during the quarter ended May 31, 2020 in which the issuer was an Affiliate are as follows:
Company
Purchases
Sales
Total Interest from
Investments
Management Fee
Income
Net Realized
Gain (Loss) from
Investments
Net Change in
Unrealized
Appreciation
(Depreciation)
Elyria Foundry Company, L.L.C.
$
$
$
46,223
$
$
$
(1,758,988
)
GreyHeller LLC
230,371
(363,252
)
Top Gun Pressure Washing, LLC
1,806,750
167,999
(244,777
)
TG Pressure Washing Holdings, LLC
138,148
(77,235
)
$
1,944,898
$
$
444,593
$
$
$
(2,444,252
)
(g)
As defined in the Investment Company Act, we Control this portfolio company because we own more
than 25% of the portfolio companys outstanding voting securities. Transactions during the quarter ended May 31, 2020 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:
Company
Purchases
Sales
Total Interest from
Investments
Management Fee
Income
Net Realized
Gain (Loss) from
Investments
Net Change in
Unrealized
Appreciation
(Depreciation)
Netreo Holdings, LLC
$
1,188,000
$
$
150,833
$
$
$
(537,967
)
Saratoga Investment Corp. CLO 2013-1, Ltd.
628,877
634,572
(3,112,366
)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes
65,530
(175,000
)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes
220,549
(516,000
)
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (j)
2,500,000
102,577
(741,890
)
Total
$
3,688,000
$
$
1,168,366
$
634,572
$
$
(5,083,223
)
(h)
Non-income producing at May 31, 2020.
(i)
Includes securities issued by an affiliate of the Company.
(j)
All or a portion of this investment has an unfunded commitment as of May 31, 2020. (see Note 8 to the
consolidated financial statements).
(k)
As of May 31, 2020, the investment was on non-accrual status. The fair value of these investments was
approximately $3.9 million, which represented 0.8% of the Companys portfolio (see Note 2 to the consolidated financial statements).
(l)
Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Companys
consolidated statements of assets and liabilities as of May 31, 2020.
LIBOR - London Interbank Offered Rate
1M USD LIBOR - The 1 month USD LIBOR rate as of May 31, 2020 was 0.18%.
3M USD LIBOR - The 3 month USD LIBOR rate as of May 31, 2020 was 0.34%.
PIK - Payment-in-Kind (see Note 2 to the consolidated financial statements).
See accompanying notes to
consolidated financial statements.
8
Table of Contents
Saratoga Investment Corp.
Consolidated Schedule of Investments
February 29, 2020
Company
Industry
Investment Interest Rate/
Maturity
Original
Acquisition
Date
Principal/
Number of
Shares
Cost
Fair Value
(c)
% of
Net Assets
Non-control/Non-affiliate investments - 138.2% (b)
Apex Holdings Software Technologies, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.46% Cash, 9/21/2021
9/21/2016
$
18,000,000
$
17,951,463
$
17,589,600
5.8
%
Apex Holdings Software Technologies, LLC
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+8.00%),
9.46% Cash, 9/21/2021
10/1/2018
$
1,500,000
1,491,938
1,465,800
0.5
%
ArbiterSports, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+6.50%),
8.25% Cash, 2/21/2025
2/21/2020
$
26,000,000
25,765,288
25,740,000
8.6
%
Arbiter Sports, LLC (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+6.50%),
8.25% Cash, 2/21/2025
2/21/2020
$
0.0
%
Avionte Holdings, LLC (h)
Business Services
Class A Units
1/8/2014
100,000
100,000
922,337
0.3
%
CLEO Communications Holding, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.46% Cash/2.00% PIK, 3/31/2022
3/31/2017
$
13,791,686
13,773,206
14,048,211
4.6
%
CLEO Communications Holding, LLC
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+8.00%),
9.46% Cash/2.00% PIK, 3/31/2022
3/31/2017
$
20,041,560
19,919,746
20,414,333
6.7
%
CoConstruct, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+7.50%),
10.00% Cash, 7/5/2024
7/5/2019
$
4,200,000
4,161,917
4,284,000
1.4
%
CoConstruct, LLC (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.50%),
10.00% Cash, 7/5/2024
7/5/2019
$
0.0
%
Davisware, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
9.00% Cash, 7/31/2024
9/6/2019
$
3,000,000
2,971,896
2,970,000
1.0
%
Davisware, LLC (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
9.00% Cash, 7/31/2024
9/6/2019
$
0.0
%
Destiny Solutions Inc. (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+7.25%),
9.25% Cash, 10/23/2024
5/16/2018
$
36,000,000
35,686,318
35,888,400
11.8
%
Destiny Solutions Inc. (h), (i)
Business Services
Limited Partner Interests
5/16/2018
2,342
2,468,464
2,805,839
0.9
%
Emily Street Enterprises, L.L.C.
Business Services
Senior Secured Note
(3M USD LIBOR+8.50%),
10.00% Cash, 4/22/2020
12/28/2012
$
3,300,000
3,299,987
3,300,000
1.1
%
Emily Street Enterprises, L.L.C. (h)
Business Services
Warrant Membership Interests
Expires
12/28/2022
12/28/2012
49,318
400,000
499,464
0.2
%
Erwin, Inc. (d)
Business Services
Second Lien Term Loan
(3M USD LIBOR+11.50%),
12.96% Cash/1.00% PIK, 8/28/2021
2/29/2016
$
16,049,804
15,990,286
16,049,804
5.3
%
FMG Suite Holdings, LLC (d)
Business Services
Second Lien Term Loan
(1M USD LIBOR+8.00%),
9.52% Cash, 11/16/2023
5/16/2018
$
23,000,000
22,863,835
23,000,000
7.6
%
GDS Holdings US, Inc. (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
8.50% Cash, 8/23/2023
8/23/2018
$
7,500,000
7,444,170
7,650,000
2.5
%
GDS Holdings US, Inc. (d)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
8.50% Cash, 8/23/2023
8/23/2018
$
1,000,000
990,526
1,020,000
0.3
%
GDS Software Holdings, LLC (h)
Business Services
Common Stock Class A Units
8/23/2018
250,000
250,000
421,291
0.1
%
Identity Automation Systems (h)
Business Services
Common Stock Class A Units
8/25/2014
232,616
232,616
860,269
0.4
%
Identity Automation Systems (d)
Business Services
First Lien Term Loan
(3M USD LIBOR+9.24%),
10.99% Cash, 5/8/2024
8/25/2014
$
15,422,500
15,389,090
15,524,289
5.1
%
inMotionNow, Inc.
Business Services
First Lien Term Loan
(3M USD LIBOR+7.25),
9.75% Cash, 5/15/2024
5/15/2019
$
12,200,000
12,094,364
12,200,000
4.1
%
inMotionNow, Inc. (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.25)
9.75% Cash, 5/15/2024
5/15/2019
$
2,000,000
1,981,329
2,000,000
0.0
%
Knowland Group, LLC
Business Services
Second Lien Term Loan
(3M USD LIBOR+8.00%),
10.00% Cash, 5/9/2024
11/9/2018
$
15,000,000
15,000,000
14,893,500
4.9
%
National Waste Partners (d)
Business Services
Second Lien Term Loan
10.00% Cash,
2/13/2022
2/13/2017
$
9,000,000
8,959,602
9,000,000
3.0
%
Omatic Software, LLC
Business Services
First Lien Term Loan
(3M USD LIBOR+8.00%),
9.75% Cash, 5/29/2023
5/29/2018
$
5,500,000
5,459,192
5,554,999
1.9
%
Omatic Software, LLC (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+8.00%),
9.75% Cash, 5/29/2023
5/29/2018
$
0.0
%
Passageways, Inc.
Business Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
8.75% Cash, 7/5/2023
7/5/2018
$
5,000,000
4,961,214
5,034,500
1.7
%
Passageways, Inc. (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
8.75% Cash, 7/5/2023
1/3/2020
$
2,000,000
1,991,001
2,013,800
0.7
%
Passageways, Inc. (h)
Business Services
Series A Preferred Stock
7/5/2018
2,027,205
1,000,000
2,042,180
0.8
%
Vector Controls Holding Co., LLC (d)
Business Services
First Lien Term Loan 10.50% (9.00% Cash/1.50% PIK), 3/6/2022
3/6/2013
$
7,849,846
7,849,846
7,928,345
2.6
%
Vector Controls Holding Co., LLC (h)
Business Services
Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027
5/31/2015
343
2,850,231
0.9
%
Total Business Services
250,447,294
257,971,192
84.8
%
Targus Holdings, Inc. (h)
Consumer Products
Common Stock
12/31/2009
210,456
1,589,630
417,619
0.1
%
Total Consumer Products
1,589,630
417,619
0.1
%
My Alarm Center, LLC (k)
Consumer Services
Preferred Equity Class A Units
8.00%
PIK
7/14/2017
2,227
2,357,879
0.0
%
My Alarm Center, LLC (h)
Consumer Services
Preferred Equity Class B Units
7/14/2017
1,797
1,796,880
0.0
%
My Alarm Center, LLC (h)
Consumer Services
Preferred Equity Class Z Units
9/12/2018
676
712,343
1,997,158
0.6
%
My Alarm Center, LLC (h)
Consumer Services
Common Stock
7/14/2017
96,224
0.0
%
Total Consumer Services
4,867,102
1,997,158
0.6
%
C2 Educational Systems (d)
Education
First Lien Term Loan
(3M USD LIBOR+7.00%),
8.50% Cash, 5/31/2020
5/31/2017
$
16,000,000
15,981,853
16,000,000
5.3
%
EMS LINQ, Inc.
Education
First Lien Term Loan
(1M USD LIBOR+8.50%),
10.02% Cash, 8/9/2024
8/9/2019
$
14,925,000
14,780,293
14,823,510
4.8
%
GoReact
Education
First Lien Term Loan
(3M USD LIBOR+7.50%),
9.50% Cash, 1/17/2025
1/17/2020
$
5,000,000
4,930,819
4,950,000
1.6
%
GoReact (j)
Education
Delayed Draw Term Loan
(3M USD LIBOR+7.50%),
9.50% Cash, 1/17/2025
1/17/2020
$
0.0
%
Kev Software Inc. (a)
Education
First Lien Term Loan
(1M USD LIBOR+8.63%),
10.15% Cash, 9/13/2023
9/13/2018
$
21,231,923
21,086,573
21,202,198
7.0
%
Texas Teachers of Tomorrow, LLC (h), (i)
Education
Common Stock
12/2/2015
750,000
750,000
703,910
0.2
%
Texas Teachers of Tomorrow, LLC (d)
Education
First Lien Term Loan
(3M USD LIBOR+7.25%),
9.75% Cash, 6/28/2024
6/28/2019
$
19,661,200
19,483,213
19,661,200
6.5
%
Total Education
77,012,751
77,340,818
25.4
%
TMAC Acquisition Co., LLC
Food and Beverage
Unsecured Term Loan
8.00% PIK,
9/01/2023
3/1/2018
$
2,261,017
2,261,017
2,140,880
0.7
%
Total Food and Beverage
2,261,017
2,140,880
0.7
%
Axiom Parent Holdings, LLC (h)
Healthcare Services
Common Stock Class A Units
6/19/2018
400,000
400,000
428,706
0.1
%
Axiom Purchaser, Inc. (d)
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+6.00%),
7.75% Cash, 6/19/2023
6/19/2018
$
10,000,000
9,936,612
9,944,000
3.3
%
Axiom Purchaser, Inc. (d), (j)
Healthcare Services
Delayed Draw Term Loan
(3M USD LIBOR+6.00%),
7.75% Cash, 6/19/2023
6/19/2018
$
3,000,000
2,977,619
2,983,200
1.0
%
ComForCare Health Care
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+7.50%),
8.96% Cash, 1/31/2022
1/31/2017
$
15,000,000
14,929,216
15,099,000
5.0
%
HemaTerra Holding Company, LLC
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+6.75%),
9.25% Cash, 4/15/2024
4/15/2019
$
6,000,000
5,944,473
6,120,000
2.0
%
HemaTerra Holding Company, LLC (j)
Healthcare Services
Delayed Draw Term Loan
(3M USD LIBOR+6.75%),
9.25% Cash, 4/15/2024
4/15/2019
$
10,000,000
9,912,295
10,200,000
3.4
%
TRC HemaTerra, LLC (h)
Healthcare Services
Class D Membership Interests
4/15/2019
2,000,000
2,000,000
2,259,190
0.7
%
Ohio Medical, LLC (h)
Healthcare Services
Common Stock
1/15/2016
5,000
500,000
416,550
0.1
%
Ohio Medical, LLC
Healthcare Services
Senior Subordinated Note
12.00% Cash,
7/15/2021
1/15/2016
$
7,300,000
7,274,482
7,300,000
2.4
%
PDDS Buyer, LLC
Healthcare Services
First Lien Term Loan
(3M USD LIBOR+7.00%),
9.50% Cash, 7/15/2024
7/15/2019
$
12,000,000
11,888,585
12,184,800
4.0
%
See accompanying notes to
consolidated financial statements.
9
Table of Contents
Company
Industry
Investment Interest Rate/
Maturity
Original
Acquisition
Date
Principal/
Number of
Shares
Cost
Fair Value
(c)
% of
Net Assets
PDDS Buyer, LLC (j)
Healthcare Services
Delayed Draw Term Loan(3M USD LIBOR+7.00%), 9.50% Cash, 7/15/2024
7/15/2019
$
0.0
%
Roscoe Medical, Inc. (h)
Healthcare Services
Common Stock
3/26/2014
5,081
508,077
0.0
%
Roscoe Medical, Inc. (k)
Healthcare Services
Second Lien Term Loan
11.25% Cash,
3/28/2021
3/26/2014
$
4,200,000
4,200,000
2,136,960
0.7
%
Total Healthcare Services
70,471,359
69,072,406
22.7
%
Village Realty Holdings LLC
Property
Management
First Lien Term Loan
(3M USD LIBOR+6.50%),
8.75% Cash, 10/8/2024
10/8/2019
$
7,250,000
7,180,560
7,264,500
2.4
%
Village Realty Holdings LLC (j)
Property
Management
Delayed Draw Term Loan
(3M USD LIBOR+6.50%),
8.75% Cash, 10/8/2024
10/8/2019
$
3,876,322
3,838,783
3,884,075
1.4
%
V Rental Holdings LLC (h)
Property
Management
Class A-1 Membership Units
10/8/2019
116,700
338,229
354,280
0.1
%
Total Property Management
11,357,572
11,502,855
3.9
%
Sub Total Non-control/Non-affiliate investments
418,006,725
420,442,928
138.2
%
Affiliate investments6.0% (b)
Top Gun Pressure Washing, LLC (f)
Business Services
First Lien Term Loan(3M USD LIBOR+7.00%), 9.50% Cash, 8/12/2024
8/12/2019
$
5,000,000
4,952,729
5,024,500
1.7
%
Top Gun Pressure Washing, LLC (f), (j)
Business Services
Delayed Draw Term Loan
(3M USD LIBOR+7.00%),
9.50% Cash, 8/12/2024
8/12/2019
$
0.0
%
TG Pressure Washing Holdings, LLC (f), (h)
Business Services
Preferred Equity
8//12/2019
350,000
350,000
350,000
0.1
%
GreyHeller LLC (f)
Business Services
First Lien Term Loan
(3M USD LIBOR+11.00%),
12.46% Cash, 11/16/2021
11/17/2016
$
7,000,000
6,971,109
7,000,000
2.2
%
GreyHeller LLC (f), (h)
Business Services
Series A Preferred Units
11/17/2016
850,000
850,000
2,981,503
1.0
%
Total Business Services
13,123,838
15,356,003
5.0
%
Elyria Foundry Company, L.L.C. (f), (h)
Metals
Common Stock
7/30/2010
60,000
9,685,028
1,939,800
0.6
%
Elyria Foundry Company, L.L.C. (d), (f)
Metals
Second Lien Term Loan
15.00% PIK,
8/10/2022
7/30/2010
$
1,190,051
1,190,051
1,190,051
0.4
%
Total Metals
10,875,079
3,129,851
1.0
%
Sub Total Affiliate investments
23,998,917
18,485,854
6.0
%
Control investments - 15.4% (b)
Netreo Holdings, LLC (g)
Business Services
First Lien Term Loan
(3M USD LIBOR +6.25%),
9.00% Cash/2.00% PIK,
7/3/2023
7/3/2018
$
5,162,734
5,123,191
5,265,989
1.7
%
Netreo Holdings, LLC (g), (h)
Business Services
Common Stock Class A Unit
7/3/2018
3,150,000
3,150,000
6,762,672
2.3
%
Total Business Services
8,273,191
12,028,661
4.0
%
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)
Structured Finance
Securities
Other/Structured Finance Securities
10.97%,
1/20/2030
1/22/2008
$
69,500,000
23,520,428
22,557,240
7.4
%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g)
Structured Finance
Securities
Other/Structured Finance Securities
(3M USD
LIBOR+8.75%), 10.21%, 1/20/2030
12/14/2018
$
2,500,000
2,500,000
2,478,000
0.8
%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g)
Structured Finance
Securities
Other/Structured Finance Securities
(3M USD
LIBOR+10.00%), 11.46%, 1/20/2030
12/14/2018
$
7,500,000
7,500,000
7,434,750
2.4
%
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (a), (g), (j)
Structured Finance
Securities
Unsecured Loan
(3M USD LIBOR+7.50%), 8.96%,
8/20/2021
2/18/2020
$
2,500,000
2,500,000
2,204,541
0.8
%
Total Structured Finance Securities
36,020,428
34,674,531
11.4
%
Sub Total Control investments
44,293,619
46,703,192
15.4
%
TOTAL INVESTMENTS159.6% (b)
$
486,299,261
$
485,631,974
159.6
%
Number of
Shares
Cost
Fair Value
% of
Net Assets
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 13.0%
(b)
U.S. Bank Money Market (l)
39,450,352
$
39,450,352
$
39,450,352
13.0
%
Total cash and cash equivalents and cash and cash equivalents, reserve
accounts
39,450,352
$
39,450,352
$
39,450,352
13.0
%
(a)
Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of
1940, as amended. As of February 29, 2020, non-qualifying assets represent 11.5% of the Companys 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 $304,286,853 as of February 29, 2020.
(c)
Because there is no readily available market value for these investments, the fair values of these investments
were determined using significant unobservable inputs and approved in good faith by our board of directors. These investments have been included as Level 3 in the Fair Value Hierarchy (see Note 3 to the consolidated financial statements).
(d)
These securities are either fully or partially pledged as collateral under a senior secured revolving credit
facility (see Note 7 to the consolidated financial statements).
(e)
This investment does not have a stated interest rate that is payable thereon. As a result, the 10.97% interest
rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f)
As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and
25.0% of the voting securities. Transactions during the year ended February 29, 2020 in which the issuer was an Affiliate are as follows:
Company
Purchases
Sales
Total Interest from
Investments
Management
Fee Income
Net Realized
Gain (Loss) from
Investments
Net Change in
Unrealized
Appreciation
(Depreciation)
GreyHeller LLC
$
$
$
961,322
$
$
$
1,331,201
Elyria Foundry Company, L.L.C.
167,835
135,600
Top Gun Pressure Washing, LLC
4,950,000
269,257
71,771
TG Pressure Washing Holdings, LLC
350,000
Total
$
5,300,000
$
$
1,398,414
$
$
$
1,538,572
(g)
As defined in the Investment Company Act, we Control this portfolio company because we own more
than 25% of the portfolio companys outstanding voting securities. Transactions during the year ended February 29, 2020 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:
Company
Purchases
Sales
Total Interest from
Investments
Management Fee
Income
Net Realized
Gain (Loss) from
Investments
Net Change in
Unrealized
Appreciation
(Depreciation)
Easy Ice, LLC
$
$
(65,219,080
)
$
3,335,320
$
$
31,225,165
$
(3,816,610
)
Easy Ice Masters, LLC
(4,169,121
)
382,066
(51,436
)
Netreo Holdings, LLC
578,617
1,654,603
Saratoga Investment Corp. CLO 2013-1, Ltd.
4,058,715
2,503,804
(2,840,298
)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes
280,689
(5,500
)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes
937,378
(15,750
)
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd (j)
2,500,000
7,642
(295,459
)
Total
$
2,500,000
$
(69,388,201
)
$
9,580,427
$
2,503,804
$
31,225,165
$
(5,370,450
)
(h)
Non-income producing at February 29, 2020.
(i)
Includes securities issued by an affiliate of the Company.
(j)
All or a portion of this investment has an unfunded commitment as of February 29, 2020. (see Note 8 to the
consolidated financial statements).
(k)
As of February 29, 2020, the investment was on non-accrual status. The fair value of these investments was
approximately $2.1 million, which represented 0.4% of the Companys portfolio (see Note 2 to the consolidated financial statements).
(l)
Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Companys
consolidated statements of assets and liabilities as of February 29, 2020.
LIBOR - London Interbank Offered Rate
1M USD LIBOR - The 1 month USD LIBOR rate as of February 29, 2020 was 1.52%.
3M USD LIBOR - The 3 month USD LIBOR rate as of February 29, 2020 was 1.46%.
PIK - Payment-in-Kind (see Note 2 to the consolidated financial statements).
See accompanying notes to consolidated financial statements.
10
Table of Contents
SARATOGA INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2020
(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, as amended (the 1940 Act). The
Company commenced operations on March 23, 2007 as GSC Investment Corp. and completed its 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 of 1986, as amended (the Code). The Company expects to continue to qualify and to elect to be treated, for tax purposes, as a RIC. The Companys investment objective is to generate
current income and, to a lesser extent, capital appreciation from its investments.
GSC Investment, LLC (the LLC) was
organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.
On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company
as the surviving entity, in accordance with the procedure for such merger in the LLCs limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was
converted into a share of common stock of the Company.
On July 30, 2010, the Company changed its name from GSC Investment
Corp. to Saratoga Investment Corp. in connection with the consummation of a recapitalization transaction.
The Company
is externally managed and advised by the investment adviser, Saratoga Investment Advisors, LLC (the Manager or Saratoga Investment Advisors), pursuant to an investment advisory and 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-GH, Inc., SIA-MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc., which are structured as Delaware entities, or tax blockers (Taxable Blockers), to hold equity or
equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass through entities). Tax Blockers are consolidated for accounting purposes, but are not consolidated for U.S. federal income tax
purposes and may incur U.S. federal income tax expenses as a result of their ownership of portfolio companies.
On February 11, 2020,
the Company entered into an unsecured loan agreement (CLO 2013-1 Warehouse 2 Loan) with Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (CLO 2013-1 Warehouse 2), a wholly-owned subsidiary of Saratoga Investment Corp.
CLO 2013-1, Ltd. (Saratoga CLO), pursuant to which CLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse 2
Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. As of May 31, 2020, the Companys investment in the CLO 2013-1 Warehouse 2 had a fair value of $4.0 million.
On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (SBIC LP), received a Small Business
Investment Company (SBIC) license from the Small Business Administration (SBA). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (SBIC II LP), also received an SBIC
license from the SBA. The new license will provide up to $175.0 million in additional long- term capital in the form of SBA debentures.
Note 2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally
accepted accounting principles (U.S. GAAP), are stated in U.S. Dollars and include the accounts of the Company and its special purpose financing subsidiaries, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding
LLC), SBIC LP, SBIC II LP, SIA-Avionte, Inc., SIA-GH, Inc., SIA-MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc. All intercompany accounts and transactions have been eliminated in consolidation. All references made to the
Company, we, and us herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.
11
Table of Contents
The Company, SBIC LP and SBIC II LP are all considered to be investment companies for
financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946, Financial Services Investment
Companies (ASC 946). There have been no changes to the Company, SBIC LP or SBIC II LPs status as investment companies during the three months ended May 31, 2020.
Use of Estimates in the Preparation of Financial Statements
The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results
could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which
approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as, a money market fund if such investment would cause the Company to exceed any of the following limitations:
we were to own more than 3.0% of the total outstanding voting stock of the money market fund;
we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of
our total assets, except as allowed pursuant to Rule 12d1-1 of Section 12(d)(1) of the 1940 Act which is designed to permit cash sweep arrangements rather than investments directly in short-term instruments; or
we were to hold securities in money market funds and other registered investment companies and BDCs having an
aggregate value in excess of 10.0% of the value of our total assets.
As of May 31, 2020, the Company did not
exceed any of these limitations.
Cash and Cash Equivalents, Reserve Accounts
Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid
investments in money market funds, representing payments received on secured investments or other reserved amounts associated with the Companys $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 subsidiaries, SBIC LP and SBIC II LP.
The statements of cash
flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts.
The following table provides a reconciliation of cash and cash equivalents and cash and cash equivalents, reserve accounts reported within the
consolidated statements of assets and liabilities that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
May 31,
2020
May 31,
2019
Cash and cash equivalents
$
12,842,608
$
37,183,604
Cash and cash equivalents, reserve accounts
12,952,393
23,812,643
Total cash and cash equivalents and cash and cash equivalents, reserve accounts
$
25,795,001
$
60,996,247
12
Table of Contents
Investment Classification
The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, Control Investments
are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, Affiliated Investments are defined as those non-control
investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, Non-affiliated Investments are defined as investments that are neither Control Investments nor Affiliated Investments.
Investment Valuation
The Company
accounts for its investments at fair value in accordance with the FASB ASC Topic 820, Fair Value Measurement (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value
hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be transferred
at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers
in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
Investments for which
market quotations are readily available are fair valued at such market quotations obtained from independent third-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to
reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the
audit committee of our board of directors and a third-party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our
investments include the nature and realizable value of any collateral, the portfolio companys ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded
companies, discounted cash flow and other relevant factors.
The Company undertakes a multi-step valuation process each quarter when
valuing investments for which market quotations are not readily available, as described below:
Each investment is initially valued by the responsible investment professionals of the Manager and preliminary
valuation conclusions are documented, reviewed and discussed with our senior management; and
An independent valuation firm engaged by our board of directors independently reviews a selection of these
preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year.
In addition, all our investments are subject to the following valuation process:
The audit committee of our board of directors reviews and approves each preliminary valuation and our Manager and
independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and
Our board of directors discusses the valuations and approves the fair value of each investment, in good faith,
based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.
The Companys investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (Saratoga CLO) is carried at fair value, which is
based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for
equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to
form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The
assumptions are based on available market data and projections provided by third parties as well as management estimates. The Company uses the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis
on expected future cash flows to determine the valuation for our investment in Saratoga CLO.
Because such valuations, and particularly
valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have
been used if a ready market for these investments existed. The Companys 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.
13
Table of Contents
Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, Derivatives and Hedging (ASC
815). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by
the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.
Investment Transactions and
Income Recognition
Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is
determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of
discounts over the life of the investment and amortization of premiums on investments up to the earliest call date.
Loans are generally
placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be
recognized as a reduction in principal depending upon managements judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in managements judgment, are likely
to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At May 31, 2020, certain investments in three portfolio companies, including preferred
equity interests, were on non-accrual status with a fair value of approximately $3.9 million, or 0.8% of the fair value of our portfolio. At February 29, 2020, certain investments in two portfolio companies, including preferred equity
interests, were on non-accrual status with a fair value of approximately $2.1 million, or 0.4% of the fair value of our portfolio.
Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC
Topic 325, Investments-Other, Beneficial Interests in Securitized Financial Assets , (ASC 325), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there
are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the
investment from the date the estimated yield was changed.
Payment-in-Kind Interest
The Company holds debt and preferred equity investments in its portfolio that contain a payment-in-kind (PIK) interest provision.
The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company
stops accruing PIK interest if it is expected that the issuer will not be able to pay all principal and interest when due.
Structuring and Advisory
Fee Income
Structuring and advisory fee income represents various fee income earned and received performing certain investment
structuring and advisory activities during the closing of new investments.
Other Income
Other income includes dividends received, origination and monitoring fees and prepayment income fees and is recorded in the consolidated
statements of operations when earned.
Deferred Debt Financing Costs
Financing costs incurred in connection with our credit facility and notes are deferred and amortized using the straight-line method over the
life of the respective facility and debt securities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the straight-line method over the life of the debentures.
The Company presents deferred debt financing costs on the balance sheet as a contra-liability as a direct deduction from the carrying amount
of that debt liability, consistent with debt discounts.
Contingencies
In the ordinary course of business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future
events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote. Therefore, the Company has not accrued any liabilities in
connection with such indemnifications.
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In the ordinary course of business, the Company may directly or indirectly be a defendant or
plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.
Income Taxes
The Company has elected to
be treated for tax purposes as a RIC under the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for
federal income taxes, except as related to the Taxable Blockers when applicable.
In order to qualify as a RIC, among other requirements,
the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of
4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.
Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current
year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year
dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.
In accordance with certain applicable U.S. Treasury regulations and private letter rulings issued by the Internal Revenue Service
(IRS), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on
the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will
receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other
requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
The Company may utilize wholly-owned holding companies taxed under Subchapter C of the Code or tax blockers, when making equity investments in
portfolio companies taxed as pass-through entities to meet its source-of-income requirements as a RIC. Taxable Blockers are consolidated in the Companys U.S. GAAP financial statements and may result in current and deferred federal and state
income tax expense with respect to income derived from those investments. Such income, net of applicable income taxes, is not included in the Companys tax-basis net investment income until distributed by the Taxable Blocker, which may result
in timing and character differences between the Companys U.S. GAAP and tax-basis net investment income and realized gains and losses. Income tax expense or benefit from Taxable Blockers related to net investment income are included in total
operating expenses, while any expense or benefit related to federal or state income tax originated for capital gains and losses are included together with the applicable net realized or unrealized gain or loss line item. Deferred tax assets of the
Taxable Blockers are reduced by a valuation allowance when, in the opinion of management, it is more-likely than-not that some portion or all of the deferred tax assets will not be realized.
FASB ASC Topic 740, Income Taxes , (ASC 740), provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Companys 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, 2020, the Company did not incur any interest or
penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2017, 2018 and 2019 federal tax years for the Company remain subject to examination by the IRS. As of May 31, 2020 and February 29, 2020,
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.
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Capital Gains Incentive Fee
The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the
consolidated statements of assets and liabilities, by the Company to the Manager when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments given the fact that a capital
gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time.
The actual
incentive fee payable to the Companys Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and only reflected those realized capital gains net of realized and unrealized losses for the
period.
New Accounting Pronouncements
There are currently no new accounting pronouncements that would have a material impact on the Company.
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
investments 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 1Valuations based on quoted prices in active markets for identical assets or liabilities that the
Company has the ability to access.
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Level 2 Pricing inputs are other than quoted prices in active markets, which are either directly or
indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for
substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities
and less liquid, privately held or restricted equity securities, for which some level of recent trading activity has been observed.
Level 3 Pricing inputs are unobservable for the investment and includes situations where there is little,
if any, market activity for the investment. The inputs may be based on the Companys own assumptions about how market participants would price the asset or liability or may use Level 2 inputs, as adjusted, to reflect specific investment
attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures
(earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level 3 if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used
in the valuation methodology.
In addition to using the above inputs in investment valuations, the Company continues to
employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are
trading, in determining fair value.
The following table presents fair value measurements of investments, by major class, as of
May 31, 2020 (dollars in thousands), according to the fair value hierarchy:
Fair Value Measurements
Level 1
Level 2
Level 3
Total
First lien term loans
$
$
$
354,435
$
354,435
Second lien term loans
69,487
69,487
Unsecured term loans
5,811
5,811
Structured finance securities
27,306
27,306
Equity interests
25,908
25,908
Total
$
$
$
482,947
$
482,947
The following table presents fair value measurements of investments, by major class, as of February 29,
2020 (dollars in thousands), according to the fair value hierarchy:
Fair Value Measurements
Level 1
Level 2
Level 3
Total
First lien term loans
$
$
$
346,233
$
346,233
Second lien term loans
73,570
73,570
Unsecured term loans
4,346
4,346
Structured finance securities
32,470
32,470
Equity interests
29,013
29,013
Total
$
$
$
485,632
$
485,632
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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, 2020 (dollars in thousands):
First lien
term loans
Second lien
term loans
Unsecured
term loans
Structured
finance
securities
Equity
interests
Total
Balance as of February 29, 2020
$
346,233
$
73,570
$
4,346
$
32,470
$
29,013
$
485,632
Payment-in-kind and other adjustments to cost
191
466
(1,361
)
(704
)
Net accretion of discount on investments
279
33
312
Net change in unrealized appreciation (depreciation) on investments
(19,115
)
(4,582
)
(1,035
)
(3,803
)
(3,415
)
(31,950
)
Purchases
36,189
2,500
310
38,999
Sales and repayments
(9,350
)
(9,350
)
Net realized gain (loss) from investments
8
8
Balance as of May 31, 2020
$
354,435
$
69,487
$
5,811
$
27,306
$
25,908
$
482,947
Net change in unrealized appreciation (depreciation) for the period relating to those Level 3
assets that were still held by the Company at the end of the period
$
(18,880
)
$
(4,583
)
$
(1,034
)
$
(3,804
)
$
(3,414
)
$
(31,715
)
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 interests.
Sales and
repayments represent net proceeds received from investments sold, and principal paydowns received during the period.
Transfers and
restructurings, if any, are recognized at the beginning of the period in which they occur. There were no transfers or restructures in or out of Levels 1, 2 or 3 during the three months ended May 31, 2020.
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, 2019 (dollars in thousands):
First lien
term loans
Second lien
term loans
Unsecured
term loans
Structured
finance
securities
Equity
interests
Total
Balance as of February 28, 2019
$
202,846
$
125,786
$
2,100
$
35,328
$
35,960
$
402,020
Payment-in-kind and other adjustments to cost
157
891
1,383
242
2,673
Net accretion of discount on investments
166
152
318
Net change in unrealized appreciation (depreciation) on investments
(217
)
476
(42
)
1,254
2,517
3,988
Purchases
25,444
1,925
27,369
Sales and repayments
(8,917
)
(18,000
)
(26,917
)
Net realized gain (loss) from investments
Balance as of May 31, 2019
$
219,479
$
109,305
$
2,058
$
37,965
$
40,644
$
409,451
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets
that were still held by the Company at the end of the period
$
(217
)
$
468
$
(42
)
$
1,254
$
2,517
$
3,980
Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There
were no transfers or restructures in or out of Levels 1, 2, or 3 during the three months ended May 31, 2019.
The valuation techniques and
significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of May 31, 2020 were as follows (dollars in thousands):
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted Average*
First lien term loans
$
354,435
Market Comparables
Market Yield (%)
7.5% - 32.1%
11.7%
EBITDA Multiples (x)
0.0x
0.0x
Second lien term loans
69,487
Market Comparables
Market Yield (%)
9.2% - 117.3%
15.8%
EBITDA Multiples (x)
5.0x
5.0x
Unsecured term loans
5,811
Market Comparables
Market Yield (%)
15.2% - 28.6%
24.3%
EBITDA Multiples (x)
5.2x
5.2x
Structured finance securities
27,306
Discounted Cash
Flow
Discount Rate (%)
12.25% - 24.00%
20.3%
Recovery Rate (%)
35.0% - 70.0%
70.0%
Prepayment Rate (%)
10.0%
10.0%
Equity interests
25,908
Market Comparables
EBITDA Multiples (x)
4.0x - 14.0x
6.3x
Revenue Multiples (x)
1.0x - 45.1x
8.0x
Total
$
482,947
*
The weighted average in the table above is calculated based on each investments fair value weighting,
using the applicable unobservable input.
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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, 2020 were as follows (dollars in thousands):
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average*
First lien term loans
$
346,233
Market Comparables
Market Yield (%)
7.8% - 12.5%
9.7%
EBITDA Multiples (x)
0.0x
0.0x
Second lien term loans
73,570
Market Comparables
Market Yield (%)
9.5% - 85.1%
13.0%
EBITDA Multiples (x)
5.0x
5.0x
Unsecured term loans
4,346
Market Comparables
Market Yield (%)
18.3% - 21.3%
19.8%
EBITDA Multiples (x)
5.2x
5.2x
Structured finance securities
32,470
Discounted Cash Flow
Discount Rate (%)
9.25% - 16.00%
14.2%
Recovery Rate (%)
35.0% - 70.0%
70.0%
Prepayment Rate (%)
20.0%
20.0%
Equity interests
29,013
Market Comparables
EBITDA Multiples (x)
4.0x - 14.0x
6.5x
Revenue Multiples (x)
1.0x - 40.7x
7.3x
Total
$
485,632
*
The weighted average in the table above is calculated based on each investments fair value weighting,
using the applicable unobservable input.
For investments utilizing a market comparables valuation technique, a
significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the earnings before interest, tax, depreciation and
amortization (EBITDA) or revenue valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase
(decrease) in the discount rate and prepayment rate, in isolation, would result in a significantly lower (higher) fair value measurement while a significant increase (decrease) in recovery rate, in isolation, would result in a significantly higher
(lower) fair value measurement. For investments utilizing a market quote in deriving a value, a significant increase (decrease) in the market quote, in isolation, would result in a significantly higher (lower) fair value measurement.
The composition of our investments as of May 31, 2020 at amortized cost and fair value was as follows (dollars in thousands):
Investments at
Amortized Cost
Amortized Cost
Percentage of Total
Portfolio
Investments at
Fair Value
Fair Value
Percentage of Total
Portfolio
First lien term loans
$
370,417
71.9
%
$
354,435
73.4
%
Second lien term loans
75,978
14.7
69,487
14.4
Unsecured term loans
7,261
1.4
5,811
1.2
Structured finance securities
32,160
6.2
27,306
5.6
Equity interests
29,749
5.8
25,908
5.4
Total
$
515,565
100.0
%
$
482,947
100.0
%
The composition of our investments as of February 29, 2020 at amortized cost and fair value was as
follows (dollars in thousands):
Investments at
Amortized Cost
Amortized Cost
Percentage of Total
Portfolio
Investments at
Fair Value
Fair Value
Percentage of Total
Portfolio
First lien term loans
$
343,100
70.5
%
$
346,233
71.3
%
Second lien term loans
75,478
15.5
73,570
15.1
Unsecured term loans
4,761
1.0
4,346
0.9
Structured finance securities
33,521
6.9
32,470
6.7
Equity interests
29,439
6.1
29,013
6.0
Total
$
486,299
100.0
%
$
485,632
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 companys securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation
methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public
companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating
the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio
companys assets and liabilities. We also take into account historical and anticipated financial results.
Our investment in Saratoga
CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the
underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash
flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order
to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. In connection with the refinancing of the Saratoga CLO liabilities, we ran Intex models
based on assumptions about the refinanced Saratoga CLOs 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, 2020. The inputs at May 31, 2020 for the valuation model include:
Default rate: 2.0%
Recovery rate: 35-70%
Discount rate: 24.0%
Prepayment rate: 10.0%
Reinvestment rate / price: L+400bps / $95.00
Investment Concentration
Set forth is a
brief description of each portfolio company in which the fair value of our investment represents greater than 5% of our total assets as of May 31, 2020.
CLEO Communications Holding, LLC
CLEO
Communications Holding, LLC (Cleo) is a provider of technology enabled data communication and integration platform for daily business transactions. Cleos platform allows for the automation of business-to-business transaction
information for customers operating in the retail, manufacturing, logistics and the healthcare verticals. The platform also allows for internal application-to-application communication, allowing customers core enterprise software applications
to easily share and transfer data.
Destiny Solutions Inc.
Destiny Solutions provides a SaaS-based student lifecycle management (SLM) software solution used by higher education institutions
to manage their continuing education (CE) and non-degree educational programs for non-traditional students who fall outside of the traditional student profile. Traditional students are full-time students working
toward an undergraduate, graduate, or doctorate degree. Destinys software acts as the ERP, CRM, e-commerce platform, and student information management system for non-traditional student programs.
Saratoga Investment Corp. CLO 2013-1, Ltd.
The Company has a collateral management agreement with Saratoga CLO, pursuant to which the Company acts as its collateral manager. The Saratoga
CLO invests primarily in senior secured first lien term loans. The Company also holds an investment in the subordinated note and Class F-R-2 and G-R-2 notes of the Saratoga CLO. In addition, the Company entered into an unsecured loan agreement with
CLO 2013-1 Warehouse 2, a wholly- owned subsidiary of Saratoga CLO, in order to provide capital necessary to support warehouse activities.
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Table of Contents
Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (Saratoga CLO)
On January 22, 2008, the Company entered into a collateral management agreement with Saratoga CLO, pursuant to which the Company acts as
its collateral manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, the Company completed a second refinancing of the Saratoga CLO with its reinvestment
period extended to October 2018.
On December 14, 2018, the Company completed a third refinancing and upsize of the Saratoga CLO (the
2013-1 Reset CLO Notes). The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period ending January 2020 was also
added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing
its liabilities, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million aggregate principal
amount of the Class G-R-2 notes tranches at par, with a coupon of 3M USD LIBOR plus 8.75% and 3M USD LIBOR plus 10.00%, respectively. As part of this refinancing, the Company also redeemed our existing $4.5 million aggregate amount of the Class F
notes tranche at par.
On February 11, 2020, the Company entered into an unsecured loan agreement (CLO 2013-1 Warehouse 2
Loan) with CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse
activities. The CLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. As of May 31, 2020, the aggregate principal amount and fair value of the Companys investment in
the CLO 2013-1 Warehouse 2 Loan was $5.0 million and $4.0 million, respectively.
The Saratoga CLO remains 100.0% owned and managed by the
Company. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLOs assets, paid quarterly to the extent of available proceeds.
Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes
receive an internal rate of return paid in cash equal to or greater than 12.0%.
For the three months ended May 31, 2020 and
May 31, 2019, we accrued management fee income of $0.6 million and $0.6 million, respectively, and interest income of $0.6 million and $1.1 million, respectively, from the Saratoga CLO.
As of May 31, 2020, the aggregate principal amounts of the Companys investments in the subordinated notes, Class F-R-2 Notes and
Class G-R-2 Notes of the Saratoga CLO was $69.5 million, $2.5 million and $7.5 million, respectively, which had a corresponding fair value of $18.1 million, $2.3 million and $6.9 million, respectively. The Company determines the fair value of its
investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO.As of May 31, 2020, Saratoga CLO had investments with a principal balance
of $519.0 million and a weighted average spread over LIBOR of 4.0% and had debt with a principal balance of $488.5 million with a weighted average spread over LIBOR of 2.2%. As a result, Saratoga CLO earns a spread between the interest
income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. As of May 31, 2020, the present value of the
projected future cash flows of the subordinated notes was approximately $18.3 CLO Valuation Model million, using a 24.0% discount rate. The Companys total investment in the subordinate notes of Saratoga CLO is $43.8 million, which is comprised
of the initial investment of $30.0 million in January 2008 plus the additional investment of $13.8 million in December 2018, and to date the Company has since received distributions of $62.5 million, management fees of $22.1 million and incentive
fees of $1.2 million. In conjunction with the third refinancing of the 2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO.
As of February 29, 2020, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $22.6
million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of February 29,
2020, the fair value of its investment in the Class F-R-2 Notes and G-R-2 Notes of Saratoga CLO was $2.5 million and $7.4 million, respectively. As of February 29, 2020, Saratoga CLO had investments with a principal balance of $528.4 million
and a weighted average spread over LIBOR of 4.0% and had debt with a principal balance of $475.1 million with a weighted average spread over LIBOR of 2.2%. As of February 29, 2020, the present value of the projected future cash flows of the
subordinated notes was approximately $22.9 million, using a 16.0% discount rate.
21
Table of Contents
Below is certain financial information from the separate financial statements of Saratoga
CLO as of May 31, 2020 (unaudited) and February 29, 2020 and for the three months ended May 31, 2020 (unaudited) and May 31, 2019 (unaudited).
22
Table of Contents
Saratoga Investment Corp. CLO 2013-1, Ltd.
Statements of Assets and Liabilities
May 31, 2020
February 29, 2020
(unaudited)
ASSETS
Investments at fair value
Loans at fair value (amortized cost of $511,757,973 and $523,438,207, respectively)
$
457,744,271
$
500,999,677
Equities at fair value (amortized cost of $2,566,752 and $2,566,752, respectively)
257
Total investments at fair value (amortized cost of $514,324,725 and $526,004,959,
respectively)
457,744,271
500,999,934
Cash and cash equivalents
5,234,135
9,081,041
Receivable from open trades
9,372,675
10,419,700
Interest receivable (net of reserve of $356,472 and $307,705, respectively)
2,036,503
1,294,523
Prepaid expenses and other assets
58,382
84,526
Total assets
$
474,445,966
$
521,879,724
LIABILITIES
Interest payable
$
1,999,748
$
2,090,188
Payable from open trades
9,355,964
36,673,471
Accrued base management fee
55,725
54,441
Accrued subordinated management fee
222,898
217,766
Accounts payable and accrued expenses
68,349
81,822
Loan payable, related party
5,000,000
2,500,000
Loan payable, third party
13,528,220
2,600,000
Saratoga Investment Corp. CLO 2013-1, Ltd. Notes:
Class A-1FL-R-2 Senior Secured Floating Rate Notes
255,000,000
255,000,000
Class A-1FXD-R-2 Senior Secured Fixed Rate Notes
25,000,000
25,000,000
Class-A-2-R-2 Senior Secured Floating Rate Notes
40,000,000
40,000,000
Class B-R-2 Senior Secured Floating Rate Notes
59,500,000
59,500,000
Class C-R-2 Deferrable Mezzanine Floating Rate Notes
22,500,000
22,500,000
Discount on Class C-R-2 Notes
(516,720
)
(530,448
)
Class D-R-2 Deferrable Mezzanine Floating Rate Notes
31,000,000
31,000,000
Discount on Class D-R-2 Notes
(940,279
)
(965,259
)
Class E-1-R-2 Deferrable Mezzanine Floating Rate Notes
27,000,000
27,000,000
Class E-2-R-2 Deferrable Mezzanine Fixed Rate Notes
Class F-R-2 Deferrable Junior Floating Rate Notes
2,500,000
2,500,000
Class G-R-2 Deferrable Junior Floating Rate Notes
7,500,000
7,500,000
Deferred debt financing costs
(2,281,588
)
(2,340,764
)
Subordinated Notes
69,500,000
69,500,000
Discount on Subordinated Notes
(22,306,712
)
(22,899,324
)
Total liabilities
$
543,685,605
$
556,981,893
NET ASSETS
Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 common shares issued
and outstanding, respectively
$
250
$
250
Total distributable earnings (loss)
(69,239,889
)
(35,102,419
)
Total net assets
(69,239,639
)
(35,102,169
)
Total liabilities and net assets
$
474,445,966
$
521,879,724
23
Table of Contents
Saratoga Investment Corp. CLO 2013-1, Ltd.
Statements of Operations
(unaudited)
For the three months ended
May 31, 2020
May 31, 2019
INVESTMENT INCOME
Total interest from investments
7,213,489
8,203,707
Interest from cash and cash equivalents
3,287
7,363
Other income
109,641
140,123
Total investment income
7,326,417
8,351,193
EXPENSES
Interest and debt financing expenses
7,288,568
6,418,808
Base management fee
125,521
125,903
Subordinated management fee
502,085
503,613
Professional fees
88,490
124,508
Trustee expenses
51,858
19,879
Other expense
28,052
32,538
Total expenses
8,084,574
7,225,249
NET INVESTMENT INCOME (LOSS)
(758,157
)
1,125,944
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments
(1,803,884
)
(943,934
)
Net change in unrealized depreciation on investments
(31,575,429
)
(2,205,995
)
Net realized and unrealized loss on investments
(33,379,313
)
(3,149,929
)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$
(34,137,470
)
$
(2,023,985
)
24
Table of Contents
Saratoga Investment Corp. CLO 2013-1, Ltd.
Schedule of Investments
May 31, 2020
(unaudited)
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/
Spread
x
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair
Value
Education Management II LLC (b)
Services: Consumer
Education Management II A-2 Preferred Shares
Equity
0.00
%
0.00
%
0.00
%
18,975
$
1,897,538
$
Education Management II LLC (b)
Services: Consumer
Education Management II A-1 Preferred Shares
Equity
0.00
%
0.00
%
0.00
%
6,692
669,214
1011778 B.C. Unlimited Liability Company
Beverage Food & Tobacco
Term Loan B4
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
11/19/2026
$
1,496,250
1,453,849
1,434,530
24 Hour Fitness Worldwide Inc.
Services: Consumer
Term Loan (5/18)
Loan
3M USD LIBOR+
3.50
%
0.00
%
3.84
%
5/30/2025
2,952,437
2,942,983
826,682
ABB Con-Cise Optical Group LLC
Consumer goods: Non-durable
Term Loan B
Loan
6M USD LIBOR+
5.00
%
1.00
%
6.00
%
6/15/2023
2,076,547
2,058,435
1,654,323
ADMI Corp.
Services: Consumer
Term Loan B
Loan
3M USD LIBOR+
2.75
%
0.00
%
3.09
%
4/30/2025
1,965,276
1,957,855
1,798,719
Advantage Sales & Marketing Inc.
Services: Business
First Lien Term Loan
Loan
3M USD LIBOR+
3.25
%
1.00
%
4.25
%
7/23/2021
2,364,874
2,364,078
2,119,850
Advantage Sales & Marketing Inc.
Services: Business
Term Loan B Incremental
Loan
3M USD LIBOR+
3.25
%
1.00
%
4.25
%
7/23/2021
488,693
485,128
438,114
Advisor Group Holdings Inc
Banking Finance Insurance & Real Estate
Term Loan (7/19)
Loan
1M USD LIBOR+
5.00
%
0.00
%
5.18
%
7/31/2026
498,750
497,545
462,177
Aegis Toxicology Sciences Corporation
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.50
%
5/9/2025
3,940,000
3,911,716
3,299,750
Agiliti Health Inc.
Healthcare & Pharmaceuticals
Term Loan (1/19)
Loan
3M USD LIBOR+
3.00
%
0.00
%
3.34
%
1/5/2026
495,000
495,000
480,150
Agrofresh Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
4.75
%
1.00
%
5.75
%
7/30/2021
2,881,923
2,879,786
2,633,357
AI Convoy (Luxembourg) S.a.r.l.
Aerospace & Defense
AI Convoy (Luxembourg) USD T/L B
Loan
6M USD LIBOR+
3.50
%
1.00
%
4.50
%
1/15/2027
1,500,000
1,492,592
1,428,750
AI Mistral (Luxembourg) Subco Sarl
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.00
%
3/11/2024
485,000
485,000
366,175
AIS Holdco LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
5.00
%
0.00
%
5.34
%
8/15/2025
2,406,250
2,396,870
1,973,125
Alchemy US Holdco 1 LLC
Metals & Mining
Term Loan
Loan
1M USD LIBOR+
5.50
%
0.00
%
5.68
%
10/10/2025
1,937,500
1,914,018
1,724,375
Alion Science and Technology Corporation
Aerospace & Defense
Term Loan B (1st Lien)
Loan
1M USD LIBOR+
4.50
%
1.00
%
5.50
%
8/19/2021
3,377,293
3,374,207
3,337,880
Allen Media LLC
Media: Advertising Printing & Publishing
Allen Media T/L B (1/20)
Loan
2M USD LIBOR+
5.50
%
0.00
%
5.78
%
2/10/2027
3,000,000
2,986,071
2,827,500
Altisource S.a r.l.
Banking Finance Insurance & Real Estate
Term Loan B (03/18)
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.00
%
4/3/2024
1,454,005
1,446,990
1,066,265
Altra Industrial Motion Corp.
Capital Equipment
Term Loan
Loan
1M USD LIBOR+
2.00
%
0.00
%
2.18
%
10/1/2025
1,767,163
1,763,700
1,678,805
American Greetings Corporation
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
4.50
%
1.00
%
5.50
%
4/5/2024
4,780,845
4,777,921
4,398,377
American Residential Services LLC
Services: Consumer
Term Loan B
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.00
%
6/30/2022
3,915,488
3,907,173
3,641,404
Amerilife Holdings LLC
Banking Finance Insurance & Real Estate
AmeriLife T/L
Loan
1M USD LIBOR+
4.00
%
0.00
%
4.18
%
3/18/2027
886,364
884,237
815,454
Amerilife Holdings LLC (a)
Banking Finance Insurance & Real Estate
Unfunded Commitment
Loan
1M USD LIBOR+
4.00
%
0.00
%
4.18
%
3/18/2027
Amynta Agency Borrower Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
2/28/2025
3,453,572
3,418,544
3,194,554
Anastasia Parent LLC
Consumer goods: Non-durable
Term Loan
Loan
3M USD LIBOR+
3.75
%
0.00
%
4.09
%
8/11/2025
985,000
981,157
317,249
Anchor Glass Container Corporation
Containers Packaging & Glass
Term Loan (07/17)
Loan
3M USD LIBOR+
2.75
%
1.00
%
3.75
%
12/7/2023
483,819
482,396
360,750
Api Group DE Inc
Services: Business
Term Loan B
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
10/1/2026
997,500
992,795
957,181
APLP Holdings Limited Partnership
Utilities
APLP Holdings T/L B (01/20)
Loan
1M USD LIBOR+
2.50
%
1.00
%
3.50
%
4/11/2025
1,894,737
1,894,737
1,834,939
Aramark Services Inc.
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
1/15/2027
2,500,000
2,410,516
2,374,224
Arctic Glacier U.S.A. Inc.
Beverage Food & Tobacco
Term Loan (3/18)
Loan
3M USD LIBOR+
3.50
%
1.00
%
4.50
%
3/20/2024
3,350,967
3,333,558
2,587,583
Aretec Group Inc.
Banking Finance Insurance & Real Estate
Term Loan (10/18)
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
10/1/2025
1,975,000
1,971,083
1,817,000
Aristocrat International PTY Ltd
Hotel Gaming & Leisure
Term Loan (5/20)
Loan
3M USD LIBOR+
3.75
%
1.00
%
4.75
%
10/21/2024
1,000,000
980,043
993,750
ASG Technologies Group Inc.
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
7/31/2024
465,137
463,621
406,028
AssetMark Financial Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
3M USD LIBOR+
3.00
%
0.00
%
3.34
%
11/14/2025
1,237,500
1,235,709
1,206,563
Asurion LLC
Banking Finance Insurance & Real Estate
Term Loan B-4 (Replacement)
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
8/4/2022
870,960
868,920
852,888
Asurion LLC
Banking Finance Insurance & Real Estate
Term Loan B6
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
11/3/2023
491,477
488,707
478,271
Athenahealth Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
3M USD LIBOR+
4.50
%
0.00
%
4.84
%
2/11/2026
1,980,000
1,946,688
1,905,750
Avaya Inc.
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
12/16/2024
3,169,156
3,140,053
2,944,146
Avison Young (Canada) Inc.
Services: Business
Term Loan
Loan
3M USD LIBOR+
5.00
%
0.00
%
5.34
%
1/30/2026
3,467,443
3,412,554
3,097,953
Avolon TLB Borrower 1 (US) LLC
Capital Equipment
Term Loan B3
Loan
1M USD LIBOR+
1.75
%
0.75
%
2.50
%
1/15/2025
1,000,000
847,650
942,860
B&G Foods Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
10/10/2026
248,750
247,605
245,081
Ball Metalpack Finco LLC
Containers Packaging & Glass
Term Loan
Loan
3M USD LIBOR+
4.50
%
0.00
%
4.84
%
7/31/2025
3,934,925
3,919,453
3,478,474
Berry Global Inc.
Chemicals Plastics & Rubber
Term Loan Y
Loan
1M USD LIBOR+
2.00
%
0.00
%
2.18
%
7/1/2026
4,974,969
4,969,626
4,850,593
Blackstone Mortgage Trust Inc.
Banking Finance Insurance & Real Estate
Term Loan B-2
Loan
1M USD LIBOR+
4.75
%
1.00
%
5.75
%
4/23/2026
500,000
485,055
487,500
Blount International Inc.
Forest Products & Paper
Term Loan B (09/18)
Loan
1M USD LIBOR+
3.75
%
1.00
%
4.75
%
4/12/2023
3,445,038
3,442,502
3,279,951
Blucora Inc.
Services: Consumer
Term Loan (11/17)
Loan
3M USD LIBOR+
3.00
%
1.00
%
4.00
%
5/22/2024
955,134
953,335
907,377
Bombardier Recreational Products Inc.
Consumer goods: Durable
Term Loan (1/20)
Loan
1M USD LIBOR+
2.00
%
0.00
%
2.18
%
5/24/2027
992,513
983,756
917,011
Bracket Intermediate Holding Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
4.25
%
0.00
%
4.59
%
9/5/2025
985,000
981,186
896,350
Broadstreet Partners Inc.
Banking Finance Insurance & Real Estate
Term Loan B3
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
1/27/2027
2,024,614
2,022,906
1,940,248
Brookfield Property REIT Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
8/27/2025
4,000,000
3,112,644
3,024,280
Brookfield WEC Holdings Inc.
Energy: Electricity
Term Loan 1/20
Loan
1M USD LIBOR+
3.00
%
0.75
%
3.75
%
8/1/2025
496,231
495,158
484,292
Buckeye Partners L.P.
Utilities: Oil & Gas
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
11/2/2026
1,000,000
995,596
970,000
BW Gas & Convenience Holdings LLC
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
6.25
%
0.00
%
6.43
%
11/18/2024
2,962,500
2,853,893
2,784,750
Calceus Acquisition Inc.
Consumer goods: Non-durable
Term Loan B
Loan
3M USD LIBOR+
5.50
%
0.00
%
5.84
%
2/12/2025
968,750
958,753
900,938
Callaway Golf Company
Retail
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
1/2/2026
695,625
683,433
685,191
CareerBuilder LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
6.75
%
1.00
%
7.75
%
7/31/2023
1,393,388
1,373,831
1,247,082
Casa Systems Inc.
Telecommunications
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.00
%
12/20/2023
1,451,250
1,443,042
1,310,363
Castle US Holding Corporation
Media: Advertising Printing & Publishing
Term Loan B (USD)
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
1/29/2027
500,000
497,688
462,710
CCS-CMGC Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
0.00
%
5.84
%
10/1/2025
2,468,750
2,448,592
2,147,813
Cengage Learning Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.25
%
6/7/2023
1,443,708
1,432,362
1,162,907
CenturyLink Inc.
Telecommunications
Term Loan B (1/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
3/15/2027
2,992,500
2,989,209
2,867,653
Chemours Company The
Chemicals Plastics & Rubber
Term Loan
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
4/3/2025
997,455
938,747
930,955
Citadel Securities LP
Banking Finance Insurance & Real Estate
Term Loan (2/20)
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
2/27/2026
990,019
988,954
968,159
25
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/
Spread
x
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair
Value
Clarios Global LP
Automotive
Term Loan B
Loan
1M USD LIBOR+
3.50
%
0.00
%
3.68
%
4/30/2026
1,492,500
1,478,985
1,417,875
Compass Power Generation L.L.C.
Utilities: Electric
Term Loan B (08/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
12/20/2024
1,886,209
1,882,170
1,777,752
Concordia International Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.50
%
9/6/2024
1,177,580
1,127,951
1,042,900
Connect U.S. Finco LLC
Telecommunications
Delayed Draw Term Loan B
Loan
1M USD LIBOR+
4.50
%
1.00
%
5.50
%
12/11/2026
3,000,000
2,837,460
2,790,000
Consolidated Communications Inc.
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.00
%
10/5/2023
1,471,612
1,461,859
1,406,316
Coral-US Co-Borrower LLC
Telecommunications
Term Loan B-5
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
1/31/2028
2,000,000
2,000,000
1,895,620
Covia Holdings Corporation
Metals & Mining
Term Loan
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.00
%
6/2/2025
982,500
982,500
591,347
CPI Acquisition Inc
Banking Finance Insurance & Real Estate
Term Loan B (1st Lien)
Loan
6M USD LIBOR+
4.50
%
1.00
%
5.50
%
8/17/2022
1,436,782
1,428,726
1,050,647
Crown Subsea Communications Holding Inc.
Construction & Building
Term Loan
Loan
1M USD LIBOR+
6.00
%
0.00
%
6.18
%
11/3/2025
949,545
941,012
906,815
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B (03/17)
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
7/17/2025
1,969,543
1,948,342
1,892,239
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
1/15/2026
493,750
492,789
474,770
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B-5
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
4/15/2027
498,750
498,750
480,361
Cushman & Wakefield U.S. Borrower LLC
Construction & Building
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
8/21/2025
3,945,050
3,929,466
3,678,759
Daseke Companies Inc.
Transportation: Cargo
Replacement Term Loan
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.00
%
2/27/2024
1,950,705
1,942,527
1,576,014
Dealer Tire LLC
Automotive
Dealer Tire T/L B-1
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
12/12/2025
2,992,500
2,985,290
2,768,063
Delek US Holdings Inc.
Utilities: Oil & Gas
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
3/31/2025
6,429,673
6,365,806
5,530,869
Dell International L.L.C.
High Tech Industries
Term Loan B-1
Loan
1M USD LIBOR+
2.00
%
0.75
%
2.75
%
9/19/2025
3,804,870
3,800,748
3,732,425
Delta 2 (Lux) SARL
Hotel Gaming & Leisure
Term Loan B
Loan
1M USD LIBOR+
2.50
%
1.00
%
3.50
%
2/1/2024
1,318,289
1,316,053
1,240,840
Delta Air Lines Inc.
Transportation: Consumer
Term Loan B (4/20)
Loan
3M USD LIBOR+
4.75
%
1.00
%
5.75
%
4/27/2023
250,000
242,646
246,458
DHX Media Ltd.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
4.25
%
1.00
%
5.25
%
12/29/2023
279,282
278,127
252,052
Diamond Sports Group LLC
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
8/24/2026
3,470,000
2,878,355
2,971,188
Digital Room Holdings Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
6M USD LIBOR+
5.00
%
0.00
%
5.51
%
5/21/2026
2,977,500
2,940,328
2,173,575
Dole Food Company Inc.
Beverage Food & Tobacco
Term Loan B
Loan
1M USD LIBOR+
2.75
%
1.00
%
3.75
%
4/8/2024
465,625
464,315
454,664
DRW Holdings LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
11/27/2026
4,987,500
4,940,766
4,788,000
DynCorp International Inc.
Aerospace & Defense
Term Loan B
Loan
1M USD LIBOR+
6.00
%
1.00
%
7.00
%
8/18/2025
2,925,000
2,846,164
2,749,500
Eagletree-Carbide Acquisition Corp.
Consumer goods: Durable
Term Loan
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.25
%
8/28/2024
4,887,115
4,863,037
4,654,977
EIG Investors Corp.
High Tech Industries
Term Loan (06/18)
Loan
3M USD LIBOR+
3.75
%
1.00
%
4.75
%
2/9/2023
2,186,768
2,175,273
2,117,513
Encapsys LLC
Chemicals Plastics & Rubber
Term Loan B2
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.25
%
11/7/2024
496,142
491,791
467,614
Endo Luxembourg Finance Company I S.a.r.l.
Healthcare & Pharmaceuticals
Term Loan B (4/17)
Loan
1M USD LIBOR+
4.25
%
0.75
%
5.00
%
4/29/2024
3,926,930
3,906,672
3,664,572
Energy Acquisition LP
Capital Equipment
Term Loan (6/18)
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
6/26/2025
1,965,000
1,955,242
1,503,225
Envision Healthcare Corporation
Healthcare & Pharmaceuticals
Term Loan B (06/18)
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
10/10/2025
4,937,500
4,928,369
3,211,597
EyeCare Partners LLC
Healthcare & Pharmaceuticals
EyeCare Partners T/L B
Loan
6M USD LIBOR+
3.75
%
0.00
%
4.26
%
2/18/2027
1,621,622
1,619,987
1,475,676
EyeCare Partners LLC (a)
Healthcare & Pharmaceuticals
Unfunded Commitment
Loan
6M USD LIBOR+
3.75
%
0.00
%
4.26
%
2/18/2027
FinCo I LLC
Banking Finance Insurance & Real Estate
2018 Term Loan B
Loan
1M USD LIBOR+
2.00
%
0.00
%
2.18
%
12/27/2022
359,915
359,378
346,418
First Eagle Holdings Inc.
Banking Finance Insurance & Real Estate
Refinancing Term Loan
Loan
3M USD LIBOR+
2.50
%
0.00
%
2.84
%
2/1/2027
5,436,375
5,414,271
5,106,114
Fitness International LLC
Services: Consumer
Term Loan B (4/18)
Loan
6M USD LIBOR+
3.25
%
0.00
%
3.76
%
4/18/2025
1,330,058
1,323,314
743,795
Franklin Square Holdings L.P.
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
8/1/2025
4,432,497
4,404,023
4,244,116
Froneri US Inc.
Beverage Food & Tobacco
Term Loan B-2
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
1/29/2027
2,000,000
1,995,302
1,905,000
Fusion Connect Inc.
Telecommunications
Take Back 2nd Out Term Loan
Loan
3M USD LIBOR+
1.00
%
2.00
%
3.00
%
7/14/2025
771,131
751,777
501,235
GBT US LLC
Hotel Gaming & Leisure
Term Loan 2/20
Loan
3M USD LIBOR+
4.00
%
0.00
%
4.34
%
2/26/2027
2,993,363
2,933,497
2,544,358
GBT US LLC (a)
Hotel Gaming & Leisure
Delayed Term Loan (2/20)
Loan
3M USD LIBOR+
4.00
%
0.00
%
4.34
%
2/26/2027
General Nutrition Centers Inc.
Retail
FILO Term Loan
Loan
1M USD LIBOR+
7.00
%
0.00
%
7.18
%
1/3/2023
585,849
584,910
512,618
General Nutrition Centers Inc. (b)
Retail
Term Loan B2
Loan
2M USD LIBOR+
8.75
%
0.75
%
9.50
%
3/4/2021
852,377
852,151
584,825
Genesee & Wyoming Inc.
Transportation: Cargo
Term Loan (11/19)
Loan
3M USD LIBOR+
2.00
%
0.00
%
2.34
%
12/30/2026
1,500,000
1,492,967
1,465,980
GEO Group Inc. The
Banking Finance Insurance & Real Estate
Term Loan Refinance
Loan
1M USD LIBOR+
2.00
%
0.75
%
2.75
%
3/25/2024
3,994,859
3,630,078
3,516,115
GI Chill Acquisition LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
4.00
%
0.00
%
4.34
%
8/6/2025
2,462,500
2,452,780
2,216,250
GI Revelation Acquisition LLC
Services: Business
Term Loan
Loan
1M USD LIBOR+
5.00
%
0.00
%
5.18
%
4/16/2025
1,228,741
1,223,952
1,054,665
Gigamon Inc.
Services: Business
Term Loan B
Loan
6M USD LIBOR+
4.25
%
1.00
%
5.25
%
12/27/2024
2,952,600
2,931,537
2,804,970
Global Tel*Link Corporation
Telecommunications
Term Loan B
Loan
3M USD LIBOR+
4.25
%
0.00
%
4.59
%
11/28/2025
3,022,463
3,022,463
2,516,201
Go Wireless Inc.
Telecommunications
Term Loan
Loan
3M USD LIBOR+
6.50
%
1.00
%
7.50
%
12/22/2024
3,158,117
3,119,216
2,316,289
Goodyear Tire & Rubber Company The
Chemicals Plastics & Rubber
Second Lien Term Loan
Loan
3M USD LIBOR+
2.00
%
0.00
%
2.34
%
3/7/2025
3,000,000
2,922,576
2,805,000
Greenhill & Co. Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
4/12/2024
3,661,538
3,626,752
3,423,538
Grosvenor Capital Management Holdings LLLP
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.75
%
1.00
%
3.75
%
3/28/2025
660,340
657,827
637,228
Guidehouse LLP
Aerospace & Defense
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
5/1/2025
3,954,873
3,933,151
3,816,453
Harland Clarke Holdings Corp.
Media: Advertising Printing & Publishing
Term Loan
Loan
3M USD LIBOR+
4.75
%
1.00
%
5.75
%
11/3/2023
1,695,528
1,689,040
1,041,784
HD Supply Waterworks Ltd.
Construction & Building
Term Loan
Loan
3M USD LIBOR+
2.75
%
1.00
%
3.75
%
8/1/2024
487,500
486,692
466,172
Helix Acquisition Holdings Inc.
Capital Equipment
Term Loan (2019 Incremental)
Loan
3M USD LIBOR+
3.75
%
0.00
%
4.09
%
9/30/2024
2,970,000
2,920,543
2,494,800
Helix Gen Funding LLC
Energy: Electricity
Term Loan B (02/17)
Loan
1M USD LIBOR+
3.75
%
1.00
%
4.75
%
6/3/2024
264,030
263,720
254,541
HLF Financing SaRL LLC
Consumer goods: Non-durable
Term Loan B (08/18)
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
8/18/2025
3,940,000
3,925,846
3,848,080
Holley Purchaser Inc.
Automotive
Term Loan B
Loan
3M USD LIBOR+
5.00
%
0.00
%
5.34
%
10/24/2025
2,468,750
2,448,967
1,975,000
Hudson River Trading LLC
Banking Finance Insurance & Real Estate
Term Loan B (01/20)
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
2/18/2027
5,985,000
5,961,921
5,775,525
Hyperion Refinance S.a.r.l.
Banking Finance Insurance & Real Estate
Tem Loan (12/17)
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
12/20/2024
1,705,420
1,697,964
1,639,693
ICH US Intermediate Holdings II Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
6M USD LIBOR+
5.75
%
1.00
%
6.75
%
12/24/2026
4,937,500
4,748,836
4,674,183
Idera Inc.
High Tech Industries
Term Loan B
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.00
%
6/28/2024
3,927,080
3,913,747
3,698,014
Inmar Inc.
Services: Business
Term Loan B
Loan
6M USD LIBOR+
4.00
%
1.00
%
5.00
%
5/1/2024
3,448,179
3,373,498
2,982,675
Innophos Holdings Inc.
Chemicals Plastics & Rubber
Term Loan B
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
2/5/2027
500,000
497,607
479,585
Intrado Corporation
Telecommunications
Term Loan B
Loan
3M USD LIBOR+
3.50
%
1.00
%
4.50
%
10/10/2024
2,953,656
2,885,855
2,377,693
ION Media Networks Inc.
Media: Broadcasting & Subscription
Term Loan B
Loan
3M USD LIBOR+
3.00
%
0.00
%
3.34
%
12/18/2024
995,000
990,604
948,046
Isagenix International LLC
Beverage Food & Tobacco
Term Loan
Loan
3M USD LIBOR+
5.75
%
1.00
%
6.75
%
6/16/2025
2,758,021
2,714,401
999,783
Jane Street Group LLC
Banking Finance Insurance & Real Estate
Term Loan B (1/20)
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
1/31/2025
1,000,000
977,897
975,000
Jefferies Finance LLC / JFIN Co-Issuer Corp
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
6/3/2026
3,221,225
3,204,009
2,954,475
26
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/
Spread
x
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair
Value
Jill Holdings LLC
Retail
Term Loan (1st Lien)
Loan
3M USD LIBOR+
5.00
%
1.00
%
6.00
%
5/9/2022
1,794,987
1,791,984
1,136,819
JP Intermediate B LLC
Consumer goods: Non-durable
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.50
%
11/20/2025
4,624,326
4,580,021
2,913,325
KAR Auction Services Inc.
Automotive
Term Loan B (09/19)
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
9/21/2026
248,750
248,204
237,556
Kindred Healthcare Inc.
Healthcare & Pharmaceuticals
Term Loan (6/18)
Loan
1M USD LIBOR+
5.00
%
0.00
%
5.18
%
7/2/2025
1,994,937
1,975,551
1,879,390
Lakeland Tours LLC
Hotel Gaming & Leisure
Term Loan B
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.25
%
12/16/2024
2,451,229
2,444,616
1,210,907
Learfield Communications LLC
Media: Advertising Printing & Publishing
Initial Term Loan (A-L Parent)
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.25
%
12/1/2023
483,750
482,461
338,625
Lifetime Brands Inc.
Consumer goods: Non-durable
Term Loan B
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
2/28/2025
2,905,639
2,870,940
2,556,962
Lighthouse Network LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
6M USD LIBOR+
4.50
%
1.00
%
5.50
%
12/2/2024
4,118,558
4,105,606
3,624,331
Lightstone Holdco LLC
Energy: Electricity
Term Loan B
Loan
3M USD LIBOR+
3.75
%
1.00
%
4.75
%
1/30/2024
1,322,520
1,320,814
1,073,833
Lightstone Holdco LLC
Energy: Electricity
Term Loan C
Loan
3M USD LIBOR+
3.75
%
1.00
%
4.75
%
1/30/2024
74,592
74,500
60,566
Lindblad Expeditions Inc.
Hotel Gaming & Leisure
US 2018 Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
3/27/2025
393,000
392,318
314,400
Lindblad Expeditions Inc.
Hotel Gaming & Leisure
Cayman Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
3/27/2025
98,250
98,079
78,600
Liquidnet Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
6M USD LIBOR+
3.25
%
1.00
%
4.25
%
7/15/2024
2,088,642
2,084,101
1,832,784
LPL Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B1
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
11/11/2026
1,242,099
1,239,297
1,193,583
MA FinanceCo. LLC
High Tech Industries
Term Loan
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.25
%
5/29/2025
500,000
487,500
487,500
Marriott Ownership Resorts Inc.
Hotel Gaming & Leisure
Term Loan (11/19)
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
8/29/2025
1,496,250
1,496,250
1,410,216
Match Group Inc.
Services: Consumer
Term Loan (1/20)
Loan
3M USD LIBOR+
1.75
%
0.00
%
2.09
%
2/15/2027
250,000
249,425
243,125
McAfee LLC
Services: Business
Term Loan B
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
9/30/2024
1,151,419
1,142,444
1,131,270
McDermott International (Americas) Inc. (b)
Construction & Building
Term Loan B
Loan
Prime+
4.00
%
1.00
%
5.00
%
5/12/2025
1,965,000
1,933,938
670,065
McGraw-Hill Global Education Holdings LLC
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.00
%
5/4/2022
928,592
926,922
789,304
Meredith Corporation
Media: Advertising Printing & Publishing
Term Loan B2
Loan
3M USD LIBOR+
2.50
%
0.00
%
2.84
%
1/31/2025
578,738
577,776
557,758
Messer Industries GMBH
Chemicals Plastics & Rubber
Term Loan B
Loan
3M USD LIBOR+
2.50
%
0.00
%
2.84
%
3/2/2026
2,970,000
2,963,431
2,843,240
Michaels Stores Inc.
Retail
Term Loan B
Loan
3M USD LIBOR+
2.50
%
1.00
%
3.50
%
1/30/2023
2,591,749
2,583,984
2,248,343
Midwest Physician Administrative Services LLC
Healthcare & Pharmaceuticals
Term Loan (2/18)
Loan
1M USD LIBOR+
2.75
%
0.75
%
3.50
%
8/15/2024
968,433
965,064
889,990
Milk Specialties Company
Beverage Food & Tobacco
Term Loan (2/17)
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.00
%
8/16/2023
3,889,577
3,841,743
3,463,358
MKS Instruments Inc.
High Tech Industries
Term Loan B6
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
2/2/2026
885,063
877,576
858,511
MLN US HoldCo LLC
Telecommunications
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
11/28/2025
987,500
985,773
744,950
MRC Global (US) Inc.
Metals & Mining
Term Loan B2
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
9/20/2024
488,740
487,885
437,423
Natgasoline LLC
Chemicals Plastics & Rubber
Term Loan
Loan
6M USD LIBOR+
3.50
%
0.00
%
4.01
%
11/14/2025
493,750
491,812
474,000
National Mentor Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
3/9/2026
1,895,027
1,878,364
1,830,596
National Mentor Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan C
Loan
3M USD LIBOR+
4.25
%
0.00
%
4.59
%
3/9/2026
86,065
85,331
83,139
NeuStar Inc.
Telecommunications
Term Loan B4 (03/18)
Loan
6M USD LIBOR+
3.50
%
1.00
%
4.50
%
8/8/2024
2,954,545
2,913,787
2,512,280
NeuStar Inc.
Telecommunications
Term Loan B-5
Loan
3M USD LIBOR+
4.50
%
1.00
%
5.50
%
8/8/2024
990,000
973,946
849,549
Nexstar Broadcasting Inc.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
9/18/2026
240,156
239,075
231,002
NMI Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
3M USD LIBOR+
4.75
%
1.00
%
5.75
%
5/24/2023
3,446,137
3,448,371
3,239,369
NorthPole Newco S.a r.l
Aerospace & Defense
Term Loan
Loan
3M USD LIBOR+
7.00
%
0.00
%
7.34
%
3/3/2025
4,750,000
4,330,953
4,168,125
Novetta Solutions LLC
Aerospace & Defense
Term Loan
Loan
3M USD LIBOR+
5.00
%
1.00
%
6.00
%
10/17/2022
1,914,870
1,907,111
1,798,178
Novetta Solutions LLC
Aerospace & Defense
Second Lien Term Loan
Loan
3M USD LIBOR+
8.50
%
1.00
%
9.50
%
10/16/2023
1,000,000
994,639
940,000
NPC International Inc. (b)
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
4/19/2024
487,500
487,124
198,169
Octave Music Group Inc. The
Services: Business
Term Loan B
Loan
1M USD LIBOR+
5.25
%
0.00
%
5.43
%
5/29/2025
4,000,000
3,962,190
3,280,000
Onex Carestream Finance LP
High Tech Industries
Term Loan
Loan
3M USD LIBOR+
6.75
%
1.00
%
7.75
%
5/8/2023
2,359,150
2,354,156
2,194,010
Owens & Minor Distribution Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
4/30/2025
491,250
483,741
426,312
Patriot Container Corp.
Environmental Industries
Term Loan (3/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
4.50
%
3/20/2025
498,728
496,388
466,310
PCI Gaming Authority
Hotel Gaming & Leisure
Term Loan
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
5/29/2026
878,269
874,285
831,791
Peraton Corp.
Aerospace & Defense
Term Loan
Loan
2M USD LIBOR+
5.25
%
1.00
%
6.25
%
4/29/2024
2,441,173
2,432,426
2,343,527
PGX Holdings Inc. (b)
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
5.25
%
1.00
%
6.25
%
9/29/2020
3,458,472
3,454,413
1,867,575
PI UK Holdco II Limited
Services: Business
Term Loan B1 (PI UK Holdco II)
Loan
3M USD LIBOR+
3.25
%
1.00
%
4.25
%
1/3/2025
1,470,000
1,463,803
1,357,133
Pitney Bowes Inc.
Services: Business
Term Loan B
Loan
1M USD LIBOR+
5.50
%
0.00
%
5.68
%
1/7/2025
2,500,000
2,248,353
1,980,000
Pixelle Specialty Solutions LLC
Forest Products & Paper
Term Loan
Loan
1M USD LIBOR+
6.50
%
1.00
%
7.50
%
10/31/2024
1,987,374
1,950,136
1,775,718
Plastipak Packaging Inc.
Containers Packaging & Glass
Plastipak Packaging T/L B (04/18)
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
10/15/2024
2,944,583
2,922,086
2,845,821
Playtika Holding Corp.
High Tech Industries
Trm Loan B (12/19)
Loan
6M USD LIBOR+
6.00
%
1.00
%
7.00
%
12/10/2024
2,950,000
2,895,503
2,946,843
Polymer Process Holdings Inc
Containers Packaging & Glass
Term Loan
Loan
1M USD LIBOR+
6.00
%
0.00
%
6.18
%
4/30/2026
2,977,500
2,925,077
2,549,484
Presidio Holdings Inc.
Services: Business
Term Loan B (1/20)
Loan
3M USD LIBOR+
3.50
%
0.00
%
3.84
%
1/22/2027
500,000
498,908
484,065
Prime Security Services Borrower LLC
Services: Consumer
Term Loan (Protection One/ADT)
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.25
%
9/23/2026
2,985,000
2,968,866
2,905,718
Priority Payment Systems Holdings LLC
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
6.50
%
1.00
%
7.50
%
1/3/2023
2,466,349
2,456,581
1,973,079
Project Accelerate Parent LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.25
%
1/2/2025
1,960,000
1,953,063
1,553,300
Prometric Holdings Inc.
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.00
%
1/29/2025
490,050
488,344
416,543
Pug LLC
Services: Consumer
Term Loan B (02/20)
Loan
1M USD LIBOR+
3.50
%
0.00
%
3.68
%
2/12/2027
1,496,250
1,488,962
1,305,478
Rackspace Hosting Inc.
High Tech Industries
Term Loan B
Loan
3M USD LIBOR+
3.00
%
1.00
%
4.00
%
11/3/2023
1,472,279
1,464,781
1,430,613
Radiology Partners Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
4.25
%
0.00
%
4.59
%
7/9/2025
1,432,727
1,426,848
1,331,720
Research Now Group Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.50
%
12/20/2024
3,917,387
3,811,620
3,564,822
Resolute Investment Managers Inc.
Banking Finance Insurance & Real Estate
Term Loan (10/17)
Loan
3M USD LIBOR+
3.25
%
1.00
%
4.25
%
4/29/2022
2,673,167
2,674,366
2,549,533
Rexnord LLC
Capital Equipment
Term Loan (11/19)
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
8/21/2024
862,069
862,070
849,404
Reynolds Consumer Products LLC
Containers Packaging & Glass
Reynolds Consumer Products T/L
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
2/4/2027
1,500,000
1,498,177
1,470,945
RGIS Services LLC (b)
Services: Business
Term Loan
Loan
3M USD LIBOR+
7.50
%
1.00
%
8.50
%
3/31/2023
482,554
477,953
265,405
Robertshaw US Holding Corp.
Consumer goods: Durable
Term Loan B
Loan
6M USD LIBOR+
3.25
%
1.00
%
4.25
%
2/28/2025
980,000
978,136
773,896
Rocket Software Inc.
High Tech Industries
Term Loan (11/18)
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
11/28/2025
3,960,000
3,944,520
3,724,063
Russell Investments US Institutional Holdco Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
6M USD LIBOR+
2.75
%
1.00
%
3.75
%
6/1/2023
5,637,965
5,559,901
5,315,530
Sahara Parent Inc.
High Tech Industries
Term Loan B (11/18)
Loan
3M USD LIBOR+
6.25
%
0.00
%
6.59
%
8/16/2024
1,950,300
1,935,103
1,790,863
Sally Holdings LLC
Retail
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
7/5/2024
768,409
765,760
722,305
Sally Holdings LLC
Retail
Term Loan (Fixed)
Loan
Fixed
0.00
%
0.00
%
0.00
%
7/5/2024
1,000,000
996,979
945,000
27
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/
Spread
x
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair Value
Samsonite International S.A.
Consumer goods: Non-durable
Term Loan B2
Loan
1M USD LIBOR+
4.50
%
1.00
%
5.50
%
4/25/2025
1,000,000
970,000
969,580
Savage Enterprises LLC
Energy: Oil & Gas
Term Loan B (02/20)
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
8/1/2025
2,449,704
2,423,090
2,409,896
SCS Holdings I Inc.
High Tech Industries
Term Loan 1/20
Loan
1M USD LIBOR+
3.50
%
0.00
%
3.68
%
7/1/2026
1,985,025
1,980,734
1,932,918
Seadrill Operating LP
Energy: Oil & Gas
Term Loan B
Loan
3M USD LIBOR+
6.00
%
1.00
%
7.00
%
2/21/2021
902,649
892,542
142,916
Shutterfly Inc.
Media: Advertising Printing & Publishing
Term Loan B
Loan
3M USD LIBOR+
6.00
%
1.00
%
7.00
%
9/25/2026
870,968
830,571
767,323
SMB Shipping Logistics LLC
Transportation: Consumer
Term Loan B
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.00
%
2/2/2024
1,931,951
1,930,419
1,690,457
SMG US Midco 2 Inc.
Services: Business
Term Loan (01/20)
Loan
3M USD LIBOR+
2.50
%
0.00
%
2.84
%
1/23/2025
498,750
498,750
438,900
Sothebys
Services: Business
Term Loan
Loan
1M USD LIBOR+
5.50
%
1.00
%
6.50
%
1/15/2027
3,316,066
3,251,646
2,978,922
SP PF Buyer LLC
Consumer goods: Durable
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
4.68
%
12/19/2025
1,980,000
1,909,760
1,480,763
SRAM LLC
Consumer goods: Durable
Term Loan
Loan
6M USD LIBOR+
2.75
%
1.00
%
3.75
%
3/15/2024
1,762,897
1,756,175
1,701,196
SS&C European Holdings S.A.R.L.
Services: Business
Term Loan B4
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
4/16/2025
192,493
192,148
186,118
SS&C Technologies Inc.
Services: Business
Term Loan B3
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
4/16/2025
280,056
279,546
270,780
SS&C Technologies Inc.
Services: Business
Term Loan B-5
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
4/16/2025
492,422
491,466
476,359
Staples Inc.
Wholesale
Term Loan (03/19)
Loan
3M USD LIBOR+
5.00
%
0.00
%
5.34
%
4/16/2026
1,955,250
1,955,250
1,726,740
Stats Intermediate Holdings LLC
Hotel Gaming & Leisure
Term Loan
Loan
1M USD LIBOR+
5.25
%
0.00
%
5.43
%
7/10/2026
1,995,000
1,950,157
1,782,193
Steak N Shake Operations Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
3.75
%
1.00
%
4.75
%
3/19/2021
822,151
820,919
641,278
Sybil Software LLC
High Tech Industries
Term Loan B (4/18)
Loan
3M USD LIBOR+
2.25
%
1.00
%
3.25
%
9/29/2023
1,890,601
1,862,249
1,830,347
Teneo Holdings LLC
Banking Finance Insurance & Real Estate
Term Loan
Loan
3M USD LIBOR+
5.25
%
1.00
%
6.25
%
7/11/2025
2,487,500
2,399,481
2,263,625
Tenneco Inc.
Capital Equipment
Term Loan B
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
10/1/2025
1,481,250
1,469,552
1,186,541
Ten-X LLC
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.00
%
9/30/2024
1,955,000
1,953,155
1,752,169
Terex Corporation
Capital Equipment
Term Loan
Loan
3M USD LIBOR+
2.75
%
0.75
%
3.50
%
1/31/2024
990,000
986,353
960,300
TGG TS Acquisition Company
Media: Diversified & Production
Term Loan (12/18)
Loan
1M USD LIBOR+
6.50
%
0.00
%
6.68
%
12/15/2025
2,746,102
2,624,135
2,478,357
The Edelman Financial Center LLC
Banking Finance Insurance & Real Estate
Term Loan B (06/18)
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
7/21/2025
1,234,375
1,229,724
1,175,742
Thor Industries Inc.
Automotive
Term Loan (USD)
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
2/2/2026
2,965,878
2,895,389
2,854,658
Tivity Health Inc.
Healthcare & Pharmaceuticals
Term Loan A
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
3/8/2024
1,600,000
1,587,055
1,408,000
Tivity Health Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
5.25
%
0.00
%
5.43
%
3/6/2026
2,334,338
2,283,519
2,055,688
T-Mobile USA Inc.
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
4/1/2027
2,000,000
1,970,000
1,999,540
Transdigm Inc.
Aerospace & Defense
Term Loan G (02/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
8/22/2024
4,096,027
4,100,487
3,737,625
Travel Leaders Group LLC
Hotel Gaming & Leisure
Term Loan B (08/18)
Loan
1M USD LIBOR+
4.00
%
0.00
%
4.18
%
1/25/2024
2,456,250
2,453,261
1,473,750
TRC Companies Inc.
Services: Business
Term Loan
Loan
3M USD LIBOR+
3.50
%
1.00
%
4.50
%
6/21/2024
3,368,182
3,358,677
3,098,727
TRC Companies Inc.
Services: Business
Term Loan B
Loan
3M USD LIBOR+
5.00
%
1.00
%
6.00
%
6/21/2024
995,000
981,276
915,400
Trico Group LLC
Containers Packaging & Glass
Incremental Term Loan
Loan
3M USD LIBOR+
7.00
%
1.00
%
8.00
%
2/2/2024
4,696,562
4,591,232
4,344,320
Truck Hero Inc.
Transportation: Cargo
First Lien Term Loan
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
4/22/2024
2,919,937
2,904,610
2,649,843
Trugreen Limited Partnership
Services: Consumer
Term Loan (03/19)
Loan
1M USD LIBOR+
3.75
%
0.00
%
3.93
%
3/19/2026
978,924
970,466
943,438
Twin River Worldwide Holdings Inc.
Hotel Gaming & Leisure
Term Loan B
Loan
1M USD LIBOR+
2.75
%
0.00
%
2.93
%
5/11/2026
992,500
988,080
871,226
United Natural Foods Inc.
Beverage Food & Tobacco
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
4.43
%
10/22/2025
3,456,250
3,269,341
3,240,234
Univar Solutions Inc.
Chemicals Plastics & Rubber
Term Loan B3 (11/17)
Loan
3M USD LIBOR+
2.25
%
0.00
%
2.59
%
7/1/2024
1,627,723
1,622,294
1,581,430
Univision Communications Inc.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
2.75
%
1.00
%
3.75
%
3/15/2024
2,700,582
2,690,340
2,576,355
URS Holdco Inc.
Transportation: Cargo
Term Loan (10/17)
Loan
3M USD LIBOR+
5.75
%
1.00
%
6.75
%
8/30/2024
976,253
966,607
740,322
US Ecology Holdings Inc.
Environmental Industries
Term Loan B
Loan
1M USD LIBOR+
2.50
%
0.00
%
2.68
%
11/2/2026
498,750
497,679
490,022
VeriFone Systems Inc.
Banking Finance Insurance & Real Estate
Term Loan (7/18)
Loan
3M USD LIBOR+
4.00
%
0.00
%
4.34
%
8/20/2025
5,417,500
5,391,755
4,382,270
VFH Parent LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
3.00
%
0.00
%
3.18
%
3/2/2026
3,421,653
3,409,756
3,357,497
Victory Capital Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B (01/20)
Loan
3M USD LIBOR+
2.50
%
0.00
%
2.84
%
7/1/2026
1,891,235
1,851,368
1,826,611
Virtus Investment Partners Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.75
%
3.00
%
6/3/2024
2,826,626
2,826,194
2,755,960
Vistra Operations Company LLC
Utilities: Electric
2018 Incremental Term Loan
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
12/31/2025
924,960
924,142
905,304
Vizient Inc.
Healthcare & Pharmaceuticals
Term Loan B-6
Loan
1M USD LIBOR+
2.00
%
0.00
%
2.18
%
5/6/2026
495,000
494,002
475,819
VM Consolidated Inc.
Construction & Building
Term Loan B1 (02/20)
Loan
1M USD LIBOR+
3.25
%
0.00
%
3.43
%
2/28/2025
479,194
477,393
452,838
WeddingWire Inc.
Services: Consumer
Term Loan
Loan
3M USD LIBOR+
4.50
%
0.00
%
4.84
%
12/19/2025
3,950,000
3,943,221
3,634,000
West Corporation
Telecommunications
Term Loan B (Olympus Merger)
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.00
%
10/10/2024
1,234,217
1,164,698
1,001,086
Western Dental Services Inc.
Retail
Term Loan (12/18)
Loan
3M USD LIBOR+
5.25
%
1.00
%
6.25
%
6/30/2023
2,432,469
2,419,117
1,982,462
Western Digital Corporation
High Tech Industries
Term Loan B-4
Loan
1M USD LIBOR+
1.75
%
0.00
%
1.93
%
4/29/2023
903,135
886,707
883,564
Winter Park Intermediate Inc.
Automotive
Term Loan
Loan
6M USD LIBOR+
4.75
%
0.00
%
5.26
%
4/4/2025
1,979,938
1,962,682
1,722,546
Wirepath LLC
Consumer goods: Non-durable
Term Loan
Loan
6M USD LIBOR+
4.00
%
1.00
%
5.00
%
8/5/2024
2,947,637
2,925,682
2,248,487
WP CityMD Bidco LLC
Services: Consumer
Term Loan B
Loan
6M USD LIBOR+
4.50
%
1.00
%
5.50
%
8/13/2026
3,491,250
3,459,637
3,406,866
YS Garments LLC
Retail
Term Loan
Loan
3M USD LIBOR+
6.00
%
0.00
%
6.34
%
8/9/2024
1,925,000
1,909,867
1,694,000
Zekelman Industries Inc
Metals & Mining
Term Loan (01/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
2.43
%
1/25/2027
1,000,000
1,000,000
967,810
Zep Inc.
Chemicals Plastics & Rubber
Term Loan
Loan
6M USD LIBOR+
4.00
%
1.00
%
5.00
%
8/12/2024
2,437,500
2,429,338
1,969,037
Zest Acquisition Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
1M USD LIBOR+
3.50
%
0.00
%
3.68
%
3/14/2025
959,762
956,282
808,600
$
514,324,725
$
457,744,271
Number
of Shares
Cost
Fair Value
Cash and cash equivalents
U.S. Bank Money Market (c)
5,234,135
$
5,234,135
$
5,234,135
Total cash and cash equivalents
5,234,135
$
5,234,135
$
5,234,135
(a) All or a portion of this investment has an unfunded commitment as of May 31, 2020.
(b) As of May 31, 2020, the investment was in default and on non-accrual status.
(c) Included within cash and cash equivalents in Saratoga CLOs Statements of Assets and Liabilities as of May 31, 2020.
28
Table of Contents
LIBORLondon Interbank Offered Rate
1W USD LIBORThe 1 week USD LIBOR rate as of May 31, 2020 was 0.09%.
1M USD LIBORThe 1 month USD LIBOR rate as of May 31, 2020 was 0.18%.
2M USD LIBORThe 2 month USD LIBOR rate as of May 31, 2020 was 0.28%.
3M USD LIBORThe 3 month USD LIBOR rate as of May 31, 2020 was 0.34%.
6M USD LIBORThe 6 month USD LIBOR rate as of May 31, 2020 was 0.51%.
PrimeThe Prime Rate as of May 31, 2020 was 3.25%.
29
Table of Contents
Saratoga Investment Corp. CLO 2013-1, Ltd.
Schedule of Investments
February 29, 2020
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/Spread
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number of
Shares
Cost
Fair
Value
Education Management II LLC
Services: Consumer
Education Management II A-2 Preferred Shares
Equity
0.00
%
0.00
%
0.00
%
18,975
$
1,897,538
$
190
Education Management II LLC
Services: Consumer
Education Management II A-1 Preferred Shares
Equity
0.00
%
0.00
%
0.00
%
6,692
669,214
67
1011778 B.C. Unlimited Liability Company
Beverage Food & Tobacco
Term Loan B4
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
11/19/2026
$
500,000.00
498,790
491,665
24 Hour Fitness Worldwide Inc.
Services: Consumer
Term Loan (5/18)
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
5/30/2025
2,959,950
2,949,872
1,943,710
ABB Con-Cise Optical Group LLC
Consumer goods: Non-durable
Term Loan B
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.52
%
6/15/2023
2,081,927
2,062,239
1,969,149
ADMI Corp.
Services: Consumer
Term Loan B
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
4/30/2025
1,970,000
1,962,286
1,924,848
Advantage Sales & Marketing Inc.
Services: Business
First Lien Term Loan
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
7/23/2021
2,371,131
2,370,010
2,286,173
Advantage Sales & Marketing Inc.
Services: Business
Term Loan B Incremental
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
7/23/2021
489,950
485,523
470,352
Advisor Group Holdings Inc
Banking Finance Insurance & Real Estate
Term Loan (7/19)
Loan
1M USD LIBOR+
5.00
%
0.00
%
6.52
%
7/31/2026
500,000
498,753
486,875
Aegis Toxicology Sciences Corporation
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.96
%
5/9/2025
3,950,000
3,919,494
3,695,225
Agiliti Health Inc.
Healthcare & Pharmaceuticals
Term Loan (1/19)
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
1/5/2026
496,250
496,250
486,325
Agrofresh Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
4.75
%
1.00
%
6.27
%
7/30/2021
2,889,487
2,886,790
2,677,601
AI Convoy Bidco Limited
Aerospace & Defense
AI Convoy Bidco T/L B (USD)
Loan
3M USD LIBOR+
3.50
%
1.00
%
4.96
%
1/29/2027
1,500,000
1,492,500
1,483,125
AI Mistral (Luxembourg) Subco Sarl
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.52
%
3/11/2024
486,250
486,250
384,138
AIS Holdco LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
5.00
%
0.00
%
6.46
%
8/15/2025
2,421,875
2,411,617
2,228,125
Alchemy US Holdco 1 LLC
Metals & Mining
Term Loan
Loan
1M USD LIBOR+
5.50
%
0.00
%
7.02
%
10/10/2025
1,950,000
1,925,236
1,945,125
Alion Science and Technology Corporation
Aerospace & Defense
Term Loan B (1st Lien)
Loan
1M USD LIBOR+
4.50
%
1.00
%
6.02
%
8/19/2021
3,377,293
3,373,263
3,373,071
Allen Media LLC
Media: Advertising Printing & Publishing
Allen Media T/L B (1/20)
Loan
3M USD LIBOR+
5.50
%
0.00
%
6.96
%
2/10/2027
3,000,000
2,985,000
2,936,250
Altisource S.a r.l.
Banking Finance Insurance & Real Estate
Term Loan B (03/18)
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
4/3/2024
1,454,005
1,446,493
1,353,141
Altra Industrial Motion Corp.
Capital Equipment
Term Loan
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
10/1/2025
1,767,163
1,763,366
1,748,943
American Dental Partners Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.71
%
3/24/2023
990,000
982,019
982,575
American Greetings Corporation
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
4.50
%
1.00
%
6.02
%
4/5/2024
4,889,524
4,886,331
4,788,702
American Residential Services LLC
Services: Consumer
Term Loan B
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
6/30/2022
3,925,767
3,916,564
3,896,324
AmeriLife Group LLC
Banking Finance Insurance & Real Estate
AmeriLife T/L
Loan
3M USD LIBOR+
4.00
%
0.00
%
5.46
%
2/5/2027
838,710
836,613
832,419
AmeriLife Group LLC(a)
Banking Finance Insurance & Real Estate
Unfunded Commitment
Loan
3M USD LIBOR+
4.00
%
0.00
%
4.00
%
2/5/2027
Amex GBT (2/20) T/L
Banking Finance Insurance & Real Estate
Term Loan
Loan
3M USD LIBOR+
4.00
%
0.00
%
5.46
%
2/26/2027
2,993,363
2,933,496
2,926,012
Amex GBT 2/20 D/T/L(a)
Banking Finance Insurance & Real Estate
Unfunded Commitment
Loan
3M USD LIBOR+
4.00
%
0.00
%
5.46
%
2/26/2027
Amynta Agency Borrower Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
2/28/2025
3,462,357
3,425,731
3,224,320
Anastasia Parent LLC
Consumer goods: Non-durable
Term Loan
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
8/11/2025
987,500
983,508
759,141
Anchor Glass Container Corporation
Containers Packaging & Glass
Term Loan (07/17)
Loan
3M USD LIBOR+
2.75
%
1.00
%
4.21
%
12/7/2023
485,063
483,537
354,789
Api Group DE Inc
Services: Business
Term Loan B
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
10/1/2026
1,000,000
995,123
990,000
APLP Holdings Limited Partnership
Utilities
APLP Holdings T/L B (Atlantic Power)
Loan
1M USD LIBOR+
2.75
%
1.00
%
4.27
%
4/13/2023
2,000,000
2,000,000
1,977,500
Aramark Services Inc.
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
1/15/2027
1,500,000
1,498,209
1,484,070
Arctic Glacier U.S.A. Inc.
Beverage Food & Tobacco
Term Loan (3/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
3/20/2024
3,350,967
3,332,339
3,225,306
Aretec Group Inc.
Banking Finance Insurance & Real Estate
Term Loan (10/18)
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
10/1/2025
1,980,000
1,975,743
1,937,093
ASG Technologies Group Inc.
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
7/31/2024
488,775
487,107
476,556
AssetMark Financial Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
3M USD LIBOR+
3.00
%
0.00
%
4.46
%
11/14/2025
1,237,500
1,235,582
1,228,219
Astoria Energy LLC
Energy: Electricity
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
12/24/2021
1,391,552
1,385,662
1,384,595
Asurion LLC
Banking Finance Insurance & Real Estate
Term Loan B-4 (Replacement)
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
8/4/2022
1,876,925
1,872,057
1,853,069
Asurion LLC
Banking Finance Insurance & Real Estate
Term Loan B6
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
11/3/2023
492,773
489,808
485,381
Athenahealth Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
2/11/2026
1,985,000
1,950,006
1,970,113
Avaya Inc.
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
12/16/2024
3,169,156
3,138,355
3,010,698
Avison Young (Canada) Inc.
Services: Business
Term Loan
Loan
3M USD LIBOR+
5.00
%
0.00
%
6.46
%
1/30/2026
3,476,222
3,418,777
3,406,697
B&G Foods Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
10/10/2026
249,375
248,169
246,881
Ball Metalpack Finco LLC
Containers Packaging & Glass
Term Loan
Loan
3M USD LIBOR+
4.50
%
0.00
%
5.96
%
7/31/2025
3,944,937
3,928,266
3,432,096
Bausch Health Companies Inc.
Healthcare & Pharmaceuticals
Term Loan B (05/18)
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
6/2/2025
25,355
25,274
25,161
Berry Global Inc.
Chemicals Plastics & Rubber
Term Loan Y
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
7/1/2026
4,987,500
4,981,754
4,897,974
Blount International Inc.
Forest Products & Paper
Term Loan B (09/18)
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
4/12/2023
3,453,781
3,450,952
3,432,195
Blucora Inc.
Services: Consumer
Term Loan (11/17)
Loan
2M USD LIBOR+
3.00
%
1.00
%
4.50
%
5/22/2024
955,900
953,639
946,341
Bombardier Recreational Products Inc.
Consumer goods: Durable
Term Loan (1/20)
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
5/24/2027
995,000
985,847
978,214
Boxer Parent Company Inc.
Services: Business
Term Loan
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
10/2/2025
2,475,000
2,454,363
2,374,070
Bracket Intermediate Holding Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
4.25
%
0.00
%
5.71
%
9/5/2025
987,500
983,437
987,500
Broadstreet Partners Inc.
Banking Finance Insurance & Real Estate
Term Loan B3
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
1/27/2027
2,024,614
2,022,736
2,002,687
Brookfield WEC Holdings Inc.
Energy: Electricity
Term Loan 1/20
Loan
1M USD LIBOR+
3.00
%
0.75
%
4.52
%
8/1/2025
497,487
496,370
488,627
Buckeye Partners L.P.
Utilities: Oil & Gas
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
11/2/2026
1,000,000
995,334
989,170
BW Gas & Convenience Holdings LLC
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
6.25
%
0.00
%
7.77
%
11/18/2024
3,000,000
2,884,283
2,992,500
Calceus Acquisition Inc.
Consumer goods: Non-durable
Term Loan B
Loan
1M USD LIBOR+
5.50
%
0.00
%
7.02
%
2/12/2025
975,000
964,353
964,031
Callaway Golf Company
Retail
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
1/2/2026
697,500
684,758
696,196
CareerBuilder LLC
Services: Business
Term Loan
Loan
1M USD LIBOR+
6.75
%
1.00
%
8.27
%
7/31/2023
2,266,211
2,232,341
2,223,720
CareStream Health Inc.
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
6.25
%
1.00
%
7.77
%
2/28/2021
2,362,278
2,356,691
2,263,062
Casa Systems Inc.
Telecommunications
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
12/20/2023
1,455,000
1,446,052
1,236,750
Castle US Holding Corporation
High Tech Industries
Term Loan B (USD)
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
1/27/2027
500,000
497,509
475,000
CCS-CMGC Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
0.00
%
6.96
%
10/1/2025
2,475,000
2,453,876
2,338,875
Cengage Learning Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
4.25
%
1.00
%
5.77
%
6/7/2023
1,447,458
1,435,195
1,329,447
30
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/Spread
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair
Value
CenturyLink Inc.
Telecommunications
Term Loan B (1/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
3/15/2027
3,000,000
2,996,438
2,922,180
C1itadel Securities LP
Banking Finance Insurance & Real Estate
Term Loan (2/20)
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
2/27/2026
992,500
991,371
983,816
Clarios Global LP
Automotive
Term Loan B
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
4/30/2026
1,496,250
1,482,216
1,451,991
Compass Power Generation L.L.C.
Utilities: Electric
Term Loan B (08/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
12/20/2024
1,891,221
1,886,758
1,855,761
Compuware Corporation
High Tech Industries
Term Loan (08/18)
Loan
1M USD LIBOR+
4.00
%
0.00
%
5.52
%
8/22/2025
495,000
493,979
493,763
Concordia International Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.96
%
9/6/2024
1,183,650
1,131,380
1,088,224
Connect U.S. Finco LLC
Telecommunications
Delayed Draw Term Loan B
Loan
1M USD LIBOR+
4.50
%
1.00
%
6.02
%
12/11/2026
2,000,000
1,984,055
1,980,000
Consolidated Communications Inc.
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.52
%
10/5/2023
1,475,404
1,464,720
1,395,481
Coral-US Co-Borrower LLC
Telecommunications
Term Loan B-5
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
1/31/2028
2,000,000
2,000,000
1,976,660
Covia Holdings Corporation
Metals & Mining
Term Loan
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
6/2/2025
985,000
985,000
711,663
CPI Acquisition Inc
Banking Finance Insurance & Real Estate
Term Loan B (1st Lien)
Loan
6M USD LIBOR+
4.50
%
1.00
%
5.90
%
8/17/2022
1,436,782
1,427,762
1,089,957
Crown Subsea Communications Holding Inc
Construction & Building
Term Loan
Loan
1M USD LIBOR+
6.00
%
0.00
%
7.52
%
11/3/2025
1,655,837
1,640,398
1,649,627
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B (03/17)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
7/17/2025
1,974,620
1,952,260
1,941,308
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B-5
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
4/15/2027
500,000
500,000
492,500
CSC Holdings LLC
Media: Broadcasting & Subscription
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
1/15/2026
495,000
493,968
486,031
Cushman & Wakefield U.S. Borrower LLC
Construction & Building
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
8/21/2025
3,945,050
3,928,487
3,874,789
Daseke Companies Inc.
Transportation: Cargo
Replacement Term Loan
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.52
%
2/27/2024
1,955,694
1,946,628
1,867,688
DaVita Inc.
High Tech Industries
Term Loan B-1
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
8/12/2026
997,500
995,133
985,859
Dealer Tire LLC
Automotive
Dealer Tire T/L B-1
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
12/12/2025
3,000,000
2,992,500
2,977,500
Delek US Holdings Inc.
Utilities: Oil & Gas
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
3/31/2025
6,446,003
6,379,073
6,317,083
Dell International L.L.C.
High Tech Industries
Term Loan B-1
Loan
1M USD LIBOR+
2.00
%
0.75
%
3.52
%
9/19/2025
3,814,430
3,809,967
3,766,292
Delta 2 (Lux) SARL
Hotel Gaming & Leisure
Term Loan B
Loan
1M USD LIBOR+
2.50
%
1.00
%
4.02
%
2/1/2024
1,318,289
1,315,922
1,275,445
DHX Media Ltd.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
4.25
%
1.00
%
5.77
%
12/29/2023
279,282
278,012
267,413
Diamond Sports Group LLC
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
8/24/2026
997,500
992,773
907,725
Digital Room Holdings Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
5.00
%
0.00
%
6.52
%
5/21/2026
2,985,000
2,944,957
2,790,975
Dole Food Company Inc.
Beverage Food & Tobacco
Term Loan B
Loan
1M USD LIBOR+
2.75
%
1.00
%
4.27
%
4/8/2024
468,750
467,304
461,522
DRW Holdings LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
11/27/2026
5,000,000
4,950,804
4,962,500
DynCorp International Inc.
Aerospace & Defense
Term Loan B
Loan
1M USD LIBOR+
6.00
%
1.00
%
7.52
%
8/18/2025
2,962,500
2,879,096
2,925,469
Eagletree-Carbide Acquisition Corp.
Consumer goods: Durable
Term Loan
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.71
%
8/28/2024
4,927,385
4,901,606
4,804,200
EIG Investors Corp.
High Tech Industries
Term Loan (06/18)
Loan
3M USD LIBOR+
3.75
%
1.00
%
5.21
%
2/9/2023
2,199,416
2,186,449
2,160,926
Encapsys LLC
Chemicals Plastics & Rubber
Term Loan B2
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
11/7/2024
497,428
492,831
491,832
Endo Luxembourg Finance Company I S.a.r.l.
Healthcare & Pharmaceuticals
Term Loan B (4/17)
Loan
1M USD LIBOR+
4.25
%
0.75
%
5.77
%
4/29/2024
3,937,025
3,914,795
3,766,985
Energy Acquisition LP
Capital Equipment
Term Loan (6/18)
Loan
3M USD LIBOR+
4.25
%
0.00
%
5.71
%
6/26/2025
1,970,000
1,957,901
1,811,179
Envision Healthcare Corporation
Healthcare & Pharmaceuticals
Term Loan B (06/18)
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
10/10/2025
4,950,000
4,939,709
3,966,188
EyeCare Partners LLC
Healthcare & Pharmaceuticals
EyeCare Partners T/L B
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
2/5/2027
1,621,622
1,619,618
1,583,789
EyeCare Partners LLC(a)
Healthcare & Pharmaceuticals
EyeCare Partners Delayed Draw Term Loan
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
2/5/2027
FinCo I LLC
Banking Finance Insurance & Real Estate
2018 Term Loan B
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
12/27/2022
360,538
359,905
356,752
First Eagle Holdings Inc.
Banking Finance Insurance & Real Estate
Refinancing Term Loan
Loan
3M USD LIBOR+
2.50
%
0.00
%
3.96
%
2/1/2027
5,450,000
5,426,720
5,338,275
Fitness International LLC
Services: Consumer
Term Loan B (4/18)
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
4/18/2025
1,330,058
1,322,900
1,312,103
Franklin Square Holdings L.P.
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
8/1/2025
4,443,748
4,414,007
4,421,530
Froneri International Ltd
Beverage Food & Tobacco
Term Loan B-2
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
1/29/2027
2,000,000
1,995,162
1,962,500
Fusion Connect Inc.
Telecommunications
Exit Term Loan (1/20)
Loan
3M USD LIBOR+
9.50
%
2.00
%
11.50
%
1/14/2025
1,500,000
1,470,716
1,495,005
Fusion Connect Inc.
Telecommunications
Take Back 2nd Out Term Loan
Loan
6M USD LIBOR+
8.00
%
2.00
%
10.00
%
7/14/2025
757,724
737,560
527,883
GBT Group Services B.V.
Hotel Gaming & Leisure
Term Loan
Loan
3M USD LIBOR+
2.50
%
0.00
%
3.96
%
8/13/2025
4,443,750
4,442,729
4,410,422
GC EOS Buyer Inc.
Automotive
Term Loan B (06/18)
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
8/1/2025
2,962,500
2,940,820
2,888,438
General Nutrition Centers Inc.
Retail
Term Loan B2
Loan
3M USD LIBOR+
8.75
%
0.75
%
10.21
%
3/4/2021
930,446
929,986
856,010
General Nutrition Centers Inc.
Retail
FILO Term Loan
Loan
1M USD LIBOR+
7.00
%
0.00
%
8.52
%
1/3/2023
585,849
584,748
583,505
Genesee & Wyoming Inc.
Transportation: Cargo
Term Loan (11/19)
Loan
3M USD LIBOR+
2.00
%
0.00
%
3.46
%
12/30/2026
1,500,000
1,492,771
1,489,380
GEO Group Inc. The
Banking Finance Insurance & Real Estate
Term Loan Refinance
Loan
1M USD LIBOR+
2.00
%
0.75
%
3.52
%
3/25/2024
2,000,000
1,911,214
1,846,260
GI Chill Acquisition LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
4.00
%
0.00
%
5.46
%
8/6/2025
2,468,750
2,458,492
2,450,234
GI Revelation Acquisition LLC
Services: Business
Term Loan
Loan
1M USD LIBOR+
5.00
%
0.00
%
6.52
%
4/16/2025
1,231,867
1,226,730
1,155,652
Gigamon Inc.
Services: Business
Term Loan B
Loan
1M USD LIBOR+
4.25
%
1.00
%
5.77
%
12/27/2024
2,960,000
2,937,550
2,952,600
Global Tel*Link Corporation
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
11/28/2025
3,039,750
3,039,750
2,886,668
Go Wireless Inc.
Telecommunications
Term Loan
Loan
1M USD LIBOR+
6.50
%
1.00
%
8.02
%
12/22/2024
3,202,597
3,161,265
3,005,093
Goodyear Tire & Rubber Company The
Chemicals Plastics & Rubber
Second Lien Term Loan
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
3/7/2025
2,000,000
2,000,000
1,950,000
Greenhill & Co. Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
4/12/2024
3,661,538
3,624,459
3,644,769
Grosvenor Capital Management Holdings LLLP
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.75
%
1.00
%
4.27
%
3/28/2025
898,530
894,831
898,530
Guidehouse LLP
Aerospace & Defense
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
5/1/2025
3,964,937
3,941,954
3,895,550
Harland Clarke Holdings Corp.
Media: Advertising Printing & Publishing
Term Loan
Loan
3M USD LIBOR+
4.75
%
1.00
%
6.21
%
11/3/2023
1,723,072
1,715,720
1,356,919
HD Supply Waterworks Ltd.
Construction & Building
Term Loan
Loan
3M USD LIBOR+
2.75
%
1.00
%
4.21
%
8/1/2024
488,750
487,883
481,419
Helix Acquisition Holdings Inc.
Capital Equipment
Term Loan (2019 Incremental)
Loan
3M USD LIBOR+
3.75
%
0.00
%
5.21
%
9/30/2024
2,977,500
2,925,219
2,754,188
Helix Gen Funding LLC
Energy: Electricity
Term Loan B (02/17)
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
6/3/2024
264,030
263,694
253,799
HLF Financing SaRL LLC
Consumer goods: Non-durable
Term Loan B (08/18)
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
8/18/2025
3,950,000
3,935,111
3,883,364
Holley Purchaser Inc.
Automotive
Term Loan B
Loan
3M USD LIBOR+
5.00
%
0.00
%
6.46
%
10/24/2025
2,475,000
2,454,070
2,301,750
Hudson River Trading LLC
Banking Finance Insurance & Real Estate
Term Loan B (01/20)
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
2/18/2027
6,000,000
5,975,621
5,955,000
Hyperion Refinance S.a.r.l.
Banking Finance Insurance & Real Estate
Tem Loan (12/17)
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
12/20/2024
1,709,781
1,701,824
1,691,623
ICH US Intermediate Holdings II Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
3M USD LIBOR+
5.75
%
1.00
%
7.21
%
12/24/2026
5,000,000
4,803,288
4,875,000
Idera Inc.
High Tech Industries
Term Loan B
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
6/28/2024
2,939,742
2,919,274
2,917,694
Informatica LLC
High Tech Industries
Term Loan B (02/20)
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
2/25/2027
500,000
497,500
489,375
Inmar Inc.
Services: Business
Term Loan B
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
5/1/2024
3,457,043
3,377,774
3,320,939
Innophos Holdings Inc
Chemicals Plastics & Rubber
Term Loan B
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
2/4/2027
500,000
497,521
496,250
31
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/Spread
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair
Value
ION Media Networks Inc.
Media: Broadcasting & Subscription
Term Loan B
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
12/18/2024997,500992,818982,538
Isagenix International LLC
Beverage Food & Tobacco
Term Loan
Loan
3M USD LIBOR+
5.75
%
1.00
%
7.21
%
6/16/2025
2,796,876
2,750,718
1,118,750
Jefferies Finance LLC / JFIN Co-Issuer Corp
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
6/3/2026
3,229,359
3,211,489
3,172,846
Jill Holdings LLC
Retail
Term Loan (1st Lien)
Loan
3M USD LIBOR+
5.00
%
1.00
%
6.46
%
5/9/2022
1,800,290
1,796,697
1,458,235
JP Intermediate B LLC
Consumer goods: Non-durable
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.96
%
11/20/2025
4,687,500
4,640,380
2,499,984
KAR Auction Services Inc.
Automotive
Term Loan B (09/19)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
9/19/2026
249,375
248,789
247,505
Kindred Healthcare Inc.
Healthcare & Pharmaceuticals
Kindred Healthcare T/L (6/18)
Loan
1M USD LIBOR+
5.00
%
0.00
%
6.52
%
7/2/2025
2,000,000
1,980,000
1,975,000
Lakeland Tours LLC
Hotel Gaming & Leisure
Term Loan B
Loan
3M USD LIBOR+
4.25
%
1.00
%
5.71
%
12/16/2024
2,457,482
2,450,618
2,248,596
Lannett Company Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
5.38
%
1.00
%
6.89
%
11/25/2022
2,379,293
2,356,101
2,343,175
Learfield Communications LLC
Media: Advertising Printing & Publishing
Initial Term Loan (A-L Parent)
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
12/1/2023
485,000
483,577
439,531
Lifetime Brands Inc.
Consumer goods: Non-durable
Term Loan B
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
2/28/2025
2,992,386
2,955,090
2,857,728
Lighthouse Network LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
4.50
%
1.00
%
6.02
%
12/2/2024
4,129,092
4,115,428
4,123,930
Lightstone Holdco LLC
Energy: Electricity
Term Loan B
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
1/30/2024
1,322,520
1,320,692
1,164,651
Lightstone Holdco LLC
Energy: Electricity
Term Loan C
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
1/30/2024
74,592
74,493
65,688
Lindblad Expeditions Inc.
Hotel Gaming & Leisure
US 2018 Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
3/27/2025
394,000
393,227
390,060
Lindblad Expeditions Inc.
Hotel Gaming & Leisure
Cayman Term Loan
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
3/27/2025
98,500
98,307
97,515
Liquidnet Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
7/15/2024
2,131,268
2,126,212
2,093,970
LPL Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B1
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
11/11/2026
1,245,213
1,242,233
1,243,133
Marriott Ownership Resorts Inc.
Hotel Gaming & Leisure
Term Loan (11/19)
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
3/12/2026
1,500,000
1,500,000
1,432,500
Match Group Inc.
Services: Consumer
Term Loan (1/20)
Loan
3M USD LIBOR+
1.75
%
0.00
%
3.21
%
2/5/2027
250,000
249,377
248,438
McAfee LLC
Services: Business
Term Loan B
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
9/30/2024
3,159,418
3,131,317
3,136,165
McDermott International (Americas) Inc.(b)
Construction & Building
Term Loan B
Loan
3M USD LIBOR+
5.00
%
1.00
%
6.46
%
5/12/2025
1,965,000
1,933,938
1,126,928
McGraw-Hill Global Education Holdings LLC
Media: Advertising Printing & Publishing
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
5/4/2022
956,813
954,867
897,807
Meredith Corporation
Media: Advertising Printing & Publishing
Term Loan B2
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
1/31/2025
578,738
577,724
572,227
Messer Industries GMBH
Chemicals Plastics & Rubber
Term Loan B
Loan
3M USD LIBOR+
2.50
%
0.00
%
3.96
%
3/2/2026
2,977,500
2,970,753
2,917,950
Michaels Stores Inc.
Retail
Term Loan B
Loan
1M USD LIBOR+
2.50
%
1.00
%
4.02
%
1/30/2023
2,599,163
2,590,493
2,393,387
Midwest Physician Administrative Services LLC
Healthcare & Pharmaceuticals
Term Loan (2/18)
Loan
1M USD LIBOR+
2.75
%
0.75
%
4.27
%
8/15/2024
970,910
967,282
951,492
Milk Specialties Company
Beverage Food & Tobacco
Term Loan (2/17)
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
8/16/2023
3,899,905
3,848,164
3,696,798
MKS Instruments Inc.
High Tech Industries
Term Loan B6
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
2/2/2026
887,425
879,526
875,001
MLN US HoldCo LLC
Telecommunications
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
11/28/2025
990,000
988,165
932,144
MRC Global (US) Inc.
Metals & Mining
Term Loan B2
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
9/20/2024
490,000
489,047
477,750
NAI Entertainment Holdings LLC
Hotel Gaming & Leisure
Term Loan B
Loan
1M USD LIBOR+
2.50
%
1.00
%
4.02
%
5/8/2025
870,833
869,104
855,594
Natgasoline LLC
Chemicals Plastics & Rubber
Term Loan
Loan
6M USD LIBOR+
3.50
%
0.00
%
4.90
%
11/14/2025
495,000
492,907
491,288
National Mentor Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
1M USD LIBOR+
4.00
%
0.00
%
5.52
%
3/9/2026
1,881,215
1,864,059
1,871,809
National Mentor Holdings Inc.
Healthcare & Pharmaceuticals
Term Loan C
Loan
1M USD LIBOR+
4.00
%
0.00
%
5.52
%
3/9/2026
104,662
103,730
104,139
NeuStar Inc.
Telecommunications
Term Loan B4 (03/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
8/8/2024
2,962,121
2,918,947
2,688,125
NeuStar Inc.
Telecommunications
Term Loan B-5
Loan
1M USD LIBOR+
4.50
%
1.00
%
6.02
%
8/8/2024
992,500
975,477
959,311
Nexstar Broadcasting Inc.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
9/18/2026
249,375
248,222
247,298
NMI Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
4.75
%
1.00
%
6.27
%
5/23/2023
3,454,906
3,457,271
3,420,357
NorthPole Newco S.a r.l
Aerospace & Defense
Term Loan
Loan
3M USD LIBOR+
7.00
%
0.00
%
8.46
%
3/3/2025
4,812,500
4,371,041
4,162,813
Novetta Solutions LLC
Aerospace & Defense
Term Loan
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.52
%
10/17/2022
1,919,870
1,911,097
1,878,478
Novetta Solutions LLC
Aerospace & Defense
Second Lien Term Loan
Loan
1M USD LIBOR+
8.50
%
1.00
%
10.02
%
10/16/2023
1,000,000
994,137
973,750
NPC International Inc.(b)
Beverage Food & Tobacco
Term Loan
Loan
3M USD LIBOR+
3.50
%
1.00
%
4.96
%
4/19/2024
487,500
487,124
237,544
Octave Music Group Inc. The
Services: Business
Term Loan B
Loan
2M USD LIBOR+
5.25
%
1.00
%
6.75
%
5/29/2025
5,000,000
4,950,000
4,937,500
Office Depot Inc.
Retail
Term Loan B
Loan
1M USD LIBOR+
5.25
%
1.00
%
6.77
%
11/8/2022
2,456,367
2,445,611
2,464,547
Owens & Minor Distribution Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
4/30/2025
492,500
484,678
413,700
Patriot Container Corp.
Environmental Industries
Term Loan (3/18)
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
3/20/2025
500,000
497,500
492,500
PCI Gaming Authority
Hotel Gaming & Leisure
Term Loan
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
5/29/2026
878,269
874,086
871,682
Peraton Corp.
Aerospace & Defense
Term Loan
Loan
2M USD LIBOR+
5.25
%
1.00
%
6.75
%
4/29/2024
2,447,449
2,437,345
2,386,263
PGX Holdings Inc.
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
5.25
%
1.00
%
6.77
%
9/29/2020
3,564,650
3,555,767
1,782,325
PI UK Holdco II Limited
Services: Business
Term Loan B1 (PI UK Holdco II)
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
1/3/2025
1,473,750
1,467,204
1,449,802
Pixelle Specialty Solutions LLC
Forest Products & Paper
Term Loan
Loan
1M USD LIBOR+
6.50
%
1.00
%
8.02
%
10/31/2024
2,000,000
1,960,340
1,953,120
Plastipak Packaging Inc
Containers Packaging & Glass
Plastipak Packaging T/L B (04/18)
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
10/15/2024
2,944,583
2,921,203
2,885,691
Playtika Holding Corp.
High Tech Industries
Trm Loan B (12/19)
Loan
1M USD LIBOR+
6.00
%
1.00
%
7.52
%
12/10/2024
4,000,000
3,922,736
3,988,760
Polymer Process Holdings Inc
Containers Packaging & Glass
Term Loan
Loan
1M USD LIBOR+
6.00
%
0.00
%
7.52
%
4/30/2026
2,985,000
2,930,303
2,921,569
Presidio Inc.
Services: Business
Term Loan B (1/20)
Loan
3M USD LIBOR+
3.50
%
0.00
%
4.96
%
1/22/2027
500,000
498,787
495,000
Prime Security Services Borrower LLC
Services: Consumer
Term Loan (Protection One/ADT)
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
9/23/2026
2,992,500
2,975,658
2,905,717
Priority Payment Systems Holdings LLC
High Tech Industries
Term Loan
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.52
%
1/3/2023
2,472,719
2,462,039
2,404,720
Project Accelerate Parent LLC
Services: Business
Term Loan
Loan
1M USD LIBOR+
4.25
%
1.00
%
5.77
%
1/2/2025
1,965,000
1,957,491
1,940,438
Prometric Holdings Inc.
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
3.00
%
1.00
%
4.52
%
1/29/2025
491,288
489,418
473,478
Pug LLC
Services: Consumer
Pug T/L B (02/20)
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
2/12/2027
1,500,000
1,492,500
1,395,000
Rackspace Hosting Inc.
High Tech Industries
Term Loan B
Loan
3M USD LIBOR+
3.00
%
1.00
%
4.46
%
11/3/2023
1,476,064
1,467,715
1,403,486
Radio Systems Corporation
Consumer goods: Durable
Term Loan
Loan
2M USD LIBOR+
2.75
%
1.00
%
4.25
%
5/2/2024
1,462,500
1,462,500
1,449,703
Radiology Partners Inc.
Healthcare & Pharmaceuticals
Term Loan
Loan
2M USD LIBOR+
4.25
%
0.00
%
5.75
%
7/9/2025
1,432,727
1,426,403
1,413,386
Research Now Group Inc.
Media: Advertising Printing & Publishing
Term Loan
Loan
3M USD LIBOR+
5.50
%
1.00
%
6.96
%
12/20/2024
3,927,406
3,816,352
3,868,494
Resolute Investment Managers Inc.
Banking Finance Insurance & Real Estate
Term Loan (10/17)
Loan
3M USD LIBOR+
3.25
%
1.00
%
4.71
%
4/29/2022
2,680,466
2,681,757
2,673,765
Rexnord LLC
Capital Equipment
Term Loan (11/19)
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
8/21/2024
862,069
862,069
858,431
Reynolds Consumer Products Inc.
Containers Packaging & Glass
Reynolds Consumer Products T/L
Loan
3M USD LIBOR+
1.75
%
0.00
%
3.21
%
2/4/2027
1,500,000
1,498,128
1,483,875
RGIS Services LLC
Services: Business
Term Loan
Loan
3M USD LIBOR+
7.50
%
1.00
%
8.96
%
3/31/2023
482,554
477,839
421,994
Robertshaw US Holding Corp.
Consumer goods: Durable
Term Loan B
Loan
1M USD LIBOR+
3.25
%
1.00
%
4.77
%
2/28/2025
982,500
980,484
884,250
Rocket Software Inc.
High Tech Industries
Term Loan (11/18)
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
11/28/2025
3,970,000
3,953,381
3,817,393
32
Table of Contents
Issuer Name
Industry
Asset Name
Asset
Type
Reference Rate/Spread
LIBOR
Floor
Current
Rate
(All In)
Maturity
Date
Principal/
Number
of Shares
Cost
Fair Value
Russell Investments US Institutional Holdco Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.75
%
1.00
%
4.27
%
6/1/20235,637,9655,554,2765,553,396
Sahara Parent Inc.
High Tech Industries
Term Loan B (11/18)
Loan
3M USD LIBOR+
6.25
%
0.00
%
7.71
%
8/16/2024
1,955,250
1,938,956
1,877,040
Sally Holdings LLC
Retail
Term Loan (Fixed)
Loan
1M USD LIBOR+
0.00
%
0.00
%
0.00
%
7/5/2024
1,000,000
996,778
980,000
Sally Holdings LLC
Retail
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
7/5/2024
768,409
765,606
753,041
Savage Enterprises LLC
Energy: Oil & Gas
Term Loan
Loan
1M USD LIBOR+
4.00
%
0.00
%
5.52
%
8/1/2025
3,284,831
3,247,280
3,270,049
SCS Holdings I Inc.
High Tech Industries
Term Loan 1/20
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
7/1/2026
1,990,000
1,985,537
1,976,329
Seadrill Operating LP
Energy: Oil & Gas
Term Loan B
Loan
3M USD LIBOR+
6.00
%
1.00
%
7.46
%
2/21/2021
905,168
891,491
288,359
Shutterfly Inc.
Media: Advertising Printing & Publishing
Term Loan B
Loan
3M USD LIBOR+
6.00
%
1.00
%
7.46
%
9/25/2026
870,968
829,352
827,968
SMB Shipping Logistics LLC
Transportation: Consumer
Term Loan B
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
2/2/2024
1,947,873
1,946,123
1,913,785
SMG US Midco 2 Inc.
Services: Business
Term Loan (01/20)
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
1/23/2025
500,000
500,000
495,000
Snacking Investment BidCo Pty Limited
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
12/18/2026
1,000,000
990,193
987,500
Sothebys
Services: Business
Term Loan
Loan
1M USD LIBOR+
5.50
%
1.00
%
7.02
%
1/15/2027
3,324,994
3,258,223
3,315,285
SP PF Buyer LLC
Consumer goods: Durable
Term Loan B
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
12/19/2025
1,985,000
1,911,678
1,801,388
SRAM LLC
Consumer goods: Durable
Term Loan
Loan
1M USD LIBOR+
2.75
%
1.00
%
3.72
%
3/15/2024
1,769,661
1,762,426
1,756,388
SS&C European Holdings S.A.R.L.
Services: Business
Term Loan B4
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
4/16/2025
199,839
199,466
196,841
SS&C Technologies Inc.
Services: Business
Term Loan B-5
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
4/16/2025
493,682
492,653
486,000
SS&C Technologies Inc.
Services: Business
Term Loan B3
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
4/16/2025
280,056
279,525
275,855
Staples Inc.
Wholesale
Term Loan (03/19)
Loan
1M USD LIBOR+
5.00
%
0.00
%
6.52
%
4/16/2026
1,960,188
1,960,188
1,928,334
Stats Intermediate Holdings LLC
Hotel Gaming & Leisure
Term Loan
Loan
6M USD LIBOR+
5.25
%
0.00
%
6.65
%
7/10/2026
2,000,000
1,953,068
1,920,000
Steak N Shake Operations Inc.
Beverage Food & Tobacco
Term Loan
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
3/19/2021
824,991
823,352
662,740
STG-Fairway Holdings LLC
Services: Business
STG Fairway T/L (First Advantage) (Fastball Merger
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
1/29/2027
500,000
497,500
496,040
Sybil Software LLC
High Tech Industries
Term Loan B (4/18)
Loan
3M USD LIBOR+
2.25
%
1.00
%
3.71
%
9/29/2023
263,565
262,651
261,918
Teneo Holdings LLC
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
5.25
%
1.00
%
6.77
%
7/11/2025
2,493,750
2,401,489
2,381,531
Tenneco Inc
Capital Equipment
Term Loan B
Loan
1M USD LIBOR+
3.00
%
0.00
%
4.52
%
10/1/2025
1,485,000
1,472,625
1,386,619
Ten-X LLC
Banking Finance Insurance & Real Estate
Term Loan
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
9/30/2024
1,960,000
1,958,142
1,927,327
Terex Corporation
Capital Equipment
Term Loan
Loan
1M USD LIBOR+
2.75
%
0.75
%
4.27
%
1/31/2024
992,500
988,635
991,567
TGG TS Acquisition Company
Media: Diversified & Production
Term Loan (12/18)
Loan
1M USD LIBOR+
6.50
%
0.00
%
8.02
%
12/15/2025
2,766,667
2,639,073
2,711,333
The Edelman Financial Center LLC
Banking Finance Insurance & Real Estate
Term Loan B (06/18)
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
7/21/2025
1,237,500
1,232,467
1,211,203
The Knot Worldwide Inc
Services: Consumer
Term Loan
Loan
1M USD LIBOR+
4.50
%
0.00
%
6.02
%
12/19/2025
3,960,000
3,952,856
3,890,700
Thor Industries Inc.
Automotive
Term Loan (USD)
Loan
2M USD LIBOR+
3.75
%
0.00
%
5.25
%
2/2/2026
2,031,203
2,018,102
2,000,735
Tivity Health Inc.
Healthcare & Pharmaceuticals
Term Loan B
Loan
1M USD LIBOR+
5.25
%
0.00
%
6.77
%
3/6/2026
2,334,338
2,281,664
2,209,288
Tivity Health Inc.
Healthcare & Pharmaceuticals
Term Loan A
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
3/8/2024
1,600,000
1,586,231
1,504,000
Transdigm Inc.
Aerospace & Defense
Term Loan G (02/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
8/22/2024
4,106,293
4,111,126
4,013,901
Travel Leaders Group LLC
Hotel Gaming & Leisure
Term Loan B (08/18)
Loan
1M USD LIBOR+
4.00
%
0.00
%
5.52
%
1/25/2024
2,462,500
2,458,773
2,410,172
TRC Companies Inc.
Services: Business
Term Loan
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
6/21/2024
3,376,818
3,366,553
3,250,188
TRC Companies Inc.
Services: Business
Term Loan B
Loan
1M USD LIBOR+
5.00
%
1.00
%
6.52
%
6/21/2024
997,500
982,926
980,044
Trico Group LLC
Containers Packaging & Glass
Incremental Term Loan
Loan
3M USD LIBOR+
7.00
%
1.00
%
8.46
%
2/2/2024
4,758,359
4,645,140
4,675,088
Truck Hero Inc.
Transportation: Cargo
First Lien Term Loan
Loan
1M USD LIBOR+
3.75
%
0.00
%
5.27
%
4/22/2024
2,927,444
2,910,795
2,874,984
Trugreen Limited Partnership
Services: Consumer
Term Loan (03/19)
Loan
1M USD LIBOR+
3.75
%
1.00
%
5.27
%
3/19/2026
981,396
972,628
981,396
Twin River Worldwide Holdings Inc.
Hotel Gaming & Leisure
Term Loan B
Loan
1M USD LIBOR+
2.75
%
0.00
%
4.27
%
5/11/2026
995,000
990,418
971,060
United Natural Foods Inc.
Beverage Food & Tobacco
Term Loan B
Loan
1M USD LIBOR+
4.25
%
0.00
%
5.77
%
10/22/2025
3,465,000
3,270,106
2,875,950
Univar Solutions Inc.
Chemicals Plastics & Rubber
Term Loan B3 (11/17)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
7/1/2024
1,627,723
1,621,989
1,603,307
Univision Communications Inc.
Media: Broadcasting & Subscription
Term Loan
Loan
1M USD LIBOR+
2.75
%
1.00
%
4.27
%
3/15/2024
2,746,369
2,735,251
2,634,565
URS Holdco Inc.
Transportation: Cargo
Term Loan (10/17)
Loan
1M USD LIBOR+
5.75
%
1.00
%
7.27
%
8/30/2024
984,169
973,856
821,778
US Ecology Inc.
Environmental Industries
Term Loan B
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
11/2/2026
500,000
498,859
496,250
VeriFone Systems Inc.
Banking Finance Insurance & Real Estate
Term Loan (7/18)
Loan
3M USD LIBOR+
4.00
%
0.00
%
5.46
%
8/20/2025
5,431,250
5,403,194
5,214,000
Verra Mobility Corp.
Construction & Building
Term Loan B1 (02/20)
Loan
1M USD LIBOR+
3.25
%
0.00
%
4.77
%
2/28/2025
491,250
489,331
483,881
VFH Parent LLC
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
3/2/2026
3,801,266
3,787,581
3,793,663
Victory Capital Holdings Inc.
Banking Finance Insurance & Real Estate
Term Loan B (01/20)
Loan
1M USD LIBOR+
2.50
%
0.00
%
4.02
%
7/1/2026
422,273
418,485
415,939
Virtus Investment Partners Inc.
Banking Finance Insurance & Real Estate
Term Loan B
Loan
1M USD LIBOR+
2.25
%
0.75
%
3.77
%
6/3/2024
3,218,500
3,217,979
3,213,479
Vistra Operations Company LLC
Utilities: Electric
2018 Incremental Term Loan
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
12/31/2025
927,500
926,595
919,094
Vizient Inc.
Healthcare & Pharmaceuticals
Term Loan B-6
Loan
1M USD LIBOR+
2.00
%
0.00
%
3.52
%
5/6/2026
496,250
495,208
491,600
VS Buyer T/L (Veeam Software)
High Tech Industries
Term Loan
Loan
3M USD LIBOR+
3.25
%
0.00
%
4.71
%
2/28/2027
1,000,000
1,000,000
986,250
Weight Watchers International Inc.
Services: Consumer
Term Loan B
Loan
3M USD LIBOR+
4.75
%
0.75
%
6.21
%
11/29/2024
1,670,130
1,645,266
1,665,955
West Corporation
Telecommunications
Term Loan B
Loan
1M USD LIBOR+
3.50
%
1.00
%
5.02
%
10/10/2024
2,961,172
2,889,546
2,319,573
West Corporation
Telecommunications
Term Loan B (Olympus Merger)
Loan
1M USD LIBOR+
4.00
%
1.00
%
5.52
%
10/10/2024
1,237,374
1,164,156
981,002
Western Dental Services Inc.
Retail
Term Loan (12/18)
Loan
1M USD LIBOR+
5.25
%
1.00
%
6.77
%
6/30/2023
2,438,722
2,424,403
2,444,819
Western Digital Corporation
High Tech Industries
Term Loan B-4
Loan
1M USD LIBOR+
1.75
%
0.00
%
3.27
%
4/29/2023
903,135
885,248
892,975
Winter Park Intermediate Inc.
Automotive
Term Loan
Loan
1M USD LIBOR+
4.75
%
0.00
%
6.27
%
4/4/2025
1,984,953
1,966,855
1,951,864
Wirepath LLC
Consumer goods: Non-durable
Term Loan
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
8/5/2024
2,955,118
2,931,790
2,766,730
WP CityMD Bidco LLC
Services: Consumer
Term Loan B
Loan
3M USD LIBOR+
4.50
%
1.00
%
5.96
%
8/13/2026
3,500,000
3,467,362
3,476,375
YS Garments LLC
Retail
Term Loan
Loan
1W USD LIBOR+
6.00
%
1.00
%
7.57
%
8/9/2024
1,937,500
1,921,365
1,908,438
Zekelman Industries Inc
Metals & Mining
Term Loan (01/20)
Loan
1M USD LIBOR+
2.25
%
0.00
%
3.77
%
1/19/2027
1,000,000
1,000,000
977,500
Zep Inc.
Chemicals Plastics & Rubber
Term Loan
Loan
3M USD LIBOR+
4.00
%
1.00
%
5.46
%
8/12/2024
2,443,750
2,434,999
1,840,461
Zest Acquisition Corp.
Healthcare & Pharmaceuticals
Term Loan
Loan
1M USD LIBOR+
3.50
%
0.00
%
5.02
%
3/14/2025
982,500
978,750
934,603
$
526,004,959
$
500,999,934
Number of Shares
Cost
Fair Value
Cash and cash equivalents
U.S. Bank Money Market (c)
9,081,041
$
9,081,041
$
9,081,041
Total cash and cash equivalents
9,081,041
$
9,081,041
$
9,081,041
33
Table of Contents
(a) All or a portion of this investment has an unfunded commitment as of February 29, 2020.
(b) As of February 29, 2020, the investment was in default and on non-accrual status.
(c) Included within cash and cash equivalents in Saratoga CLOs Statements of Assets and Liabilities as of February 29, 2020.
LIBORLondon Interbank Offered Rate
1W USD LIBORThe 1 week USD LIBOR rate as of February 29, 2020 was 1.57%.
1M USD LIBORThe 1 month USD LIBOR rate as of February 29, 2020 was 1.52%.
2M USD LIBORThe 2 month USD LIBOR rate as of February 29, 2020 was 1.50%.
3M USD LIBORThe 3 month USD LIBOR rate as of February 29, 2020 was 1.46%.
6M USD LIBORThe 6 month USD LIBOR rate as of February 29, 2020 was 1.40%.
PrimeThe Prime Rate as of February 29, 2020 was 4.75%.
34
Table of Contents
Note 5. Income Taxes
SIA-Avionte, Inc., SIA-GH, Inc., SIA-MAC, Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc., each 100% owned by the Company,
are each filing standalone C Corporation tax returns for federal and state purposes. As separately regarded entities for tax purposes, these entities are taxed at normal corporate rates. For tax purposes, any distributions by the entities to the
parent company would generally need to be distributed to the Companys shareholders. Generally, such distributions of the entities income to the Companys shareholders will be considered as qualified dividends for tax purposes. The
entities taxable net income will differ from U.S. GAAP net income because of deferred tax temporary differences adjustments arising from net operating losses and unrealized appreciation and deprecation of securities held. Deferred tax assets and
liabilities are measured using enacted corporate federal and state tax rates expected to apply to taxable income in the years in which those net operating losses are utilized and the unrealized gains and losses are realized. Deferred tax assets and
deferred tax liabilities are netted off by entity, as allowed. The recoverability of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will
not be realized on the basis of a history of operating losses combined with insufficient projected taxable income or other taxable events in the taxable blockers.
Deferred tax assets and liabilities, and related valuation allowance as of May 31, 2020 and February 29, 2020 were as follows:
May 31, 2020
February 29, 2020
Total deferred tax assets
$
1,924,689
$
1,744,879
Total deferred tax liabilities
(1,144,746
)
(1,412,486
)
Valuation allowance on net deferred tax assets
(1,850,621
)
(1,679,756
)
Net deferred tax liability
$
(1,070,678
)
$
(1,347,363
)
As of May 31, 2020, the valuation allowance on deferred tax assets was $1.9 million, which represents the
federal and state tax effect of net operating losses and unrealized losses that we do not believe we will realize through future taxable income. Any adjustments to the Companys valuation allowance will depend on estimates of future taxable
income and will be made in the period such determination is made.
Net deferred tax (benefit) expense for the three months ended
May 31, 2020 includes $(0.3) million net change in unrealized appreciation (depreciation) on investments and $(0.01) million net change in total operating expense, in the consolidated statement of operations, respectively.
Net deferred tax (benefit) expense for the three months ended May 31, 2019 includes $0.02 million net change in unrealized appreciation
(depreciation) on investments and $0.0 million net change in total operating expense, in the consolidated statement of operations, respectively.
Deferred tax temporary differences may include differences for state taxes and joint venture interests.
Federal and state income tax provisions (benefits) on investments for three months ended May 31, 2020 and May 31, 2019:
May 31, 2020
May 31, 2019
Current
Federal
$
$
State
Net current expense
Deferred
Federal
(245,474
)
13,290
State
(31,211
)
9,776
Net deferred expense
(276,685
)
23,066
Net tax provision
$
(276,685
)
$
23,066
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Note 6. Agreements and Related Party Transactions
Investment Advisory and Management Agreement
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 Companys stockholders. On July 7, 2020, our board of directors approved the renewal of the Management
Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is
responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay
our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive management fee.
Base Management Fee and Incentive Management Fee
The base management fee of 1.75% per year is calculated based on the average value of our gross assets (other than cash or cash
equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters. The base management fee is paid quarterly following the filing of the most recent 10-Q.
The incentive management fee consists of the following two parts:
The first, payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the
value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter, subject to a catch-up provision. Under this provision, in any fiscal
quarter, our Manager receives no incentive fee unless our pre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but
is less than or equal to 2.344% in any fiscal quarter; and 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter. There is no accumulation of amounts on the hurdle rate from quarter to
quarter, and accordingly there is no claw back of amounts previously paid if subsequent quarters are below the quarterly hurdle rate, and there is no delay of payment if prior quarters are below the quarterly hurdle rate.
The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the
Management Agreement) and equals 20.0% of our incentive fee capital gains, which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized
capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Companys portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Importantly, the capital gains portion of the
incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of
the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the incentive fee capital gains calculations, the cost basis for computing
realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.
For the three months ended May 31, 2020 and May 31, 2019, the Company incurred $2.2 million and $1.8 million in base management
fees, respectively. For the three months ended May 31, 2020 and May 31, 2019, the Company incurred $1.4 million and $1.2 million in incentive fees related to pre-incentive fee net investment income, respectively. For the three months ended
May 31, 2020 and May 31, 2019, the Company accrued a (benefit) of $(3.3) million and an expense of $1.0 million in incentive fees related to capital gains.
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, 2020, the base management fees accrual was $2.2 million and the incentive fees accrual was $1.4
million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 29, 2020, the base management fees accrual was $2.1 million and the incentive fees
accrual was $13.7 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.
Administration Agreement
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
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Agreement and subsequent renewals. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the
cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration
Agreement for an additional one-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5
million, effective November 1, 2016. On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of
expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase
the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additional
one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019. On July 7, 2020, our board of directors approved the renewal of the
Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.225 million to $2.775 million effective August 1, 2020.
For the three months ended May 31, 2020 and May 31, 2019, we recognized $0.6 million and $0.5 million in administrator expenses,
respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of May 31, 2020, $0.4 million of administrator
expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 29, 2020, $0.5 million of administrator expenses were accrued and included in due to manager in the
accompanying consolidated statements of assets and liabilities.
Saratoga CLO
On August 7, 2018, the Company entered into an unsecured loan agreement with CLO 2013-1 Warehouse, a wholly-owned subsidiary of Saratoga
CLO, pursuant to which CLO 2013-1 Warehouse may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse Loan, which expired on February 7, 2020,
bears interest at an annual rate of 3M USD LIBOR + 7.5%.
On December 14, 2018, the Company completed the third refinancing and
issuance of the 2013-1 Reset CLO Notes. This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period ending January 2020 was also added. In
addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the
newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the
existing $4.5 million of Class F notes and $20.0 million CLO 2013-1 Warehouse Loan were repaid. The Company also paid $2.0 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO and was reimbursed by the
Saratoga CLO for these costs during the year ended February 29, 2020.
For the three months ended May 31, 2020 and May 31,
2019, we recognized management fee income of $0.6 million and $0.6 million, respectively, related to the Saratoga CLO.
In conjunction
with the third refinancing and issuance of the 2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information.
On February 11, 2020, the Company entered into an unsecured loan agreement CLO 2013-1 Warehouse 2 Loan with CLO 2013-1 Warehouse 2, a
wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse 2
Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. As of May 31, 2020, the aggregate principal amount of the Companys investment in the CLO 2013-1 Warehouse 2 Loan was $5.0 million, which
had a fair value of $4.0 million.
For the three months ended May 31, 2020 and May 31, 2019, the Company neither bought nor sold
any investments from the Saratoga CLO.
Note 7. Borrowings
Credit Facility
As a BDC, we are
only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200.0% after giving effect to such leverage, or, if we obtain the required approvals from our independent directors and/or
stockholders, 150.0%. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing. Our asset coverage ratio, as defined in the 1940 Act, was 569.4% as of
May 31, 2020 and 607.1% as of February 29, 2020. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our non-interested board of directors approved of our
becoming subject to a minimum asset coverage ratio of 150.0% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act, as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.
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On April 11, 2007, we entered into a $100.0 million revolving securitized credit
facility (the Revolving Facility). On May 1, 2007, we entered into a $25.7 million term securitized credit facility (the Term Facility and, together with the Revolving Facility, the Facilities), which was
fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively affected the value
of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced a two-year amortization period during which all principal proceeds from the collateral were used to repay outstanding
borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable
monthly at the greater of the commercial paper rate and our lenders 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 lenders prime
rate plus 6.00% plus a default rate of 3.00%.
On July 30, 2010, we used the net proceeds from (i) the stock purchase
transaction and (ii) a portion of the funds available to us under the $45.0 million senior secured revolving credit facility (the Credit Facility) with Madison Capital Funding LLC, in each case, to pay the full amount of principal
and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets, other than those held by SBIC LP, have
been pledged under the Credit Facility to secure our obligations thereunder.
On February 24, 2012, we amended the Credit Facility
to, among other things:
expand the borrowing capacity under the Credit Facility from $40.0 million to $45.0 million;
extend the period during which we may make and repay borrowings under the Credit Facility from July 30, 2013
to February 24, 2015 (the Revolving Period). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Credit
Facility are due and payable five years after the end of the Revolving Period; and
remove the condition that we may not acquire additional loan assets without the prior written consent of Madison
Capital Funding LLC.
On September 17, 2014, we entered into a second amendment to the Credit Facility to, among other things:
extend the commitment termination date from February 24, 2015 to September 17, 2017;
extend the maturity date of the Credit Facility from February 24, 2020 to September 17, 2022 (unless
terminated sooner upon certain events);
reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50%
to 4.75%; and
reduce the floor on base rate borrowings from 3.00% to 2.25%, and on LIBOR borrowings from 2.00% to 1.25%.
On May 18, 2017, we entered into a third amendment to the Credit Facility to, among other things:
extend the commitment termination date from September 17, 2017 to September 17, 2020;
extend the final maturity date of the Credit Facility from September 17, 2022 to September 17, 2025
(unless terminated sooner upon certain events);
reduce the floor on base rate borrowings from 2.25% to 2.00%;
reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and
reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding
to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.
On April 24, 2020, we entered into a fourth
amendment to the Credit Facility to, among other things:
permit certain amendments related to the Paycheck Protection Program (Permitted PPP Amendment) to
Loan Asset Documents;
exclude certain debt and interest amounts allowed by the Permitted PPP Amendments from certain calculations
related to Net Leverage Ratio, Interest Coverage Ratio and EBITDA; and
exclude such Permitted PPP Amendments from constituting a Material Modification.
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In addition to any fees or other amounts payable under the terms of the Credit Facility
agreement with Madison Capital Funding LLC, an administrative agent fee per annum equal to $0.1 million is payable in equal monthly installments in arrears.
As of May 31, 2020 and February 29, 2020, there were no outstanding borrowings under the Credit Facility. During the applicable
periods, the Company was in compliance with all of the limitations and requirements of the Credit Facility. Financing costs of $3.1 million related to the Credit Facility have been capitalized and are being amortized over the term of the facility.
For the three months ended May 31, 2020 and May 31, 2019, we recorded $0.1 million and $0.1 million of interest expense related
to the Credit Facility, respectively, which includes commitment and administrative agent fees. For the three months ended May 31, 2020 and May 31, 2019, we recorded $0.02 million and $0.02 million of amortization of deferred financing
costs related to the Credit Facility, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During both the three month periods
ended May 31, 2020 and May 31, 2019, there was no outstanding borrowings under the Credit Facility.
The Credit Facility
contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Credit Facility also includes certain requirements
relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. The Credit Facility
has an eight-year term, consisting of a three-year period (the Revolving Period), under which the Company may make and repay borrowings, and a final maturity five years from the end of the Revolving Period. Availability on the Credit
Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain eligible
loan assets included as part of the Borrowing Base. Funds may be borrowed at the greater of the prevailing one-month LIBOR rate and 1.00%, plus an applicable margin of 4.75%. At the Companys option, funds may be borrowed based on an
alternative base rate, which in no event will be less than 2.00%, and the applicable margin over such alternative base rate is 3.75%. In addition, the Company will pay the lenders a commitment fee of 0.75% per year (or 0.50% if the ratio of
advances outstanding to aggregate commitments is greater than or equal to 50%) on the unused amount of the Credit Facility for the duration of the Revolving Period.
Our borrowing base under the Credit Facility was $36.8 million subject to the Credit Facility cap of $45.0 million at May 31, 2020. For
purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (SEC).
Accordingly, the May 31, 2020 borrowing base relies upon the valuations set forth in the Annual Report on Form 10-K for the year ended February 29, 2020. The valuations presented in this Quarterly Report on Form 10-Q will not be
incorporated into the borrowing base until after this Quarterly Report on Form 10-Q is filed with the SEC.
SBA Debentures
Our wholly-owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is
paid in and is subject to customary regulatory requirements including but not limited to an examination by the SBA.
On August 14,
2019, the Companys wholly-owned subsidiary, SBIC II LP, received an SBIC license from the SBA. The new license provides up to $175.0 million in additional long-term capital in the form of SBA debentures. As a result of the 2016
omnibus spending bill signed into law in December 2015, the maximum amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million. With this license approval,
Saratoga will grow its SBA relationship from $150.0 million to $325.0 million of committed capital.
As of May 31, 2020, we
have funded SBIC LP and SBIC II LP with an aggregate total of equity capital of $75.0 million and $50.0 million, respectively, and have $170.0 million in SBA-guaranteed debentures outstanding, of which $150.0 million is held in SBIC LP and $20.0
million held in SBIC II LP. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a
market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP and SBIC II LP may borrow to a maximum of $150.0 million and $175.0 million, respectively, which is up to twice its potential regulatory
capital.
SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs
may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have
average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to smaller concerns as defined by the SBA. A smaller
concern is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to
determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest
in the equity securities of such businesses and provide them with consulting and advisory services.
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SBIC LP and SBIC II LP are subject to regulation and oversight by the SBA, including
requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC II LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC II LP continuing to
be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP and SBIC II LP assets over our stockholders and debtholders in the event we liquidate SBIC LP and SBIC II LP or the SBA exercises its
remedies under the SBA-guaranteed debentures issued by SBIC LP and SBIC II LP upon an event of default.
The Company received exemptive
relief from the SEC to permit it to exclude the debt of SBIC subsidiaries guaranteed by the SBA from the definition of senior securities in the asset coverage test under the 1940 Act. This allows the Company increased flexibility under the asset
coverage test by permitting it to borrow up to $325.0 million more than it would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed
into law on March 23, 2018, the non-interested board of directors of the Company approved of the Company becoming subject to a minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the Investment Company Act,
as amended. The 150.0% asset coverage ratio became effective on April 16, 2019.
As noted above, as of May 31, 2020, there was
$170.0 million of SBA debentures outstanding and as of February 29, 2020, there was $150.0 million of SBA debentures outstanding. The carrying amount of the amount outstanding of SBA debentures approximates its fair value, which is based on a
waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy. Financing costs of $5.0 million and $1.2 million related to the SBA debentures issued by SBIC LP and SBIC II LP,
respectively, have been capitalized and are being amortized over the term of the commitment and drawdown.
For the three months ended
May 31, 2020 and May 31, 2019, we recorded $1.2 million and $1.2 million of interest expense related to the SBA debentures, respectively. For the three months ended May 31, 2020 and May 31, 2019, we recorded $0.2 million and $0.1
million of amortization of deferred financing costs related to the SBA debentures, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of
operations. The weighted average interest rate during the three months ended May 31, 2020 and May 31, 2019 on the outstanding borrowings of the SBA debentures was 3.16% and 3.25%, respectively. During the three months ended May 31,
2020 and May 31, 2019, the average dollar amount of SBA debentures outstanding was $157.4 million and $150.0 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 previously limited the amount of SBA-guaranteed debentures that an SBIC may issue to $150.0
million when it has at least $75.0 million in regulatory capital but this has increased to $175.0 million for new licenses when it has at least $87.5 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum
amount of $350.0 million in SBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.
Notes
On May 10, 2013, the Company issued $42.0 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the 2020
Notes). The 2020 Notes will mature on May 31, 2020, and since May 31, 2016, may be redeemed in whole or in part at any time or from time to time at the Companys option. Interest will be payable quarterly beginning
August 15, 2013. On May 17, 2013, the Company closed an additional $6.3 million in aggregate principal amount of the 2020 Notes, pursuant to the full exercise of the underwriters option to purchase additional 2020 Notes. The 2020
Notes were redeemed in full on January 13, 2017.
On May 29, 2015, the Company entered into a Debt Distribution Agreement with
Ladenburg Thalmann & Co. through which the Company may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (ATM) offering. Prior to the 2020 Notes being
redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).
On December 21, 2016, the Company issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate notes due 2023 (the
2023 Notes) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the
underwriters option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. Interest on the 2023 Notes is paid quarterly in arrears on March 15, June 15, September 15 and
December 15, at a rate of 6.75% per year, beginning March 30, 2017. The 2023 Notes mature on December 30, 2023, and commencing December 21, 2019, may be redeemed in whole or in part at any time or from time to time at our
option. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes, which amounted to $61.8 million, and for general corporate purposes in accordance with our investment objective and strategies.
On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate
principal amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes. The 2023 Notes were listed on the NYSE under the trading symbol SAB with a par value of $25.00 per share, and have been delisted
following the redemption.
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On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of
our 6.25% fixed-rate notes due 2025 (the 2025 Notes) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included
the full exercise of the underwriters option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on
February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025 and commencing August 28, 2021, may be redeemed in
whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the
2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.
On February 5, 2019, the Company completed
a re-opening and up-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2
million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate,
interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The
financing costs and discount of $1.0 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.
As of May 31, 2020, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol
SAF with a par value of $25.00 per share.
As of May 31, 2020, the carrying amount and fair value of the 2025 Notes was
$60.0 million and $56.5 million, respectively. The fair value of the 2025 Notes, which is publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy.
As of February 29, 2020, the carrying amount and fair value of the 2025 Notes was $60.0 million and $60.6 million, respectively.
For
the three months ended May 31, 2020 and May 31, 2019, we recorded $0.9 million and $0.9 million, respectively, of interest expense and $0.1 million and $0.1 million, respectively, of amortization of deferred financing costs related to the
2025 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2020 and May 31, 2019, the
average dollar amount of 2025 Notes outstanding was $60.0 million and $60.0 million, respectively.
For the three months ended
May 31, 2019, we recorded $1.3 million of interest expense and $0.1 million, of amortization of deferred financing costs related to the 2023 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt
financing expense on the consolidated statements of operations. During the three months ended May 31, 2019, the average dollar amount of 2023 Notes outstanding was $74.5 million.
Senior Securities
Information about our
senior securities is shown in the following table as of May 31, 2020 for the fiscal year periods indicated in the table, unless otherwise noted.
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Table of Contents
SENIOR SECURITIES
(dollar amounts in thousands, except per share data)
Class and Year (1)(2)
Total
Amount
Outstanding
Exclusive of
Treasury
Securities(3)
Asset
Coverage
per
Unit(4)
Involuntary
Liquidating
Preference
per
Share(5)
Average
Market
Value
per
Share(6)
(in thousands)
Credit Facility with Madison Capital Funding
Fiscal year 2021 (as of May 31, 2020)
$
$
5,694
N/A
Fiscal year 2020 (as of February 29, 2020)
$
$
6,071
N/A
Fiscal year 2019 (as of February 28, 2019)
$
$
2,345
N/A
Fiscal year 2018 (as of February 28, 2018)
$
$
2,930
N/A
Fiscal year 2017 (as of February 28, 2017)
$
$
2,710
N/A
Fiscal year 2016 (as of February 29, 2016)
$
$
3,025
N/A
Fiscal year 2015 (as of February 28, 2015)
$
9,600
$
3,117
N/A
Fiscal year 2014 (as of February 28, 2014)
$
$
3,348
N/A
Fiscal year 2013 (as of February 28, 2013)
$
24,300
$
5,421
N/A
Fiscal year 2012 (as of February 29, 2012)
$
20,000
$
5,834
N/A
Fiscal year 2011 (as of February 28, 2011)
$
4,500
$
20,077
N/A
Fiscal year 2010 (as of February 28, 2010)
$
$
N/A
Fiscal year 2009 (as of February 28, 2009)
$
$
N/A
Fiscal year 2008 (as of February 29, 2008)
$
$
N/A
Fiscal year 2007 (as of February 28, 2007)
$
$
N/A
7.50% Notes due 2020 (7)
Fiscal year 2017 (as of February 28, 2017)
$
$
N/A
Fiscal year 2016 (as of February 29, 2016)
$
61,793
$
3,025
$
25.24
(8)
Fiscal year 2015 (as of February 28, 2015)
$
48,300
$
3,117
$
25.46
(8)
Fiscal year 2014 (as of February 28, 2014)
$
48,300
$
3,348
$
25.18
(8)
Fiscal year 2013 (as of February 28, 2013)
$
$
N/A
Fiscal year 2012 (as of February 29, 2012)
$
$
N/A
Fiscal year 2011 (as of February 28, 2011)
$
$
N/A
Fiscal year 2010 (as of February 28, 2010)
$
$
N/A
Fiscal year 2009 (as of February 28, 2009)
$
$
N/A
Fiscal year 2008 (as of February 29, 2008)
$
$
N/A
Fiscal year 2007 (as of February 28, 2007)
$
$
N/A
6.75% Notes due 2023 (9)
Fiscal year 2020 (as of February 29, 2020)
$
$
N/A
Fiscal year 2019 (as of February 28, 2019)
$
74,451
$
2,345
$
25.74
(10)
Fiscal year 2018 (as of February 28, 2018)
$
74,451
$
2,930
$
26.05
(10)
Fiscal year 2017 (as of February 28, 2017)
$
74,451
$
2,710
$
25.89
(10)
6.25% Notes due 2025
Fiscal year 2021 (as of May 31, 2020)
$
60,000
$
5,694
$
22.15
(11)
Fiscal year 2020 (as of February 29, 2020)
$
60,000
$
6,071
$
25.75
(11)
Fiscal year 2019 (as of February 28, 2019)
$
60,000
$
2,345
$
24.97
(11)
(1)
We have excluded our SBA-guaranteed debentures from this table because the SEC has granted us
exemptive relief that permits us to exclude such debentures from the definition of senior securities in the 200% asset coverage ratio we are required to maintain under the 1940 Act.
(2)
This table does not include the senior securities of our predecessor entity, GSC Investment Corp., relating to
a revolving securitized credit facility with Deutsche Bank, in light of the fact that the Company was under different management during the time that such credit facility was outstanding.
(3)
Total amount of senior securities outstanding at the end of the period presented.
(4)
Asset coverage per unit is the ratio of our total assets, less all liabilities and indebtedness not represented
by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness, calculated on a total basis.
(5)
The amount to which such class of senior security would be entitled upon the involuntary liquidation of the
issuer in preference to any security junior to it. The indicates information which the Securities and Exchange Commission expressly does not require to be disclosed for certain types of senior securities.
(6)
Not applicable for credit facility because not registered for public trading.
(7)
On January 13, 2017, the Company redeemed in full its 2020 Notes. The Company used a portion of the net
proceeds from the 2023 Notes offering, which was completed in December 2016, to redeem the 2020 Notes in full.
(8)
Based on the average daily trading price of the 2020 Notes on the NYSE.
(9)
On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.45 million,
respectively, in aggregate principal amount of the $74.45 million in aggregate principal amount of issued and outstanding 2023 Notes.
(10)
Based on the average daily trading price of the 2023 Notes on the NYSE.
(11)
Based on the average daily trading price of the 2025 Notes on the NYSE.
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Note 8. Commitments and Contingencies
Contractual Obligations
The following table shows our
payment obligations for repayment of debt and other contractual obligations at May 31, 2020:
Payment Due by Period
Total
Less Than
1 Year
1 - 3
Years
3 - 5
Years
More Than
5 Years
Long-Term Debt Obligations
($ in thousands)
Revolving credit facility
$
$
$
$
$
SBA debentures
170,000
40,000
39,000
91,000
2025 Notes
60,000
60,000
Total Long-Term Debt Obligations
$
230,000
$
$
40,000
$
39,000
$
151,000
Off-Balance Sheet Arrangements
As of May 31, 2020 and February 29, 2020, the Companys off-balance sheet arrangements consisted of $48.3 million and $64.1
million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Companys 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 Companys consolidated statements of assets and liabilities and are not reflected in
the Companys consolidated statements of assets and liabilities.
A summary of the unfunded commitments outstanding as of May 31, 2020 and
February 29, 2020 is shown in the table below (dollars in thousands):
May 31, 2020
February 29, 2020
At Companys discretion
inMotionNow, Inc.
$
3,000
$
3,000
Omatic Software, LLC
1,000
Passageways, Inc.
5,000
5,000
PDDS Buyer, LLC
3,000
5,000
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd.
15,000
17,500
Top Gun Pressure Washing, LLC
3,175
5,000
Village Realty Holdings LLC
10,000
10,000
39,175
46,500
At portfolio companys discretion - satisfaction of certain financial and nonfinancial
covenants required
ArbiterSports, LLC
1,000
Axiom Purchaser, Inc.
1,000
CoConstruct, LLC
3,500
Davisware, LLC
1,022
2,000
GoReact
2,000
2,000
HemaTerra Holding Company, LLC
2,000
4,000
Passageways, Inc.
3,000
3,000
Village Realty Holdings LLC
1,124
1,124
9,146
17,624
Total
$
48,321
$
64,124
Note 9. Directors Fees
The independent directors receive an annual fee of $60,000. They also receive $2,500 plus reimbursement of reasonable out-of- pocket expenses
incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonable out-of- pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee
receives an annual fee of $10,000 and the chairman of each other committee receives an annual fee of $5,000 for their additional services in these
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Table of Contents
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, 2020 and May 31, 2019, we incurred $0.1 million and $0.1 million for directors fees and expenses, respectively. As of May 31, 2020 and
February 29, 2020, $0.1 million and $0.06 million in directors fees and expenses were accrued and unpaid, respectively. As of May 31, 2020, we had not issued any common stock to our directors as compensation for their services.
Note 10. Stockholders Equity
On
May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.
On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain
individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC
Group in the LLC were exchanged for 6.7 shares of the Company.
On March 28, 2007, the Company completed its IPO of 725,000 shares of
common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriters discount and commissions, and $1.0 million in offering costs, were $100.7
million.
On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total
proceeds received from this sale were $15.0 million.
On August 12, 2010, we effected a one-for-ten reverse stock split of our
outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash.
The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.
On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to
200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements. On October 7, 2015, the Companys board of directors extended the open market share repurchase
plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On
October 5, 2016, the Companys board of directors extended the open market share repurchase plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV,
as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, the Companys board of directors extended
the open market share repurchase plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On
May 4, 2020, the Board of Directors increased the share repurchase plan to 1.3 million shares of common stock. As of May 31, 2020, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately
$3.7 million pursuant to this repurchase plan. During the three months ended May 31, 2020, there was no activity related to the repurchase plan.
On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may
offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were also added to the agreement. On July 11, 2019, the amount of the common
stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. As of May 31, 2020, the Company sold 3,992,018 shares for gross proceeds of $97.1
million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs). During the three months ended May 31, 2020, there was no activity related to the ATM offering.
On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an
aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the
underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.
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Table of Contents
The Company adopted Rule 3-04/Rule 8-03(a)(5) under Regulation S-X (Note 2). Pursuant to the regulation, the Company
has
presented a reconciliation of the changes in each significant caption of stockholders equity as shown in the tables below:
Common Stock
Capital
in Excess
Total
Distributable
Shares
Amount
of Par Value
Earnings (Loss)
Net Assets
Balance at February 28, 2019
7,657,156
$
7,657
$
203,552,800
$
(22,685,270
)
$
180,875,187
Increase (Decrease) from Operations:
Net investment income
3,680,788
3,680,788
Net realized gain (loss) from investments
Net change in unrealized appreciation (depreciation) on investments
3,989,130
3,989,130
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
(20,930
)
(20,930
)
Decrease from Shareholder Distributions:
Distributions of investment income net
(4,176,132
)
(4,176,132
)
Capital Share Transactions:
Proceeds from issuance of common stock
76,448
77
1,772,557
1,772,634
Stock dividend distribution
31,240
31
667,358
667,389
Repurchases of common stock
Offering costs
(4,365
)
(4,365
)
Balance at May 31, 2019
7,764,844
$
7,765
$
205,988,350
$
(19,212,414
)
$
186,783,701
Increase (Decrease) from Operations:
Net investment income
4,956,074
4,956,074
Net realized gain (loss) from investments
1,870,089
1,870,089
Net change in unrealized appreciation (depreciation) on investments
1,457,872
1,457,872
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
(704,263
)
(704,263
)
Decrease from Shareholder Distributions:
Distributions of investment income net
(4,336,226
)
(4,336,226
)
Capital Share Transactions:
Proceeds from issuance of common stock
1,371,667
1,371
34,101,012
34,102,383
Stock dividend distribution
31,545
32
714,497
714,529
Repurchases of common stock
Offering costs
(507,592
)
(507,592
)
Balance at August 31, 2019
9,168,056
$
9,168
$
240,296,267
$
(15,968,868
)
$
224,336,567
Increase (Decrease) from Operations:
Net investment income
4,575,303
4,575,303
Net realized gain (loss) from investments
10,739,678
10,739,678
Net change in unrealized appreciation (depreciation) on investments
(536,151
)
(536,151
)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
(1,061,608
)
(1,061,608
)
Decrease from Shareholder Distributions:
Distributions of investment income net
(5,323,383
)
(5,323,383
)
Capital Share Transactions:
Proceeds from issuance of common stock
1,952,367
1,951
49,351,357
49,353,308
Stock dividend distribution
34,575
36
806,857
806,893
Repurchases of common stock
Offering costs
(710,257
)
(710,257
)
Balance at November 30, 2019
11,154,998
$
11,155
$
289,744,224
$
(7,575,029
)
$
282,180,350
Increase (Decrease) from Operations:
Net investment income
66,106
66,106
Net realized gain (loss) from investments
30,267,388
30,267,388
Net change in unrealized appreciation (depreciation) on investments
(5,681,765
)
(5,681,765
)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
2,141,150
2,141,150
Decrease from Shareholder Distributions:
Distributions of investment income net
(6,261,839
)
(6,261,839
)
Capital Share Transactions:
Proceeds from issuance of common stock
26,865
27
676,089
676,116
Stock dividend distribution
35,682
36
907,645
907,681
Repurchases of common stock
Offering costs
(8,334
)
(8,334
)
Tax reclassification of stockholders equity in accordance with generally accepted accounting
principles
(1,842,633
)
1,842,633
Balance at February 29, 2020
11,217,545
$
11,218
$
289,476,991
$
14,798,644
$
304,286,853
Increase (Decrease) from Operations:
Net investment income
9,018,314
9,018,314
Net realized gain (loss) from investments
8,480
8,480
Net change in unrealized appreciation (depreciation) on investments
(31,950,369
)
(31,950,369
)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
267,740
267,740
Decrease from Shareholder Distributions:
Distributions of investment income net
Capital Share Transactions:
Proceeds from issuance of common stock
Stock dividend distribution
Repurchases of common stock
Offering costs
Balance at May 31, 2020
11,217,545
$
11,218
$
289,476,991
$
(7,857,191
)
$
281,631,018
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Note 11. Earnings Per Share
In accordance with the provisions of FASB ASC Topic 260, Earnings per Share (ASC 260), basic earnings per share
is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating
earnings per share on a diluted basis.
The following information sets forth the computation of the weighted average basic and diluted net
increase in net assets resulting from operations per share for the three months ended May 31, 2020 and May 31, 2019 (dollars in thousands except share and per share amounts):
For the three months ended
Basic and Diluted
May 31, 2020
May 31, 2019
Net increase (decrease) in net assets resulting from operations
$
(22,656
)
$
7,649
Weighted average common shares outstanding
11,217,545
7,746,187
Weighted average earnings (loss) per common share
$
(2.02
)
$
0.99
Note 12. Dividend
During the three months ended May 31, 2020, there were no dividends declared.
On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common
stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to our DRIP. Based on shareholder elections, the dividend consisted of
approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a
price of $21.36 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.
The following table summarizes dividends declared for the three months ended May 31, 2019 (dollars in thousands except per share amounts):
Amount
Per Share
Total
Amount*
Date Declared
Record Date
Payment Date
February 26, 2019
March 14, 2019
March 28, 2019
$
0.54
$
4,176
Total dividends declared
$
0.54
$
4,176
*
Total amount is calculated based on the number of shares outstanding at the date of record.
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Note 13. Financial Highlights
The following is a schedule of financial highlights as of and for the three months ended May 31, 2020 and May 31, 2019:
Per share data
May 31, 2020
May 31, 2019
Net asset value at beginning of period
$
27.13
$
23.62
Net investment income(1)
0.80
0.48
Net realized and unrealized gains (losses) on investments(1)
(2.82
)
0.51
Net increase (decrease) in net assets resulting from operations
(2.02
)
0.99
Distributions declared from net investment income
(0.54
)
Total distributions to stockholders
(0.54
)
Dilution(2)
(0.01
)
Net asset value at end of period
$
25.11
$
24.06
Net assets at end of period
$
281,631,018
$
186,783,701
Shares outstanding at end of period
11,217,545
7,764,844
Per share market value at end of period
$
15.18
$
24.65
Total return based on market value(3)(4)
(33.74
)%
9.69
%
Total return based on net asset value(3)(5)
(7.45
)%
4.42
%
Ratio/Supplemental data:
Ratio of net investment income to average net assets(6)
10.33
%
11.39
%
Expenses:
Ratio of operating expenses to average net assets(7)
4.84
%
6.69
%
Ratio of incentive management fees expense (benefit) to average net assets(3)
(0.63
)%
1.15
%
Ratio of interest and debt financing expenses to average net assets(7)
3.47
%
8.37
%
Ratio of total expenses to average net assets(6)
7.68
%
16.21
%
Portfolio turnover rate(3)(8)
1.93
%
6.63
%
Asset coverage ratio per unit(9)
5,694
2,389
Average market value per unit
Credit Facility(10)
N/A
N/A
SBA Debentures(10)
N/A
N/A
2023 Notes
N/A
$
25.78
2025 Notes
$
22.15
$
25.28
(1)
Per share amounts are calculated using the weighted average shares outstanding during the period.
(2)
Represents the dilutive effect of issuing common stock below net asset value per share during the period in
connection with the satisfaction of the Companys annual RIC distribution requirement and may include the impact of the different share amounts used for different items (weighted average basic common shares outstanding for the corresponding
period and actual common shares outstanding at the end of the period) in the per common share data calculation and rounding impacts. See Note 12, Dividend.
(3)
Ratios are not annualized.
(4)
Total investment return is calculated assuming a purchase of common shares at the current market value on the
first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Companys DRIP. Total
investment return does not reflect brokerage commissions.
(5)
Total investment return is calculated assuming a purchase of common shares at the current net asset value on
the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Companys DRIP.
Total investment return does not reflect brokerage commissions.
(6)
Ratios are annualized. Incentive management fees included within the ratio are not annualized.
(7)
Ratios are annualized.
(8)
Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the
average of the invested assets at fair value.
(9)
Asset coverage ratio per unit is the ratio of the carrying value of our total consolidated assets, less all
liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage ratio per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. Asset
coverage ratio per unit does not include unfunded commitments. The inclusion of unfunded commitments in the calculation of the asset coverage ratio per unit would not cause us to be below the required amount of regulatory coverage.
(10)
The Credit Facility and SBA Debentures are not registered for public trading.
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Note 14. Subsequent Events
The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have
occurred that would require adjustments to the Companys consolidated financial statements and disclosures in the consolidated financial statements except for the following:
On June 24, 2020, the Company issued $37.5 million in aggregate principal amount of 7.25% fixed-rate notes due 2025 (the Second
2025 Notes) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million. Offering costs incurred were approximately $0.2 million. The Company has granted the underwriters an option to purchase up to
an additional $5.625 million in aggregate principal amount of Notes within 30 days, which they fully exercised on July 6, 2020 for additional net proceeds of $5.4 million after deducting additional underwriting commissions of approximately $0.2
million. Interest on the Second 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020. The Second 2025 Notes mature
on June 30, 2025 and commencing June 24, 2022, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering will be used for general corporate purposes in accordance with the
Companys investment objective and strategies. The Second 2025 Notes are expected to be listed on the New York Stock Exchange and to trade thereon within 30 days of the original issue date under the trading symbol SAK. The Company
has received an investment grade private rating of BBB from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.
On July 7, 2020, the Company declared a dividend of $0.40 per share payable on August 12, 2020, to common stockholders of record on
July 27, 2020. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Companys DRIP.
Subsequent to May 31, 2020, the global outbreak of the coronavirus (COVID-19) pandemic, and the related effect on the U.S. and
global economies, has had adverse consequences for the business operations of some of the Companys portfolio companies and, as a result, has had some adverse effects on the Companys operations. The ultimate economic fallout from the
pandemic, and the long-term impact on economies, markets, industries and individual issuers, remain uncertain. The operational and financial performance of the issuers of securities in which the Company invests depends on future developments,
including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Companys investments and negatively impact the Companys performance.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and
related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information
that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Note about Forward-Looking Statements and Part I,
Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020.
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 and the impact of COVID-19 pandemic thereon;
the introduction, withdrawal, success and timing of business initiatives and strategies;
changes in political, economic or industry conditions, the interest rate environment or financial and capital
markets, which could result in changes in the value of our assets;
pandemics or other serious public health events, such as the recent global outbreak of COVID-19;
the relative and absolute investment performance and operations of our Manager;
the impact of increased competition;
our ability to turn potential investment opportunities into transactions and thereafter into completed and
successful investments;
the unfavorable resolution of any future legal proceedings;
our business prospects and the prospects of our portfolio companies, including our and their ability to achieve
our respective objectives as a result of the current COVID-19 pandemic;
the impact of investments that we expect to make and future acquisitions and divestitures;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy and its impact on the industries in which we invest
and the impact of the COVID-19 pandemic thereon;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;
our regulatory structure and tax status, including our ability to operate as a business development company
(BDC), or to operate our small business investment company (SBIC) subsidiaries, 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 impact of the COVID-19
pandemic thereon;
the impact of interest rate volatility on our results, particularly because we use leverage as part of our
investment strategy;
the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions
of government agencies relating to us or our Manager;
the impact of changes to tax legislation and, generally, our tax position;
our ability to access capital and any future financings by us;
the ability of our Manager to attract and retain highly talented professionals; and
the ability of our Manager to locate suitable investments for us and to monitor and effectively administer our
investments.
Such forward-looking statements may include statements preceded by, followed by or that otherwise include
terms such as anticipate, believe, could, estimate, expect, intend, may, plan, potential, project, should,
will and would or the negative of these terms or other comparable terminology.
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We have based the forward-looking statements included in this quarterly report on Form 10-Q
on information available to us on the date of this quarterly report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking
statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by
law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K.
The following analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this quarterly report on Form 10-Q.
OVERVIEW
We are a Maryland corporation
that has elected to be treated as a BDC under the 1940 Act. Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior
and unitranche leveraged loans and mezzanine debt issued by private U.S. middle market companies, which we define as companies having earnings before interest, tax, depreciation and amortization (EBITDA) of between $2 million and $50
million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include
investments in distressed debt, which may include securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation
funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of investment company under Section 3(c)(1) or
Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of its net assets. We have elected and qualified to be treated as a RIC under Subchapter M of the Code.
COVID-19 Update
On March 11,
2020, the World Health Organization declared the novel coronavirus, or COVID-19, as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The outbreak of COVID-19 has, and continues, to severely
impact global economic activity and cause significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting
quarantines, mandating business and school closures and restricting travel. Such actions are creating disruption in global supply chains and adversely impacting a number of industries. The outbreak could have a continued adverse impact on economic
and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty
and risks with respect to the underlying value of the Companys portfolio companies, the Companys business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements,
company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.
We have evaluated subsequent events from June 1, 2020 through July 8, 2020. However, as the discussion in this Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations relates to the Companys financial statements for the quarter-ended May 31, 2020, the analysis contained herein may not fully account for impacts relating to the COVID-19
pandemic. In that regard, for example, as of May 31, 2020, the Company valued its portfolio investments in conformity with U.S. GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that
time. Due to the overall volatility that the COVID-19 pandemic has caused, any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio. The potential impact to our results going
forward will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID- 19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact,
all of which are beyond our control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.
Corporate History
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 to replace GSCP (NJ), L.P. as our
investment adviser and changed our name to Saratoga Investment Corp.
As a result of the event of default under a revolving securitized
credit facility with Deutsche Bank we previously had in place, in December 2008 we engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate strategic transaction opportunities and consider alternatives for us. On
April 14, 2010, GSC Investment Corp. entered into a stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates and an assignment, assumption and novation agreement with Saratoga Investment Advisors, pursuant to
which GSC Investment Corp. assumed certain rights and obligations of Saratoga Investment Advisors under a debt commitment letter Saratoga Investment Advisors received from Madison Capital Funding LLC, which indicated Madison Capital Fundings
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.
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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). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (SBIC II LP), also received an SBIC license from the SBA.
In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% fixed-rate unsecured notes due 2020 (the 2020
Notes) for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters full exercise of their overallotment option. The 2020 Notes were
listed on the NYSE under the trading symbol SAQ with a par value of $25.00 per share. The 2020 Notes were redeemed in full on January 13, 2017.
On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for
sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (ATM) offering. Prior to the 2020 Notes being redeemed in full, the Company sold 539,725 bonds with a principal of
$13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).
On December 21,
2016, we issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate unsecured notes due 2023 (the 2023Notes) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and
offering costs of approximately $0.5 million. The issuance included the exercise of substantially all of the underwriters option to purchase an additional $9.8 million aggregate principal amount of 2023 Notes within 30 days. The 2023 Notes
were listed on the NYSE under the trading symbol SAB with a par value of $25.00 per share. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal
amount of the $74.5 million in aggregate principal amount of issued and outstanding 2023 Notes.
On March 16, 2017, we entered into
an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and
B. Riley FBR, Inc. were also added to the agreement. On July 11, 2019, the amount of the common stock to be offered through this offering was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered
was increased to $130.0 million. As of May 31, 2020, the Company sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs). During the three
months ended May 31, 2020, there was no activity related to the ATM offering.
On July 13, 2018, the Company issued 1,150,000
shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2
million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.
On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the 2025
Notes) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters option
to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of
6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025 and commencing August 28, 2021, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the
offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes.
On December 14, 2018, the Company completed the third refinancing of the Saratoga CLO (the 2013-1 Reset CLO Notes). This
refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period of January 2020 was also added. In addition to and as part of the refinancing, the
Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga
CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes were
repaid.
On February 5, 2019, the Company completed a re-opening and up-sizing of its existing 2025 Notes by issuing an additional
$20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance
included the full exercise of
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the underwriters option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged
from the existing 2025 Notes issued in August 2018. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to
the 2025 Notes have been capitalized and are being amortized over the term of the 2025 Notes. As of May 31, 2020, the total 2025 Notes outstanding was $60.0 million. The 2025 Notes are listed on the NYSE under the trading symbol SAF
with a par value of $25.00 per share.
On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP
(SBIC II LP), also received an SBIC license from the SBA. The new license will provide up to $175.0 million in additional long-term capital in the form of SBA debentures.
On February 11, 2020, the Company entered into an unsecured loan agreement (CLO 2013-1 Warehouse 2 Loan) with Saratoga
Investment Corp. CLO 2013-1 Warehouse 2, Ltd (CLO 2013-1 Warehouse 2), a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to
provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR +7.5%.
On June 24, 2020, the Company issued $37.5 million in aggregate principal amount of 7.25% fixed-rate notes due 2025 (the Second
2025 Notes) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million. Offering costs incurred were approximately $0.2 million. The Company has granted the underwriters an option to purchase up to
an additional $5.625 million in aggregate principal amount of Notes within 30 days, which they fully exercised on July 6, 2020 for additional net proceeds of $5.4 million after deducting additional underwriting commissions of approximately $0.2
million. Interest on the Second 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020. The Second 2025 Notes mature
on June 30, 2025 and commencing June 24, 2022, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering will be used for general corporate purposes in accordance with the
Companys investment objective and strategies. The Second 2025 Notes are expected to be listed on the New York Stock Exchange and to trade thereon within 30 days of the original issue date under the trading symbol SAK. The Company
has received an investment grade private rating of BBB from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.
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 Companys 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
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estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ
materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment
Valuation
The Company accounts for its investments at fair value in accordance with the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement and Disclosures (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair
value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold or its liabilities are to be
transferred at the balance sheet date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers
and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third-party
pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are
not readily available at fair value as approved, in good faith, by our board of directors based on input from Saratoga Investment Advisors, the audit committee of our board of directors and a third party independent valuation firm. Determinations of
fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio companys ability
to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.
We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as
described below:
Each investment is initially valued by the responsible investment professionals of Saratoga Investment Advisors
and preliminary valuation conclusions are documented and discussed with our senior management; and
An independent valuation firm engaged by our board of directors independently reviews a selection of these
preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year. We use a third-party independent valuation
firm to value our investment in the subordinated notes of Saratoga CLO and the Class F-R-2 Notes and Class G-R-2 Notes tranches of the Saratoga CLOs every quarter.
In addition, all our investments are subject to the following valuation process:
The audit committee of our board of directors reviews and approves each preliminary valuation and Saratoga
Investment Advisors and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and
Our board of directors discusses the valuations and approves the fair value of each investment, in good faith,
based on the input of Saratoga Investment Advisors, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.
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 Saratoga Investment Advisors and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our
investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data
and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for
our investment in Saratoga CLO.
Revenue Recognition
Income Recognition
Interest income,
adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest
is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for
the accretion of discounts and amortization of premiums on investments.
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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
managements judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in managements judgment, are likely to remain current, although we may make exceptions to
this general rule if the loan has sufficient collateral value and is in the process of collection.
Payment-in-Kind Interest
The Company holds debt and preferred equity investments in its portfolio that contain a payment-in-kind (PIK) interest provision.
The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop
accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.
Revenues
We generate revenue in the form of interest income and capital gains on the debt investments that we hold and capital gains, if any, on equity
interests that we may acquire. We expect our debt investments, whether in the form of leveraged loans or mezzanine debt, to have terms of up to ten years, and to bear interest at either a fixed or floating rate. Interest on debt will be payable
generally either quarterly or semi-annually. In some cases, our debt or preferred equity investments may provide for a portion or all of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal
amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In
addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in
connection with our investments and recognized as earned. We may also invest in preferred equity or common equity securities that pay dividends on a current basis.
On January 22, 2008, we entered into a collateral management agreement with Saratoga CLO, pursuant to which we act as its collateral
manager. The Saratoga CLO was initially refinanced in October 2013 with its reinvestment period extended to October 2016. On November 15, 2016, we completed a second refinancing of the Saratoga CLO with its reinvestment period extended to
October 2018.
On December 14, 2018, we completed a third refinancing and upsize of the Saratoga CLO. The third Saratoga CLO
refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period of January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio
increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, we invested an additional $13.8 million in
all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million in aggregate principal amount of the Class G-R-2 notes tranches at par, with a coupon of
LIBOR plus 8.75% and LIBOR plus 10.00%, respectively. As part of this refinancing, we also redeemed our existing $4.5 million aggregate amount of the Class F notes tranche at par.
On February 11, 2020, the Company entered into an unsecured loan agreement (CLO 2013-1 Warehouse 2 Loan) with Saratoga
Investment Corp. CLO 2013-1 Warehouse 2, Ltd (CLO 2013-1 Warehouse 2), a wholly-owned subsidiary of Saratoga CLO, pursuant to which CLO 2013-1 Warehouse 2 may borrow from time to time up to $20.0 million from the Company in order to
provide capital necessary to support warehouse activities. The CLO 2013-1 Warehouse 2 Loan, which expires on August 20, 2021, bears interest at an annual rate of 3M USD LIBOR + 7.5%. For the three months ended May 31, 2020, the maximum
amount invested by us in CLO 2013-1 Warehouse 2 amounted to $5.0 million. As of May 31, 2020, the fair value of our investment in CLO 2013-1 Warehouse 2 was $4.0 million.
The Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.10% per
annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLOs assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the 2013-1
Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLOs assets, paid quarterly to the extent of available
proceeds.
Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes on December 14, 2018, we are no longer
entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.
Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC
Topic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (ASC 325-40), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when
there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the
investment from the date the estimated yield was changed.
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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 administrators overhead. Our investment advisory and management fees compensate our Manager 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 Manager payable to third parties, including agents, consultants or other advisers, in
monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;
expenses incurred by our Manager payable for travel and due diligence on our prospective portfolio companies;
interest payable on debt, if any, incurred to finance our investments;
offerings of our common stock and other securities;
investment advisory and management fees;
fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with,
evaluating and making investments;
transfer agent and custodial fees;
federal and state registration fees;
all costs of registration and listing our common stock on any securities exchange;
federal, state and local taxes;
independent directors fees and expenses;
costs of preparing and filing reports or other documents required by governmental bodies (including the U.S.
Securities and Exchange Commission (SEC) and the SBA);
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 administrators overhead in performing its obligations under an Administration Agreement, including rent and the allocable
portion of the cost of our officers and their respective staffs (including travel expenses)).
Pursuant to the
investment advisory and management agreement that we had with GSCP (NJ), L.P., our former investment adviser and administrator, we had agreed to pay GSCP (NJ), L.P. as investment adviser a quarterly base management fee of 1.75% of the average value
of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters and an incentive fee.
The incentive fee had two parts:
A fee, payable quarterly in arrears, equal to 20.0% of our pre-incentive fee net investment income, expressed as
a rate of return on the value of the net assets at the end of the immediately preceding quarter, that exceeded a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter. Under this provision, in any fiscal quarter, our former
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.
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Table of Contents
A fee, payable at the end of each fiscal year, equal to 20.0% of our net realized capital gains, if any, computed
net of all realized capital losses and unrealized capital depreciation, in each case on a cumulative basis on each investment in the Companys portfolio, less the aggregate amount of capital gains incentive fees paid to our former investment
adviser through such date.
We deferred cash payment of any incentive fee otherwise earned by our former investment
adviser if, during the then most recent four full fiscal quarters ending on or prior to the date such payment was to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total
assets less liabilities) (before taking into account any incentive fees payable during that period) was less than 7.5% of our net assets at the beginning of such period. These calculations were appropriately pro-rated for the first three fiscal
quarters of operation and adjusted for any share issuances or repurchases during the applicable period. Such incentive fee would become payable on the next date on which such test had been satisfied for the most recent four full fiscal quarters or
upon certain terminations of the investment advisory and management agreement. We commenced deferring cash payment of incentive fees during the quarterly period ended August 31, 2007 and continued to defer such payments through the quarterly
period ended May 31, 2010. As of July 30, 2010, the date on which GSCP (NJ), L.P. ceased to be our investment adviser and administrator, we owed GSCP (NJ), L.P. $2.9 million in fees for services previously provided to us; of which $0.3
million has been paid by us. GSCP (NJ), L.P. agreed to waive payment by us of the remaining $2.6 million in connection with the consummation of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates described
elsewhere in this Quarterly Report.
The terms of the investment advisory and management agreement with Saratoga Investment Advisors, our
current investment adviser, are substantially similar to the terms of the investment advisory and management agreement we had entered into with GSCP (NJ), L.P., our former investment adviser, except for the following material distinctions in the fee
terms:
The capital gains portion of the incentive fee was reset with respect to gains and losses from May 31, 2010,
and therefore losses and gains incurred prior to such time will not be taken into account when calculating the capital gains fee payable to Saratoga Investment Advisors and, as a result, Saratoga Investment Advisors will be entitled to 20.0% of net
gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 equal the fair value of such investment as of such date. Under the investment advisory
and management agreement with our former investment adviser, GSCP (NJ), L.P., the capital gains fee was calculated from March 21, 2007, and the gains were substantially outweighed by losses.
Under the catch up provision, 100.0% of our pre-incentive fee net investment income with respect to
that portion of such pre-incentive fee net investment income that exceeds 1.875% but is less than or equal to 2.344% in any fiscal quarter is payable to Saratoga Investment Advisors. This will enable Saratoga Investment Advisors to receive 20.0% of
all net investment income as such amount approaches 2.344% in any quarter, and Saratoga Investment Advisors will receive 20.0% of any additional net investment income. Under the investment advisory and management agreement with our former investment
adviser, GSCP (NJ), L.P. only received 20.0% of the excess net investment income over 1.875%.
We will no longer have deferral rights regarding incentive fees in the event that the distributions to
stockholders and change in net assets is less than 7.5% for the preceding four fiscal quarters.
Capital Gains Incentive
Fee
The Company records an expense accrual relating to the capital gains incentive fee payable by the Company to its
Manager when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at
such time. The actual incentive fee payable to the Companys Manager related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.
New Accounting Pronouncements
There are
currently no new accounting pronouncements that would have a material impact on the Company.
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Table of Contents
Portfolio and Investment Activity
Investment Portfolio Overview
May 31, 2020
February 29, 2020
($ in millions)
Number of investments(1)
76
74
Number of portfolio companies(2)
39
35
Average investment per portfolio company(2)
$
11.6
$
12.9
Average investment size(1)
$
6.1
$
6.3
Weighted average maturity(3)
2.9yrs
3.1 yrs
Number of industries
9
9
Non-performing or delinquent investments (fair value)
$
3.9
$
2.1
Fixed rate debt (% of interest earning portfolio)(3)
$
28.6(6.5%)
$
29.7(6.8%)
Fixed rate debt (weighted average current coupon)(3)
8.7%
9.3%
Floating rate debt (% of interest earning portfolio)(3)
$
410.3(93.5%)
$
404.4(93.2%)
Floating rate debt (weighted average current spread over LIBOR)(3)(4)
7.9
%
8.0
%
(1)
Excludes our investment in the subordinated notes of Saratoga CLO.
(2)
Excludes our investment in the subordinated notes of Saratoga CLO, Class F-R-2 Notes and Class G-R-2 Notes
tranches of Saratoga CLO and loan to Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd.
(3)
Excludes our investment in the subordinated notes of Saratoga CLO and equity interests.
(4)
Calculation uses either 1-month or 3-month LIBOR, depending on the contractual terms, and after factoring in
any existing LIBOR floors.
During the three months ended May 31, 2020, we invested $39.0 million in new or
existing portfolio companies and had $9.4 million in aggregate amount of exits and repayments resulting in net investments of $29.6 million for the period. During the three months ended May 31, 2019, we invested $27.4 million in new or existing
portfolio companies and had $26.9 million in aggregate amount of exits and repayments resulting in net investments of $0.5 million for the period.
Portfolio Composition
Our portfolio composition at May 31, 2020 and February 29, 2020 at fair value was as follows:
May 31, 2020
February 29, 2020
Percentage
of Total
Portfolio
Weighted
Average
Current
Yield
Percentage
of Total
Portfolio
Weighted
Average
Current
Yield
First lien term loans
73.4
%
9.9
%
71.3
%
9.6
%
Second lien term loans
14.4
11.1
15.1
10.7
Unsecured term loans
1.2
6.7
0.9
9.3
Structured finance securities
5.6
11.7
6.7
11.4
Equity interests
5.4
6.0
Total
100.0
%
9.6
%
100.0
%
9.3
%
At May 31, 2020, our investment in the subordinated notes of Saratoga CLO, a collateralized loan
obligation fund, had a fair value of $18.1 million and constituted 3.7% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of May 31, 2020 and February 29, 2020, was composed of $519.0 million and
$528.4 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of May 31, 2020, we also own $2.5 million in aggregate principal of the F-R-2 Notes and $7.5 million in aggregate
principal of the G-R-2 Notes in the Saratoga CLO, that only rank senior to the subordinated notes. At May 31, 2020, our investment in CLO 2013-1 Warehouse 2, a wholly-owned subsidiary of Saratoga CLO, had a fair value of $4.0 million and
constituted 0.8% of our portfolio.
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Table of Contents
This investment is subject to unique risks. (See Part 1. Item 1A. Risk
FactorsOur 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, 2020).
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, 2020, $449.0 million or 98.1% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below)
color rating of green or yellow and seven Saratoga CLO portfolio investments were in default with a fair value of $3.6 million. At February 29, 2020, $494.2 million or 98.6% of the Saratoga CLO portfolio investments in terms of market value had
a CMR (as defined below) color rating of green or yellow and two Saratoga CLO portfolio investments were in default with a fair value of $1.4 million. For more information relating to the Saratoga CLO, see the audited financial statements for
Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020.
Saratoga Investment Advisors normally grades
all of our investments using a credit and monitoring rating system (CMR). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of
default, and restructuring risk. The color ratings are characterized as follows: (Green)performing credit; (Yellow)underperforming credit; (Red)in principal payment default and/or expected loss of principal.
Portfolio CMR distribution
The CMR distribution for our investments at May 31, 2020 and February 29, 2020 was as follows:
Saratoga Investment Corp.
May 31, 2020
February 29, 2020
Color Score
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)
Green
$
396,777
82.2
%
$
429,784
88.5
%
Yellow
40,148
8.3
2,141
0.5
Red
2,029
0.4
2,137
0.4
N/A(1)
43,993
9.1
51,570
10.6
Total
$
482,947
100.0
%
$
485,632
100.0
%
(1)
Comprised of our investment in the subordinated notes of Saratoga CLO and equity interests.
The change in reserve from $1.2 million as of February 29, 2020 to $1.5 million as of May 31, 2020 was
primarily related to the additional interest accruals reserved on My Alarm Center, LLC, Roscoe Medical, Inc. and TMAC Acquisition Co., LLC.
The CMR distribution of Saratoga CLO investments at May 31, 2020 and February 29, 2020 was as follows:
Saratoga CLO
May 31, 2020
February 29, 2020
Color Score
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)
Green
$
381,793
83.4
%
$
456,767
91.1
%
Yellow
67,179
14.7
37,446
7.5
Red
8,772
1.9
6,787
1.4
N/A(1)
0
0.0
0
0.0
Total
$
457,744
100.0
%
$
501,000
100.0
%
(1)
Comprised of Saratoga CLOs equity interests.
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Table of Contents
Portfolio composition by industry grouping at fair value
The following table shows our portfolio composition by industry grouping at fair value at May 31, 2020 and February 29, 2020:
Saratoga Investment Corp.
May 31, 2020
February 29, 2020
Investments
At
Fair Value
Percentage
of Total
Portfolio
Investments
At
Fair Value
Percentage
of Total
Portfolio
($ in thousands)
Business Services
$
294,092
60.9
%
$
285,356
58.8
%
Healthcare Services
71,864
14.9
69,072
14.2
Education
70,070
14.5
77,341
15.9
Structured Finance Securities(1)
31,269
6.5
34,675
7.1
Property Management
9,981
2.0
11,503
2.4
Consumer Services
1,997
0.4
1,997
0.4
Food and Beverage
1,848
0.4
2,141
0.4
Metals
1,417
0.3
3,130
0.7
Consumer Products
409
0.1
417
0.1
Total
$
482,947
100.0
%
$
485,632
100.0
%
(1)
Comprised of our investment in the subordinated notes, Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO
and Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd.
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Table of Contents
The following table shows Saratoga CLOs portfolio composition by industry grouping at
fair value at May 31, 2020 and February 29, 2020:
Saratoga CLO
May 31, 2020
February 29, 2020
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)
Banking Finance Insurance & Real Estate
$
86,039
18.8
%
$
87,957
17.6
%
Services: Business
37,308
8.2
45,735
9.1
Healthcare & Pharmaceuticals
33,988
7.4
39,978
8.0
High Tech Industries
30,372
6.6
32,897
6.6
Telecommunications
28,033
6.1
28,317
5.6
Services: Consumer
25,015
5.5
28,327
5.6
Aerospace & Defense
24,320
5.3
25,093
5.0
Beverage Food & Tobacco
20,588
4.5
21,637
4.3
Media: Advertising Printing & Publishing
18,085
4.0
19,808
4.0
Chemicals Plastics & Rubber
16,401
3.6
14,689
2.9
Consumer goods: Non-durable
15,409
3.4
15,700
3.1
Containers Packaging & Glass
15,050
3.3
15,753
3.1
Hotel Gaming & Leisure
12,752
2.8
16,883
3.4
Automotive
10,976
2.4
13,820
2.8
Retail
10,511
2.3
14,538
2.9
Media: Broadcasting & Subscription
9,826
2.1
7,959
1.6
Capital Equipment
9,616
2.1
9,551
1.9
Consumer goods: Durable
9,528
2.1
11,674
2.3
Utilities: Oil & Gas
6,501
1.4
7,306
1.5
Transportation: Cargo
6,432
1.4
7,054
1.4
Construction & Building
6,175
1.3
7,617
1.5
Forest Products & Paper
5,056
1.1
5,385
1.1
Metals & Mining
3,721
0.8
4,112
0.8
Utilities: Electric
2,683
0.6
4,752
1.0
Energy: Oil & Gas
2,553
0.6
3,559
0.7
Media: Diversified & Production
2,478
0.5
2,711
0.5
Transportation: Consumer
1,937
0.4
1,914
0.4
Energy: Electricity
1,873
0.4
3,357
0.7
Utilities
1,835
0.4
0.0
Wholesale
1,727
0.4
1,928
0.4
Environmental Industries
956
0.2
989
0.2
Total
$
457,744
100.0
%
$
501,000
100.0
%
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Table of Contents
Portfolio composition by geographic location at fair value
The following table shows our portfolio composition by geographic location at fair value at May 31, 2020 and February 29, 2020. The
geographic composition is determined by the location of the corporate headquarters of the portfolio company.
May 31, 2020
February 29, 2020
Investments
at
Fair Value
Percentage
of Total
Portfolio
Investments
at
Fair Value
Percentage
of Total
Portfolio
($ in thousands)
Southeast
$
159,280
33.0
%
$
165,353
34.0
%
West
117,808
24.4
99,390
20.5
Midwest
73,130
15.1
75,528
15.5
Southwest
53,609
11.1
61,456
12.7
Northeast
18,018
3.7
18,047
3.7
Northwest
9,623
2.0
9,981
2.1
Other(1)
51,479
10.7
55,877
11.5
Total
$
482,947
100.0
%
$
485,632
100.0
%
(1)
Comprised of our investment in the subordinated notes, Class F-R-2 Notes and Class G-R-2 Notes of Saratoga CLO,
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd and foreign investments.
Results of operations
Operating results for the three months ended May 31, 2020 and May 30, 2019 was as follows:
For the three months ended
May 31, 2020
May 31, 2019
($ in thousands)
Total investment income
$
13,297
$
12,751
Total operating expenses
4,279
9,070
Net investment income
9,018
3,681
Net realized gain (loss) from investments
8
Net change in unrealized appreciation (depreciation) on investments
(31,950
)
3,989
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on
investments
268
(21
)
Net increase (decrease) in net assets resulting from operations
$
(22,656
)
$
7,649
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Investment income
The composition of our investment income for three months ended May 31, 2020 and May 31, 2019 was as follows:
For the three months ended
May 31, 2020
May 31, 2019
($ in thousands)
Interest from investments
$
12,150
$
11,603
Interest from cash and cash equivalents
12
51
Management fee income
635
630
Structuring and advisory fee income*
313
316
Other income*
187
151
Total investment income
$
13,297
$
12,751
*
Certain prior period amounts have been reclassified to conform to current period presentation.
For the three months ended May 31, 2020, total investment income increased $0.5 million, or 4.3% to $13.3 million
from $12.8 million for the three months ended May 31, 2019. Interest income from investments increased $0.6 million, or 4.7%, to $12.2 million for the three months ended May 31, 2020 from $11.6 million for the three months ended
May 31, 2019. This reflects the impact of the increase of $73.4 million, or 17.9% in total investments at May 31, 2020 from $409.5 million at May 31, 2019, offset by the reduction in LIBOR during this same period. At May 31,
2020, the weighted average current yield on investments was 9.6% compared to 10.6% at May 31, 2019, which offset some of the increase in investments.
For the three months ended May 31, 2020 and May 31, 2019, total PIK income was $0.7 million and $1.2 million, respectively. This
decrease was primarily due to the sale of our investment in Easy Ice, LLC during the fourth quarter of the fiscal year ended February 29, 2020, which primarily generated PIK income.
Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended May 31, 2020 and
May 31, 2019, total management fee income was $0.6 million and $0.6 million, respectively.
Operating expenses
The composition of our operating expenses for the three months ended May 31, 2020 and May 31, 2019 was as follows:
For the three months ended
May 31, 2020
May 31, 2019
($ in thousands)
Interest and debt financing expenses
$
2,564
$
3,864
Base management fees
2,160
1,812
Incentive management fees expense (benefit)
(1,858
)
2,113
Professional fees
387
395
Administrator expenses
556
500
Insurance
68
65
Directors fees and expenses
60
60
General & administrative and other expenses
351
259
Income tax expense (benefit)
(9
)
2
Total operating expenses
$
4,279
$
9,070
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For the three months ended May 31, 2020, total operating expenses decreased $4.8
million, or 52.8% compared to the three months ended May 31, 2019.
For the three months ended May 31, 2020, interest and debt
financing expenses decreased $1.3 million, or 33.7% compared to the three months ended May 31, 2019. The decrease is primarily attributable to a decrease in average outstanding debt from $284.5 million for the three months ended May 31,
2019 to $217.4 million for the three months ended May 31, 2020, primarily reflecting the redemption of our 2023 Notes during the fiscal quarter ended February 29, 2020.
For the three months ended May 31, 2020, the weighted average interest rate on our outstanding indebtedness was 4.01% compared to 4.80%
for the three months ended May 31, 2019. The decrease in weighted average interest rate was primarily driven by the redemption of the 2023 Notes during the fiscal quarter ended February 29, 2020 which carried a fixed rate of 6.75%.
As of May 31, 2020 and February 29, 2020, the SBA debentures represented 73.9% and 71.4% of overall debt, respectively.
For the three months ended May 31, 2020, base management fees increased $0.3 million, or 19.2% compared to the three months ended
May 31, 2019. The increase in base management fees results from the 18.9% increase in the average value of our total assets, less cash and cash equivalents, from $412.0 million for the three months ended May 31, 2019 to $489.8 million for
the three months ended May 31, 2020.
For the three months ended May 31, 2020, incentive management fees decreased $4.0 million,
or 187.9%, compared to the three months ended May 31, 2019. The first part of the incentive management fees increased from $1.2 million for the three months ended May 31, 2019 to $1.4 million for the three months ended May 31, 2020,
as higher average total assets led to increased net investment income above the hurdle rate pursuant to the Management Agreement. The incentive management fees related to capital gains decreased from a $1.0 million expense for the three months ended
May 31, 2019 to a $(3.3) million benefit for the three months ended May 31, 2020, reflecting a reversal of incentive fee accrual due to an increase in unrealized depreciation on investments as of May 31, 2020.
For the three months ended May 31, 2020, professional fees decreased $0.01 million, or 2.1% compared to the three months ended
May 31, 2019.
For the three months ended May 31, 2020, administrator expenses increased $0.1 million, or 11.3%, compared to the
three months ended May 31, 2019. These increases during the period are attributable to an increase to the cap on the payment or reimbursements of expenses by the Company from $2.0 million to $2.225 million, effective August 1, 2019.
As discussed above, the decrease in interest and debt financing expenses for the three months ended May 31, 2020 compared to the three
months ended May 31, 2019 is primarily attributable to a decrease in the average dollar amount of outstanding debt. During the three months ended May 31, 2020 and May 31, 2019, there were no borrowings outstanding under the Credit
Facility. For the three months ended May 31, 2020 and May 31, 2019, the average borrowings outstanding of SBA debentures was $157.4 million and $150.0 million, respectively. For the three months ended May 31, 2020 and May 31,
2019, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.16% and 3.25%, respectively. During the three months ended May 31, 2020 and May 31, 2019, the average dollar amount of our 6.25% fixed-rate
2025 Notes outstanding was $60.0 million and $60.0 million, respectively. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in
aggregate principal amount of issued and outstanding 2023 Notes. During the three months ended May 31, 2019, the average dollar amount of our 6.75% fixed-rate 2023 Notes outstanding was $74.5 million.
For the three months ended May 31, 2020 and May 31, 2019, there were income tax expense (benefits) of $0.01 million and $0.0
million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in the taxable blockers.
Net realized gains (losses) on sales of investments
For the three months ended May 31, 2020, the Company had $9.4 million of sales, repayments, exits or restructurings resulting in $0.01
million of n
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.