Saratoga Investment Corp.
SARATOGA INVESTMENT CORP. (Form: 10-Q, Received: 07/13/2016 16:02:32)
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the Quarterly Period Ended May 31, 2016

 

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

Commission File Number: 001-33376

 

 

SARATOGA INVESTMENT CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   20-8700615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

535 Madison Avenue

New York, New York

  10022
(Address of principal executive office)   (Zip Code)

(212) 906-7800

(Registrant’s telephone number, including area code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ¨     No   ¨

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

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   x    Smaller Reporting Company   ¨

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

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of July 12, 2016 was 5,741,913.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

 

 

         Page  

PART I

  FINANCIAL INFORMATION      3   

Item 1.

  Consolidated Financial Statements      3   
  Consolidated Statements of Assets and Liabilities as of May 31, 2016 (unaudited) and February 29, 2016      3   
  Consolidated Statements of Operations for the three months ended May 31, 2016 and May 31, 2015 (unaudited)      4   
  Consolidated Schedules of Investments as of May 31, 2016 (unaudited) and February 29, 2016      5   
  Consolidated Statements of Changes in Net Assets for the three months ended May 31, 2016 and May 31, 2015 (unaudited)      7   
  Consolidated Statements of Cash Flows for the three months ended May 31, 2016 and May 31, 2015 (unaudited)      8   
  Notes to Consolidated Financial Statements as of May 31, 2016 (unaudited)      9   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      32   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      53   

Item 4.

  Controls and Procedures      53   

PART II

  OTHER INFORMATION      54   

Item 1.

  Legal Proceedings      54   

Item 1A.

  Risk Factors      54   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      54   

Item 3.

  Defaults Upon Senior Securities      54   

Item 4.

  Mine Safety Disclosures      54   

Item 5.

  Other Information      54   

Item 6.

  Exhibits      55   

Signatures

       56   

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

 

     As of  
     May 31, 2016     February 29, 2016  
     (unaudited)        

ASSETS

    

Investments at fair value

    

Non-control/non-affiliate investments (amortized cost of $254,888,356 and $268,145,090, respectively)

   $ 251,975,004      $ 271,168,186   

Control investments (cost of $12,072,644 and $13,030,751, respectively)

     12,452,454        12,827,980   
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $266,961,000 and $281,175,841, respectively)

     264,427,458        283,996,166   

Cash and cash equivalents

     1,309,111        2,440,277   

Cash and cash equivalents, reserve accounts

     26,164,331        4,594,506   

Interest receivable (net of reserve of $0 and $728,519, respectively)

     3,442,047        3,195,919   

Management fee receivable

     170,494        170,016   

Other assets

     360,202        350,368   

Receivable from unsettled trades

     —          300,000   
  

 

 

   

 

 

 

Total assets

   $ 295,873,643      $ 295,047,252   
  

 

 

   

 

 

 

LIABILITIES

    

Revolving credit facility

   $ —        $ —     

Deferred debt financing costs, revolving credit facility

     (496,064     (515,906

SBA debentures payable

     103,660,000        103,660,000   

Deferred debt financing costs, SBA debentures payable

     (2,669,276     (2,493,303

Notes payable

     61,793,125        61,793,125   

Deferred debt financing costs, notes payable

     (1,589,192     (1,694,586

Dividend payable

     —          875,599   

Base management and incentive fees payable

     5,753,045        5,593,956   

Accounts payable and accrued expenses

     938,257        855,873   

Interest and debt fees payable

     1,038,923        1,552,069   

Payable for repurchases of common stock

     36,887        20,957   

Directors fees payable

     54,000        31,500   

Due to manager

     225,070        218,093   
  

 

 

   

 

 

 

Total liabilities

   $ 168,744,775      $ 169,897,377   
  

 

 

   

 

 

 

Commitments and contingencies (See Note 7)

    

NET ASSETS

    

Common stock, par value $.001, 100,000,000 common shares authorized, 5,750,222 and 5,672,227 common shares issued and outstanding, respectively

   $ 5,750      $ 5,672   

Capital in excess of par value

     189,751,969        188,714,329   

Distribution in excess of net investment income

     (26,025,665     (26,217,902

Accumulated net realized loss from investments and derivatives

     (34,069,644     (40,172,549

Accumulated net unrealized appreciation (depreciation) on investments and derivatives

     (2,533,542     2,820,325   
  

 

 

   

 

 

 

Total net assets

     127,128,868        125,149,875   
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 295,873,643      $ 295,047,252   
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE

   $ 22.11      $ 22.06   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Operations

(unaudited)

 

     For the three months ended
May 31, 2016
    For the three months ended
May 31, 2015
 

INVESTMENT INCOME

    

Interest from investments

    

Non-control/Non-affiliate investments

   $ 6,620,113      $ 5,648,979   

Payment-in-kind interest income from Non-control/Non-affiliate investments

     129,090        691,152   

Control investments

     532,126        590,990   
  

 

 

   

 

 

 

Total interest income

     7,281,329        6,931,121   

Interest from cash and cash equivalents

     3,786        736   

Management fee income

     373,684        378,746   

Other income

     249,596        250,564   
  

 

 

   

 

 

 

Total investment income

     7,908,395        7,561,167   
  

 

 

   

 

 

 

EXPENSES

    

Interest and debt financing expenses

     2,368,056        1,963,865   

Base management fees

     1,227,157        1,124,098   

Professional fees

     359,299        333,444   

Administrator expenses

     325,000        250,000   

Incentive management fees

     728,280        1,797,833   

Insurance

     70,658        87,317   

Directors fees and expenses

     66,000        51,000   

General & administrative

     212,209        182,920   

Other expense

     13,187        —     
  

 

 

   

 

 

 

Total expenses

     5,369,846        5,790,477   
  

 

 

   

 

 

 

NET INVESTMENT INCOME

     2,538,549        1,770,690   
  

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

    

Net realized gain from investments

     6,102,905        73,246   

Net unrealized appreciation (depreciation) on investments

     (5,353,867     5,540,969   
  

 

 

   

 

 

 

Net gain on investments

     749,038        5,614,215   
  

 

 

   

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 3,287,587      $ 7,384,905   
  

 

 

   

 

 

 

WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE

   $ 0.57      $ 1.36   

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED

     5,737,496        5,422,491   

See accompanying notes to consolidated financial statements.

 

4


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

May 31, 2016

(unaudited)

 

Company

 

Industry

 

Investment Interest Rate /

Maturity

  Principal/
Number of

Shares
    Cost     Fair Value (c)     % of
Net Assets
 

Non-control/Non-affiliated investments - 198.2% (b)

       

National Truck Protection Co., Inc. (d), (g)

  Automotive Aftermarket     Common Stock     1,116      $ 1,000,000      $ 2,004,619        1.6

National Truck Protection Co., Inc. (d)

  Automotive Aftermarket   First Lien Term Loan 15.50% Cash, 9/13/2018   $ 6,776,770        6,776,770        6,776,770        5.3
       

 

 

   

 

 

   

 

 

 
    Total Automotive Aftermarket       7,776,770        8,781,389        6.9
       

 

 

   

 

 

   

 

 

 

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting A-1     2,535        220,900        2,198,225        1.7

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting B-1     1,600        139,424        1,387,440        1.1

Polar Holding Company, Ltd. (a), (i)

  Building Products   First Lien Term Loan 10.00% Cash, 9/30/2016   $ 2,000,000        2,000,000        2,000,000        1.6
       

 

 

   

 

 

   

 

 

 
    Total Building Products       2,360,324        5,585,665        4.4
       

 

 

   

 

 

   

 

 

 

Avionte Holdings, LLC (g)

  Business Services   Common Stock     100,000        100,000        215,000        0.2

Avionte Holdings, LLC

  Business Services   First Lien Term Loan 9.75% Cash, 1/8/2019   $ 2,406,342        2,378,598        2,406,342        1.9

Avionte Holdings, LLC (j), (k)

  Business Services   Delayed Draw Term Loan A 9.75% Cash, 1/8/2019   $ —          —          —          0.0

BMC Software, Inc. (d)

  Business Services   Syndicated Loan 5.00% Cash, 9/10/2020   $ 5,656,667        5,620,832        5,062,717        4.0

Courion Corporation

  Business Services   Second Lien Term Loan 11.00% Cash, 6/1/2021   $ 15,000,000        14,862,224        14,850,000        11.7

Dispensing Dynamics International (d)

  Business Services   Senior Secured Note 12.50% Cash, 1/1/2018   $ 12,000,000        12,021,849        11,100,000        8.7

Easy Ice, LLC (d)

  Business Services   First Lien Term Loan 9.50% Cash, 1/15/2020   $ 14,000,000        13,880,323        13,938,400        11.0

Emily Street Enterprises, L.L.C.

  Business Services   Senior Secured Note 10.00% Cash, 1/23/2020   $ 3,300,000        3,267,411        3,346,860        2.6

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

  Business Services   Warrant Membership Interests     49,318        400,000        495,482        0.4

Finalsite Holdings, Inc.

  Business Services   Second Lien Term Loan 10.25% Cash, 5/21/2020   $ 7,500,000        7,444,463        7,500,000        5.9

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   First Lien Term Loan 6.25% Cash, 10/8/2021   $ 4,987,500        4,896,207        4,879,271        3.8

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   Second Lien Term Loan 10.50% Cash, 10/8/2022   $ 3,000,000        2,915,418        2,940,000        2.3

Identity Automation Systems (g)

  Business Services   Common Stock Class A Units     232,616        232,616        434,992        0.3

Identity Automation Systems

  Business Services   First Lien Term Loan 10.25% Cash, 12/18/2020   $ 6,920,476        6,866,477        6,920,476        5.5

Identity Automation Systems (j), (k)

  Business Services   Delayed Draw Term Loan 10.25% Cash, 12/18/2020   $ —          —          —          0.0

Knowland Technology Holdings, L.L.C.

  Business Services   First Lien Term Loan 8.00% Cash, 11/29/2017   $ 5,259,171        5,228,421        5,259,171        4.1

PCF Number 4, Inc.

  Business Services   Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021   $ 13,033,222        12,904,063        12,902,890        10.2

Vector Controls Holding Co., LLC (d)

  Business Services   First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018   $ 9,005,714        8,932,843        9,005,714        7.1

Vector Controls Holding Co., LLC (d), (g)

  Business Services   Warrants to Purchase Limited Liability Company Interests     343        —          427,186        0.3
       

 

 

   

 

 

   

 

 

 
    Total Business Services       101,951,745        101,684,501        80.0
       

 

 

   

 

 

   

 

 

 

Targus Holdings, Inc. (d), (g)

  Consumer Products   Common Stock     210,456        1,791,242        8,418        0.0

Targus Holdings, Inc. (d)

  Consumer Products   Second Lien Term Loan A-2 15.00% PIK, 12/31/2019   $ 212,845        212,845        212,845        0.2

Targus Holdings, Inc. (d)

  Consumer Products   Second Lien Term Loan B 15.00% PIK, 12/31/2019   $ 638,536        638,536        638,536        0.5
       

 

 

   

 

 

   

 

 

 
    Total Consumer Products       2,642,623        859,799        0.7
       

 

 

   

 

 

   

 

 

 

Expedited Travel L.L.C.

  Consumer Services   Common Stock     1,000,000        1,000,000        1,776,185        1.4

Expedited Travel L.L.C.

  Consumer Services   First Lien Term Loan 10.00% Cash, 10/10/2019   $ 10,733,455        10,674,863        10,733,455        8.5

My Alarm Center, LLC

  Consumer Services   Second Lien Term Loan 12.00% Cash, 7/9/2019   $ 7,500,000        7,500,000        7,406,250        5.8

PrePaid Legal Services, Inc. (d)

  Consumer Services   First Lien Term Loan 6.50% Cash, 7/1/2019   $ 1,519,034        1,510,071        1,505,970        1.2

PrePaid Legal Services, Inc. (d)

  Consumer Services   Second Lien Term Loan 10.25% Cash, 7/1/2020   $ 10,000,000        9,963,960        9,822,000        7.7

Prime Security Services, LLC

  Consumer Services   Second Lien Term Loan 9.75% Cash, 7/1/2022   $ 12,000,000        11,835,176        12,092,400        9.5
       

 

 

   

 

 

   

 

 

 
    Total Consumer Services       42,484,070        43,336,260        34.1
       

 

 

   

 

 

   

 

 

 

M/C Acquisition Corp., L.L.C. (d), (g)

  Education   Class A Common Stock     544,761        30,241        —          0.0

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

  Education   First Lien Term Loan 1.00% Cash, 3/31/2016   $ 2,321,073        1,193,790        8,087        0.0

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

  Education   Common Stock     750,000        750,000        884,948        0.7

Texas Teachers of Tomorrow, LLC.

  Education   Second Lien Term Loan 10.75% Cash, 6/2/2021   $ 10,000,000        9,906,257        9,900,000        7.8
       

 

 

   

 

 

   

 

 

 
    Total Education       11,880,288        10,793,035        8.5
       

 

 

   

 

 

   

 

 

 

TM Restaurant Group L.L.C.

  Food and Beverage   First Lien Term Loan 9.75% Cash, 7/16/2017   $ 9,556,413        9,477,341        9,353,817        7.4
       

 

 

   

 

 

   

 

 

 
    Total Food and Beverage       9,477,341        9,353,817        7.4
       

 

 

   

 

 

   

 

 

 

Bristol Hospice, LLC

  Healthcare Services   Senior Secured Note 11.00% (10.00% Cash/1.00% PIK), 11/29/2018   $ 5,391,235        5,331,651        5,445,147        4.3

Censis Technologies, Inc.

  Healthcare Services   First Lien Term Loan B 11.00% Cash, 7/24/2019   $ 11,475,000        11,314,365        10,934,527        8.6

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

  Healthcare Services   Limited Partner Interests     999        999,000        714,565        0.5

Roscoe Medical, Inc. (d), (g)

  Healthcare Services   Common Stock     5,081        508,077        474,217        0.4

Roscoe Medical, Inc.

  Healthcare Services   Second Lien Term Loan 11.25% Cash, 9/26/2019   $ 4,200,000        4,144,752        4,036,200        3.2

Ohio Medical, LLC (g)

  Healthcare Services   Common Stock     5,000        500,000        503,000        0.4

Ohio Medical, LLC

  Healthcare Services   Senior Subordinated Note 12.00% , 7/15/2021   $ 7,300,000        7,231,781        7,218,240        5.7

Smile Brands Group Inc. (d)

  Healthcare Services   Syndicated Loan 9.00% (7.50% Cash/1.50% PIK), 8/16/2019   $ 4,427,968        4,373,169        3,852,332        3.0

Zest Holdings, LLC (d)

  Healthcare Services   Syndicated Loan 5.25% Cash, 8/16/2020   $ 4,136,911        4,075,783        4,126,569        3.2
       

 

 

   

 

 

   

 

 

 
    Total Healthcare Services       38,478,578        37,304,797        29.3
       

 

 

   

 

 

   

 

 

 

HMN Holdco, LLC

  Media   First Lien Term Loan 10.00% Cash, 5/16/2019   $ 8,819,107        8,703,287        8,819,107        6.9

HMN Holdco, LLC

  Media   First Lien Term Loan 10.00% Cash, 5/16/2019   $ 1,600,000        1,574,097        1,600,000        1.3

HMN Holdco, LLC

  Media   Class A Series     4,264        61,647        288,204        0.2

HMN Holdco, LLC

  Media   Class A Warrant     30,320        438,353        1,683,366        1.3

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests (Common)     57,872        —          2,917,906        2.3

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests     8,139        —          467,504        0.4
       

 

 

   

 

 

   

 

 

 
    Total Media       10,777,384        15,776,087        12.4
       

 

 

   

 

 

   

 

 

 

Elyria Foundry Company, L.L.C.

  Metals   Common Stock     35,000        9,217,564        582,750        0.4

Elyria Foundry Company, L.L.C.

  Metals   Revolver 10.00% Cash, 3/31/2017   $ 8,500,000        8,500,000        8,500,000        6.7
       

 

 

   

 

 

   

 

 

 
    Total Metals       17,717,564        9,082,750        7.1
       

 

 

   

 

 

   

 

 

 

Mercury Network, LLC

  Real Estate   First Lien Term Loan 9.75% Cash, 4/24/2020   $ 9,004,348        8,928,626        8,958,426        7.0

Mercury Network, LLC (g)

  Real Estate   Common Stock     413,043        413,043        458,478        0.4
       

 

 

   

 

 

   

 

 

 
    Total Real Estate       9,341,669        9,416,904        7.4
       

 

 

   

 

 

   

 

 

 

Sub Total Non-control/Non-affiliated investments

      254,888,356        251,975,004        198.2
       

 

 

   

 

 

   

 

 

 

Control investments - 9.8% (b)

           

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

  Structured Finance Securities   Other/Structured Finance Securities 17.88%, 10/17/2023   $ 30,000,000        12,072,644        12,452,454        9.8
       

 

 

   

 

 

   

 

 

 

Sub Total Control investments

          12,072,644        12,452,454        9.8
       

 

 

   

 

 

   

 

 

 

TOTAL INVESTMENTS - 208.0% (b)

      $ 266,961,000      $ 264,427,458        208.0
       

 

 

   

 

 

   

 

 

 

 

    Principal     Cost     Fair Value     % of
Net Assets
 

Cash and cash equivalents and cash and cash equivalents, reserve accounts - 21.6%

       

U.S. Bank Money Market (l)

  $ 27,473,442      $ 27,473,442      $ 27,473,442        21.6
 

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 27,473,442      $ 27,473,442      $ 27,473,442        21.6
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $127,128,868 as of May 31, 2016.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 17.88% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

                   Sales      Interest      Management      Net Realized      Net Unrealized  

Company

   Purchases      Redemptions      (Cost)      Income      Fee Income      Gains/(Losses)      Appreciation  

Saratoga Investment Corp. CLO
2013-1, Ltd.

   $ —         $ —         $ —         $ 532,126       $ 373,684       $ —         $ 379,810   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g) Non-income producing at May 31, 2016.
(h) Includes securities issued by an affiliate of the company.
(i) Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada.
(j) The investment has an unfunded commitment as of May 31, 2016 (see Note 7).
(k) The entire commitment was unfunded at May 31, 2016. As such, no interest is being earned on this investment.
(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s Consolidated Statements of Assets and Liabilities as of May 31, 2016.

 

5


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 29, 2016

 

Company

 

Industry

 

Investment Interest Rate /

Maturity

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

Non-control/Non-affiliated investments - 216.6% (b)

           

National Truck Protection Co., Inc. (d), (g)

  Automotive Aftermarket   Common Stock      1,116       $ 1,000,000       $ 1,695,303         1.4

National Truck Protection Co., Inc. (d)

  Automotive Aftermarket   First Lien Term Loan 15.50% Cash, 9/13/2018    $ 6,776,770         6,776,770         6,776,770         5.4

Take 5 Oil Change, L.L.C. (d), (g)

  Automotive Aftermarket   Common Stock      7,128         480,535         6,235,209         5.0
         

 

 

    

 

 

    

 

 

 
    Total Automotive Aftermarket         8,257,305         14,707,282         11.8
         

 

 

    

 

 

    

 

 

 

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting A-1      2,535         220,900         2,676,909         2.1

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting B-1      1,600         139,424         1,689,568         1.3

Polar Holding Company, Ltd. (a), (i)

  Building Products   First Lien Term Loan 10.00% Cash, 9/30/2016    $ 2,000,000         2,000,000         2,000,000         1.6
         

 

 

    

 

 

    

 

 

 
    Total Building Products         2,360,324         6,366,477         5.0
         

 

 

    

 

 

    

 

 

 

Avionte Holdings, LLC (g)

  Business Services   Common Stock      100,000         100,000         169,850         0.1

Avionte Holdings, LLC

  Business Services   First Lien Term Loan 9.75% Cash, 1/8/2019    $ 2,406,342         2,376,045         2,382,844         1.9

Avionte Holdings, LLC (j), (k)

  Business Services   Delayed Draw Term Loan A 9.75% Cash, 1/8/2019    $ —           —           —           0.0

BMC Software, Inc. (d)

  Business Services  

Syndicated Loan

5.00% Cash, 9/10/2020

   $ 5,671,667         5,633,920         4,520,318         3.6

Courion Corporation

  Business Services   Second Lien Term Loan 11.00% Cash, 6/1/2021    $ 15,000,000         14,856,720         14,850,000         11.9

Dispensing Dynamics International (d)

  Business Services   Senior Secured Note 12.50% Cash, 1/1/2018    $ 12,000,000         12,025,101         10,950,000         8.8

Easy Ice, LLC (d)

  Business Services   First Lien Term Loan 9.50% Cash, 1/15/2020    $ 14,000,000         13,873,485         13,806,098         11.0

Emily Street Enterprises, L.L.C.

  Business Services   Senior Secured Note 10.00% Cash, 1/23/2020    $ 8,400,000         8,305,033         8,568,000         6.8

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

  Business Services   Warrant Membership Interests      49,318         400,000         577,020         0.5

Finalsite Holdings, Inc.

  Business Services   Second Lien Term Loan 10.25% Cash, 5/21/2020    $ 7,500,000         7,440,729         7,500,000         6.0

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   First Lien Term Loan 6.25% Cash, 10/8/2021    $ 5,000,000         4,904,573         4,895,000         3.9

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   Second Lien Term Loan 10.50% Cash, 10/8/2022    $ 3,000,000         2,912,784         2,910,000         2.3

Identity Automation Systems (g)

  Business Services   Common Stock Class A Units      232,616         232,616         427,409         0.3

Identity Automation Systems

  Business Services   First Lien Term Loan 10.25% Cash, 12/18/2020    $ 6,900,000         6,842,573         6,900,000         5.5

Identity Automation Systems (j), (k)

  Business Services   Delayed Draw Term Loan 10.25% Cash, 12/18/2020    $ —           —           —           0.0

Knowland Technology Holdings, L.L.C.

  Business Services   First Lien Term Loan 8.00% Cash, 11/29/2017    $ 5,259,171         5,224,422         5,259,171         4.2

PCF Number 4, Inc.

  Business Services   Second Lien Term Loan 13.50% (12.50% Cash/1.00% PIK), 8/28/2021    $ 13,000,000         12,870,023         12,870,000         10.3

Vector Controls Holding Co., LLC (d)

  Business Services   First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018    $ 9,035,515         8,952,442         9,035,515         7.2

Vector Controls Holding Co., LLC (d), (g)

  Business Services   Warrants to Purchase Limited Liability Company Interests      343         —           354,819         0.3
         

 

 

    

 

 

    

 

 

 
    Total Business Services         106,950,466         105,976,044         84.6
         

 

 

    

 

 

    

 

 

 

Advanced Air & Heat of Florida, LLC

  Consumer Products   First Lien Term Loan 9.50% Cash, 7/17/2020    $ 6,800,000         6,733,661         6,800,000         5.4

Targus Holdings, Inc. (d), (g)

  Consumer Products   Common Stock      210,456         1,791,242         —           0.0

Targus Holdings, Inc. (d)

  Consumer Products   Second Lien Term Loan A-2 15.00% PIK, 12/31/2019    $ 210,456         210,456         210,456         0.2

Targus Holdings, Inc. (d)

  Consumer Products   Second Lien Term Loan B 15.00% PIK, 12/31/2019    $ 631,369         631,369         631,369         0.5
         

 

 

    

 

 

    

 

 

 
    Total Consumer Products         9,366,728         7,641,825         6.1
         

 

 

    

 

 

    

 

 

 

Expedited Travel L.L.C. (g)

  Consumer Services   Common Stock      1,000,000         1,000,000         1,647,767         1.3

Expedited Travel L.L.C.

  Consumer Services   First Lien Term Loan 10.00% Cash, 10/10/2019    $ 11,475,490         11,401,380         11,647,623         9.3

My Alarm Center, LLC

  Consumer Services   Second Lien Term Loan 12.00% Cash, 7/9/2019    $ 7,500,000         7,500,000         7,450,500         6.0

PrePaid Legal Services, Inc. (d)

  Consumer Services   First Lien Term Loan 6.50% Cash, 7/1/2019    $ 1,572,921         1,562,787         1,556,248         1.2

PrePaid Legal Services, Inc. (d)

  Consumer Services   Second Lien Term Loan 10.25% Cash, 7/1/2020    $ 10,000,000         9,962,104         9,827,000         7.9

Prime Security Services, LLC

  Consumer Services   Second Lien Term Loan 9.75% Cash, 7/1/2022    $ 12,000,000         11,829,030         10,980,000         8.8
         

 

 

    

 

 

    

 

 

 
    Total Consumer Services         43,255,301         43,109,138         34.5
         

 

 

    

 

 

    

 

 

 

M/C Acquisition Corp., L.L.C. (d), (g)

  Education   Class A Common Stock      544,761         30,241         —           0.0

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

  Education  

First Lien Term Loan

1.00% Cash, 3/31/2016

   $ 2,321,073         1,193,790         8,087         0.0

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

  Education   Common Stock      750         750,000         785,475         0.6

Texas Teachers of Tomorrow, LLC

  Education   Second Lien Term Loan 10.75% Cash, 6/2/2021    $ 10,000,000         9,902,816         9,900,000         7.9
         

 

 

    

 

 

    

 

 

 
    Total Education         11,876,847         10,693,562         8.5
         

 

 

    

 

 

    

 

 

 

TM Restaurant Group L.L.C.

  Food and Beverage   First Lien Term Loan 9.75% Cash, 7/16/2017    $ 9,622,319         9,527,041         9,131,048         7.3
         

 

 

    

 

 

    

 

 

 
    Total Food and Beverage         9,527,041         9,131,048         7.3
         

 

 

    

 

 

    

 

 

 

Bristol Hospice, LLC

  Healthcare Services   Senior Secured Note 11.00% (10.00% Cash/1.00% PIK), 11/29/2018    $ 5,404,747         5,339,820         5,404,747         4.3

Censis Technologies, Inc.

  Healthcare Services   First Lien Term Loan B 11.00% Cash, 7/24/2019    $ 11,550,000         11,377,810         11,459,418         9.2

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

  Healthcare Services   Limited Partner Interests      999         999,000         810,642         0.7

Roscoe Medical, Inc. (d), (g)

  Healthcare Services   Common Stock      5,000         500,000         334,000         0.3

Roscoe Medical, Inc.

  Healthcare Services   Second Lien Term Loan 11.25% Cash, 9/26/2019    $ 4,200,000         4,141,519         3,822,000         3.0

Ohio Medical, LLC (g)

  Healthcare Services   Common Stock      5,000         500,000         500,000         0.4

Ohio Medical, LLC

  Healthcare Services   Senior Subordinated Note 12.00% , 7/15/2021    $ 7,300,000         7,228,452         7,227,000         5.8

Smile Brands Group Inc. (d)

  Healthcare Services   Syndicated Loan 10.50% (9.00% Cash/1.50% PIK), 8/16/2019    $ 4,420,900         4,362,266         3,216,647         2.6

Zest Holdings, LLC (d)

  Healthcare Services   Syndicated Loan 5.25% Cash, 8/16/2020    $ 4,207,821         4,142,093         4,130,692         3.3
         

 

 

    

 

 

    

 

 

 
    Total Healthcare Services         38,590,960         36,905,146         29.6
         

 

 

    

 

 

    

 

 

 

HMN Holdco, LLC

  Media   First Lien Term Loan 10.00% Cash, 5/16/2019    $ 8,937,982         8,812,479         8,937,983         7.1

HMN Holdco, LLC

  Media   First Lien Term Loan 10.00% Cash, 5/16/2019    $ 1,600,000         1,572,821         1,600,000         1.3

HMN Holdco, LLC

  Media   Class A Series      4,264         61,647         314,683         0.3

HMN Holdco, LLC

  Media   Class A Warrant      30,320         438,353         1,889,542         1.5

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests (Common)      57,872         —           3,309,121         2.6

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests      8,139         —           523,012         0.4
         

 

 

    

 

 

    

 

 

 
    Total Media         10,885,300         16,574,341         13.2
         

 

 

    

 

 

    

 

 

 

Elyria Foundry Company, L.L.C.

  Metals   Common Stock      35,000         9,217,564         2,026,150         1.6

Elyria Foundry Company, L.L.C.

  Metals   Revolver 10.00% Cash, 3/31/2017    $ 8,500,000         8,500,000         8,500,000         6.8
         

 

 

    

 

 

    

 

 

 
    Total Metals         17,717,564         10,526,150         8.4
         

 

 

    

 

 

    

 

 

 

Mercury Network, LLC

  Real Estate   First Lien Term Loan 9.75% Cash, 4/24/2020    $ 9,025,000         8,944,211         9,025,000         7.2

Mercury Network, LLC (g)

  Real Estate   Common Stock      413,043         413,043         512,173         0.4
         

 

 

    

 

 

    

 

 

 
    Total Real Estate         9,357,254         9,537,173         7.6
         

 

 

    

 

 

    

 

 

 

Sub Total Non-control/Non-affiliated investments

        268,145,090         271,168,186         216.6
         

 

 

    

 

 

    

 

 

 

Control investments - 10.3% (b)

               

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

  Structured Finance Securities   Other/Structured Finance Securities 16.14%, 10/17/2023    $ 30,000,000         13,030,751         12,827,980         10.3
         

 

 

    

 

 

    

 

 

 

Sub Total Control investments

            13,030,751         12,827,980         10.3
         

 

 

    

 

 

    

 

 

 

TOTAL INVESTMENTS - 226.9% (b)

        $   281,175,841       $ 283,996,166         226.9
         

 

 

    

 

 

    

 

 

 

 

     Principal      Cost      Fair Value      % of
Net Assets
 

Cash and cash equivalents and cash and cash equivalents, reserve accounts - 5.6%

           

U.S. Bank Money Market (l)

   $ 7,034,783       $ 7,034,783       $ 7,034,783         5.6
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 7,034,783       $ 7,034,783       $ 7,034,783         5.6
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 5.2% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $125,149,875 as of February 29, 2016.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 16.14% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

   Purchases      Redemptions      Sales
(Cost)
     Interest
Income
     Management
Fee Income
     Net Realized
Gains/(Losses)
     Net Unrealized
Depreciation
 

Saratoga Investment Corp. CLO 2013-1, Ltd.

   $ —         $ —         $ —         $ 2,665,648       $ 1,494,779       $ —         $ (202,771
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g) Non-income producing at February 29, 2016.
(h) Includes securities issued by an affiliate of the company.
(i) Non-U.S. company. The principal place of business for Polar Holding Company, Ltd. is Canada.
(j) The investment has an unfunded commitment as of February 29, 2016 (see Note 7).
(k) The entire commitment was unfunded at February 29, 2016. As such, no interest is being earned on this investment.
(l) Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s Consolidated Statements of Assets and Liabilities as of February 29, 2016.

 

6


Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)

 

     For the three months ended
May 31, 2016
    For the three months ended
May 31, 2015
 

INCREASE FROM OPERATIONS:

    

Net investment income

   $ 2,538,549      $ 1,770,690   

Net realized gain from investments

     6,102,905        73,246   

Net unrealized appreciation (depreciation) on investments

     (5,353,867     5,540,969   
  

 

 

   

 

 

 

Net increase in net assets from operations

     3,287,587        7,384,905   
  

 

 

   

 

 

 

DECREASE FROM SHAREHOLDER DISTRIBUTIONS:

    

Distributions declared

     (2,346,311     (6,894,523
  

 

 

   

 

 

 

Net decrease in net assets from shareholder distributions

     (2,346,311     (6,894,523
  

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS:

    

Stock dividend distribution

     1,750,901        402,200   

Repurchases of common stock

     (713,184     —     
  

 

 

   

 

 

 

Net increase in net assets from capital share transactions

     1,037,717        402,200   
  

 

 

   

 

 

 

Total increase in net assets

     1,978,993        892,582   

Net assets at beginning of period

     125,149,875        122,598,742   
  

 

 

   

 

 

 

Net assets at end of period

   $ 127,128,868      $ 123,491,324   
  

 

 

   

 

 

 

Net asset value per common share

   $ 22.11      $ 22.75   

Common shares outstanding at end of period

     5,750,222        5,428,758   

Distribution in excess of net investment income

   $ (26,025,665   $ (29,029,436

See accompanying notes to consolidated financial statements.

 

7


Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Cash Flows

(unaudited)

 

     For the three months ended
May 31, 2016
    For the three months ended
May 31, 2015
 

Operating activities

    

NET INCREASE IN NET ASSETS FROM OPERATIONS

   $ 3,287,587      $ 7,384,905   

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

    

Paid-in-kind interest income

     (134,256     (597,336

Net accretion of discount on investments

     (136,568     (143,205

Amortization of deferred debt financing costs

     262,663        217,658   

Net realized gain from investments

     (6,102,905     (73,246

Net unrealized (appreciation) depreciation on investments

     5,353,867        (5,540,969

Proceeds from sales and redemptions of investments

     20,588,570        7,323,338   

Purchase of investments

     —          (23,174,833

(Increase) decrease in operating assets:

    

Cash and cash equivalents, reserve accounts

     (21,569,825     12,311,321   

Interest receivable

     (246,128     (324,128

Management fee receivable

     (478     (2,614

Other assets

     (9,834     (4,847

Receivable from unsettled trades

     300,000        —     

Increase (decrease) in operating liabilities:

    

Base management and incentive fees payable

     159,089        929,376   

Accounts payable and accrued expenses

     82,384        (167,306

Interest and debt fees payable

     (513,146     (492,838

Payable for repurchases of common stock

     15,930        —     

Directors fees payable

     22,500        7,500   

Due to manager

     6,977        10,000   
  

 

 

   

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

     1,366,427        (2,337,224
  

 

 

   

 

 

 

Financing activities

    

Borrowings on debt

     —          3,200,000   

Paydowns on debt

     —          (1,000,000

Payments of deferred debt financing costs

     (313,400     (152,773

Repurchases of common stock

     (713,184     —     

Payments of cash dividends

     (1,471,009     (899,034
  

 

 

   

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

     (2,497,593     1,148,193   
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (1,131,166     (1,189,031

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     2,440,277        1,888,158   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 1,309,111      $ 699,127   
  

 

 

   

 

 

 

Supplemental information:

    

Interest paid during the period

   $ 2,618,539      $ 2,239,045   

Supplemental non-cash information:

    

Paid-in-kind interest income

   $ 134,256      $ 597,336   

Net accretion of discount on investments

   $ 136,568      $ 143,205   

Amortization of deferred debt financing costs

   $ 262,663      $ 217,658   

Stock dividend distribution

   $ 1,750,901      $ 402,200   

See accompanying notes to consolidated financial statements.

 

8


Table of Contents

SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2016

(unaudited)

Note 1. Organization

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

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

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

On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.”.

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

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

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”).

On April 2, 2015, the SBA issued a “green light” or “go forth” letter inviting the Company to continue the application process to obtain a license to form and operate its second SBIC subsidiary. If approved, a second SBIC license would provide us an incremental source of long-term capital by permitting us to issue up to $150.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an SBIC license, or of the timeframe in which it would receive a license, should one be granted.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), are stated in U.S. Dollars and include the accounts of the Company and its special purpose financing subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC). All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

The Company and SBIC LP are both considered to be investment companies for financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services — Investment Companies” (“ASC Topic 946”). There have been no changes to the Company or SBIC LP’s status as investment companies during the three months ended May 31, 2016.

 

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Use of Estimates in the Preparation of Financial Statements

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

Cash and Cash Equivalents

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

 

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

 

    we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets; or

 

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

As of May 31, 2016, the Company did not exceed any of these limitations.

Cash and Cash Equivalents, Reserve Accounts

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

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

Investment Classification

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

Investment Valuation

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

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective

 

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judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

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

 

    Each investment is initially valued by the responsible investment professionals of our Manager and preliminary valuation conclusions are documented and discussed with the senior management of our Manager; and

 

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

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

 

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

 

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

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

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

Derivative Financial Instruments

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

Investment Transactions and Income Recognition

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

 

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Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325-40,  Investments-Other, Beneficial Interests in Securitized Financial Assets , (“ASC 325-40”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

Other Income

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

Paid-in-Kind Interest

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

Deferred Debt Financing Costs

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

Accounting Standards Update (“ASU”) 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company has adopted the provisions of ASU 2015-03 as of February 28, 2015, by reclassifying deferred debt financing costs from within total assets to within total liabilities as a contra-liability. Prior period amounts were reclassified to conform to the current period presentation.

Contingencies

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

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

Income Taxes

The Company has filed an election to be treated, for tax purposes, as a RIC under Subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes.

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

 

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

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

ASC 740,  Income Taxes , (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations. During the fiscal year ended February 29, 2016, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2013, 2014 and 2015 federal tax years for the Company remain subject to examination by the IRS. As of May 31, 2016 and February 29, 2016, there were no uncertain tax positions. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

Dividends

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

We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare a cash dividend, then our stockholders who have not “opted out” of the DRIP by the dividend record date will have their cash dividends automatically reinvested into additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

Capital Gains Incentive Fee

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to its investment adviser when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s investment adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains, net of realized and unrealized losses for the period.

New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Amendments to the Leases (“ASC Topic 842”), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance is effective for annual and interim periods beginning after December 15, 2018. Management is currently evaluating the impact these changes will have on the Company’s consolidated financial statements and disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and measurement of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial

 

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liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted for public business entities. Management is currently evaluating the impact the adoption of this standard has on the Company’s consolidated financial statements and disclosures.

In August 2014, the FASB issued new accounting guidance that requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments provide a definition of the term “substantial doubt” and include principles for considering the mitigating effect of management’s plans. The amendments also require an evaluation every reporting period, including interim periods for a period of one year after the date that the financial statements are issued (or available to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are effective for reporting periods ending after December 15, 2016. Management does not believe these changes will have a material impact on the Company’s consolidated financial statements and disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016, and early application is not permitted. Management is currently evaluating the impact these changes will have on the Company’s consolidated financial statements and disclosures.

Risk Management

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

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.

The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

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

Note 3. Investments

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

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

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

 

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

 

    Level 2—Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

 

    Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 asset, assuming no additional corroborating evidence.

 

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

The following table presents fair value measurements of investments, by major class, as of May 31, 2016 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

Syndicated loans

   $ —        $ —        $ 13,042       $ 13,042   

First lien term loans

     —          —          131,492         131,492   

Second lien term loans

     —          —          89,519         89,519   

Structured finance securities

     —          —          12,452         12,452   

Equity interests

     —          —          17,922         17,922   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 264,427       $ 264,427   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents fair value measurements of investments, by major class, as of February 29, 2016 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

Syndicated loans

   $ —        $ —        $ 11,868       $ 11,868   

First lien term loans

     —          —          144,643         144,643   

Second lien term loans

     —          —          88,178         88,178   

Structured finance securities

     —          —          12,828         12,828   

Equity interests

     —          —          26,479         26,479   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ —        $ 283,996       $ 283,996   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended May 31, 2016 (dollars in thousands):

 

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

Balance as of February 29, 2016

   $ 11,868      $ 144,643      $ 88,178       $ 12,828      $ 26,479      $ 283,996   

Net unrealized appreciation (depreciation) on investments

     1,242        (363     1,268         583        (8,084     (5,354

Purchases and other adjustments to cost

     26        164        73         —         8        271   

Sales and redemptions

     (95     (13,078     —           (959     (6,457     (20,589

Net realized gain from investments

     1        126        —          —         5,976        6,103   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of May 31, 2016

   $ 13,042      $ 131,492      $ 89,519       $ 12,452      $ 17,922      $ 264,427   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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

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

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur.

 

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The net change in unrealized appreciation (depreciation) for the three months ended May 31, 2016 on investments still held as of May 31, 2016 is $467,145 and is included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended May 31, 2015 (dollars in thousands):

 

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

Balance as of February 28, 2015

   $ 18,302      $ 145,207      $ 35,603      $ 4,230       $ 17,031      $ 20,165      $ 240,538   

Net unrealized appreciation (depreciation) on investments

     (240     29        (22     1,036         609        4,129        5,541   

Purchases and other adjustments to cost

     11        17,941        5,056        494         —         413        23,915   

Sales and redemptions

     (283     (6,174     (86     —          (780     —          (7,323

Net realized gain from investments

     4        69        —         —          —         —          73   

Restructures in

     —         —         —         101         —         —          101   

Restructures out

     —         —         —         —          —         (101     (101
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of May 31, 2015

   $ 17,794      $ 157,072      $ 40,551      $ 5,861       $ 16,860      $ 24,606      $ 262,744   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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

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

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur.

The net change in unrealized appreciation (depreciation) for the three months ended May 31, 2015 on investments still held as of May 31, 2015 was $5,493,439 and was included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of May 31, 2016 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique    Unobservable Input   Range

Syndicated loans

     13,042       Market Comparables    Third-Party Bid (%)   86.0% - 99.8%

First lien term loans

     131,492       Market Comparables    Market Yield (%)   6.8% - 15.5%
         EBITDA Multiples (x)   1.0x
         Third-Party Bid (%)   92.5% - 99.4%

Second lien term loans

     89,519       Market Comparables    Market Yield (%)   10.3% - 15.0%
         Third-Party Bid (%)   98.0% - 100.5%

Structured finance securities

     12,452       Discounted Cash Flow    Discount Rate (%)   19.0%

Equity interests

     17,922       Market Comparables    EBITDA Multiples (x)
Revenue Multiples
  2.9x - 11.0x

1.8x - 3.0x

 

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The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 29, 2016 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique    Unobservable Input   Range

Syndicated loans

     11,868       Market Comparables    Third-Party Bid (%)   72.5% - 98.2%

First lien term loans

     144,643       Market Comparables    Market Yield (%)   6.8% - 15.5%
         EBITDA Multiples (x)   1.0x
         Revenue Multiples
Third-Party Bid
  91.3 - 98.9

Second lien term loans

     88,178       Market Comparables    Market Yield (%)   0.0% - 15.0%
         Third-Party Bid (%)   91.5% - 98.6%

Structured finance securities

     12,828       Discounted Cash
Flow
   Discount Rate (%)   20.0%

Equity interests

     26,479       Market Comparables    EBITDA Multiples (x)
Revenue Multiples
  6.8x - 16.4x

For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the EBITDA or revenue valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing a market quote in deriving a value, a significant increase (decrease) in the market quote, in isolation, would result in a significantly higher (lower) fair value measurement.

The composition of our investments as of May 31, 2016, at amortized cost and fair value were as follows (dollars in thousands):

 

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

Syndicated loans

   $ 14,070         5.3   $ 13,042         4.9

First lien term loans

     133,457         50.0        131,492         49.7   

Second lien term loans

     89,559         33.5        89,519         33.9   

Structured finance securities

     12,073         4.5        12,452         4.7   

Equity interests

     17,802         6.7        17,922         6.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 266,961         100.0   $ 264,427         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

The composition of our investments as of February 29, 2016, at amortized cost and fair value were as follows (dollars in thousands):

 

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

Syndicated loans

   $ 14,138         5.0   $ 11,868         4.2

First lien term loans

     146,246         52.0        144,643         50.9   

Second lien term loans

     89,486         31.9        88,178         31.1   

Structured finance securities

     13,031         4.6        12,828         4.5   

Equity interests

     18,275         6.5        26,479         9.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 281,176         100.0   $ 283,996         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

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

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing

 

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investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. For the quarter ended November 30, 2013, in connection with the refinancing of the Saratoga CLO liabilities, we ran Intex models based on assumptions about the refinanced Saratoga CLO’s structure, including capital structure, cost of liabilities and reinvestment period. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at May 31, 2016. The significant inputs for the valuation model include:

 

    Default rates: 2.0%

 

    Recovery rates: 35-70%

 

    Prepayment rate: 20.0%

 

    Reinvestment rate / price: L+375bps / $99.50

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

On January 22, 2008, we invested $30 million in all of the outstanding subordinated notes of GSC Investment Corp. CLO 2007, Ltd., a collateralized loan obligation fund managed by us that invests primarily in senior secured loans. Additionally, we entered into a collateral management agreement with GSC Investment Corp. CLO 2007, Ltd. pursuant to which we act as collateral manager to it. The Saratoga CLO was refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the fee basis amount at the beginning of the collection period, paid quarterly to the extent of available proceeds. We are also entitled to an incentive management fee equal to 20.0% of the remaining interest proceeds and principal proceeds, if any, after the subordinated notes have realized the incentive management fee target return of 12.0%, in accordance with the priority of payments after making the prior distributions on the relevant payment date. For the three months ended May 31, 2016 and May 31, 2015, we accrued $0.4 million and $0.4 million in management fee income, respectively, and $0.5 million and $0.6 million in interest income, respectively, from Saratoga CLO. We did not accrue any amounts related to the incentive management fee as the 12.0% hurdle rate has not yet been achieved.

At May 31, 2016, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $12.5 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. At May 31, 2016, Saratoga CLO had investments with a principal balance of $305.3 million and a weighted average spread over LIBOR of 4.38%, and had debt with a principal balance of $282.4 million with a weighted average spread over LIBOR of 1.84%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. At May 31, 2016, the total “spread”, or projected future cash flows of the subordinated notes, over the life of Saratoga CLO was $12.7 million, which had a present value of approximately $12.5 million, using a 19.0% discount rate.

Below is certain financial information from the separate financial statements of Saratoga CLO as of May 31, 2016 (unaudited) and February 29, 2016 and for the three months ended May 31, 2016 and May 31, 2015 (unaudited).

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

 

     As of  
     May 31, 2016     February 29, 2016  
     (unaudited)        

ASSETS

    

Investments

    

Fair Value Loans (amortized cost of $302,165,524 and $300,112,538, respectively)

   $ 296,151,177      $ 284,652,926   

Fair Value Other/Structured finance securities (amortized cost of $3,531,218 and $3,531,218, respectively)

     67,271        191,863   
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $305,696,742 and $303,643,756, respectively)

     296,218,448        284,844,789   

Cash and cash equivalents

     2,663,033        2,349,633   

Receivable from open trades

     4,917,860        2,691,831   

Interest receivable

     1,732,199        1,698,562   
  

 

 

   

 

 

 

Total assets

   $ 305,531,540      $ 291,584,815   
  

 

 

   

 

 

 

LIABILITIES

    

Interest payable

   $ 661,241      $ 626,040   

Payable from open trades

     11,334,374        7,123,854   

Accrued base management fee

     85,247        85,008   

Accrued subordinated management fee

     85,247        85,008   

Class A-1 Notes - SIC CLO 2013-1, Ltd.

     170,000,000        170,000,000   

Discount on Class A-1 Notes - SIC CLO 2013-1, Ltd.

     (1,274,881     (1,319,258

Class A-2 Notes - SIC CLO 2013-1, Ltd.

     20,000,000        20,000,000   

Discount on Class A-2 Notes - SIC CLO 2013-1, Ltd.

     (132,150     (136,750

Class B Notes - SIC CLO 2013-1, Ltd.

     44,800,000        44,800,000   

Discount on Class B Notes - SIC CLO 2013-1, Ltd.

     (858,446     (888,328

Class C Notes - SIC CLO 2013-1, Ltd.

     16,000,000        16,000,000   

Discount on Class C Notes - SIC CLO 2013-1, Ltd.

     (534,473     (553,078

Class D Notes - SIC CLO 2013-1, Ltd.

     14,000,000        14,000,000   

Discount on Class D Notes - SIC CLO 2013-1, Ltd.

     (693,788     (717,938

Class E Notes - SIC CLO 2013-1, Ltd.

     13,100,000        13,100,000   

Discount on Class E Notes - SIC CLO 2013-1, Ltd.

     (1,307,991     (1,353,521

Class F Notes - SIC CLO 2013-1, Ltd.

     4,500,000        4,500,000   

Discount on Class F Notes - SIC CLO 2013-1, Ltd.

     (475,740     (492,300

Deferred debt financing costs, SIC CLO 2013-1, Ltd. Notes

     (1,660,294     (1,716,554

Subordinated Notes

     30,000,000        30,000,000   
  

 

 

   

 

 

 

Total liabilities

   $ 317,628,346      $ 313,142,183   
  

 

 

   

 

 

 

Commitments and contingencies

    

NET ASSETS

    

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

   $ 250      $ 250   

Accumulated loss

     (21,557,623     (5,803,406

Net gain/(loss)

     9,460,567        (15,754,212
  

 

 

   

 

 

 

Total net assets

     (12,096,806     (21,557,368
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 305,531,540      $ 291,584,815   
  

 

 

   

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

(unaudited)

 

     For the three months ended
May 31, 2016
     For the three months ended
May 31, 2015
 

INVESTMENT INCOME

     

Interest from investments

   $ 3,788,336       $ 3,512,587   

Interest from cash and cash equivalents

     771         290   

Other income

     243,301         164,115   
  

 

 

    

 

 

 

Total investment income

     4,032,408         3,676,992   
  

 

 

    

 

 

 

EXPENSES

     

Interest expense

     3,281,015         2,846,636   

Professional fees

     18,482         59,222   

Miscellaneous fee expense

     8,244         4,925   

Base management fee

     186,842         189,373   

Subordinated management fee

     186,842         189,373   

Trustee expenses

     26,688         31,284   

Amortization expense

     239,963         239,963   
  

 

 

    

 

 

 

Total expenses

     3,948,076         3,560,776   
  

 

 

    

 

 

 

NET INVESTMENT INCOME

     84,332         116,216   
  

 

 

    

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

     

Net realized gain on investments

     55,562         42,561   

Net unrealized appreciation/(depreciation) on investments

     9,320,673         (85,832
  

 

 

    

 

 

 

Net gain/(loss) on investments

     9,376,235         (43,271
  

 

 

    

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 9,460,567       $ 72,945   
  

 

 

    

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1 Ltd.

Schedule of Investments

May 31, 2016

(unaudited)

 

Issuer Name

 

Industry

 

Asset Name

  Asset
Type
  Current
Rate
    Maturity
Date
    Principal/
Number
of Shares
    Cost     Fair Value  

Education Management II LLC

  Leisure Goods/Activities/Movies   A-1 Preferred Shares   Equity     0.00       6,692      $ 669,214      $ 13,384   

Education Management II LLC

  Leisure Goods/Activities/Movies   A-2 Preferred Shares   Equity     0.00       18,975        1,897,538        190   

New Millennium Holdco, Inc.

  Healthcare & Pharmaceuticals   Common Stock   Equity     0.00       14,813        964,466        53,697   

24 Hour Holdings III LLC

  Leisure Goods/Activities/Movies   Term Loan   Loan     4.75     5/28/2021      $ 491,250        487,536        472,214   

Acosta Holdco Inc.

  Media   Term Loan B1   Loan     4.25     9/26/2021      $ 1,970,100        1,957,539        1,963,953   

Aspen Dental Management, Inc.

  Healthcare & Pharmaceuticals   Term Loan Initial   Loan     5.50     4/29/2022      $ 496,250        494,069        496,250   

Advantage Sales & Marketing Inc.

  Services: Business   Delayed Draw Term Loan   Loan     4.25     7/25/2021      $ 2,464,975        2,461,937        2,454,203   

AgroFresh

  Food Services   Term Loan   Loan     5.75     7/30/2021      $ 1,985,000        1,976,192        1,940,338   

Aegis Toxicology Science Corporation

  Healthcare & Pharmaceuticals   Term B Loan   Loan     5.50     2/24/2021      $ 2,482,500        2,340,000        2,271,488   

Akorn, Inc.

  Healthcare & Pharmaceuticals   Term Loan B   Loan     6.00     4/16/2021      $ 398,056        396,749        400,047   

Albertson’s LLC

  Retailers (Except Food and Drugs)   Term Loan B-4   Loan     5.50     8/25/2021      $ 3,375,900        3,359,650        3,374,853   

Alere Inc. (fka IM US Holdings, LLC)

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.25     6/20/2022      $ 924,936        922,841        922,235   

Alion Science T/L B (1st Lien)

  High Tech Industries   Term Loan B (First Lien)   Loan     5.50     8/19/2021      $ 2,977,500        2,964,159        2,873,288   

Alliance HealthCare T/L B

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.25     6/3/2019      $ 992,284        987,715        947,632   

APCO Holdings, Inc.

  Automotive   Term Loan   Loan     7.00     1/31/2022      $ 2,000,000        1,945,000        1,940,000   

American Beacon Advisors, Inc.

  Financial Intermediaries   Term Loan (First Lien)   Loan     5.50     4/30/2022      $ 242,690        241,617        240,263   

Aramark Corporation

  Food Products   U.S. Term F Loan   Loan     3.25     2/24/2021      $ 3,142,407        3,142,407        3,146,335   

Asurion, LLC (fka Asurion Corporation)

  Insurance   Incremental Tranche B-1 Term Loan   Loan     5.00     5/24/2019      $ 2,583,471        2,561,885        2,585,306   

Asurion, LLC (fka Asurion Corporation)

  Insurance   Term Loan B4 (First Lien)   Loan     5.00     8/4/2022      $ 2,462,500        2,451,257        2,454,300   

Auction.com

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     6.00     5/13/2019      $ 2,516,637        2,516,201        2,491,471   

Avantor Performance Materials Holdings, Inc.

  Chemicals/Plastics   Term Loan   Loan     5.25     6/24/2017      $ 2,156,953        2,154,428        2,146,168   

Bass Pro Group, LLC

  Retailers (Except Food and Drugs)   Term Loan   Loan     4.00     6/5/2020      $ 1,485,000        1,482,309        1,460,408   

Belmond Interfin Ltd.

  Lodging & Casinos   Term Loan   Loan     4.00     3/19/2021      $ 490,000        488,188        485,713   

Berry Plastics Corporation

  Chemicals/Plastics   Term E Loan   Loan     3.75     1/6/2021      $ 1,314,499        1,305,573        1,318,232   

BJ’s Wholesale Club, Inc.

  Food/Drug Retailers   New 2013 (November) Replacement Loan (First Lien)   Loan     4.50     9/26/2019      $ 1,439,716        1,439,051        1,432,517   

Blue Coat Systems

  Technology   Term Loan B   Loan     4.50     5/20/2022      $ 995,000        992,757        990,960   

BMC Software

  Technology   Term Loan   Loan     5.00     9/10/2020      $ 1,974,747        1,923,739        1,753,418   

Brickman Group Holdings, Inc.

  Brokers/Dealers/Investment Houses   Initial Term Loan (First Lien)   Loan     4.00     12/18/2020      $ 1,472,456        1,461,156        1,467,096   

Brock Holdings III, Inc.

  Industrial Equipment   Term Loan (First Lien)   Loan     6.00     3/16/2017      $ 1,901,865        1,906,959        1,800,438   

Burlington Coat Factory Warehouse Corporation

  Retailers (Except Food and Drugs)   Term B-2 Loan   Loan     4.25     8/13/2021      $ 1,861,667        1,853,763        1,865,744   

BWAY Holding Company

  Leisure Goods/Activities/Movies   Term Loan B   Loan     5.50     8/14/2020      $ 982,500        974,286        982,087   

Camp International Holding Company

  Aerospace and Defense   2013 Replacement Term Loan (First Lien)   Loan     4.75     5/31/2019      $ 1,935,132        1,935,705        1,929,094   

Capital Automotive L.P.

  Conglomerate   Tranche B-1 Term Loan Facility   Loan     4.00     4/10/2019      $ 1,498,941        1,501,133        1,504,877   

Catalent Pharma Solutions, Inc

  Drugs   Initial Term B Loan   Loan     4.25     5/20/2021      $ 491,251        489,388        492,096   

Cengage Learning Acquisitions, Inc.

  Publishing   Term Loan   Loan     7.00     3/31/2020      $ 4,146,294        4,152,886        4,140,365   

Charter Communications Operating, LLC

  Cable and Satellite Television   Term F Loan   Loan     3.00     12/31/2020      $ 1,622,043        1,617,734        1,621,540   

CHS/Community Health Systems, Inc.

  Healthcare & Pharmaceuticals   Term G Loan   Loan     3.75     12/31/2019      $ 1,020,000        994,045        999,345   

CHS/Community Health Systems, Inc.

  Healthcare & Pharmaceuticals   Term H Loan   Loan     4.00     1/27/2021      $ 1,876,773        1,826,397        1,847,551   

Cinedigm Digital Funding I, LLC

  Services: Business   Term Loan   Loan     3.75     2/28/2018      $ 230,710        229,718        228,980   

CITGO Petroleum Corporation

  Oil & Gas   Term Loan B   Loan     4.50     7/29/2021      $ 1,979,950        1,958,429        1,962,625   

Communications Sales & Leasing, Inc.

  Telecommunications   Term Loan B (First Lien)   Loan     5.00     10/24/2022      $ 1,985,000        1,973,986        1,969,497   

CommScope, Inc.

  Telecommunications   Term Loan B   Loan     3.75     12/29/2022      $ 497,500        496,393        498,331   

Consolidated Aerospace Manufacturing, LLC

  Aerospace and Defense   Term Loan (First Lien)   Loan     4.75     8/11/2022      $ 1,437,500        1,430,726        1,349,453   

Concordia Healthcare Corp

  Healthcare & Pharmaceuticals   Term Loan B   Loan     5.25     10/21/2021      $ 1,995,000        1,893,680        1,974,631   

CPI Acquisition Inc.

  Technology   Term Loan B (First Lien)   Loan     5.50     8/17/2022      $ 1,436,782        1,416,649        1,394,583   

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

  Electronics/Electric   Term B Loan   Loan     4.25     11/17/2017      $ 1,560,202        1,560,202        1,521,197   

Crosby US Acquisition Corp.

  Industrial Equipment   Initial Term Loan (First Lien)   Loan     4.00     11/23/2020      $ 733,125        732,447        619,491   

CT Technologies Intermediate Hldgs, Inc

  Healthcare & Pharmaceuticals   Term Loan   Loan     5.25     12/1/2021      $ 1,481,306        1,468,467        1,459,087   

Culligan International Company

  Conglomerate   Dollar Loan (First Lien)   Loan     6.25     12/19/2017      $ 769,620        744,691        749,418   

Culligan International Company

  Conglomerate   Dollar Loan (Second Lien)   Loan     9.50     6/19/2018      $ 783,162        756,844        738,130   

Cumulus Media Holdings Inc.

  Broadcast Radio and Television   Term Loan   Loan     4.25     12/23/2020      $ 470,093        466,844        331,711   

DAE Aviation (StandardAero)

  Aerospace and Defense   Term Loan   Loan     5.25     7/7/2022      $ 1,990,000        1,981,064        2,000,786   

DCS Business Services, Inc.

  Financial Intermediaries   Term B Loan   Loan     8.75     3/19/2018      $ 2,401,521        2,390,937        2,401,521   

Dell International LLC

  Technology   Term Loan B2   Loan     4.00     4/29/2020      $ 2,887,413        2,875,592        2,887,413   

Delta 2 (Lux) S.a.r.l.

  Lodging & Casinos   Term Loan B-3   Loan     4.75     7/30/2021      $ 1,000,000        996,003        985,160   

Deluxe Entertainment Service Group, Inc.

  Leisure Goods/Activities/Movies   Term Loan (First Lien)   Loan     6.50     2/28/2020      $ 1,882,983        1,884,261        1,850,030   

Diamond Resorts International

  Lodging & Casinos   Term Loan   Loan     5.50     5/7/2021      $ 926,971        923,352        909,590   

Diamond Resorts International

  Lodging & Casinos   Term Loan (Add-On)   Loan     5.50     5/7/2021      $ 1,000,000        981,502        987,500   

Diebold, Inc.

  High Tech Industries   Term Loan B   Loan     5.25     11/6/2023      $ 500,000        495,047        500,470   

DJO Finance LLC

  Healthcare & Pharmaceuticals   Term Loan   Loan     4.25     6/8/2020      $ 496,250        494,305        485,859   

DPX Holdings B.V.

  Healthcare & Pharmaceuticals   Term Loan 2015 Incr Dollar   Loan     4.25     3/11/2021      $ 2,947,500        2,941,280        2,895,919   

Drew Marine Group Inc.

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.25     11/19/2020      $ 2,456,135        2,430,978        2,357,890   

DTZ U.S. Borrower LLC

  Construction & Building   Term Loan B Add-on   Loan     4.25     11/4/2021      $ 1,977,500        1,968,257        1,969,254   

Edelman Financial Group Inc.

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     6.50     12/19/2022      $ 1,496,250        1,467,820        1,481,916   

Education Management LLC

  Leisure Goods/Activities/Movies   Term Loan A   Loan     5.50     7/2/2020      $ 501,970        486,197        138,042   

Education Management LLC

  Leisure Goods/Activities/Movies   Term Loan B (2.00% Cash/6.50% PIK)   Loan     8.50     7/2/2020      $ 908,127        883,765        36,325   

Emerald Performance Materials, LLC

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.50     8/1/2021      $ 483,409        481,525        485,826   

Emerald Performance Materials, LLC

  Chemicals/Plastics   Term Loan (Second Lien)   Loan     7.75     8/1/2022      $ 500,000        497,909        478,335   

Emerald 2 Limited

  Chemicals/Plastics   Term Loan B1A   Loan     5.00     5/14/2021      $ 1,000,000        992,401        940,000   

Endo International plc

  Healthcare & Pharmaceuticals   Term Loan B   Loan     3.75     9/26/2022      $ 997,500        995,176        983,425   

EnergySolutions, LLC

  Environmental Industries   Term Loan B   Loan     6.75     5/29/2020      $ 937,857        924,510        909,721   

Evergreen Acqco 1 LP

  Retailers (Except Food and Drugs)   New Term Loan   Loan     5.00     7/9/2019      $ 962,587        961,085        827,026   

EWT Holdings III Corp. (fka WTG Holdings III Corp.)

  Industrial Equipment   Term Loan (First Lien)   Loan     4.75     1/15/2021      $ 1,962,387        1,958,255        1,957,481   

EWT Holdings III Corp.

  Capital Equipment   Term Loan   Loan     5.50     1/15/2021      $ 1,000,000        990,248        1,005,000   

Federal-Mogul Corporation

  Automotive   Tranche C Term Loan   Loan     4.75     4/15/2021      $ 2,947,500        2,936,632        2,780,966   

First Data Corporation

  Financial Intermediaries   First Data T/L Ext (2021)   Loan     4.43     3/24/2021      $ 2,111,028        2,037,691        2,119,831   

First Eagle Investment Management

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     4.75     12/1/2022      $ 1,496,250        1,468,264        1,491,582   

Fitness International, LLC

  Leisure Goods/Activities/Movies   Term Loan B   Loan     5.50     7/1/2020      $ 1,934,146        1,905,782        1,920,452   

FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.)

  Nonferrous Metals/Minerals   Loan   Loan     4.25     6/28/2019      $ 1,693,749        1,694,391        1,574,560   

Garda World Security Corporation

  Services: Business   Term B Delayed Draw Loan   Loan     4.00     11/6/2020      $ 198,611        197,919        195,509   

Garda World Security Corporation

  Services: Business   Term B Loan   Loan     4.00     11/6/2020      $ 776,389        773,748        764,262   

Gardner Denver, Inc.

  High Tech Industries   Initial Dollar Term Loan   Loan     4.25     7/30/2020      $ 2,444,868        2,439,045        2,260,134   

Gates Global LLC

  Leisure Goods/Activities/Movies   Term Loan (First Lien)   Loan     4.25     7/5/2021      $ 485,406        480,552        469,023   

General Nutrition Centers, Inc.

  Retailers (Except Food and Drugs)   Amended Tranche B Term Loan   Loan     3.25     3/4/2019      $ 2,127,277        2,122,467        2,118,641   

Global Tel*Link Corporation

  Services: Business   Term Loan (First Lien)   Loan     5.00     5/26/2020      $ 2,690,281        2,683,048        2,485,147   

Goodyear Tire & Rubber Company, The

  Chemicals/Plastics   Loan (Second Lien)   Loan     3.75     4/30/2019      $ 2,000,000        1,976,119        2,000,620   

Grosvenor Capital Management Holdings, LP

  Brokers/Dealers/Investment Houses   Initial Term Loan   Loan     3.75     1/4/2021      $ 1,236,890        1,232,586        1,224,521   

GTCR Valor Companies, Inc.

  Services: Business   Term Loan (First Lien)   Loan     6.00     6/1/2021      $ 1,963,979        1,931,757        1,959,070   

GTCR Valor Companies, Inc.

  Services: Business   Term Loan B   Loan     7.00     5/17/2023      $ 1,500,000        1,440,000        1,446,570   

Harland Clarke Holdings Corp. (fka Clarke American Corp.)

  Publishing   Tranche B-4 Term Loan   Loan     6.00     8/2/2019      $ 471,875        470,370        466,864   

HCA Inc.

  Healthcare & Pharmaceuticals   Tranche B-4 Term Loan   Loan     3.36     5/1/2018      $ 2,114,243        2,055,248        2,122,171   

Headwaters Incorporated

  Building & Development   Term Loan   Loan     4.50     3/24/2022      $ 248,125        247,040        249,986   

Help/Systems Holdings, Inc.

  High Tech Industries   Term Loan   Loan     6.25     10/8/2021      $ 1,496,250        1,437,838        1,463,826   

Hercules Achievement Holdings, Inc.

  Retailers (Except Food and Drugs)   Term Loan B   Loan     5.00     12/10/2021      $ 248,741        246,407        249,285   

Hertz Corporation, The

  Automotive   Tranche B-1 Term Loan   Loan     3.75     3/12/2018      $ 2,902,500        2,922,871        2,899,772   

Hoffmaster Group, Inc.

  Containers/Glass Products   Term Loan   Loan     5.25     5/8/2020      $ 1,965,000        1,951,142        1,960,088   

Hostess Brand, LLC

  Beverage, Food & Tobacco   Term Loan B (First Lien)   Loan     4.50     8/3/2022      $ 995,000        992,749        998,313   

Huntsman International LLC

  Chemicals/Plastics   Term Loan B (First Lien)   Loan     3.52     4/19/2019      $ 3,802,135        3,777,603        3,795,025   

Husky Injection Molding Systems Ltd.

  Services: Business   Term Loan B   Loan     4.25     6/30/2021      $ 489,952        488,140        488,522   

Imagine! Print Solutions, Inc.

  Media   Term Loan B   Loan     7.00     3/30/2022      $ 500,000        492,673        501,250   

Infor (US), Inc. (fka Lawson Software Inc.)

  Services: Business   Tranche B-5 Term Loan   Loan     3.75     6/3/2020      $ 2,182,611        2,169,384        2,138,566   

Insight Global

  Services: Business   Term Loan   Loan     6.00     10/29/2021      $ 2,474,490        2,462,375        2,464,592   

Informatica Corporation

  High Tech Industries   Term Loan B   Loan     4.50     8/5/2022      $ 497,500        496,346        491,072   

J. Crew Group, Inc.

  Retailers (Except Food and Drugs)   Term B-1 Loan Retired 03/05/2014   Loan     4.00     3/5/2021      $ 953,050        953,050        707,640   

Jazz Acquisition, Inc

  Aerospace and Defense   First Lien 6/14   Loan     4.50     6/19/2021      $ 491,515        490,563        412,873   

J.Jill Group, Inc.

  Retailers (Except Food and Drugs)   Term Loan (First Lien)   Loan     6.00     5/9/2022      $ 992,500        988,013        977,613   

Kinetic Concepts, Inc.

  Healthcare & Pharmaceuticals   Dollar Term D-1 Loan   Loan     4.50     5/4/2018      $ 2,446,330        2,431,726        2,445,009   

Koosharem, LLC

  Services: Business   Term Loan   Loan     7.50     5/15/2020      $ 2,957,563        2,936,295        2,447,383   

Kraton Polymers, LLC

  Chemicals/Plastics   Term Loan (Initial)   Loan     6.00     1/6/2022      $ 2,500,000        2,260,485        2,463,275   

Lannett Company, Inc.

  Healthcare & Pharmaceuticals   Term Loan B   Loan     6.38     11/25/2022      $ 1,975,000        1,909,490        1,930,563   

LPL Holdings

  Banking, Finance, Insurance & Real Estate   Term Loan B (2022)   Loan     4.75     11/21/2022      $ 1,995,000        1,976,292        1,999,988   

McGraw-Hill Global Education Holdings, LLC

  Publishing   Term Loan   Loan     5.00     5/4/2022      $ 1,000,000        995,017        1,003,250   

Mauser Holdings, Inc.

  Containers/Glass Products   Term Loan   Loan     4.50     7/31/2021      $ 492,500        490,586        488,038   

Michaels Stores, Inc.

  Retailers (Except Food and Drugs)   Term B Loan   Loan     3.75     1/28/2020      $ 485,000        485,000        485,684   

Michaels Stores, Inc.

  Retailers (Except Food and Drugs)   Term Loan B-2   Loan     4.00     1/28/2020      $ 1,209,044        1,204,541        1,212,502   

Micro Holding Corp.

  High Tech Industries   Term Loan   Loan     4.75     7/8/2021      $ 989,929        985,579        988,998   

Microsemi Corporation

  Electronics/Electric   Term Loan B   Loan     5.25     1/15/2023      $ 1,487,647        1,444,958        1,501,408   

Midas Intermediate Holdco II, LLC

  Automotive   Term Loan (Initial)   Loan     4.50     8/18/2021      $ 246,250        245,220        246,558   

MPH Acquisition Holdings LLC

  Healthcare & Pharmaceuticals   Term Loan   Loan     3.75     3/31/2021      $ 347,727        345,989        350,120   

MSC Software Corp.

  Services: Business   Term Loan   Loan     5.00     5/29/2020      $ 982,500        975,569        940,744   

National Veterinary Associates, Inc

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.75     8/14/2021      $ 985,030        981,980        981,750   

National Vision, Inc.

  Retailers (Except Food and Drugs)   Term Loan (Second Lien)   Loan     6.75     3/11/2022      $ 250,000        249,744        225,625   

Neptune Finco (CSC Holdings)

  Cable and Satellite Television   Term Loan   Loan     5.00     10/7/2022      $ 1,000,000        986,250        1,007,080   

New Millennium Holdco

  Healthcare & Pharmaceuticals   Term Loan   Loan     7.50     12/21/2020      $ 2,002,025        1,816,762        1,500,517   

Nortek, Inc.

  Electronics/Electric   Term Loan B   Loan     3.50     10/30/2020      $ 982,533        972,795        978,848   

NorthStar Asset Management Group Inc.

  Banking, Finance, Insurance & Real Estate   Term Loan B   Loan     4.63     1/30/2023      $ 2,000,000        1,932,192        1,987,500   

Novelis, Inc.

  Conglomerate   Term Loan B   Loan     4.00     6/2/2022      $ 4,759,070        4,738,112        4,743,460   

Novetta Solutions

  Aerospace and Defense   Term Loan (200MM)   Loan     6.00     10/16/2022      $ 1,995,000        1,976,309        1,977,544   

Novetta Solutions

  Aerospace and Defense   Term Loan (2nd Lien)   Loan     9.50     9/29/2023      $ 1,000,000        990,472        980,000   

NPC International, Inc.

  Food Services   Term Loan (2013)   Loan     4.75     12/28/2018      $ 477,298        477,298        476,501   

NRG Energy, Inc.

  Utilities   Term Loan (2013)   Loan     2.75     7/2/2018      $ 3,812,100        3,799,998        3,808,288   

Numericable

  Broadcast Radio and Television   Term Loan B-5   Loan     4.56     7/31/2022      $ 995,000        992,749        992,821   

NuSil Technology LLC.

  Chemicals/Plastics   Term Loan   Loan     5.25     4/7/2017      $ 1,786,810        1,767,709        1,787,561   

NVA Holdings, Inc.

  Services: Consumer   Term Loan B1   Loan     5.50     8/14/2021      $ 250,000        249,375        250,625   

Om Group

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     7.00     10/28/2021      $ 1,000,000        900,249        952,500   

ON Semiconductor Corporation

  High Tech Industries   Term Loan B   Loan     5.25     3/31/2023      $ 500,000        492,614        503,230   

Onex Carestream Finance LP

  Healthcare & Pharmaceuticals   Term Loan (First Lien 2013)   Loan     5.00     6/7/2019      $ 3,777,808        3,767,299        3,700,362   

OnexYork Acquisition Co

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.75     10/1/2021      $ 492,500        489,549        434,631   

OpenLink International LLC

  Services: Business   Term B Loan   Loan     6.25     10/30/2017      $ 2,936,828        2,935,776        2,922,144   

P.F. Chang’s China Bistro, Inc. (Wok Acquisition Corp.)

  Food/Drug Retailers   Term Borrowing   Loan     4.25     6/24/2019      $ 1,428,962        1,423,722        1,364,658   

P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC)

  Services: Business   Term Loan (First Lien)   Loan     5.00     10/30/2020      $ 977,500        973,821        885,859   

Penn Products Terminal, LLC

  Chemicals/Plastics   Term Loan B   Loan     4.75     4/13/2022      $ 222,500        221,517        216,381   

PetCo Animal Supplies Stores, Inc.

  Retailers (Except Food and Drugs)   Term Loan B-1   Loan     5.75     1/15/2023      $ 997,500        978,483        1,003,734   

PetCo Animal Supplies Stores, Inc.

  Retailers (Except Food and Drugs)   Term Loan B-2   Loan     5.62     1/15/2023      $ 997,500        978,480        1,003,365   

Petsmart, Inc. (Argos Merger Sub, Inc.)

  Retailers (Except Food and Drugs)   Term Loan B1   Loan     4.25     3/11/2022      $ 990,000        985,552        990,089   

PGX Holdings, Inc.

  Financial Intermediaries   Term Loan   Loan     5.75     9/29/2020      $ 952,143        945,000        948,172   

Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)

  Conglomerate   Term Loan   Loan     4.25     8/18/2022      $ 1,916,021        1,904,545        1,917,228   

Phillips-Medisize Corporation

  Healthcare & Pharmaceuticals   Term Loan   Loan     4.75     6/16/2021      $ 491,250        489,366        488,794   

Planet Fitness Holdings LLC

  Leisure Goods/Activities/Movies   Term Loan   Loan     4.75     3/31/2021      $ 2,410,858        2,402,881        2,416,885   

PrePaid Legal Services, Inc.

  Services: Business   Term Loan B   Loan     6.50     7/1/2019      $ 699,357        696,578        694,986   

Presidio, Inc.

  Services: Business   Term Loan   Loan     5.25     2/2/2022      $ 2,397,498        2,339,487        2,382,514   

Prime Security Services (Protection One)

  Services: Business   Term Loan   Loan     5.00     7/1/2021      $ 1,990,000        1,981,160        2,003,691   

Ranpak Holdings, Inc.

  Services: Business   Term Loan   Loan     4.25     10/1/2021      $ 500,000        497,926        435,000   

Ranpak Holdings, Inc.

  Services: Business   Term Loan (Second Lien)   Loan     8.25     10/3/2022      $ 935,991        933,651        912,591   

Redtop Acquisitions Limited

  Electronics/Electric   Initial Dollar Term Loan (First Lien)   Loan     4.50     12/3/2020      $ 488,750        486,339        487,733   

Regal Cinemas Corporation

  Services: Consumer   Term Loan   Loan     3.75     4/1/2022      $ 496,250        495,112        497,104   

Research Now Group, Inc

  Media   Term Loan B   Loan     5.50     3/18/2021      $ 2,053,260        2,043,853        2,017,328   

Rexnord LLC/RBS Global, Inc.

  Industrial Equipment   Term B Loan   Loan     4.00     8/21/2020      $ 1,625,954        1,627,152        1,616,247   

Reynolds Group Holdings Inc.

  Industrial Equipment   Incremental U.S. Term Loan   Loan     4.50     12/1/2018      $ 1,910,551        1,910,551        1,916,627   

Rocket Software, Inc.

  Services: Business   Term Loan (First Lien)   Loan     5.75     2/8/2018      $ 1,896,888        1,886,472        1,894,517   

Rovi Solutions Corporation / Rovi Guides, Inc.

  Electronics/Electric   Tranche B-3 Term Loan   Loan     3.75     7/2/2021      $ 1,473,750        1,468,151        1,458,276   

Royal Adhesives and Sealants

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.50     6/20/2022      $ 496,250        494,014        495,754   

Royal Adhesives and Sealants

  Chemicals/Plastics   Term Loan (Second Lien)   Loan     8.50     6/19/2023      $ 500,000        496,479        474,585   

RPI Finance Trust

  Financial Intermediaries   Term B-4 Term Loan   Loan     3.50     11/9/2020      $ 3,142,175        3,142,175        3,152,638   

Russell Investment Management T/L B

  Banking, Finance, Insurance & Real Estate   Term Loan B   Loan     6.75     6/1/2023      $ 2,000,000        1,880,000        1,880,840   

Sable International Finance Ltd

  Telecommunications   Term Loan B1   Loan     5.50     12/2/2022      $ 825,000        808,530        829,422   

Sable International Finance Ltd

  Telecommunications   Term Loan B2   Loan     5.50     12/2/2022      $ 675,000        661,524        678,618   

SBP Holdings LP

  Industrial Equipment   Term Loan (First Lien)   Loan     5.00     3/27/2021      $ 980,000        976,338        735,000   

Scientific Games International, Inc.

  Electronics/Electric   Term Loan B2   Loan     6.00     10/1/2021      $ 987,500        979,760        975,156   

SCS Holdings (Sirius Computer)

  High Tech Industries   Term Loan (First Lien)   Loan     6.00     10/30/2022      $ 1,977,528        1,940,472        1,977,528   

Seadrill Operating LP

  Oil & Gas   Term Loan B   Loan     4.00     2/21/2021      $ 984,887        920,503        463,714   

Sensus USA Inc.

  Utilities   Term Loan   Loan     6.50     4/5/2023      $ 1,900,135        1,894,683        1,900,135   

ServiceMaster Company, The

  Conglomerate   Tranche B Term Loan   Loan     4.25     7/1/2021      $ 1,970,000        1,954,950        1,977,388   

Shearers Foods LLC

  Food Services   Term Loan (First Lien)   Loan     4.94     6/30/2021      $ 985,000        983,058        966,531   

Sitel Worldwide

  Telecommunications   Term Loan   Loan     6.50     9/18/2021      $ 1,990,000        1,972,076        1,977,563   

Sonneborn, LLC

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.75     12/10/2020      $ 209,637        209,216        209,287   

Sonneborn, LLC

  Chemicals/Plastics   Initial US Term Loan   Loan     4.75     12/10/2020      $ 1,187,944        1,185,554        1,185,960   

Sophia, L.P.

  Electronics/Electric   Term Loan (Closing Date)   Loan     4.75     9/30/2022      $ 1,990,000        1,980,819        1,988,348   

SourceHOV LLC

  Services: Business   Term Loan B (First Lien)   Loan     7.75     10/31/2019      $ 1,912,500        1,869,937        1,367,438   

SRAM, LLC

  Industrial Equipment   Term Loan (First Lien)   Loan     4.00     4/10/2020      $ 2,891,200        2,883,896        2,558,712   

Steak ‘n Shake Operations, Inc.

  Food Services   Term Loan   Loan     4.75     3/19/2021      $ 930,673        923,879        912,059   

SuperMedia Inc. (fka Idearc Inc.)

  Publishing   Loan   Loan     11.60     12/30/2016      $ 221,073        219,104        90,087   

Survey Sampling International

  Services: Business   Term Loan B   Loan     6.00     12/16/2020      $ 1,740,000        1,730,816        1,726,950   

Sybil Finance BV

  High Tech Industries   Term Loan   Loan     4.25     3/20/2020      $ 1,255,833        1,254,607        1,254,264   

Syniverse Holdings, Inc.

  Telecommunications   Initial Term Loan   Loan     4.00     4/23/2019      $ 468,977        466,281        352,905   

TaxACT, Inc.

  Services: Business   Term Loan B   Loan     7.00     1/3/2023      $ 1,800,000        1,748,381        1,800,000   

TGI Friday’s, Inc.

  Food Services   Term Loan B   Loan     5.25     7/15/2020      $ 1,651,816        1,648,174        1,646,663   

Townsquare Media, Inc.

  Media   Term Loan B   Loan     4.25     4/1/2022      $ 932,522        928,497        934,853   

TPF II Power LLC and TPF II Covert Midco LLC

  Utilities   Term Loan B   Loan     5.50     10/2/2021      $ 1,488,058        1,431,660        1,487,136   

TransDigm, Inc.

  Aerospace and Defense   Tranche C Term Loan   Loan     3.75     2/28/2020      $ 4,266,270        4,272,377        4,267,593   

Travel Leaders Group, LLC

  Hotel, Gaming and Leisure   Term Loan B   Loan     7.00     12/7/2020      $ 2,705,290        2,689,552        2,678,237   

Tricorbraun, Inc. (fka Kranson Industries, Inc.)

  Containers/Glass Products   Term Loan   Loan     4.00     5/3/2018      $ 1,836,625        1,831,967        1,835,101   

Trugreen Limited Partnership

  Services: Business   Term Loan B   Loan     6.50     4/13/2023      $ 500,000        492,618        503,125   

Twin River Management Group, Inc.

  Lodging & Casinos   Term Loan B   Loan     5.25     7/10/2020      $ 868,969        870,550        872,775   

U.S. Security Associates Holdings, Inc.

  Services: Business   Delayed Draw Loan   Loan     6.25     7/28/2017      $ 156,480        156,021        155,698   

U.S. Security Associates Holdings, Inc.

  Services: Business   Term B Loan   Loan     6.25     7/28/2017      $ 919,021        916,538        914,426   

Univar Inc.

  Chemicals/Plastics   Term B Loan   Loan     4.25     7/1/2022      $ 2,985,000        2,971,597        2,975,926   

Univision Communications Inc.

  Telecommunications   Replacement First-Lien Term Loan   Loan     4.00     3/1/2020      $ 2,908,834        2,896,976        2,908,368   

Valeant Pharmaceuticals International, Inc.

  Drugs   Series D2 Term Loan B   Loan     3.50     2/13/2019      $ 2,517,614        2,507,628        2,481,108   

Verint Systems Inc.

  Services: Business   Term Loan   Loan     3.50     9/6/2019      $ 1,014,058        1,011,393        1,012,790   

Vertafore, Inc.

  Services: Business   Term Loan (2013)   Loan     4.25     10/3/2019      $ 2,484,603        2,484,603        2,482,839   

Vizient Inc.

  Healthcare & Pharmaceuticals   Term Loan   Loan     6.25     2/13/2023      $ 1,000,000        971,245        1,011,880   

Vouvray US Finance

  Industrial Equipment   Term Loan   Loan     4.75     6/27/2021      $ 491,250        489,339        486,745   

Washington Inventory Service

  Services: Business   U.S. Term Loan (First Lien)   Loan     5.75     12/20/2018      $ 1,736,392        1,748,193        972,380   

West Corporation

  Telecommunications   Term B-10 Loan   Loan     3.25     6/30/2018      $ 2,428,527        2,449,004        2,425,491   

Western Digital Corporation

  High Tech Industries   Term Loan B (USD)   Loan     6.25     5/1/2023      $ 2,000,000        1,940,138        1,993,120   

Windstream Corporation

  Telecommunications   Term Loan B6   Loan     5.75     3/29/2021      $ 250,000        243,929        250,313   

ZEP Inc.

  Chemicals/Plastics   Term Loan B   Loan     5.50     6/27/2022      $ 2,977,500        2,964,086        2,975,648   
             

 

 

   

 

 

 
              $ 305,696,742      $ 296,218,448   
             

 

 

   

 

 

 
                            Principal     Cost     Fair Value  

Cash and cash equivalents

               

U.S. Bank Money Market (a)

            $ 2,663,033      $ 2,663,033      $ 2,663,033   
           

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

          $ 2,663,033      $ 2,663,033      $ 2,663,033   
           

 

 

   

 

 

   

 

 

 

 

(a) Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of May 31, 2016.

 

21


Table of Contents

Saratoga Investment Corp. CLO 2013-1 Ltd.

Schedule of Investments

February 29, 2016

 

Issuer Name

 

Industry

 

Asset

Name

  Asset
Type
  Current
Rate
    Maturity
Date
    Principal/
Number
of Shares
    Cost     Fair Value  

Education Management II LLC

  Leisure Goods/Activities/Movies   A-1 Preferred Shares   Equity     0.00       6,692      $ 669,214      $ 1,673   

Education Management II LLC

  Leisure Goods/Activities/Movies   A-2 Preferred Shares   Equity     0.00       18,975        1,897,538        95   

New Millennium Holdco, Inc.

  Healthcare & Pharmaceuticals   Common Stock   Equity     0.00       14,813        964,466        190,095   

24 Hour Holdings III LLC

  Leisure Goods/Activities/Movies   Term Loan   Loan     4.75     5/28/2021      $ 492,500        488,586        455,154   

Acosta Holdco Inc.

  Media   Term Loan B1   Loan     4.25     9/26/2021      $ 1,972,936        1,959,834        1,855,389   

Aspen Dental Management, Inc.

  Healthcare & Pharmaceuticals   Term Loan Initial   Loan     5.50     4/29/2022      $ 497,500        495,228        495,221   

Advantage Sales & Marketing Inc.

  Services: Business   Delayed Draw Term Loan   Loan     4.25     7/25/2021      $ 2,471,231        2,468,039        2,342,826   

AgroFresh

  Food Services   Term Loan   Loan     5.75     7/30/2021      $ 1,990,000        1,980,704        1,935,275   

Aegis Toxicology Science Corporation

  Healthcare & Pharmaceuticals   Term B Loan   Loan     5.50     2/24/2021      $ 985,000        985,000        797,850   

Akorn, Inc.

  Healthcare & Pharmaceuticals   Term Loan B   Loan     6.00     4/16/2021      $ 398,056        396,681        396,066   

Albertson’s LLC

  Retailers (Except Food and Drugs)   Term Loan B-4   Loan     5.50     8/25/2021      $ 3,384,425        3,367,410        3,302,623   

Alere Inc. (fka IM US Holdings, LLC)

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.25     6/20/2022      $ 927,265        925,091        925,365   

Alion Science T/L B (1st Lien)

  High Tech Industries   Term Loan B (First Lien)   Loan     5.50     8/19/2021      $ 2,985,000        2,971,074        2,824,555   

Alliance HealthCare T/L B

  Healthcare & Pharmaceuticals   Term Loan B   Loan     4.25     6/3/2019      $ 994,856        990,161        906,981   

Alliant Holdings T/L B (1st Lien)

  Banking, Finance, Insurance & Real Estate   Term Loan B (First Lien)   Loan     4.50     8/12/2022      $ 995,000        992,679        960,921   

Alvogen Pharma US, Inc

  Healthcare & Pharmaceuticals   Term Loan   Loan     6.00     4/4/2022      $ 480,447        478,240        456,425   

American Beacon Advisors, Inc.

  Financial Intermediaries   Term Loan (First Lien)   Loan     5.50     4/30/2022      $ 248,749        247,612        244,190   

Aramark Corporation

  Food Products   LC-2 Facility   Loan     0.29     7/26/2016      $ 9,447        9,445        9,305   

Aramark Corporation

  Food Products   LC-3 Facility   Loan     0.29     7/26/2016      $ 5,244        5,244        5,166   

Aramark Corporation

  Food Products   U.S. Term F Loan   Loan     3.25     2/24/2021      $ 3,150,423        3,150,423        3,126,133   

Asurion, LLC (fka Asurion Corporation)

  Insurance   Incremental Tranche B-1 Term Loan   Loan     5.00     5/24/2019      $ 2,596,480        2,573,245        2,441,237   

Asurion, LLC (fka Asurion Corporation)

  Insurance   Term Loan B4 (First Lien)   Loan     5.00     8/4/2022      $ 2,478,125        2,466,303        2,270,582   

Auction.com

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     6.00     5/13/2019      $ 2,522,992        2,522,722        2,491,455   

Avantor Performance Materials Holdings, Inc.

  Chemicals/Plastics   Term Loan   Loan     5.25     6/24/2017      $ 2,156,953        2,153,896        2,135,384   

Bass Pro Group, LLC

  Retailers (Except Food and Drugs)   Term Loan   Loan     4.00     6/5/2020      $ 1,488,750        1,485,895        1,397,564   

Belmond Interfin Ltd.

  Lodging & Casinos   Term Loan   Loan     4.00     3/19/2021      $ 491,249        489,361        477,127   

Berry Plastics Corporation

  Chemicals/Plastics   Term E Loan   Loan     3.75     1/6/2021      $ 1,314,499        1,305,069        1,291,903   

BJ’s Wholesale Club, Inc.

  Food/Drug Retailers   New 2013 (November) Replacement Loan (First Lien)   Loan     4.50     9/26/2019      $ 1,476,196        1,475,409        1,401,161   

Blue Coat Systems

  Technology   Term Loan B   Loan     4.50     5/20/2022      $ 997,500        995,159        945,131   

BMC Software

  Technology   Term Loan   Loan     5.00     9/10/2020      $ 1,979,798        1,926,080        1,571,821   

Brickman Group Holdings, Inc.

  Brokers/Dealers/Investment Houses   Initial Term Loan (First Lien)   Loan     4.00     12/18/2020      $ 1,476,212        1,464,327        1,426,390   

Brock Holdings III, Inc.

  Industrial Equipment   Term Loan (First Lien)   Loan     6.00     3/16/2017      $ 1,917,168        1,924,101        1,802,138   

Burlington Coat Factory Warehouse Corporation

  Retailers (Except Food and Drugs)   Term B-2 Loan   Loan     4.25     8/13/2021      $ 1,861,667        1,853,426        1,845,843   

BWAY Holding Company

  Leisure Goods/Activities/Movies   Term Loan B   Loan     5.50     8/14/2020      $ 985,000        976,335        930,826   

Caesars Entertainment Corp.

  Lodging & Casinos   Term B-7 Loan   Loan     13.25     3/1/2017      $ 995,000        991,037        814,656   

Camp International Holding Company

  Aerospace and Defense   2013 Replacement Term Loan (First Lien)   Loan     4.75     5/31/2019      $ 1,940,113        1,940,984        1,806,730   

Capital Automotive L.P.

  Conglomerate   Tranche B-1 Term Loan Facility   Loan     4.00     4/10/2019      $ 2,051,828        2,055,060        2,044,564   

Catalent Pharma Solutions, Inc

  Drugs   Initial Term B Loan   Loan     4.25     5/20/2021      $ 492,501        490,549        487,271   

Cengage Learning Acquisitions, Inc.

  Publishing   Term Loan   Loan     7.00     3/31/2020      $ 2,647,871        2,670,807        2,539,758   

Charter Communications Operating, LLC

  Cable and Satellite Television   Term F Loan   Loan     3.00     12/31/2020      $ 2,628,783        2,621,343        2,566,823   

CHS/Community Health Systems, Inc.

  Healthcare & Pharmaceuticals   Term G Loan   Loan     3.75     12/31/2019      $ 1,022,569        994,876        974,212   

CHS/Community Health Systems, Inc.

  Healthcare & Pharmaceuticals   Term H Loan   Loan     4.00     1/27/2021      $ 1,881,500        1,828,566        1,785,920   

Cinedigm Digital Funding I, LLC

  Services: Business   Term Loan   Loan     3.75     2/28/2018      $ 298,828        297,362        295,840   

CITGO Petroleum Corporation

  Oil & Gas   Term Loan B   Loan     4.50     7/29/2021      $ 1,984,975        1,962,423        1,865,876   

Communications Sales & Leasing, Inc.

  Telecommunications   Term Loan B (First Lien)   Loan     5.00     10/24/2022      $ 1,990,000        1,978,594        1,847,596   

CommScope, Inc.

  Telecommunications   Term Loan B   Loan     3.75     12/29/2022      $ 498,750        497,568        494,176   

Consolidated Aerospace Manufacturing, LLC

  Aerospace and Defense   Term Loan (First Lien)   Loan     4.75     8/11/2022      $ 1,437,500        1,430,556        1,329,688   

Concordia Healthcare Corp

  Healthcare & Pharmaceuticals   Term Loan B   Loan     5.25     10/21/2021      $ 2,000,000        1,894,483        1,920,000   

CPI Acquisition Inc.

  Technology   Term Loan B (First Lien)   Loan     5.50     8/17/2022      $ 1,436,782        1,415,977        1,396,667   

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

  Electronics/Electric   Term B Loan   Loan     4.25     11/17/2017      $ 1,564,182        1,564,182        1,501,615   

Crosby US Acquisition Corp.

  Industrial Equipment   Initial Term Loan (First Lien)   Loan     4.00     11/23/2020      $ 735,000        734,245        536,550   

CT Technologies Intermediate Hldgs, Inc

  Healthcare & Pharmaceuticals   Term Loan   Loan     5.25     12/1/2021      $ 1,485,038        1,471,665        1,433,061   

Culligan International Company

  Conglomerate   Dollar Loan (First Lien)   Loan     6.25     12/19/2017      $ 771,625        742,910        721,469   

Culligan International Company

  Conglomerate   Dollar Loan (Second Lien)   Loan     9.50     6/19/2018      $ 783,162        754,065        734,214   

Cumulus Media Holdings Inc.

  Broadcast Radio and Television   Term Loan   Loan     4.25     12/23/2020      $ 470,093        466,690        304,973   

DAE Aviation (StandardAero)

  Aerospace and Defense   Term Loan   Loan     5.25     7/7/2022      $ 1,995,000        1,985,759        1,970,063   

DCS Business Services, Inc.

  Financial Intermediaries   Term B Loan   Loan     8.75     3/19/2018      $ 2,409,739        2,397,948        2,409,739   

Dell International LLC

  Technology   Term Loan B2   Loan     4.00     4/29/2020      $ 2,904,989        2,892,348        2,889,854   

Delta 2 (Lux) S.a.r.l.

  Lodging & Casinos   Term Loan B-3   Loan     4.75     7/30/2021      $ 1,000,000        995,870        925,000   

Deluxe Entertainment Service Group, Inc.

  Leisure Goods/Activities/Movies   Term Loan (First Lien)   Loan     6.50     2/28/2020      $ 1,882,983        1,884,279        1,751,174   

Diamond Resorts International

  Lodging & Casinos   Term Loan   Loan     5.50     5/7/2021      $ 926,971        923,222        897,614   

Diamond Resorts International

  Lodging & Casinos   Term Loan (Add-On)   Loan     5.50     5/7/2021      $ 1,000,000        980,687        968,330   

DJO Finance LLC

  Healthcare & Pharmaceuticals   Term Loan   Loan     4.25     6/8/2020      $ 497,500        495,435        478,222   

DPX Holdings B.V.

  Healthcare & Pharmaceuticals   Term Loan 2015 Incr Dollar   Loan     4.25     3/11/2021      $ 2,955,000        2,948,456        2,799,863   

Drew Marine Group Inc.

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.25     11/19/2020      $ 2,472,161        2,445,601        2,299,110   

DTZ U.S. Borrower LLC

  Construction & Building   Term Loan B Add-on   Loan     4.25     11/4/2021      $ 2,985,000        2,970,317        2,869,331   

Edelman Financial Group Inc.

  Banking, Finance, Insurance & Real Estate   Term Loan   Loan     6.50     12/19/2022      $ 1,500,000        1,470,617        1,459,695   

Education Management LLC

  Leisure Goods/Activities/Movies   Term Loan A   Loan     5.50     7/2/2020      $ 501,970        485,313        160,630   

Education Management LLC

  Leisure Goods/Activities/Movies   Term Loan B (2.00% Cash/6.50% PIK)   Loan     8.50     7/2/2020      $ 893,447        867,647        56,582   

Emerald Performance Materials, LLC

  Chemicals/Plastics   Term Loan (First Lien)   Loan     4.50     8/1/2021      $ 484,659        482,690        473,148   

Emerald Performance Materials, LLC

  Chemicals/Plastics   Term Loan (Second Lien)   Loan     7.75     8/1/2022      $ 500,000        497,844        468,750   

Emerald 2 Limited

  Chemicals/Plastics   Term Loan B1A   Loan     5.00     5/14/2021      $