Oct 15, 2013

Saratoga Investment Corp. Announces Fiscal Second Quarter 2014 Financial Results

Saratoga Investment Corp. Announces Fiscal Second Quarter 2014 Financial Results 29.9 KB

NEW YORK, Oct. 15, 2013 /PRNewswire/ -- Saratoga Investment Corp. (NYSE:SAR) ("Saratoga Investment" or "the Company"), a business development company, today announced financial results for its 2014 fiscal second quarter.

Operating Results

For the fiscal quarter ended August 31, 2013, Saratoga Investment reported net investment income of $2.3 million, or $0.48 on a weighted average per share basis, and a net loss on investments of $2.3 million, or $0.49 on a weighted average per share basis, resulting in a decrease in net assets from operations of $0.04 million, or $0.01 on a weighted average per share basis. The $2.3 million net loss on investments was comprised of $2.9 million in net unrealized depreciation on investments and $0.6 million in net realized gains from investments.

Net asset value ("NAV") was $112.4 million as of August 31, 2013, compared to $112.5 million as of May 31, 2013 and $108.7 million as of February 28, 2013. NAV per share was $23.77 as of August 31, 2013 and $23.78 as of May 31, 2013 and $22.98 as of February 28, 2013.

Christian L. Oberbeck, Chairman, Chief Executive Officer and President of Saratoga Investment, said, "We continue to see opportunities and this quarter were able to add to the investments in our portfolio. We invested approximately $55 million in both new and existing portfolio companies during the quarter, and our significant financial resources will enable us to invest in future situations as they arise."

Portfolio and Investment Activity

As of August 31, 2013, the fair value of Saratoga Investment's investment portfolio was $187.8 million, principally invested in 34 portfolio companies and one collateralized loan obligation fund (the "CLO"). The overall portfolio composition consisted of 19.8% of middle market loans, 40.2% of first lien term loans, 8.7% of second lien term loans, 13.0% of senior secured notes, 2.9% of unsecured notes, 10.5% of subordinated notes of the CLO and 4.9% of equity interests.

During the 2014 fiscal second quarter, Saratoga Investment invested $54.9 million in new or existing portfolio companies and had $29.6 million in aggregate amount of exits and repayments on its investments, resulting in net investments of $25.3 million for the period.

On October 1, 2013, the Saratoga CLO priced a refinancing of its notes. The refinanced Saratoga CLO has assets of $300 million and will have a reinvestment period through October 2016. As a result of increased pricing on the notes and the smaller asset base, interest income and equity distributions in the future will be lower than historical amounts but provide greater earnings stability during the next three to four years. Saratoga Investment Corp. will continue to own 100% of the subordinated notes and receive a 50 basis point management fee for the life of the Saratoga CLO. The refinancing is expected to close on October 17, 2013.

As of August 31, 2013, the weighted average current yield on Saratoga Investment's middle market loans, first lien term loans, second lien term loans, senior secured notes, unsecured notes, and the CLO subordinated notes were 6.6%, 10.5%, 10.1%, 14.9%, 14.9%, and 27.2%, respectively, which resulted in an aggregate weighted average current yield of 12.2%.

Liquidity and Capital Resources

As of August 31, 2013, Saratoga Investment had $48.3 million in notes payable outstanding, no borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. In addition, Saratoga Investment had an aggregate of $11.6 million in cash and cash equivalents and $16.6 million in cash and cash equivalents, reserve accounts at August 31, 2013. The Company is required to use the amounts held in cash and cash equivalents, reserve accounts to pay interest expense, reduce borrowings or pay other amounts in accordance with the terms of its senior secured revolving credit facility and its Company's Small Business Investment Company ("SBIC") subsidiary. As of August 31, 2013, the SBIC subsidiary had $25 million in regulatory capital and $40.0 million of Small Business Administration debentures.

2013 Annual Meeting of Stockholders

At Saratoga Investment's Annual Meeting of Stockholders held September 26, 2013, Mssrs. Steven M. Looney and Charles S. Whitman were elected to serve until the 2016 Annual Meeting of Stockholders. Also approved at the Meeting was the proposal to reauthorize the Company to issue its common stock at an offering price per share not less than 85% of the Company's then current net asset value per share.

2014 Fiscal Second Quarter Conference Call/Webcast Information

When: Oct. 16, 2013 at 10:00 a.m. Eastern Time (ET)

Call: Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada).

A replay of the call will be available from 12:00 p.m. ET on Oct. 16, 2013 through 11:59 p.m. ET on Oct. 22, 2013 by dialing (800) 585-8367 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada). Passcode for both replay numbers is 76281766.

Webcast: Interested parties may also access a simultaneous webcast of the call by going to http://ir.saratogainvestmentcorp.com/events.cfm.

About Saratoga Investment Corp.

Saratoga Investment Corp. is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in mezzanine debt, leveraged loans andequity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment Corp.'s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment Corp. has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Within the BDC, Saratoga Investment manages both an SBIC-licensed subsidiary and a $300 million Collateralized Loan Obligation (CLO) fund. These diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to offer a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment Corp. makes with the SEC. Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:	Richard Petrocelli
	Saratoga Investment Corp.
	212-906-7800

	Roland Tomforde
	Broadgate Consultants
	212-232-2222

Financial Statements

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

		As of
		August 31, 2013	February 28, 2013
		(unaudited)
ASSETS

Investments at fair value
	Non-control/non-affiliate investments (amortized cost of $167,382,770 and $130,465,086, respectively)	$ 168,058,055	$ 129,563,428
	Control investments (cost of $16,804,518 and $18,944,966 respectively)	19,741,624	25,516,959
	Total investments at fair value (amortized cost of $184,187,288 and $149,410,052 respectively)	187,799,679	155,080,387
Cash and cash equivalents		11,558,783	149,025
Cash and cash equivalents, reserve accounts		16,592,698	12,086,142
Interest receivable, (net of reserve of $240,693 and $53,543, respectively)		2,060,413	2,889,358
Due from manager		4,929	-
Deferred debt financing costs, net		4,250,199	2,090,184
Management fee receivable		198,522	215,853
Other assets		91,345	83,407
Receivable from unsettled trades		1,500,585	1,817,074
	Total assets	$ 224,057,153	$ 174,411,430

LIABILITIES
Revolving credit facility		$ -	$ 24,300,000
SBA debentures payable		40,000,000	36,000,000
Notes payable		48,300,000	-
Payable for unsettled trades		16,270,000	-
Management and incentive fees payable		5,486,746	4,509,322
Accounts payable and accrued expenses		501,640	435,038
Interest and debt fees payable		745,051	257,796
Due to manager		308,401	222,513
	Total liabilities	$ 111,611,838	$ 65,724,669

NET ASSETS
Common stock, par value $.001, 100,000,000 common shares
	authorized, 4,730,116 and 4,730,116 common shares issued and outstanding, respectively	$ 4,730	$ 4,730
Capital in excess of par value		174,824,076	174,824,076
Distribution in excess of net investment income		(19,781,396)	(24,522,951)
Accumulated net realized loss from investments and derivatives		(46,214,485)	(47,289,427)
Net unrealized appreciation on investments and derivatives		3,612,390	5,670,333
	Total Net Assets	112,445,315	108,686,761

Total liabilities and Net Assets		$ 224,057,153	$ 174,411,430

NET ASSET VALUE PER SHARE		$ 23.77	$ 22.98

See accompanying notes to consolidated financial statements.

Saratoga Investment Corp.

Consolidated Statements of Operations

		For the three months ended August 31		For the six months ended August 31
		2013	2012	2013	2012
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
INVESTMENT INCOME
Interest from investments
	Non-control/Non-affiliate investments	$ 3,385,362	$ 2,206,947	$ 7,254,826	$ 3,945,469
	Payment-in-kind interest income from Non-control/Non-affiliate investments	296,802	212,811	472,923	539,274
	Control investments	1,109,535	1,094,681	2,235,539	2,140,466
	Total interest income	4,791,699	3,514,439	9,963,288	6,625,209
Interest from cash and cash equivalents		3,959	1,791	5,865	4,637
Management fee income		480,750	500,225	978,841	1,000,065
Other income		111,300	146,834	457,476	152,560
	Total investment income	5,387,708	4,163,289	11,405,470	7,782,471

EXPENSES
Interest and debt financing expenses		1,603,581	653,025	2,731,436	1,278,728
Base management fees		811,106	504,802	1,547,822	963,610
Professional fees		235,191	293,483	566,255	639,322
Administrator expenses		250,000	250,000	500,000	500,000
Incentive management fees		(39,770)	869,403	781,352	1,299,674
Insurance		119,234	130,308	239,229	260,615
Directors fees and expenses		45,000	51,000	96,000	102,000
General & administrative		91,425	97,022	189,786	148,363
Other expense		75	-	12,035	3,123
	Total expenses	3,115,842	2,849,043	6,663,915	5,195,435

	NET INVESTMENT INCOME	2,271,866	1,314,246	4,741,555	2,587,036

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investments		545,642	268,718	1,074,942	447,348
Net realized loss from derivatives		-	-	-	(131,000)
Net unrealized appreciation (depreciation) on investments		(2,858,805)	3,288,078	(2,057,943)	5,027,500
Net unrealized appreciation on derivatives		-	-	-	130,925
	Net gain (loss) on investments	(2,313,163)	3,556,796	(983,001)	5,474,773

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$ (41,297)	$ 4,871,042	$ 3,758,554	$ 8,061,809

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE		$ (0.01)	$ 1.26	$ 0.79	$ 2.08

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED		4,730,116	3,876,661	4,730,116	3,876,661

See accompanying notes to consolidated financial statements.

SOURCE Saratoga Investment Corp.

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