UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 10-Q

 

 

 

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

 

For the Quarterly Period Ended May 31, 2022

 

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

 

Commission File No. 814-00732

 

 

 

SARATOGA INVESTMENT CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   20-8700615
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

 

535 Madison Avenue

New York, New York 10022

(Address of principal executive offices)

 

(212) 906-7800

(Registrant’s telephone number, including area code)

 

 

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   SAR   The New York Stock Exchange
7.25% Notes due 2025   SAK   The New York Stock Exchange
6.00% Notes due 2027   SAT   The New York Stock Exchange

 

 

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

 

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

 

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

 

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

 

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

 

The number of outstanding common shares of the registrant as of July 6, 2022 was 11,984,898.

 

 

 

 

 

 

TABLE OF CONTENTS

 

      Page
PART I.   FINANCIAL INFORMATION 1
       
Item 1.   Consolidated Financial Statements 1
       
    Consolidated Statements of Assets and Liabilities as of May 31, 2022 (unaudited) and February 28, 2022 1
       
    Consolidated Statements of Operations for the three months ended May 31, 2022 (unaudited) and May 31, 2021 (unaudited) 2
       
    Consolidated Statements of Changes in Net Assets for three months ended May 31, 2022 (unaudited) and May 31, 2021 (unaudited) 3
       
    Consolidated Statements of Cash Flows for the three months ended May 31, 2022 (unaudited) and May 31, 2021 (unaudited) 4
       
    Consolidated Schedules of Investments as of May 31, 2022 (unaudited) and February 28, 2022 5
       
    Notes to Consolidated Financial Statements as of May 31, 2022 (unaudited) 16
       
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 89
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 127
       
Item 4.   Controls and Procedures 128
       
PART II.   OTHER INFORMATION 129
       
Item 1.   Legal Proceedings 129
       
Item 1A.   Risk Factors 129
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 129
       
Item 3.   Defaults Upon Senior Securities 129
       
Item 4.   Mine Safety Disclosures 129
       
Item 5.   Other Information 129
       
Item 6.   Exhibits 130
       
Signatures 132

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

 

   May 31,
2022
   February 28,
2022
 
   (unaudited)     
ASSETS        
Investments at fair value        
Non-control/Non-affiliate investments (amortized cost of $732,722,272 and $654,965,044, respectively)  $745,481,455   $668,358,516 
Affiliate investments (amortized cost of $53,468,875 and $46,224,927, respectively)   56,045,678    48,234,124 
Control investments (amortized cost of $96,356,420 and $95,058,356, respectively)   93,006,013    100,974,715 
Total investments at fair value (amortized cost of $882,547,567 and $796,248,327, respectively)   894,533,146    817,567,355 
Cash and cash equivalents   94,939,634    47,257,801 
Cash and cash equivalents, reserve accounts   6,550,220    5,612,541 
Interest receivable (net of reserve of $733,379 and $0, respectively)   5,325,756    5,093,561 
Due from affiliate (See Note 7)   105,637    90,968 
Management fee receivable   362,777    362,549 
Other assets   220,209    254,980 
Total assets  $1,002,037,379   $876,239,755 
           
LIABILITIES          
Revolving credit facility  $25,000,000   $12,500,000 
Deferred debt financing costs, revolving credit facility   (1,075,765)   (1,191,115)
SBA debentures payable   217,000,000    185,000,000 
Deferred debt financing costs, SBA debentures payable   (4,891,468)   (4,344,983)
7.25% Notes Payable 2025   43,125,000    43,125,000 
Deferred debt financing costs, 7.25% notes payable 2025   (996,761)   (1,078,201)
7.75% Notes Payable 2025   5,000,000    5,000,000 
Deferred debt financing costs, 7.75% notes payable 2025   (170,551)   (184,375)
4.375% Notes Payable 2026   175,000,000    175,000,000 
Premium on 4.375% notes payable 2026   1,033,136    1,086,013 
Deferred debt financing costs, 4.375% notes payable 2026   (3,183,076)   (3,395,435)
4.35% Notes Payable 2027   75,000,000    75,000,000 
Discount on 4.35% notes payable 2027   (470,120)   (499,263)
Deferred debt financing costs, 4.35% notes payable 2027   (1,636,102)   (1,722,908)
6.25% Notes Payable 2027   15,000,000    15,000,000 
Deferred debt financing costs, 6.25% notes payable 2027   (398,281)   (416,253)
6.00% Notes Payable 2027   97,500,000    - 
Deferred debt financing costs, 6.00% notes payable 2027   (3,276,855)   - 
Base management and incentive fees payable   8,637,481    12,947,025 
Deferred tax liability   1,578,323    1,249,015 
Accounts payable and accrued expenses   1,020,841    799,058 
Current income tax payable   2,690,196    2,820,036 
Interest and debt fees payable   5,129,247    2,801,621 
Directors fees payable   108,566    70,000 
Due to manager   77,757    263,814 
Excise tax payable   -    630,183 
Total liabilities   656,801,568    520,459,232 
           
Commitments and contingencies (See Note 9)          
           
NET ASSETS          
Common stock, par value $0.001, 100,000,000 common shares authorized, 12,031,998 and 12,131,350 common shares issued and outstanding, respectively   12,032    12,131 
Capital in excess of par value   325,433,869    328,062,246 
Total distributable earnings (deficit)   19,789,910    27,706,146 
Total net assets   345,235,811    355,780,523 
Total liabilities and net assets  $1,002,037,379   $876,239,755 
NET ASSET VALUE PER SHARE  $28.69   $29.33 

 

See accompanying notes to consolidated financial statements.

 

1

 

 

Saratoga Investment Corp.

Consolidated Statements of Operations

(unaudited)

 

   For the three months ended 
   May 31,
2022
   May 31,
2021
 
INVESTMENT INCOME        
Interest from investments        
Interest income:        
Non-control/Non-affiliate investments  $13,851,146   $11,236,737 
Affiliate investments   1,050,148    340,512 
Control investments   1,546,130    1,854,985 
Payment-in-kind interest income:          
Non-control/Non-affiliate investments   85,681    176,766 
Affiliate investments   -    - 
Control investments   73,221    77,675 
Total interest from investments   16,606,326    13,686,675 
Interest from cash and cash equivalents   717    522 
Management fee income   815,964    818,232 
Dividend Income*   300,129    398,616 
Structuring and advisory fee income   851,728    1,301,875 
Other income*   104,268    610,070 
Total investment income   18,679,132    16,815,990 
           
OPERATING EXPENSES          
Interest and debt financing expenses   6,871,513    4,340,912 
Base management fees   3,802,063    2,758,908 
Incentive management fees expense (benefit)   (1,903,985)   5,262,536 
Professional fees   417,325    507,061 
Administrator expenses   750,000    693,750 
Insurance   87,310    86,318 
Directors fees and expenses   110,000    92,000 
General and administrative   667,416    490,651 
Income tax expense (benefit)   (98,732)   27,919 
Total operating expenses   10,702,910    14,260,055 
NET INVESTMENT INCOME   7,976,222    2,555,935 
           
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS          
Net realized gain (loss) from investments:          
Non-control/Non-affiliate investments   162,509    1,910,141 
Affiliate investments   -    - 
Control investments   -    - 
Net realized gain (loss) from investments   162,509    1,910,141 
Income tax (provision) benefit from realized gain on investments   69,250    - 
Net change in unrealized appreciation (depreciation) on investments:          
Non-control/Non-affiliate investments   (634,289)   5,448,887 
Affiliate investments   567,606    3,062,348 
Control investments   (9,266,766)   8,301,342 
Net change in unrealized appreciation (depreciation) on investments   (9,333,449)   16,812,577 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   (361,951)   (230,144)
Net realized and unrealized gain (loss) on investments   (9,463,641)   18,492,574 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $(1,487,419)  $21,048,509 
           
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE  $(0.12)  $1.88 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED   12,112,372    11,170,045 

 

*Certain prior period amounts have been reclassified to conform to current period presentation.

 

See accompanying notes to consolidated financial statements.

 

2

 

  

Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)

 

   For the three months ended 
   May 31,
2022
   May 31,
2021
 
INCREASE (DECREASE) FROM OPERATIONS:          
Net investment income  $7,976,222   $2,555,935 
Net realized gain from investments   162,509    1,910,141 
Realized losses on extinguishment of debt   -    - 
Income tax (provision) benefit from realized gain on investments   69,250    - 
Net change in unrealized appreciation (depreciation) on investments   (9,333,449)   16,812,577 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   (361,951)   (230,144)
Net increase (decrease) in net assets resulting from operations   (1,487,419)   21,048,509 
           
DECREASE FROM SHAREHOLDER DISTRIBUTIONS:          
Total distributions to shareholders   (6,428,817)   (4,799,405)
Net decrease in net assets from shareholder distributions   (6,428,817)   (4,799,405)
           
CAPITAL SHARE TRANSACTIONS:          
Stock dividend distribution   1,108,680    914,102 
Repurchases of common stock   (3,734,316)   (1,003,420)
Repurchase fees   (2,840)   (800)
Net increase (decrease) in net assets from capital share transactions   (2,628,476)   (90,118)
Total increase (decrease) in net assets   (10,544,712)   16,158,986 
Net assets at beginning of period   355,780,523    304,185,770 
Net assets at end of period  $345,235,811   $320,344,756 

 

See accompanying notes to consolidated financial statements.

 

3

 

 

Saratoga Investment Corp.

Consolidated Statements of Cash Flows

(unaudited)

 

   For the three months ended 
   May 31,
2022
   May 31,
2021
 
Operating activities          
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $(1,487,419)  $21,048,509 
ADJUSTMENTS TO RECONCILE NET INCREASE (DECREASE) IN NET ASSETS RESULTING          
FROM OPERATIONS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:          
Payment-in-kind and other adjustments to cost   1,322,915    (191,699)
Net accretion of discount on investments   (350,408)   (321,106)
Amortization of deferred debt financing costs   798,768    470,314 
Income tax expense (benefit)   (37,823)   27,919 
Net realized (gain) loss from investments   (162,509)   (1,910,141)
Net change in unrealized (appreciation) depreciation on investments   9,333,449    (16,812,577)
Net change in provision for deferred taxes on unrealized appreciation (depreciation) on investments   361,951    230,144 
Proceeds from sales and repayments of investments   10,088,607    14,941,409 
Purchases of investments   (97,197,844)   (119,166,038)
(Increase) decrease in operating assets:          
Interest receivable   (232,195)   (2,398,700)
Due from affiliate   (14,669)   119,000 
Management and incentive fee receivable   (228)   (818,232)
Other assets   34,771    78,581 
Increase (decrease) in operating liabilities:          
Base management and incentive fees payable   (4,309,544)   4,171,274 
Accounts payable and accrued expenses   221,783    236,250 
Current tax payable   (129,840)   - 
Interest and debt fees payable   2,327,626    (882,442)
Directors fees payable   38,566    21,500 
Excise tax payable   (630,183)   (691,672)
Due to manager   (186,057)   88,948 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   (80,210,283)   (101,758,759)
           
Financing activities          
Borrowings on debt   44,500,000    49,000,000 
Issuance of notes   97,500,000    50,000,000 
Payments of deferred debt financing costs   (4,112,912)   (2,289,179)
Payments of cash dividends   (5,320,137)   (3,885,303)
Repurchases of common stock   (3,734,316)   (1,003,420)
Repurchases fees   (2,840)   (800)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   128,829,795    91,821,298 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS   48,619,512    (9,937,461)
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, BEGINNING OF PERIOD   52,870,342    29,915,074 
CASH AND CASH EQUIVALENTS AND CASH AND CASH EQUIVALENTS, RESERVE ACCOUNTS, END OF PERIOD  $101,489,854   $19,977,613 
           
Supplemental information:          
Interest paid during the period  $3,589,281   $4,753,043 
Cash paid for taxes   374    692,740 
Supplemental non-cash information:          
Payment-in-kind interest income and other adjustments to cost   (1,322,915)   191,699 
Net accretion of discount on investments   350,408    321,106 
Amortization of deferred debt financing costs   798,768    470,314 
Stock dividend distribution   1,108,680    914,102 

 

See accompanying notes to consolidated financial statements.

 

4

 

 

Saratoga Investment Corp.

Consolidated Schedule of Investments

May 31, 2022

(unaudited)

 

Company(1)   Industry   Investment Interest Rate/
Maturity
  Original Acquisition Date   Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 
Non-control/Non-affiliate investments - 213.8% (b)                            
Targus Holdings, Inc. (h)   Consumer Products   Common Stock   12/31/2009     210,456     $ 1,589,630     $ 699,494       0.2 %
        Total Consumer Products                 1,589,630       699,494       0.2 %
Schoox, Inc. (h), (i)   Corporate Education Software   Series 1 Membership Interest   12/8/2020     1,050       475,698       3,448,050       1.0 %
        Total Corporate Education Software                 475,698       3,448,050       1.0 %
GreyHeller LLC (h)   Cyber Security   Common Stock   11/10/2021     7,857,689       1,906,275       2,374,651       0.7 %
        Total Cyber Security                 1,906,275       2,374,651       0.7 %
New England Dental Partners   Dental Practice Management   First Lien Term Loan
(3M USD LIBOR+8.00%), 9.61% Cash, 11/25/2025
  11/25/2020   $ 6,555,000       6,507,634       6,519,603       1.9 %
New England Dental Partners (j)   Dental Practice Management   Delayed Draw Term Loan
(3M USD LIBOR+8.00%), 9.61% Cash, 11/25/2025
  11/25/2020   $ 2,150,000       2,134,277       2,138,390       0.6 %
        Total Dental Practice Management                 8,641,911       8,657,993       2.5 %
PDDS Buyer, LLC (d)   Dental Practice Management Software   First Lien Term Loan
(3M USD LIBOR+5.50%), 7.11% Cash, 7/15/2024
  7/15/2019   $ 49,000,000       48,786,954       49,000,000       14.2 %
PDDS Buyer, LLC (h)   Dental Practice Management Software   Series A-1 Preferred Shares   8/10/2020     1,755,831       2,000,000       9,994,778       2.9 %
        Total Dental Practice Management Software                 50,786,954       58,994,778       17.1 %
Exigo, LLC   Direct Selling Software   First Lien Term Loan
(1M USD LIBOR+5.75%), 6.87% Cash, 3/16/2027
  3/16/2022   $ 25,000,000       24,794,011       24,750,000       7.2 %
Exigo, LLC (j)   Direct Selling Software   Delayed Draw Term Loan
(1M USD LIBOR+5.75%), 6.87% Cash, 3/16/2027
  3/16/2022   $ -       -       -       0.0 %
Exigo, LLC (j)   Direct Selling Software   Revolving Credit Facility
(1M USD LIBOR+5.75%), 6.87% Cash, 3/16/2027
  3/16/2022   $ 208,333       208,333       206,250       0.1 %
Exigo, LLC (h), (i)   Direct Selling Software   Common Units   3/16/2022     1,041,667       1,041,667       1,041,667       0.3 %
        Total Direct Selling Software                 26,044,011       25,997,917       7.6 %
C2 Educational Systems   Education Services   First Lien Term Loan
(3M USD LIBOR+8.50%), 10.11% Cash, 5/31/2023
  5/31/2017   $ 18,500,000       18,487,150       18,413,050       5.3 %
C2 Education Systems, Inc. (h)   Education Services   Series A-1 Preferred Stock   5/18/2021     3,127       499,904       611,355       0.2 %
Zollege PBC   Education Services   First Lien Term Loan
(3M USD LIBOR+5.50%), 7.11% Cash, 5/11/2026
  5/11/2021   $ 16,000,000       15,884,618       15,804,800       4.6 %
Zollege PBC (j)   Education Services   Delayed Draw Term Loan
(3M USD LIBOR+5.50%), 7.11% Cash, 5/11/2026
  5/11/2021   $ 500,000       496,063       481,700       0.1 %
Zollege PBC (h)   Education Services   Class A Units   5/11/2021     250,000       250,000       200,342       0.1 %
        Total Education Services                 35,617,735       35,511,247       10.3 %
Destiny Solutions Inc. (h), (i)   Education Software   Limited Partner Interests   5/16/2018     3,065       3,969,291       8,339,265       2.4 %
Identity Automation Systems (d)   Education Software   First Lien Term Loan
(3M USD LIBOR+9.24%), 10.99% Cash, 5/8/2024
  8/25/2014   $ 16,831,875       16,831,875       16,784,746       4.9 %
Identity Automation Systems (h)   Education Software   Common Stock Class A-2 Units   8/25/2014     232,616       232,616       544,519       0.2 %
Identity Automation Systems (h)   Education Software   Common Stock Class A-1 Units   3/6/2020     43,715       171,571       204,866       0.1 %
GoReact   Education Software   First Lien Term Loan
(3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025
  1/17/2020   $ 8,000,000       7,927,226       7,992,800       2.3 %
GoReact (j)   Education Software   Delayed Draw Term Loan
(3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025
  1/18/2022   $ 2,000,000       2,000,000       1,998,200       0.6 %
        Total Education Software                 31,132,579       35,864,396       10.5 %
TG Pressure Washing Holdings, LLC (h)   Facilities Maintenance   Preferred Equity   8/12/2019     488,148       488,148       499,634       0.1 %
        Total Facilities Maintenance                 488,148       499,634       0.1 %
Davisware, LLC   Field Service Management   First Lien Term Loan
(3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024
  9/6/2019   $ 6,000,000       5,960,141       5,954,400       1.7 %
Davisware, LLC (j)   Field Service Management   Delayed Draw Term Loan
(3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024
  9/6/2019   $ 977,790       975,859       970,359       0.3 %
        Total Field Service Management                 6,936,000       6,924,759       2.0 %
GDS Software Holdings, LLC   Financial Services   First Lien Term Loan
(3M USD LIBOR+7.00%), 8.61% Cash, 12/30/2026
  12/30/2021   $ 22,713,926       22,586,066       22,566,286       6.5 %
GDS Software Holdings, LLC (j)   Financial Services   Delayed Draw Term loan
(3M USD LIBOR+7.00%), 8.61% Cash, 12/30/2026
  12/30/2021   $ 1,500,000       1,485,719       1,490,250       0.4 %
GDS Software Holdings, LLC  (h)   Financial Services   Common Stock Class A Units   8/23/2018     250,000       250,000       503,775       0.1 %
        Total Financial Services                 24,321,785       24,560,311       7.0 %
Ascend Software, LLC   Financial Services Software   First Lien Term Loan
(3M USD LIBOR+7.50%), 9.11% Cash, 12/15/2026
  12/15/2021   $ 6,000,000       5,945,623       5,940,000       1.7 %
Ascend Software, LLC (j)   Financial Services Software   Delayed Draw Term Loan
(3M USD LIBOR+7.50%), 9.11% Cash, 12/15/2026
  12/15/2021   $ 1,300,000       1,287,170       1,287,000       0.4 %
        Total Financial Services Software                 7,232,793       7,227,000       2.1 %
Ohio Medical, LLC (h)   Healthcare Products Manufacturing   Common Stock   1/15/2016     5,000       380,353       634,183       0.2 %
        Total Healthcare Products Manufacturing                 380,353       634,183       0.2 %
Axiom Parent Holdings, LLC (h)   Healthcare Services   Common Stock Class A Units   6/19/2018   $ 400,000       400,000       1,269,248       0.4 %
Axiom Purchaser, Inc. (d)   Healthcare Services   First Lien Term Loan
(3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023
  6/19/2018   $ 7,500,000       7,484,272       7,479,750       2.2 %
Axiom Purchaser, Inc. (d)   Healthcare Services   Delayed Draw Term Loan
(3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023
  6/19/2018   $ 4,500,000       4,486,480       4,487,850       1.3 %
ComForCare Health Care (d)   Healthcare Services   First Lien Term Loan
(3M USD LIBOR+6.25%), 7.86% Cash, 1/31/2025
  1/31/2017   $ 25,000,000       24,908,782       25,000,000       7.2 %
        Total Healthcare Services                 37,279,534       38,236,848       11.1 %

  

5

 

 

Company(1)   Industry   Investment Interest Rate/
Maturity
  Original Acquisition Date   Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 
TRC HemaTerra, LLC (h)   Healthcare Software   Class D Membership Interests   4/15/2019     2,487       2,816,693       3,912,271       1.1 %
HemaTerra Holding Company, LLC (d)   Healthcare Software   First Lien Term Loan
(3M USD LIBOR+8.25%), 9.86% Cash, 1/31/2026
  4/15/2019   $ 35,910,000       35,636,083       35,550,900       10.3 %
HemaTerra Holding Company, LLC (d)   Healthcare Software   Delayed Draw Term Loan
(3M USD LIBOR+8.25%), 9.86% Cash, 1/31/2026
  4/15/2019   $ 13,965,000       13,881,774       13,825,350       4.0 %
Procurement Partners, LLC   Healthcare Software   First Lien Term Loan
(3M USD LIBOR+5.50%), 7.11% Cash, 11/12/2025
  11/12/2020   $ 35,125,000       34,848,066       34,896,688       10.1 %
Procurement Partners, LLC (j)   Healthcare Software   Delayed Draw Term Loan
(3M USD LIBOR+5.50%), 7.11% Cash, 11/12/2025
  11/12/2020   $ 1,200,000       1,188,650       1,192,200       0.3 %
Procurement Partners Holdings LLC (h)   Healthcare Software   Class A Units   11/12/2020     550,986       550,986       630,757       0.2 %
        Total Healthcare Software                 88,922,252       90,008,166       26.0 %
Roscoe Medical, Inc. (h)   Healthcare Supply   Common Stock   3/26/2014     5,081       508,077       -       0.0 %
        Total Healthcare Supply                 508,077       -       0.0 %
Book4Time, Inc. (a), (d)   Hospitality/Hotel   First Lien Term Loan
(3M USD LIBOR+8.50%), 10.25%, 12/22/2025
  12/22/2020   $ 3,136,517       3,113,515       3,103,270       0.9 %
Book4Time, Inc. (a)   Hospitality/Hotel   Delayed Draw Term Loan
(3M USD LIBOR+8.50%), 10.25%, 12/22/2025
  12/22/2020   $ 2,000,000       1,980,015       1,978,800       0.6 %
Book4Time, Inc. (a), (h), (i)   Hospitality/Hotel   Class A Preferred Shares   12/22/2020     200,000       156,826       216,744       0.1 %
Knowland Group, LLC (k)   Hospitality/Hotel   Second Lien Term Loan
(3M USD LIBOR+8.00%), 10.00% Cash/1.00% PIK, 5/9/2024
  11/9/2018   $ 15,878,989       15,878,989       10,059,339       2.9 %
Sceptre Hospitality Resources, LLC   Hospitality/Hotel   First Lien Term Loan
(3M USD LIBOR+8.00%), 9.61% Cash, 9/2/2026
  4/27/2020   $ 6,000,000       5,954,100       5,904,000       1.7 %
Sceptre Hospitality Resources, LLC (j)   Hospitality/Hotel   Delayed Draw Term Loan
(3M USD LIBOR+8.00%), 9.61% Cash, 9/2/2026
  9/2/2021   $ 750,000       742,524       738,000       0.2 %
        Total Hospitality/Hotel                 27,825,969       22,000,153       6.4 %
Granite Comfort, LP   HVAC Services and Sales   First Lien Term Loan
(3M USD LIBOR+7.00%), 8.61% Cash, 11/16/2025
  11/16/2020   $ 33,000,000       32,734,758       33,059,400       9.6 %
Granite Comfort, LP(j)   HVAC Services and Sales   Delayed Draw Term Loan
(3M USD LIBOR+7.00%), 8.61% Cash, 11/16/2025
  11/16/2020   $ 2,000,000       1,981,632       2,003,600       0.6 %
        Total HVAC Services and Sales                 34,716,390       35,063,000       10.2 %
AgencyBloc, LLC   Insurance Software   First Lien Term Loan
(3M USD BSBY+8.00%), 9.52% Cash, 10/1/2026
  10/1/2021   $ 9,000,000       8,930,595       8,862,300       2.6 %
Panther ParentCo LLC (h)   Insurance Software   Class A Units   10/1/2021     2,000,000       2,000,000       2,334,414       0.7 %
        Total Insurance Software                 10,930,595       11,196,714       3.3 %
Vector Controls Holding Co., LLC (d)   Industrial Products   First Lien Term Loan
(3M USD LIBOR+6.50%), 8.11% Cash, 3/6/2025
  3/6/2013   $ 4,746,986       4,746,986       4,705,213       1.4 %
Vector Controls Holding Co., LLC (h)   Industrial Products   Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027   5/31/2015     343       -       3,978,000       1.2 %
        Total Industrial Products                 4,746,986       8,683,213       2.6 %
LogicMonitor, Inc. (d)   IT Services   First Lien Term Loan
(3M USD LIBOR+5.00), 6.61% Cash, 5/17/2023
  3/20/2020   $ 43,000,000       42,851,422       43,000,000       12.5 %
           Total IT Services                 42,851,422       43,000,000       12.5 %
Centerbase, LLC   Legal Software   First Lien Term Loan
(Daily USD SOFR+7.75%), 8.75% Cash, 1/18/2027
  1/18/2022   $ 21,408,000       21,186,767       21,193,920       6.1 %
          Total Legal Software                 21,186,767       21,193,920       6.1 %
Madison Logic, Inc.   Marketing Orchestration Software   First Lien Term Loan
(1M USD LIBOR+5.50%), 6.62% Cash, 11/22/2026
  12/10/2021   $ 28,843,373       28,722,334       28,704,925       8.3 %
Madison Logic, Inc. (j)   Marketing Orchestration Software   Revolving Credit Facility
(1M USD LIBOR+5.50%), 6.62% Cash, 11/22/2026
  12/10/2021   $ -       -       -       0.0 %
        Total Marketing Orchestration Software                 28,722,334       28,704,925       8.3 %
inMotionNow, Inc.   Marketing Services   First Lien Term Loan
(3M USD LIBOR+7.50), 10.00% Cash, 5/15/2024
  5/15/2019   $ 12,200,000       12,148,027       12,151,200       3.5 %
inMotionNow, Inc. (d)   Marketing Services   Delayed Draw Term Loan
(3M USD LIBOR+7.50)  10.00% Cash, 5/15/2024
  5/15/2019   $ 5,000,000       4,976,703       4,980,000       1.4 %
          Total Marketing Services                 17,124,730       17,131,200       4.9 %
Chronus LLC   Mentoring Software   First Lien Term Loan
(3M USD LIBOR+5.25), 6.86% Cash, 8/26/2026
  8/26/2021   $ 15,000,000       14,870,093       14,920,500       4.3 %
Chronus LLC (h)   Mentoring Software   Series A Preferred Stock   8/26/2021     3,000       3,000,000       3,389,432       1.0 %
        Total Mentoring Software                 17,870,093       18,309,932       5.3 %

  

6

 

 

Company(1)   Industry   Investment Interest Rate/
Maturity
  Original Acquisition Date   Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 
Omatic Software, LLC   Non-profit Services   First Lien Term Loan
(3M USD LIBOR+8.00%), 9.75% Cash/1.00% PIK, 5/29/2023
  5/29/2018   $ 10,036,289       9,993,648       9,939,941       2.9 %
        Total Non-profit Services                 9,993,648       9,939,941       2.9 %
Emily Street Enterprises, L.L.C.   Office Supplies   Senior Secured Note
(3M USD LIBOR+8.50%), 10.11% Cash, 12/31/2023
  12/28/2012   $ 3,300,000       3,300,000       3,252,150       0.9 %
Emily Street Enterprises, L.L.C. (h)   Office Supplies   Warrant Membership Interests
Expires 12/28/2022
  12/28/2012     49,318       400,000       507,642       0.1 %
          Total Office Supplies                 3,700,000       3,759,792       1.0 %
Apex Holdings Software Technologies, LLC   Payroll Services   First Lien Term Loan
(3M USD LIBOR+8.00%), 9.61% Cash, 9/21/2024
  9/21/2016   $ 16,500,000       16,492,637       16,488,450       4.7 %
        Total Payroll Services                 16,492,637       16,488,450       4.7 %
Buildout, Inc.   Real Estate Services   First Lien Term Loan
(3M USD LIBOR+7.00%), 8.61% Cash, 7/9/2025
  7/9/2020   $ 14,000,000       13,904,509       13,904,800       4.0 %
Buildout, Inc.   Real Estate Services   Delayed Draw Term Loan
(3M USD LIBOR+7.00%), 8.61% Cash, 7/9/2025
  2/12/2021   $ 38,500,000       38,190,646       38,238,200       11.0 %
Buildout, Inc. (h), (i)   Real Estate Services   Limited Partner Interests   7/9/2020     1,205       1,205,308       1,256,264       0.4 %
        Total Real Estate Services                 53,300,463       53,399,264       15.4 %
LFR Chicken LLC   Restaurant   First Lien Term Loan
(1M USD LIBOR+7.00%), 8.12% Cash, 11/19/2026
  11/19/2021   $ 12,000,000       11,893,721       11,851,200       3.4 %
LFR Chicken LLC (j)   Restaurant   Delayed Draw Term Loan
(1M USD LIBOR+7.00%), 8.12% Cash, 11/19/2026
  11/19/2021   $ 9,000,000       8,912,727       8,888,400       2.6 %
LFR Chicken LLC (h)   Restaurant   Series B Preferred Units   11/19/2021     497,183       1,000,000       1,196,146       0.3 %
TMAC Acquisition Co., LLC   Restaurant   Unsecured Term Loan
8.00% PIK, 9/01/2023
  3/1/2018   $ 2,979,312       2,979,312       2,785,387       0.8 %
        Total Restaurant                 24,785,760       24,721,133       7.1 %
Pepper Palace, Inc. (d)   Specialty Food Retailer   First Lien Term Loan
(3M USD LIBOR+6.25%), 7.86% Cash, 6/30/2026
  6/30/2021   $ 33,745,000       33,458,240       28,828,353       8.3 %
Pepper Palace, Inc. (j)   Specialty Food Retailer   Delayed Draw Term Loan
(3M USD LIBOR+6.25%), 7.86% Cash, 6/30/2026
  6/30/2021   $ -       -       -       0.0 %
Pepper Palace, Inc. (j)   Specialty Food Retailer   Revolving Credit Facility
(3M USD LIBOR+6.25%), 7.86% Cash, 6/30/2026
  6/30/2021   $ -       -       -       0.0 %
Pepper Palace, Inc. (h)   Specialty Food Retailer   Membership Interest   6/30/2021     1,000,000       1,000,000       157,598       -0.1 %
          Total Specialty Food Retailer                 34,458,240       28,985,951       8.2 %
ArbiterSports, LLC (d)   Sports Management   First Lien Term Loan
(3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025
  2/21/2020   $ 26,000,000       25,864,509       25,706,200       7.3 %
ArbiterSports, LLC (d)   Sports Management   Delayed Draw Term Loan
(3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025
  2/21/2020   $ 1,000,000       1,000,000       988,700       0.3 %
        Total Sports Management                 26,864,509       26,694,900       7.6 %
Avionte Holdings, LLC (h)   Staffing Services   Class A Units   1/8/2014     100,000       100,000       2,059,840       0.6 %
        Total Staffing Services                 100,000       2,059,840       0.6 %
JDXpert   Talent Acquisition Software   First Lien Term Loan
(3M USD LIBOR+8.50%), 10.11% Cash, 5/2/2027
  5/2/2022   $ 6,000,000       5,940,044       5,940,000          
JDXpert (j)   Talent Acquisition Software   Delayed Draw Term Loan
(3M USD LIBOR+8.50%), 10.11% Cash, 5/2/2027
  5/2/2022   $ -       -       -          
Jobvite, Inc. (d)   Talent Acquisition Software   Second Lien Term Loan
(3M USD LIBOR+7.50%), 9.11% Cash, 1/6/2027
  7/6/2021   $ 20,000,000       19,847,950       19,576,000       5.7 %
        Total Talent Acquisition Software                 25,787,994       25,516,000       5.7 %
National Waste Partners (d)   Waste Services   Second Lien Term Loan
10.00% Cash, 11/13/2022
  2/13/2017   $ 9,000,000       9,000,000       8,993,700       2.6 %
        Total Waste Services                 9,000,000       8,993,700       2.6 %
Sub Total Non-control/Non-affiliate investments                     732,722,272       745,481,455       213.8 %
Affiliate investments - 16.2% (b)                                        
Artemis Wax Corp. (d), (f), (j)   Consumer Services   Delayed Draw Term Loan
(1M USD LIBOR+9.00%), 11.00% Cash, 5/20/2026
  5/20/2021   $ 30,000,000       29,741,794       29,949,000       8.7 %
Artemis Wax Corp. (f)   Consumer Services   Delayed Draw Term Loan
(1M USD LIBOR+6.50%), 8.50% Cash, 5/20/2026
  5/19/2022   $ 6,000,000       5,940,132       5,989,800       1.7 %
Artemis Wax Corp. (f), (h)   Consumer Services   Series B-1 Preferred Stock   5/20/2021     934,463       1,500,000       2,837,765       0.8 %
Artemis Wax Corp. (f), (h)   Consumer Services   Series C Preferred Stock   5/20/2021     5,745       5,745,485       5,745,481       1.7 %
          Total Consumer Services                 42,927,411       44,522,046       12.9 %

  

7

 

   

Company(1)   Industry   Investment Interest Rate/
Maturity
  Original Acquisition Date   Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 
Axero Holdings, LLC (f)   Employee Collaboration Software   First Lien Term Loan
(3M USD LIBOR+10.00%), 11.61% Cash, 6/30/2026
  6/30/2021   $ 5,500,000       5,452,434       5,513,200       1.6 %
Axero Holdings, LLC (f), (j)   Employee Collaboration Software   Delayed Draw Term Loan
(3M USD LIBOR+10.00%), 11.61% Cash, 6/30/2026
  6/30/2021   $ 1,100,000       1,089,030       1,102,640       0.3 %
Axero Holdings, LLC (f), (j)   Employee Collaboration Software   Revolving Credit Facility
(3M USD LIBOR+10.00%), 11.61% Cash, 6/30/2026
  2/3/2022   $ -       -       -       0.0 %
Axero Holdings, LLC (f), (h)   Employee Collaboration Software   Series A Preferred Units   6/30/2021     2,000,000       2,000,000       2,275,000       0.6 %
Axero Holdings, LLC (f), (h)   Employee Collaboration Software   Series B Preferred Units   6/30/2021     2,000,000       2,000,000       2,632,792       0.8 %
          Total Employee Collaboration Software                 10,541,464       11,523,632       3.3 %
Sub Total Affiliate investments                     53,468,875       56,045,678       16.2 %
Control investments - 26.8% (b)                                        
Netreo Holdings, LLC (g)   IT Services   First Lien Term Loan
(3M USD LIBOR +8.00%), 9.61% Cash
12/31/2025
  7/3/2018   $ 5,466,933       5,444,758       5,463,653       1.5 %
Netreo Holdings, LLC (d), (g), (j)   IT Services   Delayed Draw Term Loan
(3M USD LIBOR +8.00%), 9.61% Cash,
12/31/2025
  5/26/2020   $ 16,019,435       15,968,598       16,009,823       4.6 %
Netreo Holdings, LLC (g), (h)   IT Services   Common Stock Class A Unit   7/3/2018     4,600,677       8,344,500       18,270,011       5.3 %
          Total IT Services                 29,757,856       39,743,487       11.4 %
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)   Structured Finance Securities   Other/Structured Finance Securities
5.15%, 4/20/2033
  1/22/2008   $ 111,000,000       30,973,564       24,117,794       7.0 %
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-2-R-3 Note (a), (g)   Structured Finance Securities   Other/Structured Finance Securities
(3M USD LIBOR+10.00%), 11.61%, 4/20/2033
  8/9/2021   $ 9,375,000       9,375,000       9,375,000       2.7 %
        Total Structured Finance Securities                 40,348,564       33,492,794       9.7 %
Saratoga Senior Loan Fund I JV, LLC (a), (g), (j)   Investment Fund   Unsecured Loan
10.00%, 6/15/2023
  2/17/2022   $ 13,125,000       13,125,000       13,125,000       3.8 %
Saratoga Senior Loan Fund I JV, LLC (a), (g)   Investment Fund   Membership Interest   2/17/2022     13,125,000       13,125,000       6,644,732       1.9 %
        Total Investment Fund                 26,250,000       19,769,732       5.7 %
Sub Total Control investments                     96,356,420       93,006,013       26.8 %
TOTAL INVESTMENTS - 256.8% (b)                   $ 882,547,567     $ 894,533,146       256.8 %

 

   Number of Shares   Cost   Fair Value   % of
Net Assets
 
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 29.4% (b)                
U.S. Bank Money Market (l)   101,489,854   $101,489,854   $101,489,854    29.4%
Total cash and cash equivalents and cash and cash equivalents, reserve accounts   101,489,854   $101,489,854   $101,489,854    29.4%

  

(1)Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and are restricted securities.

 

8

 

 

(a)Represents an investment that is not a “qualifying asset” under Section 55(a) of the Investment Company Act of 1940, as amended (the 1940 Act”). As of May 31, 2022, non-qualifying assets represent 5.8% of the Company’s portfolio at fair value. As a BDC, the Company generally has to invest at least 70% of its total assets in qualifying assets.

 

(b)Percentages are based on net assets of $345,235,811 as of May 31, 2022.

 

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

 

(d)These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 8 to the consolidated financial statements).

 

(e)This investment does not have a stated interest rate that is payable thereon. As a result, the 5.15% 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 1940 Act, this portfolio company is an “affiliate” as we own between 5.0% and 25.0% of the outstanding voting securities. Transactions during the quarter ended May 31, 2022 in which the issuer was an affiliate are as follows:

 

Company  Purchases   Sales   Total Interest
from
Investments
   Management
Fee Income
   Net Realized
Gain (Loss) from
Investments
   Net Change in
Unrealized
Appreciation
(Depreciation)
 
Artemis Wax Corp.  $5,940,000   $-   $880,798   $      -   $    -   $134,348 
Axero Holdings, LLC   1,089,000    -    169,350    -    -    433,258 
Total  $7,029,000   $-   $1,050,148   $-   $-   $567,606 

 

(g)As defined in the 1940 Act, we “control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the quarter ended May 31, 2022 in which the issuer was both an affiliate and a portfolio company that we control are as follows:

 

Company  Purchases   Sales   Total Interest
from
Investments
   Management
Fee Income
   Net Realized
Gain (Loss) from
Investments
   Net Change in
Unrealized
Appreciation
(Depreciation)
 
Netreo Holdings, LLC  $2,475,000   $-   $444,031   $-   $       -   $(657,884)
Saratoga Investment Corp. CLO 2013-1, Ltd.   -    -    592,681    815,964    -    (3,237,550)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-2-R-3 Note   -    -    254,514    -    -    - 
Saratoga Senior Loan Fund I JV, LLC   -    -    328,125    -    -    - 
Saratoga Senior Loan Fund I JV, LLC   -    -    -    -    -    (5,371,332)
Total  $2,475,000   $-   $1,619,351   $815,964   $-   $(9,266,766)

 

(h)Non-income producing at May 31, 2022.

 

(i)Includes securities issued by an affiliate of the company.

 

(j)All or a portion of this investment has an unfunded commitment as of May 31, 2022. (See Note 9 to the consolidated financial statements).

 

(k)As of May 31, 2022, there were no investments on non-accrual status. (See Note 2 to the consolidated financial statements).

 

(l)Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s consolidated statements of assets and liabilities as of May 31, 2022.

  

BSBY - Bloomberg Short-Term Bank Yield

LIBOR - London Interbank Offered Rate

SOFR - Secured Overnight Financing Rate

  

3M USD BSBY - The 3 month USD BSBY rate as of May 31, 2022 was 1.56%. 

1M USD LIBOR - The 1 month USD LIBOR rate as of May 31, 2022 was 1.12%.

3M USD LIBOR - The 3 month USD LIBOR rate as of May 31, 2022 was 1.63%.

Daily USD SOFR - The daily USD SOFR rate as of May 31, 2022 was 0.79%

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

  

See accompanying notes to consolidated financial statements.

 

9

 

 

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2022

 

Company(1)  Industry  Investment Interest
Rate/Maturity
  Original
Acquisition
Date
  Principal/
Number of
Shares
   Cost   Fair Value (c)   % of
Net Assets
 
Non-control/Non-affiliate investments - 187.4% (b)                   
Targus Holdings, Inc. (h)  Consumer Products  Common Stock  12/31/2009   210,456   $1,589,630   $692,535    0.2%
      Total Consumer Products           1,589,630    692,535    0.2%
Schoox, Inc. (h), (i)  Corporate Education Software  Series 1 Membership Interest  12/8/2020   1,050    475,698    3,305,839    0.9%
      Total Corporate Education Software           475,698    3,305,839    0.9%
GreyHeller LLC (h)  Cyber Security  Common Stock  11/10/2021   6,742,392    1,635,704    1,635,704    0.5%
      Total Cyber Security           1,635,704    1,635,704    0.5%
New England Dental Partners  Dental Practice Management  First Lien Term Loan
(3M USD LIBOR+8.00%), 8.50% Cash, 11/25/2025
  11/25/2020  $6,555,000    6,502,672    6,404,891    1.8%
New England Dental Partners (j)  Dental Practice Management  Delayed Draw Term Loan
(3M USD LIBOR+8.00%), 8.50% Cash, 11/25/2025
  11/25/2020  $2,150,000    2,132,639    1,997,715    0.6%
      Total Dental Practice Management           8,635,311    8,402,606    2.4%
PDDS Buyer, LLC (d)  Dental Practice Management Software  First Lien Term Loan
(3M USD LIBOR+5.50%), 6.00% Cash, 7/15/2024
  7/15/2019  $28,000,000    27,943,852    27,938,400    7.9%
PDDS Buyer, LLC (h)  Dental Practice Management Software  Series A-1 Preferred Shares  8/10/2020   1,755,831    2,000,000    7,099,940    2.0%
      Total Dental Practice Management Software        29,943,852    35,038,340    9.9%
C2 Educational Systems  Education Services  First Lien Term Loan
(3M USD LIBOR+8.50%), 10.00% Cash, 5/31/2023
  5/31/2017  $18,500,000    18,484,747    18,220,650    5.1%
C2 Education Systems, Inc. (h)  Education Services  Series A-1 Preferred Stock  5/18/2021   3,127    499,904    599,296    0.2%
Zollege PBC  Education Services  First Lien Term Loan
(3M USD LIBOR+5.50%), 6.50% Cash, 5/11/2026
  5/11/2021  $16,000,000    15,877,908    15,794,300    4.4%
Zollege PBC (j)  Education Services  Delayed Draw Term Loan
(3M USD LIBOR+5.50%), 6.50% Cash, 5/11/2026
  5/11/2021  $500,000    495,811    493,950    0.1%
Zollege PBC (h)  Education Services  Class A Units  5/11/2021   250,000    250,000    201,218    0.1%
      Total Education Services           35,608,370    35,309,414    9.9%
Destiny Solutions Inc. (h), (i)  Education Software  Limited Partner Interests  5/16/2018   3,065    3,969,291    7,632,061    2.1%
Identity Automation Systems (d)  Education Software  First Lien Term Loan
(3M USD LIBOR+9.24%), 10.99% Cash, 5/8/2024
  8/25/2014  $16,941,250    16,941,250    16,941,250    4.8%
Identity Automation Systems (h)  Education Software  Common Stock Class A-2 Units  8/25/2014   232,616    232,616    801,923    0.2%
Identity Automation Systems (h)  Education Software  Common Stock Class A-1 Units  3/6/2020   43,715    171,571    200,820    0.1%
GoReact  Education Software  First Lien Term Loan
(3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025
  1/17/2020  $8,000,000    7,920,033    8,080,000    2.3%
GoReact (j)  Education Software  Delayed Draw Term Loan
(3M USD LIBOR+7.50%), 9.50% Cash, 1/17/2025
  1/18/2022  $-    -    -    0.0%
      Total Education Software           29,234,761    33,656,054    9.5%
TG Pressure Washing Holdings, LLC (h)  Facilities Maintenance  Preferred Equity  8/12/2019   488,148    488,148    482,036    0.1%
      Total Facilities Maintenance           488,148    482,036    0.1%
Davisware, LLC  Field Service Management  First Lien Term Loan
(3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024
  9/6/2019  $6,000,000    5,954,705    6,003,000    1.7%
Davisware, LLC (j)  Field Service Management  Delayed Draw Term Loan
(3M USD LIBOR+7.00%), 9.00% Cash, 7/31/2024
  9/6/2019  $977,790    975,504    978,279    0.3%
      Total Field Service Management           6,930,209    6,981,279    2.0%
GDS Software Holdings, LLC  Financial Services  First Lien Term Loan
(3M USD LIBOR+7.00%), 8.00% Cash, 12/30/2026
  12/30/2021  $22,713,926    22,579,864    22,570,829    6.3%
GDS Software Holdings, LLC (j)  Financial Services  Delayed Draw Term loan
(3M USD LIBOR+7.00%), 8.00% Cash, 12/30/2026
  12/18/2021  $500,000    495,031    496,850    0.1%
GDS Software Holdings, LLC  (h)  Financial Services  Common Stock Class A Units  8/23/2018   250,000    250,000    472,009    0.1%
      Total Financial Services           23,324,895    23,539,688    6.5%
Ascend Software, LLC  Financial Services Software  First Lien Term Loan
(3M USD LIBOR+7.50%), 8.50% Cash, 12/15/2026
  12/15/2021  $6,000,000    5,942,482    5,940,000    1.7%
Ascend Software, LLC (j)  Financial Services Software  Delayed Draw Term Loan
(3M USD LIBOR+7.50%), 8.50% Cash, 12/15/2026
  12/15/2021  $-    -    -    0.0%
      Total Financial Services Software           5,942,482    5,940,000    1.7%
Ohio Medical, LLC (h)  Healthcare Products Manufacturing  Common Stock  1/15/2016   5,000    380,353    714,271    0.2%
      Total Healthcare Products Manufacturing           380,353    714,271    0.2%

 

10

 

 

Company(1)  Industry  Investment Interest
Rate/Maturity
  Original
Acquisition
Date
  Principal/
Number of
Shares
   Cost   Fair Value (c)   % of
Net Assets
 
Axiom Parent Holdings, LLC (h)  Healthcare Services  Common Stock Class A Units  6/19/2018   400,000    400,000    1,032,934    0.3%
Axiom Purchaser, Inc. (d)  Healthcare Services  First Lien Term Loan
(3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023
  6/19/2018  $10,000,000    9,974,217    10,013,000    2.8%
Axiom Purchaser, Inc. (d)  Healthcare Services  Delayed Draw Term Loan
(3M USD LIBOR+6.00%), 7.75% Cash, 6/19/2023
  6/19/2018  $6,000,000    5,977,846    6,007,800    1.7%
ComForCare Health Care (d)  Healthcare Services  First Lien Term Loan
(3M USD LIBOR+7.25%), 8.25% Cash, 1/31/2025
  1/31/2017  $25,000,000    24,903,581    25,000,000    7.0%
      Total Healthcare Services           41,255,644    42,053,734    11.8%
TRC HemaTerra, LLC (h)  Healthcare Software  Class D Membership Interests  4/15/2019   2,487    2,816,693    3,788,769    1.1%
HemaTerra Holding Company, LLC (d)  Healthcare Software  First Lien Term Loan
(3M USD LIBOR+8.25%), 9.25% Cash, 1/31/2026
  4/15/2019  $36,000,000    35,715,061    35,640,000    10.0%
HemaTerra Holding Company, LLC (d)  Healthcare Software  Delayed Draw Term Loan
(3M USD LIBOR+8.25%), 9.25% Cash, 1/31/2026
  4/15/2019  $14,000,000    13,912,744    13,860,000    3.9%
Procurement Partners, LLC  Healthcare Software  First Lien Term Loan
(3M USD LIBOR+5.50%), 6.50% Cash, 11/12/2025
  11/12/2020  $35,125,000    34,827,633    34,998,550    9.8%
Procurement Partners, LLC (j)  Healthcare Software  Delayed Draw Term Loan
(3M USD LIBOR+5.50%), 6.50% Cash, 11/12/2025
  11/12/2020  $1,200,000    1,188,047    1,195,680    0.3%
Procurement Partners Holdings LLC (h)  Healthcare Software  Class A Units  11/12/2020   550,986    550,986    643,044    0.2%
      Total Healthcare Software           89,011,164    90,126,043    25.3%
Roscoe Medical, Inc. (h)  Healthcare Supply  Common Stock  3/26/2014   5,081    508,077    52,853    0.0%
Roscoe Medical, Inc.  Healthcare Supply  Second Lien Term Loan
11.25% Cash, 3/31/2022
  3/26/2014  $5,141,413    5,141,413    5,141,413    1.4%
      Total Healthcare Supply           5,649,490    5,194,266    1.4%
Book4Time, Inc. (a), (d)  Hospitality/Hotel  First Lien Term Loan
(3M USD LIBOR+8.50%), 10.25%, 12/22/2025
  12/22/2020  $3,136,517    3,111,278    3,112,052    0.9%
Book4Time, Inc. (a), (j)  Hospitality/Hotel  Delayed Draw Term Loan
(3M USD LIBOR+8.50%), 10.25%, 12/22/2025
  12/22/2020  $-    -    -    0.0%
Book4Time, Inc. (a), (h), (i)  Hospitality/Hotel  Class A Preferred Shares  12/22/2020  $200,000    156,826    198,638    0.1%
Knowland Group, LLC  Hospitality/Hotel  Second Lien Term Loan
(3M USD LIBOR+8.00%), 10.00% Cash/1.00% PIK, 5/9/2024
  11/9/2018  $15,878,989    15,878,989    10,592,873    3.0%
Sceptre Hospitality Resources, LLC  Hospitality/Hotel  First Lien Term Loan
(1M USD LIBOR+8.00%), 9.00% Cash, 9/2/2026
  4/27/2020  $6,000,000    5,952,460    6,021,000    1.7%
Sceptre Hospitality Resources, LLC (j)  Hospitality/Hotel  Delayed Draw Term Loan
(1M USD LIBOR+8.00%), 9.00% Cash, 9/2/2026
  9/2/2021  $-    -    -    0.0%
      Total Hospitality/Hotel           25,099,553    19,924,563    5.7%
Granite Comfort, LP  HVAC Services and Sales  First Lien Term Loan
(1M USD LIBOR+8.00%), 9.00% Cash, 11/16/2025
  11/16/2020  $28,000,000    27,764,146    27,977,600    7.9%
Granite Comfort, LP(j)  HVAC Services and Sales  Delayed Draw Term Loan
(1M USD LIBOR+8.00%), 9.00% Cash, 11/16/2025
  11/16/2020  $2,000,000    1,980,805    1,998,400    0.6%
      Total HVAC Services and Sales           29,744,951    29,976,000    8.5%
AgencyBloc, LLC  Insurance Software  First Lien Term Loan
(3M USD BSBY+8.00%), 9.00% Cash, 10/1/2026
  10/1/2021  $9,000,000    8,925,938    8,920,800    2.5%
Panther ParentCo LLC (h)  Insurance Software  Class A Units  10/1/2021   2,000,000    2,000,000    2,000,000    0.6%
      Total Insurance Software           10,925,938    10,920,800    3.1%
Vector Controls Holding Co., LLC (d)  Industrial Products  First Lien Term Loan
(3M USD LIBOR+6.50%), 8.00% Cash, 3/6/2025
  3/6/2013  $5,008,186    5,008,186    5,008,186    1.4%
Vector Controls Holding Co., LLC (h)  Industrial Products  Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027  5/31/2015   343    -    3,418,993    1.0%
      Total Industrial Products           5,008,186    8,427,179    2.4%
LogicMonitor, Inc. (d)  IT Services  First Lien Term Loan
(3M USD LIBOR+5.00), 6.00% Cash, 5/17/2023
  3/20/2020  $43,000,000    42,806,801    43,000,000    12.1%
      Total IT Services           42,806,801    43,000,000    12.1%
Centerbase, LLC  Legal Software  First Lien Term Loan
(Daily USD SOFR+7.50%), 8.50% Cash, 1/18/2027
  1/18/2022  $7,500,000    7,409,860    7,425,000    2.1%
      Total Legal Software           7,409,860    7,425,000    2.1%
Madison Logic, Inc.  Marketing Orchestration Software  First Lien Term Loan
(1M USD LIBOR+5.75%), 6.75% Cash, 11/22/2026
  12/10/2021  $28,915,663    28,782,977    28,776,867    8.1%

 

11

 

 

Company(1)  Industry  Investment Interest
Rate/Maturity
  Original
Acquisition
Date
  Principal/
Number of
Shares
   Cost   Fair Value (c)   % of
Net Assets
 
Madison Logic, Inc. (j)  Marketing Orchestration Software  Revolving Credit Facility
(1M USD LIBOR+5.75%), 6.75% Cash, 11/22/2026
  12/10/2021  $-    -    -    0.0%
      Total Marketing Orchestration Software           28,782,977    28,776,867    8.1%
inMotionNow, Inc.  Marketing Services  First Lien Term Loan
(3M USD LIBOR+7.50), 10.00% Cash, 5/15/2024
  5/15/2019  $12,200,000    12,139,533    12,290,280    3.5%
inMotionNow, Inc. (d)  Marketing Services  Delayed Draw Term Loan
(3M USD LIBOR+7.50)  10.00% Cash, 5/15/2024
  5/15/2019  $5,000,000    4,972,992    5,037,000    1.4%
      Total Marketing Services           17,112,525    17,327,280    4.9%
Chronus LLC  Mentoring Software  First Lien Term Loan
(3M USD LIBOR+5.25), 6.25% Cash, 8/26/2026
  8/26/2021  $15,000,000    14,861,338    14,938,500    4.2%
Chronus LLC (h)  Mentoring Software  Series A Preferred Stock  8/26/2021   3,000    3,000,000    3,382,625    1.0%
      Total Mentoring Software           17,861,338    18,321,125    5.2%
Omatic Software, LLC  Non-profit Services  First Lien Term Loan
(3M USD LIBOR+8.00%), 9.75% Cash/1.00% PIK, 5/29/2023
  5/29/2018  $10,010,685    9,955,082    10,038,714    2.8%
      Total Non-profit Services           9,955,082    10,038,714    2.8%
Emily Street Enterprises, L.L.C.  Office Supplies  Senior Secured Note
(3M USD LIBOR+8.50%), 10.00% Cash, 12/31/2023
  12/28/2012  $3,300,000    3,300,000    3,278,880    0.9%
Emily Street Enterprises, L.L.C. (h)  Office Supplies  Warrant Membership Interests
Expires 12/28/2022
  12/28/2012   49,318    400,000    446,927    0.1%
      Total Office Supplies           3,700,000    3,725,807    1.0%
Apex Holdings Software Technologies, LLC  Payroll Services  First Lien Term Loan
(3M USD LIBOR+8.00%), 9.00% Cash, 9/21/2024
  9/21/2016  $17,000,000    16,990,006    17,000,000    4.7%
      Total Payroll Services           16,990,006    17,000,000    4.7%
Buildout, Inc.  Real Estate Services  First Lien Term Loan
(3M USD LIBOR+7.00%), 8.00% Cash, 7/9/2025
  7/9/2020  $14,000,000    13,897,546    13,904,800    3.9%
Buildout, Inc.  Real Estate Services  Delayed Draw Term Loan
(3M USD LIBOR+7.00%), 8.00% Cash, 7/9/2025
  2/12/2021  $38,500,000    38,173,998    38,238,200    10.6%
Buildout, Inc. (h), (i)  Real Estate Services  Limited Partner Interests  7/9/2020   1,205    1,205,308    1,363,014    0.4%
      Total Real Estate Services           53,276,852    53,506,014    14.9%
LFR Chicken LLC  Restaurant  First Lien Term Loan
(1M USD LIBOR+7.00%), 8.00% Cash, 11/19/2026
  11/19/2021  $12,000,000    11,886,588    11,880,000    3.3%
LFR Chicken LLC (j)  Restaurant  Delayed Draw Term Loan
(1M USD LIBOR+7.00%), 8.00% Cash, 11/19/2026
  11/19/2021  $-    -    -    0.0%
LFR Chicken LLC (h)  Restaurant  Series B Preferred Units  11/19/2021   497,183    1,000,000    999,984    0.3%
TMAC Acquisition Co., LLC  Restaurant  Unsecured Term Loan
8.00% PIK, 9/01/2023
  3/1/2018  $2,979,312    2,979,312    2,805,541    0.8%
      Total Restaurant           15,865,900    15,685,525    4.4%
Pepper Palace, Inc. (d)  Specialty Food Retailer  First Lien Term Loan
(3M USD LIBOR+6.25%), 7.25% Cash, 6/30/2026
  6/30/2021  $33,830,000    33,531,592    33,261,656    9.2%
Pepper Palace, Inc. (j)  Specialty Food Retailer  Delayed Draw Term Loan
(3M USD LIBOR+6.25%), 7.25% Cash, 6/30/2026
  6/30/2021  $-    -    (33,600)   0.0%
Pepper Palace, Inc. (j)  Specialty Food Retailer  Revolving Credit Facility
(3M USD LIBOR+6.25%), 7.25% Cash, 6/30/2026
  6/30/2021  $-    -    (42,000)   0.0%
Pepper Palace, Inc. (h)  Specialty Food Retailer  Membership Interest  6/30/2021   1,000,000    1,000,000    827,050    0.1%
      Total Specialty Food Retailer           34,531,592    34,013,106    9.3%
ArbiterSports, LLC (d)  Sports Management  First Lien Term Loan
(3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025
  2/21/2020  $26,000,000    25,846,091    25,667,199    7.1%

 

12

 

 

Company(1)  Industry  Investment Interest
Rate/Maturity
  Original
Acquisition
Date
  Principal/
Number of
Shares
   Cost   Fair Value (c)   % of
Net Assets
 
ArbiterSports, LLC (d)  Sports Management  Delayed Draw Term Loan
(3M USD LIBOR+6.50%), 8.25% Cash, 2/21/2025
  2/21/2020  $1,000,000    999,997    987,200    0.3%
      Total Sports Management           26,846,088    26,654,399    7.4%
Avionte Holdings, LLC (h)  Staffing Services  Class A Units  1/8/2014   100,000    100,000    1,912,328    0.5%
      Total Staffing Services           100,000    1,912,328    0.5%
Jobvite, Inc. (d)  Talent Acquisition Software  Second Lien Term Loan
(3M USD LIBOR+7.50%), 8.50% Cash, 1/6/2027
  7/6/2021  $20,000,000    19,841,684    19,652,000    5.5%
      Total Talent Acquisition Software           19,841,684    19,652,000    5.5%
National Waste Partners (d)  Waste Services  Second Lien Term Loan
10.00% Cash, 11/13/2022
  2/13/2017  $9,000,000    9,000,000.0    9,000,000.0    2.5%
      Total Waste Services           9,000,000    9,000,000    2.5%
Sub Total Non-control/Non-affiliate investments           654,965,044    668,358,516    187.4%
Affiliate investments - 13.5% (b)                       
Artemis Wax Corp. (f), (j)  Consumer Services  Delayed Draw Term Loan
(1M USD LIBOR+9.00%), 11.00% Cash, 5/20/2026
  5/20/2021  $30,000,000    29,727,282    30,000,000    8.4%
Artemis Wax Corp. (f), (h)  Consumer Services  Series B-1 Preferred Stock  5/20/2021   934,463    1,500,000    2,687,573    0.8%
Artemis Wax Corp. (f), (h)  Consumer Services  Series C Preferred Stock  5/20/2021   5,547    5,546,609    5,546,605    1.6%
      Total Consumer Services           36,773,891    38,234,178    10.8%
Axero Holdings, LLC (f)  Employee Collaboration Software  First Lien Term Loan
(3M USD LIBOR+10.00%), 11.00% Cash, 6/30/2026
  6/30/2021  $5,500,000    5,451,036    5,482,950    1.5%
Axero Holdings, LLC (f), (j)  Employee Collaboration Software  Delayed Draw Term Loan
(3M USD LIBOR+10.00%), 11.00% Cash, 6/30/2026
  6/30/2021  $-    -    -    0.0%
Axero Holdings, LLC (f), (j)  Employee Collaboration Software  Revolving Credit Facility
(3M USD LIBOR+10.00%), 11.00% Cash, 6/30/2026
  2/3/2022  $-    -    -    0.0%
Axero Holdings, LLC (f), (h)  Employee Collaboration Software  Series A Preferred Units  6/30/2021   2,000,000    2,000,000    2,198,000    0.5%
Axero Holdings, LLC (f), (h)  Employee Collaboration Software  Series B Preferred Units  6/30/2021   2,000,000    2,000,000    2,318,996    0.7%
      Total Employee Collaboration Software           9,451,036    9,999,946    2.7%
Sub Total Affiliate investments           46,224,927    48,234,124    13.5%
Control investments - 28.3% (b)                       
Netreo Holdings, LLC (g)  IT Services  First Lien Term Loan
(3M USD LIBOR +8.00%), 9.00% Cash
12/31/2025
  7/3/2018  $5,432,440    5,409,201    5,421,575    1.4%
Netreo Holdings, LLC (d), (g), (j)  IT Services  Delayed Draw Term Loan
(3M USD LIBOR +8.00%), 9.00% Cash,
12/31/2025
  5/26/2020  $13,433,515    13,406,530    13,406,648    3.8%
Netreo Holdings, LLC (g), (h)  IT Services  Common Stock Class A Unit  7/3/2018   4,600,677    8,344,500    18,975,523    5.3%
      Total IT Services           27,160,231    37,803,746    10.5%
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)  Structured Finance Securities  Other/Structured Finance Securities
9.27%, 4/20/2033
  1/22/2008  $111,000,000    32,273,125    28,654,905    8.1%
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-2-R-3 Note (a), (g)  Structured Finance Securities  Other/Structured Finance Securities
(3M USD LIBOR+10.00%), 10.17%, 4/20/2033
  8/9/2021  $9,375,000    9,375,000    9,375,000    2.6%
      Total Structured Finance Securities           41,648,125    38,029,905    10.7%
Saratoga Senior Loan Fund I JV, LLC (a), (g), (j)  Investment Fund  Unsecured Loan
10.00%, 6/15/2023
  2/17/2022  $13,125,000    13,125,000    13,125,000    3.7%
Saratoga Senior Loan Fund I JV, LLC (a), (g), (j)  Investment Fund  Membership Interest  2/17/2022   13,125,000    13,125,000    12,016,064    3.4%
      Total Investment Fund           26,250,000    25,141,064    7.1%
Sub Total Control investments           95,058,356    100,974,715    28.3%
TOTAL INVESTMENTS - 229.2% (b)          $796,248,327   $817,567,355    229.2%

 

13

 

 

   Number of
Shares
   Cost   Fair Value   % of
Net Assets
 
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 14.9% (b)                
U.S. Bank Money Market (k)   52,870,342   $52,870,342   $52,870,342    14.9%
Total cash and cash equivalents and cash and cash equivalents, reserve accounts   52,870,342   $52,870,342   $52,870,342    14.9%

 

(1)Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and are restricted securities.

 

(a)Represents an investment that is not a “qualifying asset” under Section 55(a) of the Investment Company Act of 1940, as amended (the 1940 Act”). As of February 28, 2022, non-qualifying assets represent 6.7% of the Company’s portfolio at fair value. As a BDC, the Company generally has to invest at least 70% of its total assets in qualifying assets.

 

(b)Percentages are based on net assets of $355,780,523 as of February 28, 2022.

 

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

 

(d)These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility (see Note 8 to the consolidated financial statements).

 

(e)This investment does not have a stated interest rate that is payable thereon. As a result, the 9.27% 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.

 

14

 

 

(f)As defined in the 1940 Act, this portfolio company is an “affiliate” as we own between 5.0% and 25.0% of the outstanding voting securities. GreyHeller, LLC is no longer an affiliate as of February 28, 2022. Transactions during the year ended February 28, 2022 in which the issuer was an affiliate are as follows:

 

Company  Purchases   Sales   Total Interest from Investments   Management Fee Income   Net Realized Gain (Loss) from Investments   Net Change in Unrealized Appreciation (Depreciation) 
Artemis Wax Corp.  $36,200,000   $-   $1,919,100   $                 -   $-   $1,460,287 
Axero Holdings, LLC   9,445,000    -    416,092    -    -    548,910 
GreyHeller, LLC   8,910,000    (26,428,457)   973,278    -    7,328,457    (3,102,569)
Top Gun   -    -    -    -    -    1,066,536 
Total  $54,555,000   $(26,428,457)  $3,308,471   $-   $7,328,457   $(26,836)

 

(g)As defined in the 1940 Act, we “control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended February 28, 2022 in which the issuer was both an affiliate and a portfolio company that we control are as follows:

 

Company  Purchases   Sales   Total Interest from Investments   Management Fee Income   Net Realized
Gain (Loss) from Investments
   Net Change in Unrealized Appreciation (Depreciation) 
Netreo Holdings, LLC  $17,074,500   $-   $1,814,735   $-   $-   $5,055,909 
Saratoga Investment Corp. CLO 2013-1, Ltd.   -    -    4,372,958    3,262,591    -    (1,221,309)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-3 Note   -    (17,875,000)   814,431    -    -    (454,025)
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-1-R-3 Note   8,500,000    (8,500,000)   4,786    -    (139,867)   - 
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-2-R-3 Note   9,375,000    -    539,564    -    -    - 
Saratoga Senior Loan Fund I JV, LLC   13,125,000    -    126,389    -    -    - 
Saratoga Senior Loan Fund I JV, LLC   13,125,000    -    -    -    -    (1,108,936)
Total  $61,199,500   $(26,375,000)  $7,672,863   $3,262,591   $(139,867)  $2,271,639 

 

(h)Non-income producing at February 28, 2022.

 

(i)Includes securities issued by an affiliate of the company.

 

(j)All or a portion of this investment has an unfunded commitment as of February 28, 2022. (See Note 9 to the consolidated financial statements).

 

(k)Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company’s consolidated statements of assets and liabilities as of February 28, 2022.

 

BSBY - Bloomberg Short-Term Bank Yield

LIBOR - London Interbank Offered Rate

SOFR - Secured Overnight Financing Rate

 

3M USD BSBY - The 3 month USD BSBY rate as of February 28, 2022 was 0.50%.

1M USD LIBOR - The 1 month USD LIBOR rate as of February 28, 2022 was 0.24%.

3M USD LIBOR - The 3 month USD LIBOR rate as of February 28, 2022 was 0.50%.

Daily USD SOFR - The daily USD SOFR rate as of February 28, 2022 was 0.05%

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

 

See accompanying notes to consolidated financial statements.

 

15

 

 

SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2022

(unaudited)

 

Note 1. Organization

 

Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company commenced operations on March 23, 2007 as GSC Investment Corp. and completed the initial public offering (“IPO”) on March 28, 2007. The Company has elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments.

 

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

 

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

 

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

 

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

 

The Company has established wholly-owned subsidiaries, SIA-Avionte, Inc., SIA-AX, Inc., SIA-GH, Inc., SIA-MAC, Inc., SIA-PEP, Inc., SIA-PP Inc., SIA-TG, Inc., SIA-TT, Inc., SIA-Vector, Inc. and SIA-VR, Inc., which are structured as Delaware entities, or tax blockers (“Taxable Blockers”), to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass through entities). In February 2022, SIA-GH, Inc., SIA-TT Inc. and SIA-VR, Inc. received an approved plan of liquidation following the sale of equity held by each of the portfolio companies. Tax Blockers are consolidated for accounting purposes, but are not consolidated for U.S. federal income tax purposes and may incur U.S. federal income tax expenses as a result of their ownership of portfolio companies.

 

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

 

The Company has formed a wholly owned special purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering into a $50.0 million senior secured revolving credit facility with Encina Lender Finance, LLC (the “Lender”), supported by loans held by SIF II and pledged to the Lender under the credit facility (the “Encina Credit Facility”). The Encina Credit Facility closed on October 4, 2021. During the first two years following the closing date, SIF II may request an increase in the commitment amount under the Encina Credit Facility to up to $75.0 million. The terms of the Encina Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of the commitment amount in effect at any time thereafter. The term of the Encina Credit Facility is three years. Advances under the Encina Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary provisions related to the selection by the Lender and the Company of a replacement benchmark rate. Concurrently with the closing of the Encina Credit Facility, all remaining amounts outstanding on the Company’s existing revolving credit facility with Madison Capital Funding, LLC were repaid and the revolving credit facility terminated.

 

On October 26, 2021, the Company and TJHA JV I LLC (“TJHA”) entered into a Limited Liability Company Agreement (the “LLC Agreement”) to co-manage Saratoga Senior Loan Fund I JV LLC (“SLF JV”). SLF JV is under joint control and is not consolidated. SLF JV is invested in Saratoga Investment Corp Senior Loan Fund 2021-1 Ltd. (“SLF 2021”), which is a wholly owned subsidiary of SLF JV. SLF 2021 was formed for the purpose of making investments in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds in the primary and secondary markets.

 

16

 

 

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 wholly owned special purpose financing subsidiaries, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC), SIF II, SBIC LP, SBIC II LP, SIA-Avionte, Inc., SIA-AX, Inc., SIA-GH, Inc., SIA-MAC, Inc., SIA-PEP, Inc., SIA-PP, Inc., SIA-TG, Inc., SIA-TT Inc. and SIA-Vector, Inc. All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

 

The Company, SBIC LP and SBIC II LP are all considered to be investment companies for financial reporting purposes and have applied the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services — Investment Companies” (“ASC 946”). There have been no changes to the Company, SBIC LP or SBIC II LP’s status as investment companies during the three months ended May 31, 2022.

 

Principles of Consolidation

 

Under the investment company rules and regulations pursuant to ASC Topic 946, the Company is precluded from consolidating any entity other than another investment company.

 

The Company has determined that SLF JV is an investment company under ASC 946; however, in accordance with such guidance the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary. SLF JV is not a wholly-owned investment company subsidiary as the Company and TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest. Furthermore, ASC 810 concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, the Company does not consolidate its investment in SLF JV.

 

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 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 investment company’s total outstanding voting shares;

 

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

 

we were to hold securities in investment companies having an aggregate value in excess of 10.0% of the value of our total assets.

 

As of May 31, 2022, the Company did not exceed any of these limitations.

 

17

 

 

Cash and Cash Equivalents, Reserve Accounts

 

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid investments in money market funds, representing payments received on secured investments or other reserved amounts associated with the revolving credit facilities. 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 revolving credit facilities.

 

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

 

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

 

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

 

   May 31, 2022   May 31, 2021 
Cash and cash equivalents  $94,939,634   $317,932 
Cash and cash equivalents, reserve accounts   6,550,220    19,659,681 
Total cash and cash equivalents and cash and cash equivalents, reserve accounts  $101,489,854   $19,977,613 

 

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 or its liabilities are to be transferred at the measurement 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.

 

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

 

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

 

An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year. We use a third-party independent valuation firm to value our investment in the subordinated notes of Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”) and the Class F-2-R-3 Notes tranche of the Saratoga CLO every quarter.

 

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

 

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

 

18

 

 

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.

 

We use multiple techniques for determining fair value based on the nature of the investment and experience with those types of investments and specific portfolio companies. The selections of the valuation techniques and the inputs and assumptions used within those techniques often require subjective judgements and estimates. These techniques include market comparables, discounted cash flows and enterprise value waterfalls. Fair value is best expressed as a range of values from which the Company determines a single best estimate. The types of inputs and assumptions that may be considered in determining the range of values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis and volatility in future interest rates, call and put features, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flows and other relevant factors.

 

The Company’s investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow valuation technique that utilizes prepayment, re-investment and loss inputs 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 flows, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The cash flows use a set of inputs including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The inputs are based on available market data and projections provided by third parties as well as management estimates. The Company uses the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flow analysis on expected future cash flows to determine the valuation for our investment in Saratoga CLO.

 

The Company’s equity investment in SLF JV is measured using the proportionate share of the net asset value, or equivalent, of SLF JV as a practical expedient for fair value, provided by ASC 820.

 

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

 

Derivative Financial Instruments

 

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

 

Investment Transactions and Income Recognition

 

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

 

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At May 31, 2022, our investment in one portfolio company was on non-accrual status with a fair value of approximately $10.1 million, or 1.12% of the fair value of our portfolio. At February 28, 2022, there were no investments on non-accrual status.

 

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

 

19

 

 

Payment-in-Kind Interest

 

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

 

Dividend Income

 

Dividend income is recorded in the consolidated statements of operations when earned.

 

Structuring and Advisory Fee Income

 

Structuring and advisory fee income represents various fee income earned and received for performing certain investment structuring and advisory activities during the closing of new investments.

 

Other Income

 

Other income includes prepayment income fees, and monitoring, administration and amendment fees and is recorded in the consolidated statements of operations when earned.

 

Deferred Debt Financing Costs

 

Financing costs incurred in connection with our credit facility and notes are deferred and amortized using the straight-line method over the life of the respective facility and debt securities. Financing costs incurred in connection with the SBA debentures of SBIC LP and SBIC II LP are deferred and amortized using the straight-line method over the life of the debentures. Any discount or premium on the issuance of any debt is amortized using the effective interest method over the life of the respective debt security.

 

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

 

Realized Loss on Extinguishment of Debt 

 

Upon the repayment of debt obligations that are deemed to be extinguishments, the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs is recognized as a loss (i.e., the unamortized debt issuance costs are recognized as a loss upon extinguishment of the underlying debt obligation).

 

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 reasonably believes 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 elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. By meeting these requirements, the Company will not be subject to corporate federal income taxes on ordinary income or capital gains timely distributed to stockholders. Therefore, no provision has been recorded for federal income taxes, except as related to the Taxable Blockers and long-term capital gains, when applicable.

 

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90% 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% on undistributed income if it does not distribute at least (1) 98% of its net ordinary income in any calendar year, (2) 98.2% of its capital gain net income for each one-year period ending on October 31 and (3) any net ordinary income and capital gain net income that it recognized for preceding years, but were not distributed during such year, and on which the Company paid no U.S federal income tax.

 

20

 

 

Depending on the level of investment company taxable income earned in a tax year and the amount of net capital gains recognized in such tax year, the Company may choose to carry forward investment company taxable income and net capital gains in excess of current year dividend distributions into the next tax year and pay the 4.0% U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual investment company taxable income will be in excess of estimated current year dividend distributions for U.S. federal excise tax purposes, the Company accrues the U.S. federal excise tax, if any, on estimated excess taxable income as taxable income is earned. For the fiscal years ended February 28, 2022, 2021 and 2020, the excise tax accrual on estimated excess table income was $0.6 million, $0.7 million and $0.0 million, respectively.

 

In accordance with U.S. Treasury regulations and published guidance issued by the Internal Revenue Service (“IRS”), a publicly offered RIC may treat a distribution of its own stock as counting toward its RIC distribution requirements if each stockholder elects to receive his, her, or its entire distribution in either cash or stock of the RIC. This published guidance indicates that the rule will apply where the aggregate amount of cash to be distributed to all stockholders is not at least 20.0% of the aggregate declared distribution. Under the published guidance, if too many stockholders elect to receive cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

 

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

 

FASB ASC Topic 740, Income Taxes, (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statements of operations. During the fiscal year ended February 28, 2022, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2019, 2020, 2021 and 2022 federal tax years for the Company remain subject to examination by the IRS. As of May 31, 2022 and February 28, 2022, 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 some or all of our net 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 by the Company to the Manager on the consolidated statements of assets and liabilities when the net realized and unrealized gain on its investments exceed all net realized and unrealized capital losses on its investments because a capital gains incentive fee would be owed to the Manager if the Company were to liquidate its investment portfolio at such time.

 

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

 

21

 

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and under the Encina Credit Facility. Many of these agreements (including the credit agreements relating to the Encina Credit Facility) include an alternative successor rate or language for choosing an alternative successor rate when LIBOR reference is no longer considered to be appropriate. With respect to other agreements, the Company intends to work with its portfolio companies to modify agreements to choose an alternative successor rate. Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The standard is effective as of March 12, 2020 through December 31, 2022. Management does not believe this optional guidance has a material impact on the Company’s consolidated financial statements and disclosures.

 

Risk Management

 

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

 

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

 

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

 

Note 3. Investments

 

As noted above, the Company values all investments in accordance with ASC 820. 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 independent 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— Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments that are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities, for which some level of recent trading activity has been observed.

 

Level 3—Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level 2 inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level 3 if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation technique. We use multiple techniques for determining fair value based on the nature of the investment and experience with those types of investments and specific portfolio companies. The selections of the valuation techniques and the inputs and assumptions used within those techniques often require subjective judgements and estimates.

 

22

 

 

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

 

The following table presents fair value measurements of investments, by major class, as of May 31, 2022 (dollars in thousands), according to the fair value hierarchy:

 

   Fair Value Measurements   Valued Using
Net Asset
     
   Level 1   Level 2   Level 3   Value*   Total 
First lien term loans   $                -   $                -   $718,090                     -   $718,090 
Second lien term loans   -    -    38,629    -    38,629 
Unsecured term loans    -    -    15,910    -    15,910 
Structured finance securities   -    -    33,493    -    33,493 
Equity interests   -    -    81,766    6,645    88,411 
Total  $-   $-   $887,888   $6,645   $894,533 

 

*The Company’s equity investment in SLF JV is measured using the proportionate share of the net asset value, or equivalent, as a practical expedient and thus has not been classified in the fair value hierarchy.

 

The following table presents fair value measurements of investments, by major class, as of February 28, 2022 (dollars in thousands), according to the fair value hierarchy:

 

   Fair Value Measurements   Valued Using
Net Asset
     
   Level 1   Level 2   Level 3   Value*   Total 
First lien term loans  $-   $-   $631,572   $-   $631,572 
Second lien term loans   -    -    44,386    -    44,386 
Unsecured loans   -    -    15,931    -    15,931 
Structured finance securities   -    -    38,030    -    38,030 
Equity interests   -    -    75,632    12,016    87,648 
Total  $-   $-   $805,551   $12,016   $817,567 

 

*The Company’s equity investment in SLF JV is measured using the proportionate share of the net asset value, or equivalent, as a practical expedient and thus has not been classified in the fair value hierarchy.

 

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, 2022 (dollars in thousands):

 

   First lien
term loans
   Second lien
term loans
   Unsecured
term loans
   Structured
finance
securities
   Equity
interests
   Total 
Balance as of February 28, 2022  $631,572   $44,386   $15,931   $38,030   $75,632   $805,551 
Payment-in-kind and other adjustments to cost   (221)   -    -    (1,300)   199    (1,322)
Net accretion of discount on investments   344    6    -    -    -    350 
Net change in unrealized appreciation (depreciation) on investments   (4,707)   (622)   (21)   (3,237)   4,623    (3,964)
Purchases   95,886    -    -    -    1,312    97,198 
Sales and repayments   (4,947)   (5,141)   -    -    -    (10,088)
Net realized gain (loss) from investments   163    -    -    -    -    163 
Balance as of May 31, 2022  $718,090   $38,629   $15,910   $33,493   $81,766   $887,888 
Net change in unrealized appreciation (depreciation) for the period relating to those Level 3 assets that were still held by the Company at the end of the period  $(4,869)  $(616)  $(20)  $(3,239)  $4,623   $(4,121)

 

23

 

 

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

 

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

 

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There were no transfers or restructurings in or out of Levels 1, 2 or 3 during the three months ended May 31, 2022.

 

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, 2021 (dollars in thousands):

 

   First lien
term loans
   Second lien
term loans
   Unsecured
term
loans
   Structured
finance
securities
   Equity
interests
   Total 
Balance as of February 28, 2021  $440,456   $24,930   $2,141   $49,779   $37,007   $554,313 
Payment-in-kind and other adjustments to cost   231    -    -    (435)   396    192 
Net accretion of discount on investments   314    7    -    -    -    321 
Net change in unrealized appreciation (depreciation) on investments   497    485    28    4,077    11,725    16,812 
Purchases   87,321    -    -    -    31,845    119,166 
Sales and repayments   (12,665)   -    -    -    (2,276)   (14,941)
Net realized gain (loss) from investments   -    -    -    -    1,910    1,910 
Balance as of May 31, 2021  $516,154   $25,422   $2,169   $53,421   $80,607   $677,773 
Net change in unrealized appreciation (depreciation) for the year relating to those Level 3 assets that were still held by the Company at the end of the period  $838   $485   $28   $4,076   $13,568   $18,995 

 

Transfers and restructurings, if any, are recognized at the beginning of the period in which they occur. There were no transfers or restructurings in or out of Levels 1, 2 or 3 during the three months ended May 31, 2021.

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of May 31, 2022 were as follows (dollars in thousands):

 

   Fair Value   Valuation
Technique
  Unobservable Input  Range  Weighted
Average*
First lien term loans  $718,090   Market Comparables  Market Yield (%)   6.6% - 12.5%     8.9%
           Revenue Multiples (x)   3.5x    3.5x
Second lien term loans   38,629   Market Comparables  Market Yield (%)   9.7% - 38.7%     17.4%
Unsecured term loans   15,910   Market Comparables  Market Yield (%)   10.0% - 26.0%     12.8%
        Collateral Value Coverage  Net Asset Value  100.0%  100.0%
Structured finance securities   33,493   Discounted Cash Flow  Discount Rate (%)   10.0% - 16.0%     14.8%
           Recovery Rate (%)   35% - 70%     70.0%
           Prepayment Rate (%)  20.0%  20.0%
Equity interests   81,766   Enterprise Value Waterfall  EBITDA Multiples (x)   4.0x - 28.6x      9.3x
           Revenue Multiples (x)   1.0x - 14.5x      7.2x
           Third-party bid  100.0%  100.0%
Total  $887,888             

 

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

 

24

 

 

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2022 were as follows (dollars in thousands):

 

   Fair Value   Valuation
Technique
  Unobservable Input  Range  Weighted
Average*
First lien term loans  $631,572   Market Comparables  Market Yield (%)  6.0% - 11.3%  8.4%
           Revenue Multiples (x)  3.5x  3.5x
Second lien term loans   44,386   Market Comparables  Market Yield (%)  8.9% - 32.9%  15.6%
           EBITDA Multiples (x)  7.5x  7.5x
Unsecured term loans   15,931   Market Comparables  Market Yield (%)  22.3%  22.3%
           Net Asset Value  100.0%  100.0%
Structured finance securities   38,030   Discounted Cash Flow  Discount Rate (%)  10.0% - 15.0%  14.2%
           Recovery Rate (%)  35.0% - 70.0%  70.0%
           Prepayment Rate (%)  20.0%  20.0%
Equity interests   75,632   Enterprise Value Waterfall  EBITDA Multiples (x)  4.0x - 14.0x  9.7x
           Revenue Multiples (x)  0.5x - 38.3x  4.6x
           Third-party bid  100.0%  100.0%
Total  $805,551             

 

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

 

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

 

The composition of our investments as of May 31, 2022 at amortized cost and fair value was as follows (dollars in thousands):

 

   Investments at
Amortized Cost
   Amortized Cost
Percentage of
Total
Portfolio
   Investments at
Fair Value
   Fair Value
Percentage of
Total Portfolio
 
First lien term loans  $722,260    81.8%  $718,090    80.3%
Second lien term loans   44,727    5.1    38,629    4.3 
Unsecured term loans   16,104    1.8    15,910    1.8 
Structured finance securities   40,349    4.6    33,493    3.7 
Equity interests   59,108    6.7    88,411    9.9 
Total  $882,548    100.0%  $894,533    100.0%

 

The composition of our investments as of February 28, 2022 at amortized cost and fair value was as follows (dollars in thousands):

 

   Investments at
Amortized Cost
   Amortized Cost
Percentage of
Total
Portfolio
   Investments at
Fair Value
   Fair Value
Percentage of
Total Portfolio
 
First lien term loans  $631,037    79.3%  $631,572    77.3%
Second lien term loans   49,862    6.3    44,386    5.4 
Unsecured term loans   16,104    2.0    15,931    1.9 
Structured finance securities   41,648    5.2    38,030    4.7 
Equity interests   57,597    7.2    87,648    10.7 
Total  $796,248    100.0%  $817,567    100.0%

 

25

 

 

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 inputs that a hypothetical market participant would use to value the security in a current hypothetical sale using a market comparables valuation technique. In applying the market comparables valuation technique, we determine the fair value based on such factors as market participant inputs 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 comparables technique is not sufficient or appropriate, we may use additional techniques such as an asset liquidation or expected recovery model.

 

For equity securities of portfolio companies and partnership interests, we determine the fair value using an enterprise value waterfall valuation technique. Under the enterprise value waterfall valuation technique, 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 techniques and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The techniques for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

 

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow valuation technique that utilizes prepayment, re-investment and loss inputs 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 flows, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The cash flows use a set of inputs including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The inputs are based on available market data and projections provided by third parties as well as management estimates. We ran Intex models based on inputs 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, 2022. The inputs at May 31, 2022 for the valuation model include:

 

Default rate: 2%

 

Recovery rate: 35% -70%

 

Discount rate: 10% – 16%

 

Prepayment rate: 20%

 

Reinvestment rate / price: L+365bps / $99.00

 

Investment Concentration

 

Set forth is a brief description of each portfolio company in which the fair value of our investment represents greater than 5% of our total assets as of May 31, 2022.

 

Hematerra Holdings Company, LLC

 

HemaTerra Holding Company, LLC (“HemaTerra”) provides SaaS-based software solutions addressing complex supply chain issues across a variety of medical environments, including blood, plasma, tissue, implants and DNA sample management, to customers in blood centers, hospitals, pharmaceuticals, and law enforcement settings.

 

Buildout, Inc.

 

Buildout, Inc. (“Buildout”) provides SaaS-based real estate marketing and customer relationship management (“CRM”) software to commercial real estate (“CRE”) brokerages. Buildout provides a suite of software solutions brokers use to manage relationships, efficiently create and distribute marketing materials over a wide variety of channels, including direct mail, multiple listing websites, brokerage website, property specific websites and manage back office functions like commission calculations and broker productivity.

 

PDDS Buyer, LLC

 

PDDS Buyer, LLC (“PDDS”) provides SaaS-based dental practice management software for individual practices and dental groups.  PDDS offers key operational tools for a dental practice, including appointment scheduling, patient and clinical data intake and management, patient communications, billing and claims management, insurance verification and key performance indicator reporting.

 

26

 

 

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

 

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

 

On December 14, 2018, the Company completed a third refinancing and upsize of the Saratoga CLO (the “2013-1 Reset CLO Notes”). The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period ending January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased its aggregate principal amount from approximately $300.0 million to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million in aggregate principal amount of the Class G-R-2 notes tranches at par, with a coupon of 3M USD LIBOR plus 8.75% and 3M USD LIBOR plus 10.00%, respectively. As part of this refinancing, the Company also redeemed our existing $4.5 million in aggregate amount of the Class F notes tranche at par.

 

On February 11, 2020, the Company entered into an unsecured loan agreement with Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (“CLO 2013-1 Warehouse 2”), a wholly owned subsidiary Saratoga CLO.

 

On February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO. This fourth Saratoga CLO refinancing,  among other things, extended the Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033. The non-call period was extended to February 2022. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million. As part of this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par. Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million of the CLO 2013-1 Warehouse 2 Loan were repaid. The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. At August 31, 2021, the outstanding receivable of $2.6 million was repaid in full.

 

On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 million.

 

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

 

For the three months ended May 31, 2022 and May 31, 2021, we accrued management fee income of $0.8 million and $0.8 million, respectively, and interest income of $0.6 million and $1.1 million, respectively, from the subordinated notes of Saratoga CLO.

 

27

 

 

As of May 31, 2022, the aggregate principal amounts of the Company’s investments in the subordinated notes and Class F-2-R-3 Notes of the Saratoga CLO was $111.0 million and $9.4 million, respectively, which had a corresponding fair value of $24.1 million and $9.4 million, respectively. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of May 31, 2022, Saratoga CLO had investments with a principal balance of $647.3 million and a weighted average spread over LIBOR of 3.7% and had debt with a principal balance of $611.0 million with a weighted average spread over LIBOR of 2.2%.  As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. As of May 31, 2022, the present value of the projected future cash flows of the subordinated notes was approximately $31.1 million, using a 16.0% discount rate. The Company’s total investment in the subordinate notes of Saratoga CLO is $57.8 million, which consists of investments of $30 million in January 2008, $13.8 million in December 2018 and $14.0 million in February 2021; to date, the Company has since received distributions of $74.8 million, management fees of $29.4 million and incentive fees of $1.2 million.

 

As of February 28, 2022, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $28.7 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. As of February 28, 2022, the fair value of its investment in the Class F-R-3 Notes was $9.4 million. As of February 28, 2022, Saratoga CLO had investments with a principal balance of $660.2 million and a weighted average spread over LIBOR of 3.7% and had debt with a principal balance of $611.0 million with a weighted average spread over LIBOR of 2.2%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. As of February 28, 2022, the present value of the projected future cash flows of the subordinated notes was approximately $27.9 million, using a 15.0% discount rate.

 

Below is certain financial information from the separate financial statements of Saratoga CLO as of May 31, 2022 (unaudited) and February 28, 2022 and for the three months ended May 31, 2022 (unaudited) and May 31, 2021 (unaudited).

 

28

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

 

   May 31,
2022
   February 28,
2022
 
   (unaudited)     
ASSETS        
Investments at fair value        
Loans at fair value (amortized cost of $639,686,300 and $653,022,265, respectively)  $600,926,629   $638,929,660 
Equities at fair value  (amortized cost of $0 and $0, respectively)   -    33,690 
Total investments at fair value (amortized cost of $639,686,300 and $653,022,265, respectively)   600,926,629    638,963,350 
Cash and cash equivalents   8,708,940    6,171,793 
Receivable from open trades   13,192,335    9,152,660 
Interest receivable (net of reserve of $0 and $0, respectively)   2,291,057    2,062,856 
Prepaid expenses and other assets   79,738    100,067 
Total assets  $625,198,699   $656,450,726 
           
LIABILITIES          
Interest payable  $2,299,914   $1,659,776 
Payable from open trades   10,680,082    18,794,627 
Accrued base management fee   72,555    72,510 
Accrued subordinated management fee   290,222    290,040 
Accounts payable and accrued expenses   58,615    58,716 
Saratoga Investment Corp. CLO 2013-1, Ltd. Notes:          
Class A-1-R-3 Senior Secured Floating Rate Notes   357,500,000    357,500,000 
Class A-2-R-3 Senior Secured Floating Rate Notes   65,000,000    65,000,000 
Class B-FL-R-3 Senior Secured Floating Rate Notes   60,500,000    60,500,000 
Class B-FXD-R-3 Senior Secured Fixed Rate Notes   11,000,000    11,000,000 
Class C-FL-R-3 Deferrable Mezzanine Floating Rate Notes   26,000,000    26,000,000 
Class C-FXD-R-3 Deferrable Mezzanine Fixed Rate Notes   6,500,000    6,500,000 
Class D-R-3 Deferrable Mezzanine Floating Rate Notes   39,000,000    39,000,000 
Discount on Class D-R-3 Notes   (262,235)   (268,301)
Class E-R-3 Deferrable Mezzanine Floating Rate Notes   27,625,000    27,625,000 
Discount on Class E-R-3 Notes   (2,724,326)   (2,787,348)
Class F-1-R-3 Notes Deferrable Junior Floating Rate Notes   8,500,000    8,500,000 
Class F-2-R-3 Notes Deferrable Junior Floating Rate Notes   9,375,000    9,375,000 
Deferred debt financing costs   (2,039,465)   (2,086,928)
Subordinated Notes   111,000,000    111,000,000 
Discount on Subordinated Notes   (43,088,124)   (44,084,883)
Total liabilities  $687,287,238   $693,648,209 
           
Commitments and contingencies          
           
NET ASSETS          
Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 common shares issued and outstanding, respectively  $250   $250 
Total distributable earnings (loss)   (62,088,789)   (37,197,733)
Total net assets   (62,088,539)   (37,197,483)
Total liabilities and net assets  $625,198,699   $656,450,726 

 

See accompanying notes to financial statements.

 

29

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

(unaudited)

 

   For the three months ended 
   May 31,
2022
   May 31,
2021
 
INVESTMENT INCOME        
Total interest from investments   8,145,447    7,747,740 
Interest from cash and cash equivalents   -    572 
Other income   103,496    317,057 
Total investment income   8,248,943    8,065,369 
           
EXPENSES          
Interest and debt financing expenses   7,532,364    4,836,177 
Base management fee   163,193    163,646 
Subordinated management fee   652,771    654,586 
Professional fees   81,164    35,666 
Trustee expenses   68,086    - 
Other expense   38,089    59,783 
Total expenses   8,535,667    5,749,858 
NET INVESTMENT INCOME (LOSS)   (286,724)   2,315,511 
           
REALIZED AND UNREALIZED LOSS ON INVESTMENTS          
Net realized gain (loss) from investments   77,657    (565,094)
Net change in unrealized appreciation (depreciation) on investments   (24,681,988)   (481,097)
Net realized and unrealized gain (loss) on investments   (24,604,331)   (1,046,191)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $(24,891,055)  $1,269,320 

 

See accompanying notes to financial statements.

 

30

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd.

Schedule of Investments

May 31, 2022

(unaudited)

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
19TH HOLDINGS GOLF, LLC  Consumer goods: Durable  Term Loan  Loan   1M USD SOFR+   3.25%   0.50%   4.15%  2/7/2029  $500,000   $497,675   $470,000 
ADMI Corp.  Healthcare & Pharmaceuticals  Term Loan B  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  4/30/2025   1,925,276    1,920,809    1,822,485 
Adtalem Global Education Inc.  Services: Business  Term Loan B (02/21)  Loan   1M USD LIBOR+   4.50%   0.75%   5.43%  8/11/2028   1,033,969    1,024,867    1,004,893 
Aegis Sciences Corporation  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   5.50%   1.00%   6.90%  5/9/2025   2,589,295    2,578,245    2,521,974 
Agiliti Health Inc.  Healthcare & Pharmaceuticals  Term Loan (1/19)  Loan   1M USD LIBOR+   2.75%   0.00%   3.56%  1/4/2026   1,479,872    1,473,569    1,435,476 
Agiliti Health Inc.  Healthcare & Pharmaceuticals  Term Loan (09/20)  Loan   1M USD LIBOR+   2.75%   0.75%   3.56%  1/4/2026   285,714    283,708    276,429 
AHEAD DB Holdings, LLC  Services: Business  Term Loan (04/21)  Loan   3M USD LIBOR+   3.75%   0.75%   4.76%  10/18/2027   2,977,500    2,882,231    2,841,398 
AI Convoy (Luxembourg) S.a.r.l.  Aerospace & Defense  Term Loan B (USD)  Loan   6M USD LIBOR+   3.50%   1.00%   5.05%  1/18/2027   1,465,871    1,461,152    1,418,758 
AIS HoldCo, LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   5.00%   0.00%   6.24%  8/15/2025   4,789,642    4,678,674    4,669,901 
Alchemy Copyrights, LLC  Media: Diversified & Production  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.50%   3.80%  3/10/2028   492,516    489,734    477,740 
Alchemy US Holdco 1, LLC  Metals & Mining  Term Loan  Loan   1M USD LIBOR+   5.50%   0.00%   5.60%  10/10/2025   1,654,803    1,641,577    1,616,197 
AlixPartners, LLP  Banking, Finance, Insurance & Real Estate  Term Loan B (01/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  2/4/2028   247,500    246,999    238,080 
Alkermes, Inc.  Healthcare & Pharmaceuticals  Term Loan B (3/21)  Loan   3M USD LIBOR+   2.50%   0.50%   3.00%  3/12/2026   2,142,449    2,126,347    2,067,463 
Allen Media, LLC  Media: Diversified & Production  Term Loan (7/21)  Loan   3M USD SOFR+   5.50%   0.00%   6.30%  2/10/2027   4,428,156    4,398,416    4,187,928 
Alliant Holdings Intermediate, LLC  Banking, Finance, Insurance & Real Estate  Term Loan B4  Loan   1M USD LIBOR+   3.50%   0.50%   4.37%  11/5/2027   995,000    994,019    957,508 
Allied Universal Holdco LLC  Services: Business  Term Loan 4/21  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  5/12/2028   1,990,000    1,980,933    1,878,063 
Altisource Solutions S.a r.l.  Banking, Finance, Insurance & Real Estate  Term Loan B (03/18)  Loan   3M USD LIBOR+   4.00%   1.00%   5.01%  4/3/2024   1,223,297    1,220,514    1,038,579 
Altium Packaging LLC  Containers, Packaging & Glass  Term Loan (01/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.81%  1/29/2028   495,000    492,916    464,374 
American Greetings Corporation  Media: Advertising, Printing & Publishing  Term Loan  Loan   1M USD LIBOR+   4.50%   1.00%   5.56%  4/6/2024   3,012,861    3,011,417    2,962,637 
American Trailer World Corp  Automotive  Term Loan  Loan   1M USD SOFR+   3.50%   0.75%   4.63%  3/3/2028   1,985,000    1,979,933    1,773,161 

 

31

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
AmeriLife Holdings LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.00%   0.00%   4.80%  3/18/2027   1,971,412    1,962,517    1,886,799 
AmWINS Group, LLC  Banking, Finance, Insurance & Real Estate  Term Loan 2/21  Loan   1M USD LIBOR+   2.25%   0.75%   3.31%  2/17/2028   1,975,009    1,953,272    1,892,651 
Anastasia Parent LLC  Consumer goods: Non-durable  Term Loan  Loan   3M USD LIBOR+   3.75%   0.00%   4.76%  8/11/2025   965,000    962,664    800,110 
Anchor Glass Container Corporation  Containers, Packaging & Glass  Term Loan (07/17)  Loan   3M USD LIBOR+   2.75%   1.00%   3.75%  12/7/2023   473,869    473,269    391,240 
Anchor Packaging, LLC  Containers, Packaging & Glass  Term Loan B  Loan   1M USD LIBOR+   4.00%   0.00%   5.06%  7/18/2026   984,810    977,385    942,956 
ANI Pharmaceuticals, Inc.  Healthcare & Pharmaceuticals  Term Loan B  Loan   1M USD LIBOR+   6.00%   0.75%   7.06%  11/19/2027   2,992,500    2,938,549    2,877,797 
AP Core Holdings II LLC  High Tech Industries  Term Loan B1  Loan   1M USD LIBOR+   5.50%   0.75%   6.56%  9/1/2027   1,950,000    1,924,082    1,842,750 
AP Core Holdings II LLC  High Tech Industries  Term Loan B2  Loan   1M USD LIBOR+   5.50%   0.75%   6.56%  9/1/2027   500,000    493,364    476,250 
APi Group DE, Inc. (J2 Acquisition)  Services: Business  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  10/1/2026   1,928,237    1,920,979    1,879,221 
APLP Holdings Limited Partnership  Energy: Electricity  Term Loan B (3/21)  Loan   3M USD LIBOR+   3.75%   1.00%   4.76%  5/14/2027   623,805    618,576    606,650 
Apollo Commercial Real Estate Finance, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  5/15/2026   2,961,929    2,931,234    2,754,594 
Apollo Commercial Real Estate Finance, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B1 (2/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.46%  3/6/2028   990,000    981,591    920,700 
AppLovin Corporation  High Tech Industries  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  8/15/2025   987,245    987,245    966,266 
AppLovin Corporation  High Tech Industries  Term Loan (10/21)  Loan   1M USD LIBOR+   3.00%   0.50%   4.06%  10/21/2028   1,496,250    1,492,919    1,451,363 
Aramark Corporation  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  1/15/2027   2,331,250    2,271,606    2,244,807 
Aramark Corporation  Services: Consumer  Term Loan B (4/21)  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  4/1/2028   1,753,715    1,746,266    1,708,785 
ARC FALCON I INC.  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  9/23/2028   870,430    866,504    817,116 
ARC FALCON I INC. (a)  Chemicals, Plastics, & Rubber  Delayed Draw Term Loan  Loan   N/A   1.00%   0.50%   1.00%  9/29/2028   -    (578)   (7,803)
Arches Buyer Inc.  Services: Consumer  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.50%   4.31%  12/6/2027   1,484,848    1,475,790    1,393,902 
Arctic Glacier U.S.A., Inc.  Beverage, Food & Tobacco  Term Loan (3/18)  Loan   3M USD LIBOR+   3.50%   1.00%   4.51%  3/20/2024   3,350,967    3,342,566    2,884,613 
Aretec Group, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/18)  Loan   1M USD LIBOR+   4.25%   0.00%   5.31%  10/1/2025   1,931,174    1,926,851    1,850,064 
ASP BLADE HOLDINGS, INC.  Capital Equipment  Term Loan  Loan   1M USD LIBOR+   4.00%   0.50%   5.06%  10/7/2028   99,765    99,314    94,590 
Asplundh Tree Expert, LLC  Services: Business  Term Loan 2/21  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  9/7/2027   985,000    981,250    957,302 

 

32

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
AssuredPartners Capital, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B (2/20)  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  2/12/2027   997,449    993,807    947,936 
Assuredpartners Inc.  Banking, Finance, Insurance & Real Estate  Incremental Term Loan (7/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  2/12/2027   992,500    992,500    944,860 
Assuredpartners Inc.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD SOFR+   3.50%   0.50%   4.53%  2/12/2027   500,000    498,884    476,250 
ASTRO ONE ACQUISITION CORPORATION  Consumer goods: Durable  Term Loan  Loan   3M USD LIBOR+   5.50%   0.75%   6.51%  9/15/2028   2,992,500    2,965,557    2,657,340 
Asurion, LLC  Banking, Finance, Insurance & Real Estate  Term Loan B6  Loan   1M USD LIBOR+   3.13%   0.00%   4.18%  11/3/2023   266,824    266,195    259,964 
Asurion, LLC  Banking, Finance, Insurance & Real Estate  Term Loan B8  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  12/18/2026   2,987,548    2,977,414    2,820,993 
ATHENAHEALTH GROUP INC.  Healthcare & Pharmaceuticals  Term Loan B (2/22)  Loan   1M USD SOFR+   3.50%   0.50%   4.36%  2/15/2029   1,282,609    1,276,706    1,221,685 
ATHENAHEALTH GROUP INC. (a)  Healthcare & Pharmaceuticals  Delayed Draw Term Loan (02/22)  Loan   N/A   1.75%   0.50%   1.75%  2/15/2029   -    -    (10,326)
Avast Software S.R.O. (Sybil Finance)  High Tech Industries  Term Loan (Sybil Software)  Loan   3M USD LIBOR+   1.75%   0.00%   2.76%  3/22/2028   1,900,000    1,895,949    1,858,447 
Avaya, Inc.  Telecommunications  Term Loan B1  Loan   1M USD LIBOR+   4.25%   0.00%   5.12%  12/15/2027   1,755,766    1,747,878    1,300,514 
Avaya, Inc.  Telecommunications  Term Loan B-2 (2/21)  Loan   1M USD LIBOR+   4.00%   0.00%   4.87%  12/15/2027   1,000,000    1,000,000    740,560 
Avison Young (Canada) Inc  Services: Business  Term Loan  Loan   1M USD LIBOR+   5.75%   0.00%   6.81%  1/31/2026   3,397,217    3,363,977    3,374,557 
Avolon TLB Borrower 1 (US) LLC  Capital Equipment  Term Loan B3  Loan   1M USD LIBOR+   1.75%   0.75%   2.68%  1/15/2025   1,000,000    908,241    965,830 
Avolon TLB Borrower 1 (US) LLC  Capital Equipment  Term Loan B5 (7/21)  Loan   1M USD LIBOR+   2.25%   0.50%   3.18%  12/1/2027   493,750    489,804    476,316 
AZURITY PHARMACEUTICALS, INC.  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD LIBOR+   6.00%   0.75%   7.06%  9/20/2027   493,750    480,112    461,656 
B&G Foods, Inc.  Beverage, Food & Tobacco  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  10/10/2026   706,458    702,014    681,294 
B.C. Unlimited Liability Co (Burger King)  Beverage, Food & Tobacco  Term Loan B4  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  11/19/2026   1,466,250    1,436,896    1,408,524 
BAKELITE UK INTERMEDIATE LTD.  Chemicals, Plastics, & Rubber  Term Loan  Loan   3M USD SOFR+   4.00%   0.50%   4.50%  2/1/2029   1,000,000    995,000    937,500 
Baldwin Risk Partners, LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   3.50%   0.50%   4.34%  10/14/2027   1,235,663    1,223,441    1,187,781 
Bausch & Lomb T/L  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD SOFR+   3.25%   0.50%   4.15%  5/5/2027   -    155    - 
Bausch Health Companies Inc.  Healthcare & Pharmaceuticals  Term Loan B (1/22)  Loan   1M USD SOFR+   5.25%   0.50%   6.14%  2/1/2027   2,000,000    1,795,000    1,825,000 

 

33

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Belfor Holdings Inc.  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  4/6/2026   247,456    247,273    240,032 
Belfor Holdings Inc.  Services: Consumer  Term Loan B-2 (3/22)  Loan   1M USD SOFR+   4.25%   0.50%   5.28%  4/6/2026   1,000,000    970,903    980,000 
Belron Finance US LLC  Automotive  Term Loan B (3/21)  Loan   3M USD LIBOR+   2.50%   0.50%   3.88%  4/13/2028   1,980,000    1,963,157    1,931,490 
Bengal Debt Merger Sub LLC  Beverage, Food & Tobacco  Term Loan  Loan   3M USD SOFR+   3.25%   0.50%   4.00%  1/24/2029   2,000,000    1,998,460    1,955,000 
Blackstone Mortgage Trust, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  4/23/2026   987,342    981,727    949,082 
Blackstone Mortgage Trust, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (6/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.81%  4/23/2026   1,476,325    1,467,779    1,422,808 
Blucora, Inc.  Services: Consumer  Term Loan (11/17)  Loan   3M USD LIBOR+   4.00%   1.00%   5.01%  5/22/2024   2,441,367    2,436,766    2,392,539 
Blue Tree Holdings, Inc.  Chemicals, Plastics, & Rubber  Term Loan (2/21)  Loan   3M USD LIBOR+   2.50%   0.00%   3.50%  3/4/2028   990,000    987,965    950,400 
Bombardier Recreational Products, Inc.  Consumer goods: Durable  Term Loan (1/20)  Loan   1M USD LIBOR+   2.00%   0.00%   3.06%  5/24/2027   1,466,299    1,458,278    1,397,017 
Boxer Parent Company, Inc.  High Tech Industries  Term Loan (2/21)  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  10/2/2025   521,333    521,333    499,504 
Bracket Intermediate Holding Corp  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   4.25%   0.00%   5.22%  9/5/2025   965,000    962,678    935,085 
BrightSpring Health Services (Phoenix Guarantor)  Healthcare & Pharmaceuticals  Term Loan B-3  Loan   1M USD LIBOR+   3.50%   0.00%   4.46%  3/5/2026   990,000    990,000    953,578 
BroadStreet Partners, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B3  Loan   1M USD LIBOR+   3.00%   0.00%   4.06%  1/22/2027   2,971,527    2,966,501    2,818,404 
Brookfield WEC Holdings Inc.  Energy: Electricity  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.81%  8/1/2025   1,473,807    1,475,784    1,406,822 
Buckeye Partners, L.P.  Utilities: Oil & Gas  Term Loan (1/21)  Loan   1M USD LIBOR+   2.25%   0.00%   3.05%  11/1/2026   1,965,113    1,953,829    1,904,941 
BW Gas & Convenience Holdings LLC  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  3/31/2028   2,481,250    2,460,142    2,382,000 
Callaway Golf Company  Retail  Term Loan B  Loan   1M USD LIBOR+   4.50%   0.00%   5.56%  1/4/2026   680,625    672,685    673,179 
CareerBuilder, LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   6.75%   1.00%   7.76%  7/31/2023   5,393,388    5,272,206    3,651,755 
CareStream Health, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   6M USD LIBOR+   6.75%   1.00%   7.75%  5/8/2023   -    9,083    - 
Casa Systems, Inc  Telecommunications  Term Loan  Loan   1M USD LIBOR+   4.00%   1.00%   5.06%  12/20/2023   1,387,375    1,384,009    1,304,133 
Castle US Holding Corporation  Media: Advertising, Printing & Publishing  Term Loan B (USD)  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  1/27/2027   1,975,943    1,965,275    1,753,650 

 

34

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
CBI BUYER, INC.  Consumer goods: Durable  Term Loan  Loan   3M USD LIBOR+   3.25%   0.50%   4.26%  1/6/2028   992,500    990,636    884,982 
CCC Intelligent Solutions Inc.  Services: Business  Term Loan B  Loan   3M USD LIBOR+   2.25%   0.50%   3.26%  9/16/2028   249,375    248,828    240,647 
CCI Buyer, Inc  Telecommunications  Term Loan  Loan   3M USD SOFR+   4.00%   0.75%   4.75%  12/17/2027   247,500    245,469    236,981 
CCRR Parent, Inc.  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD LIBOR+   3.75%   0.75%   4.76%  3/5/2028   990,000    985,726    944,628 
CCS-CMGC Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   5.50%   0.00%   7.07%  9/25/2025   2,418,750    2,406,358    2,358,281 
Cengage Learning, Inc.  Media: Advertising, Printing & Publishing  Term Loan B (6/21)  Loan   6M USD LIBOR+   4.75%   1.00%   5.75%  7/14/2026   2,985,000    2,960,281    2,841,093 
CENTURI GROUP, INC.  Construction & Building  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.50%   3.56%  8/27/2028   885,830    877,884    850,397 
CenturyLink, Inc.  Telecommunications  Term Loan B (1/20)  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  3/15/2027   3,919,874    3,914,794    3,674,882 
Chemours Company, (The)  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  4/3/2025   913,004    880,469    880,884 
Churchill Downs Incorporated  Hotel, Gaming & Leisure  Term Loan B1 (3/21)  Loan   1M USD LIBOR+   2.00%   0.00%   3.06%  3/17/2028   495,000    493,964    472,314 
CIMPRESS PUBLIC LIMITED COMPANY  Media: Advertising, Printing & Publishing  USD Term Loan  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  5/17/2028   992,500    983,847    942,260 
CITADEL SECURITIES LP  Banking, Finance, Insurance & Real Estate  Term Loan B (01/21)  Loan   1M USD SOFR+   2.50%   0.00%   3.65%  2/2/2028   4,950,000    4,945,532    4,782,938 
Clarios Global LP  Automotive  Term Loan B1  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  4/30/2026   1,267,812    1,259,924    1,215,717 
Claros Mortgage Trust, Inc  Banking, Finance, Insurance & Real Estate  Term Loan B-1 (11/21)  Loan   1M USD SOFR+   4.50%   0.50%   5.39%  8/9/2026   3,466,022    3,445,212    3,344,712 
CLYDESDALE ACQUISITION HOLDINGS, INC.  Containers, Packaging & Glass  Term Loan B  Loan   1M USD SOFR+   4.25%   0.50%   5.38%  4/13/2029   1,500,000    1,463,084    1,425,000 
Cole Haan  Consumer goods: Non-durable  Term Loan B  Loan   3M USD LIBOR+   5.50%   0.00%   7.07%  2/7/2025   912,500    907,512    732,281 
Columbus McKinnon Corporation  Capital Equipment  Term Loan (4/21)  Loan   3M USD LIBOR+   2.75%   0.50%   3.81%  5/14/2028   477,687    476,684    466,342 
Conduent, Inc.  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.50%   5.31%  10/16/2028   997,500    988,351    986,697 
Connect Finco SARL  Telecommunications  Term Loan (1/21)  Loan   1M USD LIBOR+   3.50%   1.00%   4.56%  12/11/2026   2,940,000    2,822,180    2,815,050 
Consolidated Communications, Inc.  Telecommunications  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.75%   4.56%  10/2/2027   2,714,005    2,495,563    2,405,287 
CORAL-US CO-BORROWER LLC  Telecommunications  Term Loan B-5  Loan   1M USD LIBOR+   2.25%   0.00%   3.12%  1/31/2028   4,000,000    3,987,396    3,857,000 
Corelogic, Inc.  Services: Business  Term Loan (4/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  6/2/2028   2,487,500    2,476,537    2,276,063 
Cortes NP Acquisition Corp (Vertiv)  Capital Equipment  Term Loan 2/21  Loan   1M USD LIBOR+   2.75%   0.00%   3.55%  3/2/2027   1,975,000    1,975,000    1,870,898 
COWEN INC.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   6M USD LIBOR+   3.25%   0.00%   4.63%  3/24/2028   3,957,462    3,935,528    3,764,536 
CROCS INC  Consumer goods: Durable  Term Loan  Loan   6M USD SOFR+   3.50%   0.50%   4.45%  2/20/2029   3,000,000    2,880,321    2,799,990 

 

 

35

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Cross Financial Corp  Banking, Finance, Insurance & Real Estate  Term Loan B (3/21)  Loan   6M USD LIBOR+   4.00%   0.75%   4.81%  9/15/2027   496,250    495,764    478,469 
Crown Subsea Communications Holding, Inc.  Construction & Building  Term Loan (4/21)  Loan   1M USD LIBOR+   4.75%   0.75%   5.55%  4/27/2027   2,404,110    2,383,901    2,331,986 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B (03/17)  Loan   1M USD LIBOR+   2.25%   0.00%   3.12%  7/15/2025   1,928,934    1,915,989    1,830,076 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   3.12%  1/15/2026   483,750    483,173    457,144 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B-5  Loan   1M USD LIBOR+   2.50%   0.00%   3.37%  4/15/2027   488,750    488,750    459,425 
CTS Midco, LLC  High Tech Industries  Term Loan B  Loan   3M USD LIBOR+   6.00%   1.00%   7.24%  11/2/2027   1,975,000    1,927,236    1,866,375 
Daseke Inc  Transportation: Cargo  Term Loan 2/21  Loan   1M USD LIBOR+   4.00%   0.75%   4.93%  3/5/2028   1,485,000    1,478,801    1,410,750 
DCert Buyer, Inc.  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   4.00%   0.00%   5.06%  10/16/2026   1,481,108    1,481,108    1,442,851 
Dealer Tire, LLC  Automotive  Term Loan B-1  Loan   1M USD LIBOR+   4.25%   0.00%   5.31%  12/12/2025   2,932,500    2,928,270    2,856,754 
Delek US Holdings, Inc.  Utilities: Oil & Gas  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   3.27%  3/31/2025   6,299,031    6,261,515    6,054,943 
DexKo Global, Inc. (Dragon Merger)  Automotive  Term Loan (9/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.76%  10/4/2028   840,000    836,252    784,216 
DexKo Global, Inc. (Dragon Merger)  Automotive  Delayed Draw Term Loan (9/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.76%  10/4/2028   160,000    160,000    149,374 
Diamond Sports Group, LLC  Media: Broadcasting & Subscription  1st Priority Term Loan  Loan   1M USD SOFR+   8.00%   1.00%   9.00%  5/25/2026   344,930    335,006    346,310 
Diamond Sports Group, LLC  Media: Broadcasting & Subscription  Second Lien Term Loan  Loan   1M USD SOFR+   3.25%   0.00%   4.09%  8/24/2026   3,400,447    2,977,892    1,019,284 
DIRECTV FINANCING, LLC  Media: Broadcasting & Subscription  Term Loan  Loan   1M USD LIBOR+   5.00%   0.75%   6.06%  8/2/2027   3,820,000    3,786,881    3,689,471 
Dispatch Acquisition Holdings, LLC  Environmental Industries  Term Loan B (3/21)  Loan   3M USD LIBOR+   4.25%   0.75%   5.26%  3/25/2028   496,250    492,089    465,234 
DOMTAR CORPORATION  Forest Products & Paper  Term Loan 9/21  Loan   1M USD LIBOR+   5.50%   0.75%   6.34%  11/30/2028   838,544    830,684    822,821 
DRI HOLDING INC.  Media: Advertising, Printing & Publishing  Term Loan (12/21)  Loan   1M USD LIBOR+   5.25%   0.50%   6.31%  12/15/2028   3,000,000    2,971,916    2,670,000 
DRW Holdings, LLC  Banking, Finance, Insurance & Real Estate  Term Loan (2/21)  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  3/1/2028   6,435,000    6,392,510    6,180,303 
DTZ U.S. Borrower, LLC  Construction & Building  Term Loan  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  8/21/2025   3,866,149    3,856,616    3,747,768 
EAB Global, Inc.  Services: Business  Term Loan (08/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  8/16/2028   997,500    992,998    954,278 
Echo Global Logistics, Inc.  Services: Business  Term Loan  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  11/23/2028   2,000,000    1,995,567    1,911,000 
Edelman Financial Group Inc., The  Banking, Finance, Insurance & Real Estate  Term Loan B (3/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.56%  4/7/2028   2,205,211    2,197,882    2,115,437 

 

 

36

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Electrical Components Inter., Inc.  Capital Equipment  Term Loan (6/18)  Loan   1M USD LIBOR+   4.25%   0.00%   5.31%  6/26/2025   1,898,938    1,898,938    1,771,956 
ELECTRON BIDCO INC.  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD LIBOR+   3.00%   0.50%   4.06%  11/1/2028   500,000    497,725    481,500 
ELO Touch Solutions, Inc.  Media: Diversified & Production  Term Loan (12/18)  Loan   1M USD LIBOR+   6.50%   0.00%   7.56%  12/14/2025   2,216,935    2,149,539    2,172,597 
Embecta Corp  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD SOFR+   3.00%   0.50%   3.65%  3/30/2029   619,565    615,936    603,110 
Endo Luxembourg Finance Company I S.a.r.l.  Healthcare & Pharmaceuticals  Term Loan (3/21)  Loan   1M USD LIBOR+   5.00%   0.75%   6.06%  3/27/2028   2,341,198    2,333,356    1,816,137 
Endure Digital, Inc.  High Tech Industries  Term Loan B  Loan   6M USD LIBOR+   3.50%   0.75%   4.25%  2/10/2028   2,481,250    2,471,151    2,332,375 
Enterprise Merger Sub Inc.  Healthcare & Pharmaceuticals  Term Loan B (06/18)  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  10/10/2025   4,837,500    4,833,031    1,871,871 
Equiniti Group PLC  Services: Business  Term Loan B  Loan   3M USD LIBOR+   4.50%   0.50%   5.20%  12/11/2028   997,500    988,297    980,044 
EyeCare Partners, LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   3.75%   0.00%   4.76%  2/18/2027   1,962,990    1,962,809    1,826,287 
Finco I LLC  Banking, Finance, Insurance & Real Estate  Term Loan B (9/20)  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  6/27/2025   3,784,373    3,778,126    3,677,465 
First Brands Group, LLC  Automotive  1st Lien Term Loan (3/21)  Loan   3M USD SOFR+   5.00%   1.00%   6.29%  3/30/2027   4,950,000    4,882,008    4,733,438 
First Eagle Investment Management  Banking, Finance, Insurance & Real Estate  Refinancing Term Loan  Loan   3M USD LIBOR+   2.50%   0.00%   3.51%  2/1/2027   5,187,015    5,172,281    4,954,430 
First Student Bidco Inc.  Transportation: Consumer  Term Loan B  Loan   3M USD LIBOR+   3.00%   0.50%   3.98%  7/21/2028   728,566    723,885    684,590 
First Student Bidco Inc.  Transportation: Consumer  Term Loan C  Loan   3M USD LIBOR+   3.00%   0.50%   3.98%  7/21/2028   269,608    267,875    253,334 
Fitness International, LLC (LA Fitness)  Services: Consumer  Term Loan B (4/18)  Loan   3M USD LIBOR+   3.25%   1.00%   4.26%  4/18/2025   1,330,058    1,326,038    1,178,551 
FOCUS FINANCIAL PARTNERS, LLC  Banking, Finance, Insurance & Real Estate  Term Loan (1/20)  Loan   1M USD LIBOR+   2.00%   0.00%   3.06%  7/3/2024   493,590    493,241    480,273 
Franchise Group, Inc.  Services: Consumer  First Out Term Loan  Loan   3M USD LIBOR+   4.75%   0.75%   5.50%  3/10/2026   815,445    809,108    794,040 
Franklin Square Holdings, L.P.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  8/1/2025   4,342,484    4,325,024    4,179,641 
Froneri International (R&R Ice Cream)  Beverage, Food & Tobacco  Term Loan B-2  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  1/29/2027   1,965,000    1,961,840    1,881,488 
Garrett LX III S.a r.l.  Automotive  Dollar Term Loan  Loan   3M USD LIBOR+   3.25%   0.50%   4.49%  4/30/2028   1,492,500    1,486,138    1,406,681 
Gemini HDPE LLC  Chemicals, Plastics, & Rubber  Term Loan B (12/20)  Loan   3M USD LIBOR+   3.00%   0.50%   4.24%  12/31/2027   2,367,296    2,351,709    2,305,652 
General Nutrition Centers, Inc.  Retail  Second Lien Term Loan  Loan   1M USD LIBOR+   6.00%   0.00%   6.87%  10/7/2026   367,030    367,030    336,445 
Genesee & Wyoming, Inc.  Transportation: Cargo  Term Loan (11/19)  Loan   3M USD LIBOR+   2.00%   0.00%   3.01%  12/30/2026   1,470,000    1,465,169    1,433,618 

 

37

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
GEO Group, Inc., The  Banking, Finance, Insurance & Real Estate  Term Loan Refinance  Loan   1M USD LIBOR+   2.00%   0.75%   2.75%  3/22/2024   -    191,515    - 
GGP Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD SOFR+   2.50%   0.00%   3.63%  8/27/2025   3,116,200    2,672,664    2,977,280 
Global Business Travel (GBT) III Inc.  Hotel, Gaming & Leisure  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  8/13/2025   4,342,500    4,341,943    4,067,489 
Global Tel*Link Corporation  Telecommunications  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.00%   5.31%  11/29/2025   4,935,901    4,757,245    4,641,277 
Go Daddy Operating Company, LLC  High Tech Industries  Term Loan 2/21  Loan   1M USD LIBOR+   2.00%   0.00%   3.06%  8/10/2027   1,974,874    1,974,874    1,927,142 
GOLDEN WEST PACKAGING GROUP LLC  Forest Products & Paper  Term Loan (11/21)  Loan   1M USD LIBOR+   5.25%   0.75%   6.31%  12/1/2027   2,000,000    1,981,697    1,920,000 
Graham Packaging Co Inc  Containers, Packaging & Glass  Term Loan (2/21)  Loan   1M USD LIBOR+   3.00%   0.75%   4.06%  8/7/2027   969,864    964,373    918,403 
Great Outdoors Group, LLC  Retail  Term Loan B2  Loan   1M USD LIBOR+   3.75%   0.75%   4.81%  3/6/2028   987,538    983,235    935,198 
Greenhill & Co., Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  4/12/2024   2,844,231    2,830,909    2,806,317 
Griffon Corporation  Consumer goods: Durable  Term Loan B  Loan   1M USD SOFR+   2.75%   0.50%   3.67%  1/24/2029   250,000    249,421    240,938 
Grosvenor Capital Management Holdings, LLLP  Banking, Finance, Insurance & Real Estate  Amendment 5 Term Loan  Loan   1M USD LIBOR+   2.50%   0.50%   3.56%  2/24/2028   3,860,991    3,858,037    3,758,443 
Harbor Freight Tools USA, Inc.  Retail  Term Loan B (06/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.81%  10/19/2027   3,464,824    3,444,560    3,195,018 
Harland Clarke Holdings Corp.  Media: Advertising, Printing & Publishing  Term Loan (08/21)  Loan   3M USD LIBOR+   7.75%   1.00%   8.76%  6/16/2026   1,242,039    1,240,375    975,000 
Helix Gen Funding, LLc  Energy: Electricity  Term Loan B (02/17)  Loan   1M USD LIBOR+   3.75%   1.00%   4.81%  6/3/2024   219,254    219,183    204,952 
Hillman Group Inc. (The) (New)  Consumer goods: Durable  Term Loan B-1 (2/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.71%  7/14/2028   3,505,591    3,498,332    3,333,221 
Hillman Group Inc. (The) (New) (a)  Consumer goods: Durable  Delayed Draw Term Loan (2/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.71%  7/14/2028   776,371    67,173    25,696 
HLF Financing SARL (Herbalife)  Consumer goods: Non-durable  Term Loan B (08/18)  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  8/18/2025   3,540,000    3,532,098    3,364,097 
Holley Purchaser, Inc  Automotive  Term Loan (11/21)  Loan   3M USD LIBOR+   3.75%   0.75%   5.21%  11/17/2028   2,132,143    2,122,638    2,042,422 
Holley Purchaser, Inc  Automotive  Delayed Draw Term Loan  Loan   3M USD LIBOR+   3.75%   0.75%   4.58%  11/17/2028   203,036    203,036    194,492 
Howden Group Holdings  Banking, Finance, Insurance & Real Estate  Term Loan (1/21)  Loan   1M USD LIBOR+   3.25%   0.75%   4.31%  11/12/2027   2,168,662    2,159,297    2,078,901 
Hudson River Trading LLC  Banking, Finance, Insurance & Real Estate  Term Loan (3/21)  Loan   1M USD SOFR+   3.00%   0.00%   4.15%  3/17/2028   5,940,000    5,889,766    5,652,920 
Idera, Inc.  High Tech Industries  Term Loan (02/21)  Loan   1M USD LIBOR+   3.75%   0.75%   4.52%  3/2/2028   4,847,837    4,837,862    4,647,864 
IMA Financial Group, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/21)  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  11/1/2028   1,995,000    1,985,976    1,907,719 
INDY US BIDCO, LLC  Services: Business  Term Loan (11/21)  Loan   1M USD LIBOR+   3.75%   0.00%   4.81%  3/6/2028   2,232,531    2,232,285    2,159,974 

 

38

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
INEOS US PETROCHEM LLC  Chemicals, Plastics, & Rubber  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.81%  1/29/2026   992,500    988,964    961,484 
Informatica Inc.  High Tech Industries  Term Loan B (10/21)  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  10/27/2028   500,000    499,475    484,165 
Ingram Micro Inc.  High Tech Industries  Term Loan  Loan   3M USD LIBOR+   3.50%   0.50%   4.51%  6/30/2028   1,488,750    1,475,493    1,460,836 
Inmar Acquisition Sub, Inc.  Services: Business  Term Loan B  Loan   3M USD LIBOR+   4.00%   1.00%   5.01%  5/1/2024   3,377,265    3,339,727    3,253,016 
Innophos, Inc.  Chemicals, Plastics, & Rubber  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  2/4/2027   490,000    488,325    480,813 
INSTANT BRANDS HOLDINGS INC.  Consumer goods: Durable  Term Loan 4/21  Loan   6M USD LIBOR+   5.00%   0.75%   7.08%  4/7/2028   4,282,942    4,262,545    3,879,617 
INSTRUCTURE HOLDINGS, INC.  High Tech Industries  Term Loan B  Loan   3M USD LIBOR+   2.75%   0.50%   3.27%  10/30/2028   500,000    498,875    486,250 
Isagenix International, LLC  Beverage, Food & Tobacco  Term Loan  Loan   3M USD LIBOR+   5.75%   1.00%   6.75%  6/14/2025   2,378,794    2,355,030    1,395,853 
Ivory Merger Sub, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   4.43%  3/14/2025   2,949,539    2,933,008    2,777,492 
J Jill Group, Inc  Retail  Priming Term Loan  Loan   3M USD LIBOR+   5.00%   1.00%   6.00%  5/8/2024   1,569,605    1,568,865    1,466,011 
Jane Street Group  Banking, Finance, Insurance & Real Estate  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  1/31/2028   3,950,000    3,945,053    3,821,625 
Journey Personal Care Corp.  Consumer goods: Non-durable  Term Loan B  Loan   3M USD LIBOR+   4.25%   0.75%   5.26%  3/1/2028   992,500    988,224    823,775 
JP Intermediate B, LLC  Consumer goods: Non-durable  Term Loan  Loan   3M USD LIBOR+   5.50%   1.00%   6.74%  11/15/2025   4,086,554    4,060,849    3,323,226 
Klockner-Pentaplast of America, Inc.  Containers, Packaging & Glass  Term Loan (1/21) (USD)  Loan   6M USD LIBOR+   4.75%   0.50%   5.55%  2/12/2026   1,485,000    1,479,368    1,315,458 
Kodiak BP, LLC  Construction & Building  Term Loan  Loan   1M USD LIBOR+   3.25%   0.75%   4.31%  3/13/2028   495,000    493,576    459,939 
KREF Holdings X LLC  Banking, Finance, Insurance & Real Estate  Term Loan (11/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.38%  9/1/2027   495,009    485,332    485,109 
Lakeland Tours, LLC  Hotel, Gaming & Leisure  Third Out PIK Term Loan  Loan   3M USD LIBOR+   1.50%   1.25%   2.75%  9/25/2025   828,458    563,842    745,613 
Lakeland Tours, LLC  Hotel, Gaming & Leisure  Holdco Fixed Term Loan  Loan   Fixed   0.00%   0.00%   13.25%  9/27/2027   928,253    297,446    631,212 

 

39

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Lealand Finance Company B.V.  Energy: Oil & Gas  Exit Term Loan  Loan   1M USD LIBOR+   1.00%   0.00%   2.06%  6/30/2025   337,326    337,326    167,819 
Learfield Communications, Inc  Media: Advertising, Printing & Publishing  Initial Term Loan (A-L Parent)  Loan   1M USD LIBOR+   3.25%   1.00%   4.31%  12/1/2023   473,750    473,248    443,994 
Lifetime Brands, Inc  Consumer goods: Non-durable  Term Loan B  Loan   1M USD LIBOR+   3.50%   1.00%   4.56%  2/28/2025   2,616,496    2,597,391    2,556,525 
LIGHTSTONE HOLDCO LLC  Energy: Electricity  Term Loan  Loan   3M USD SOFR+   5.75%   1.00%   7.02%  2/1/2027   1,242,048    1,241,321    1,127,159 
LIGHTSTONE HOLDCO LLC  Energy: Electricity  Term Loan  Loan   3M USD SOFR+   5.75%   1.00%   7.02%  2/1/2027   70,053    70,014    63,574 
Liquid Tech Solutions Holdings, LLC  Services: Business  Term Loan  Loan   12M USD LIBOR+   4.75%   0.00%   5.75%  3/17/2028   992,500    989,269    977,613 
LogMeIn, Inc.  High Tech Industries  Term Loan (8/20)  Loan   1M USD LIBOR+   4.75%   0.00%   5.68%  8/31/2027   3,950,000    3,890,732    3,397,000 
LOYALTY VENTURES INC.  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.50%   0.50%   5.56%  11/3/2027   3,277,513    3,259,370    3,048,087 
LPL Holdings, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B1  Loan   1M USD LIBOR+   1.75%   0.00%   2.55%  11/11/2026   1,217,195    1,215,295    1,186,765 
LSF11 A5 HOLDCO LLC  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD SOFR+   3.50%   0.50%   4.65%  10/16/2028   250,000    248,900    238,438 
LSF9 Atlantis Holdings, LLC (A Wireless)  Retail  Term Loan B  Loan   3M USD SOFR+   7.25%   0.75%   8.00%  3/29/2029   3,000,000    2,901,311    2,735,010 
MA FinanceCo LLC  High Tech Industries  Term Loan B4  Loan   3M USD LIBOR+   4.25%   1.00%   5.25%  6/5/2025   2,396,175    2,390,447    2,264,386 
MAGNITE, INC.  Services: Business  Term Loan  Loan   6M USD LIBOR+   5.00%   0.75%   5.81%  4/28/2028   1,985,000    1,942,739    1,915,525 
Marriott Ownership Resorts, Inc.  Hotel, Gaming & Leisure  Term Loan (11/19)  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  8/29/2025   1,317,074    1,317,074    1,275,639 
Match Group, Inc, The  Services: Consumer  Term Loan (1/20)  Loan   3M USD LIBOR+   1.75%   0.00%   3.19%  2/15/2027   250,000    249,606    240,000 
Mayfield Agency Borrower Inc. (FeeCo)  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.50%   0.00%   5.56%  2/28/2025   3,383,286    3,362,463    3,302,933 
McGraw-Hill Education, Inc.  Media: Advertising, Printing & Publishing  Term Loan (07/21)  Loan   1M USD LIBOR+   4.75%   0.50%   5.81%  7/28/2028   1,990,000    1,971,837    1,887,177 
MedAssets Software Inter Hldg, Inc.  High Tech Industries  Term Loan (11/21) (USD)  Loan   6M USD LIBOR+   4.00%   0.50%   4.50%  12/18/2028   500,000    494,646    479,375 
Mermaid Bidco Inc.  High Tech Industries  Term Loan B2  Loan   3M USD LIBOR+   3.50%   0.75%   4.79%  12/22/2027   991,259    988,348    944,175 
Messer Industries, LLC  Chemicals, Plastics, & Rubber  Term Loan B  Loan   3M USD LIBOR+   2.50%   0.00%   3.51%  3/1/2026   3,371,438    3,357,414    3,247,538 
Michaels Companies Inc  Retail  Term Loan B (Magic Mergeco)  Loan   3M USD LIBOR+   4.25%   0.75%   5.26%  4/8/2028   2,486,237    2,468,938    2,133,117 
Milk Specialties Company  Beverage, Food & Tobacco  Term Loan (6/21)  Loan   3M USD LIBOR+   4.00%   1.00%   5.01%  8/15/2025   3,792,008    3,766,790    3,728,492 
MJH Healthcare Holdings, LLC  Healthcare & Pharmaceuticals  Term Loan B (01/22)  Loan   1M USD SOFR+   3.50%   0.50%   4.46%  1/28/2029   250,000    248,853    237,500 
MKS Instruments, Inc.  High Tech Industries  Term Loan B6  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  2/2/2026   866,167    861,350    847,224 

 

40

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
MRC Global Inc.  Metals & Mining  Term Loan B2  Loan   1M USD LIBOR+   3.00%   0.00%   4.06%  9/20/2024   351,484    351,187    341,818 
MW Industries, Inc. (Helix Acquisition Holdings)  Capital Equipment  Term Loan (2019 Incremental)  Loan   3M USD LIBOR+   3.75%   0.00%   4.76%  9/30/2024   2,842,097    2,815,833    2,746,177 
NAB Holdings, LLC (North American Bancard)  Banking, Finance, Insurance & Real Estate  Term Loan (11/21)  Loan   3M USD SOFR+   3.00%   0.50%   3.80%  11/23/2028   2,992,500    2,985,727    2,838,596 
Natgasoline LLC  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  11/14/2025   3,463,328    3,441,177    3,376,745 
National Mentor Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan 2/21  Loan   3M USD LIBOR+   3.75%   0.75%   4.76%  3/2/2028   2,756,929    2,747,321    2,460,559 
National Mentor Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan C 2/21  Loan   3M USD LIBOR+   3.75%   0.75%   4.76%  3/2/2028   87,464    87,101    78,061 
Neenah, Inc.  Forest Products & Paper  Term Loan B (03/21)  Loan   1M USD LIBOR+   3.00%   0.50%   4.06%  4/6/2028   1,985,000    1,976,517    1,949,647 
NEW ERA CAP, LLC  Consumer goods: Durable  Term Loan (01/22)  Loan   6M USD LIBOR+   6.00%   0.75%   6.75%  7/13/2027   3,769,521    3,768,472    3,694,131 
Nexstar Broadcasting, Inc. (Mission Broadcasting)  Media: Broadcasting & Subscription  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   3.30%  9/18/2026   1,113,795    1,103,855    1,092,633 
Next Level Apparel, Inc.  Retail  Term Loan  Loan   3M USD WIBOR+   5.50%   1.00%   6.54%  8/9/2024   1,712,840    1,705,670    1,678,584 
NM Z Parent Inc (Zep Inc)  Chemicals, Plastics, & Rubber  Term Loan  Loan   12M USD LIBOR+   4.00%   1.00%   5.00%  8/9/2024   -    2,860    - 
NorthPole Newco S.a.r.l (b)  Aerospace & Defense  Term Loan  Loan   Prime+   7.00%   0.00%   11.00%  3/3/2025   5,348,887    5,051,888    340,992 
NortonLifeLock Inc.  High Tech Industries  Term Loan B  Loan   3M USD SOFR+   2.00%   0.50%   2.50%  1/28/2029   1,500,000    1,492,500    1,447,500 
Novae LLC  Automotive  Term Loan B  Loan   1M USD SOFR+   5.00%   0.75%   5.87%  12/22/2028   1,555,556    1,540,962    1,505,000 
Novae LLC  Automotive  Delayed Draw Term Loan  Loan   1M USD SOFR+   5.00%   0.75%   5.87%  12/22/2028   444,444    444,444    430,000 
Nuvei Technologies Corp.  High Tech Industries  US Term Loan  Loan   1M USD LIBOR+   2.50%   0.50%   3.56%  9/29/2025   2,233,125    2,229,045    2,166,131 
Olaplex, Inc.  Consumer goods: Non-durable  Term Loan (2/22)  Loan   3M USD SOFR+   3.75%   0.50%   4.80%  2/23/2029   1,000,000    997,730    967,500 
Organon & Co.  Healthcare & Pharmaceuticals  Term Loan USD  Loan   3M USD LIBOR+   3.00%   0.50%   3.56%  6/2/2028   2,410,417    2,400,136    2,347,649 
Pacific Gas and Electric Company  Utilities: Electric  Term Loan  Loan   1M USD LIBOR+   3.00%   0.50%   4.06%  6/18/2025   1,476,212    1,470,887    1,427,778 
PACTIV EVERGREEN GROUP HOLDINGS INC.  Containers, Packaging & Glass  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.50%   4.56%  9/20/2028   995,000    990,570    947,121 
Padagis LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   4.75%   0.50%   5.72%  7/6/2028   941,176    932,844    907,059 
Panther Guarantor II, L.P. (Forcepoint)  High Tech Industries  Term Loan 1/21  Loan   3M USD LIBOR+   4.50%   0.50%   5.74%  1/7/2028   496,250    493,272    476,152 
Pathway Partners Vet Management Company LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   3.75%   0.00%   4.21%  3/30/2027   490,232    481,809    467,049 
PCI Gaming Authority  Hotel, Gaming & Leisure  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  5/29/2026   809,038    806,545    786,790 
PEARLS (Netherlands) Bidco B.V.  Chemicals, Plastics, & Rubber  USD Term Loan (02/22)  Loan   6M USD SOFR+   4.00%   0.50%   4.67%  2/28/2029   1,000,000    997,584    955,830 
PECF USS INTERMEDIATE HOLDING III CORPORATION  Environmental Industries  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.50%   5.31%  12/15/2028   99,750    99,548    93,812 

41

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
PEDIATRIC ASSOCIATES HOLDING COMPANY, LLC  Healthcare & Pharmaceuticals  Term Loan (12/22)  Loan   6M USD LIBOR+   3.25%   0.50%   5.08%  12/29/2028   1,302,632    1,296,533    1,239,128 
PEDIATRIC ASSOCIATES HOLDING COMPANY, LLC (a)  Healthcare & Pharmaceuticals  Delayed Draw Term Loan (12/21)  Loan   6M USD LIBOR+   3.25%   0.00%   4.92%  12/29/2028   69,079    69,079    59,457 
Penn National Gaming, Inc  Hotel, Gaming & Leisure  Term Loan B  Loan   1M USD SOFR+   2.75%   0.50%   3.78%  5/3/2029   1,000,000    995,012    980,310 
Peraton Corp.  Aerospace & Defense  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.75%   4.81%  2/1/2028   5,347,837    5,327,869    5,175,369 
PHYSICIAN PARTNERS, LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD SOFR+   4.00%   0.50%   5.13%  12/23/2028   2,000,000    1,981,110    1,903,340 
Ping Identity Corporation  High Tech Industries  Term Loan B (11/21)  Loan   1M USD SOFR+   3.75%   0.50%   4.88%  11/22/2028   1,000,000    995,353    972,500 
Pitney Bowes Inc  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.00%   0.00%   5.06%  3/17/2028   3,970,000    3,941,783    3,771,500 
Plastipak Holdings Inc.  Containers, Packaging & Glass  Term Loan B (11/21)  Loan   1M USD LIBOR+   2.50%   0.50%   3.31%  12/1/2028   1,936,176    1,927,213    1,869,011 
Playtika Holding Corp.  High Tech Industries  Term Loan B (3/21)  Loan   1M USD LIBOR+   2.75%   0.00%   3.81%  3/13/2028   4,455,000    4,446,544    4,261,965 
PMHC II, INC.  Chemicals, Plastics, & Rubber  Term Loan (02/22)  Loan   3M USD SOFR+   4.25%   0.50%   5.29%  4/21/2029   2,000,000    1,990,239    1,782,140 
PointClickCare Technologies, Inc.  High Tech Industries  Term Loan B  Loan   6M USD LIBOR+   3.00%   0.75%   3.75%  12/29/2027   495,000    493,048    473,963 
Polymer Process Holdings, Inc.  Containers, Packaging & Glass  Term Loan  Loan   1M USD LIBOR+   4.75%   0.75%   5.81%  2/12/2028   5,445,000    5,393,441    5,063,850 
Pre-Paid Legal Services, Inc.  Services: Consumer  Term Loan (12/21)  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  12/15/2028   3,000,000    2,976,390    2,883,750 
Presidio, Inc.  Services: Business  Term Loan B (1/20)  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  1/22/2027   491,250    490,551    475,692 
Prime Security Services Borrower, LLC (ADT)  Services: Consumer  Term Loan (1/21)  Loan   12M USD LIBOR+   2.75%   0.75%   3.50%  9/23/2026   3,547,342    3,546,975    3,453,586 
PRIORITY HOLDINGS, LLC  Services: Consumer  Term Loan  Loan   3M USD LIBOR+   5.75%   1.00%   7.32%  4/27/2027   2,977,500    2,951,315    2,921,672 
PriSo Acquisition Corporation  Construction & Building  Term Loan (01/21)  Loan   3M USD LIBOR+   3.25%   0.75%   4.22%  12/28/2027   494,998    492,939    453,982 
Project Leopard Holdings Inc  High Tech Industries  Term Loan  Loan   6M USD LIBOR+   4.50%   1.00%   5.50%  7/5/2024   493,750    493,167    488,566 
Prometric Inc. (Sarbacane Bidco)  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   3.00%   1.00%   4.06%  1/29/2025   480,150    479,222    455,245 
PUG LLC  Services: Consumer  Term Loan B (02/20)  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  2/12/2027   483,838    482,163    458,436 
QUEST BORROWER LIMITED  High Tech Industries  Term Loan (1/22)  Loan   3M USD SOFR+   4.25%   0.50%   5.47%  2/1/2029   2,000,000    1,981,173    1,843,340 
Rackspace Technology Global, Inc.  High Tech Industries  Term Loan (1/21)  Loan   3M USD LIBOR+   2.75%   0.75%   3.50%  2/15/2028   1,995,000    1,968,750    1,897,744 
RealPage, Inc.  High Tech Industries  Term Loan (04/21)  Loan   1M USD LIBOR+   3.25%   0.50%   4.31%  4/24/2028   995,000    992,993    952,603 
Renaissance Learning, Inc.  Services: Consumer  Term Loan (5/18)  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  5/30/2025   2,961,449    2,940,104    2,851,638 
Rent-A-Center, Inc.  Retail  Term Loan B2 (9/21)  Loan   1M USD LIBOR+   3.25%   0.50%   4.31%  2/17/2028   991,241    989,305    925,878 
Research Now Group, Inc  Media: Advertising, Printing & Publishing  Term Loan  Loan   6M USD LIBOR+   5.50%   1.00%   6.50%  12/20/2024   4,332,068    4,263,172    4,065,645 

 

42

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Resideo Funding Inc.  Services: Consumer  Term Loan (1/21)  Loan   2M USD LIBOR+   2.25%   0.50%   3.36%  2/11/2028   1,485,000    1,482,733    1,443,242 
Resolute Investment Managers (American Beacon), Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/20)  Loan   3M USD LIBOR+   4.25%   1.00%   5.26%  4/30/2024   3,073,181    3,067,499    2,911,839 
Restoration Hardware, Inc.  Retail  Term Loan (9/21)  Loan   1M USD LIBOR+   2.50%   0.50%   3.56%  10/20/2028   3,488,734    3,481,525    3,192,192 
Reynolds Consumer Products LLC  Containers, Packaging & Glass  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  1/29/2027   1,288,182    1,287,280    1,251,958 
Reynolds Group Holdings Inc.  Metals & Mining  Term Loan B2  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  2/5/2026   3,456,250    3,441,637    3,285,304 
Robertshaw US Holding Corp.  Consumer goods: Durable  Term Loan B  Loan   1M USD LIBOR+   3.50%   1.00%   4.56%  2/28/2025   960,000    959,144    777,600 
Rocket Software, Inc.  High Tech Industries  Term Loan (11/18)  Loan   1M USD LIBOR+   4.25%   0.00%   5.31%  11/28/2025   2,897,722    2,890,966    2,789,579 
Russell Investments US Inst’l Holdco, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/20)  Loan   6M USD LIBOR+   3.50%   1.00%   5.00%  6/2/2025   5,592,385    5,558,475    5,277,813 
RV Retailer LLC  Automotive  Term Loan  Loan   3M USD SOFR+   3.75%   0.75%   5.17%  2/8/2028   2,980,037    2,929,738    2,654,707 
Ryan Specialty Group LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD SOFR+   3.00%   0.75%   4.13%  9/1/2027   1,489,968    1,476,874    1,458,768 
S&S HOLDINGS LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   5.00%   0.50%   5.80%  3/10/2028   2,477,487    2,423,161    2,351,136 
Sally Holdings LLC  Retail  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  7/5/2024   745,909    744,577    726,329 
Samsonite International S.A.  Consumer goods: Non-durable  Term Loan B2  Loan   1M USD LIBOR+   3.00%   0.75%   4.06%  4/25/2025   934,981    917,510    910,437 
Schweitzer-Mauduit International, Inc.  High Tech Industries  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.75%   4.81%  4/20/2028   2,977,500    2,962,885    2,873,288 
Scientific Games Holdings LP  Hotel, Gaming & Leisure  Term Loan B  Loan   3M USD SOFR+   3.50%   0.50%   4.18%  4/4/2029   500,000    498,804    478,930 
SETANTA AIRCRAFT LEASING DAC  Aerospace & Defense  Term Loan  Loan   3M USD LIBOR+   2.00%   0.00%   3.01%  11/2/2028   1,000,000    997,767    969,750 
Signify Health, LLC  Healthcare & Pharmaceuticals  Term Loan B (6/21)  Loan   3M USD LIBOR+   3.25%   0.50%   4.26%  6/16/2028   497,500    495,314    476,356 
Sitel Worldwide Corporation  Services: Business  USD Term Loan (7/21)  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  8/28/2028   1,990,000    1,981,141    1,935,275 
SiteOne Landscape Supply, LLC  Services: Business  Term Loan (3/21)  Loan   1M USD LIBOR+   2.00%   0.50%   3.06%  3/18/2028   783,790    782,151    770,724 
SMG US Midco 2, Inc.  Services: Business  Term Loan (01/20)  Loan   1M USD LIBOR+   2.50%   0.00%   3.56%  1/23/2025   488,750    488,750    467,367 
Sotheby’s  Services: Business  Term Loan (7/21)  Loan   3M USD LIBOR+   4.50%   0.50%   5.54%  1/15/2027   3,248,290    3,201,631    3,148,145 
Sparta U.S. HoldCo LLC  Chemicals, Plastics, & Rubber  Term Loan (04/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.30%  8/2/2028   1,995,000    1,986,227    1,935,150 
Specialty Pharma III Inc.  Services: Business  Term Loan  Loan   1M USD LIBOR+   4.25%   0.75%   5.01%  3/31/2028   1,990,000    1,973,128    1,900,450 
Spectrum Brands, Inc.  Consumer goods: Durable  Term Loan (2/21)  Loan   1M USD LIBOR+   2.00%   0.50%   3.06%  3/3/2028   495,000    493,985    478,086 
Spin Holdco, Inc.  Services: Consumer  Term Loan 3/21  Loan   3M USD LIBOR+   4.00%   0.75%   4.75%  3/4/2028   2,970,000    2,955,317    2,825,747 
SRAM, LLC  Consumer goods: Durable  Term Loan (05/21)  Loan   6M USD LIBOR+   2.75%   0.50%   3.25%  5/12/2028   3,436,364    3,431,556    3,303,205 

 

43

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
SS&C Technologies, Inc.  Services: Business  Term Loan B3  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  4/16/2025   189,651    189,447    184,081 
SS&C Technologies, Inc.  Services: Business  Term Loan B4  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  4/16/2025   153,954    153,791    149,433 
SS&C Technologies, Inc.  Services: Business  Term Loan B-5  Loan   1M USD LIBOR+   1.75%   0.00%   2.81%  4/16/2025   476,310    475,764    462,392 
STANDARD INDUSTRIES INC.  Construction & Building  Term Loan B  Loan   6M USD LIBOR+   2.50%   0.50%   3.79%  9/22/2028   637,750    631,998    622,514 
Staples, Inc.  Wholesale  Term Loan (03/19)  Loan   3M USD LIBOR+   5.00%   0.00%   6.29%  4/16/2026   4,375,186    4,261,365    3,983,257 
Stars Group Inc. (The)  Hotel, Gaming & Leisure  Term Loan  Loan   3M USD LIBOR+   2.25%   0.00%   3.26%  7/21/2026   1,990,000    1,986,246    1,940,608 
Storable, Inc  High Tech Industries  Term Loan B  Loan   1M USD SOFR+   3.50%   0.50%   4.53%  4/17/2028   498,750    497,762    477,139 
Superannuation & Investments US LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  12/1/2028   997,500    988,251    958,598 
Sylvamo Corporation  Forest Products & Paper  Term Loan  Loan   1M USD LIBOR+   4.50%   0.50%   5.56%  8/18/2028   946,667    938,084    904,067 
Syncsort Incorporated  High Tech Industries  Term Loan B (10/21)  Loan   3M USD LIBOR+   4.00%   0.75%   5.18%  4/24/2028   2,488,747    2,487,629    2,370,531 
Ta TT Buyer LLC  Media: Broadcasting & Subscription  Term Loan 3/22  Loan   3M USD SOFR+   5.25%   0.50%   5.88%  4/2/2029   1,000,000    990,084    975,000 
Tenable Holdings, Inc.  Services: Business  Term Loan B (6/21)  Loan   6M USD LIBOR+   2.75%   0.50%   3.27%  7/7/2028   997,500    995,283    957,600 
Teneo Holdings LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD SOFR+   5.25%   1.00%   6.31%  7/15/2025   4,417,195    4,349,760    4,233,131 
Tenneco Inc  Capital Equipment  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.00%   4.06%  10/1/2025   1,451,250    1,444,159    1,377,788 
Ten-X, LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.00%   1.00%   5.06%  9/27/2024   1,915,000    1,913,605    1,790,525 
The Dun & Bradstreet Corporation  Services: Business  Term Loan  Loan   1M USD LIBOR+   3.25%   0.00%   4.27%  2/6/2026   997,475    996,275    965,805 
The Dun & Bradstreet Corporation  Services: Business  Term Loan B  Loan   1M USD SOFR+   3.25%   0.00%   4.23%  1/18/2029   250,000    248,238    241,875 
THE KNOT WORLDWIDE INC.  Services: Consumer  Term Loan (1/22)  Loan   1M USD SOFR+   4.50%   0.00%   5.63%  12/19/2025   4,869,796    4,864,098    4,760,226 
Thor Industries, Inc.  Automotive  USD Term Loan (3/21)  Loan   1M USD LIBOR+   3.00%   0.00%   4.06%  2/1/2026   2,249,532    2,213,935    2,203,147 
Tosca Services, LLC  Containers, Packaging & Glass  Term Loan (2/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.56%  8/18/2027   493,750    488,127    466,594 
Trans Union LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   2.25%   0.50%   3.31%  12/1/2028   868,468    866,495    845,670 
Transdigm, Inc.  Aerospace & Defense  Term Loan G (02/20)  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  8/22/2024   4,013,901    4,015,755    3,915,360 
Travel Leaders Group, LLC  Hotel, Gaming & Leisure  Term Loan B (08/18)  Loan   1M USD LIBOR+   4.00%   0.00%   5.06%  1/25/2024   2,406,250    2,405,629    2,156,602 
TRITON WATER HOLDINGS, INC.  Beverage, Food & Tobacco  Term Loan (03/21)  Loan   3M USD LIBOR+   3.50%   0.50%   4.51%  3/31/2028   1,488,751    1,482,482    1,371,824 
Tronox Finance LLC  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  3/10/2028   346,923    346,204    335,214 
TruGreen Limited Partnership  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   4.00%   0.75%   5.06%  10/29/2027   961,806    955,685    923,333 

44

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Uber Technologies, Inc.  Transportation: Consumer  Term Loan B (2/21)  Loan   3M USD LIBOR+   3.50%   0.00%   5.07%  2/25/2027   3,937,527    3,901,174    3,817,983 
Ultra Clean Holdings, Inc.  High Tech Industries  Incremental Term Loan 3/21  Loan   1M USD LIBOR+   3.75%   0.00%   4.51%  8/27/2025   877,955    874,681    863,688 
Unimin Corporation  Metals & Mining  Term Loan (12/20)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  7/31/2026   496,815    472,747    475,079 
United Natural Foods, Inc  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   4.31%  10/22/2025   1,540,259    1,484,910    1,504,649 
United Road Services Inc.  Transportation: Cargo  Term Loan (10/17)  Loan   6M USD LIBOR+   5.75%   1.00%   7.32%  9/1/2024   912,927    908,180    647,183 
Univision Communications Inc.  Media: Broadcasting & Subscription  Term Loan B (6/21)  Loan   1M USD LIBOR+   3.25%   0.75%   4.31%  3/15/2026   2,465,278    2,459,054    2,388,238 
Utz Quality Foods, LLC  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.00%   4.06%  1/20/2028   1,842,457    1,840,030    1,762,771 
Vaco Holdings, LLC  Services: Business  Term Loan (01/22)  Loan   1M USD SOFR+   5.00%   0.75%   5.80%  1/19/2029   249,375    248,243    241,477 
Verifone Systems, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (7/18)  Loan   3M USD LIBOR+   4.00%   0.00%   5.52%  8/20/2025   1,378,747    1,374,159    1,223,638 
Vertex Aerospace Services Corp  Aerospace & Defense  Term Loan (10/21)  Loan   1M USD LIBOR+   4.00%   0.75%   5.06%  12/6/2028   1,000,000    995,418    970,499 
VFH Parent LLC  Banking, Finance, Insurance & Real Estate  Term Loan (01/22)  Loan   1M USD SOFR+   3.00%   0.50%   3.88%  1/12/2029   3,100,888    3,092,966    2,984,604 
Virtus Investment Partners, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B (9/21)  Loan   1M USD LIBOR+   2.25%   0.00%   3.05%  9/28/2028   2,985,000    2,976,012    2,876,793 
Vistra Energy Corp  Utilities: Electric  2018 Incremental Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   2.64%  12/31/2025   904,636    904,207    878,111 
Vizient, Inc  Healthcare & Pharmaceuticals  Term Loan 4/22  Loan   1M USD SOFR+   2.25%   0.50%   3.13%  4/28/2029   500,000    494,999    497,969 
VM Consolidated, Inc.  Construction & Building  Term Loan B (3/21)  Loan   6M USD LIBOR+   3.25%   0.00%   3.60%  3/19/2028   2,333,435    2,330,474    2,269,264 
Vouvray US Finance LLC  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   3.00%   1.00%   4.06%  3/11/2024   475,000    474,999    382,255 

 

45

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair
Value
 
Warner Music Group Corp. (WMG Acquisition Corp.)  Hotel, Gaming & Leisure  Term Loan G  Loan   1M USD LIBOR+   2.13%   0.00%   3.18%  1/20/2028   1,250,000    1,249,776    1,212,762 
Wastequip, LLC (HPCC Merger/Patriot Container)  Environmental Industries  Term Loan (3/18)  Loan   1M USD LIBOR+   3.75%   1.00%   4.75%  3/15/2025   488,550    487,437    437,099 
Watlow Electric Manufacturing Company  High Tech Industries  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.50%   4.81%  3/2/2028   2,475,000    2,464,334    2,374,464 
West Corporation  Telecommunications  Term Loan B (Olympus Merger)  Loan   1M USD LIBOR+   4.00%   1.00%   5.06%  10/10/2024   1,066,719    1,032,279    953,016 
West Corporation  Telecommunications  Term Loan B  Loan   1M USD LIBOR+   3.50%   1.00%   4.56%  10/10/2024   2,552,943    2,519,949    2,265,737 
WEX Inc.  Services: Business  Term Loan B (3/21)  Loan   1M USD LIBOR+   2.25%   0.00%   3.31%  3/31/2028   2,977,481    2,966,791    2,890,628 
WildBrain Ltd.  Media: Diversified & Production  Term Loan  Loan   1M USD LIBOR+   4.25%   0.75%   5.31%  3/27/2028   1,980,000    1,946,129    1,894,207 
WP CITYMD BIDCO LLC  Services: Consumer  Term Loan B  Loan   6M USD LIBOR+   3.25%   0.50%   3.75%  12/22/2028   7,424,013    7,400,283    7,156,748 
Xperi Corporation  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   4.56%  6/8/2028   2,706,468    2,695,714    2,612,878 
Zayo Group, LLC  Telecommunications  Term Loan 4/22  Loan   3M USD SOFR+   4.25%   0.50%   4.75%  3/9/2027   1,000,000    975,000    955,940 
ZEBRA BUYER LLC  Banking, Finance, Insurance & Real Estate  Term Loan 4/21  Loan   3M USD LIBOR+   3.25%   0.50%   4.31%  11/1/2028   887,097    883,218    859,748 
Zekelman Industries, Inc.  Metals & Mining  Term Loan (01/20)  Loan   1M USD LIBOR+   2.00%   0.00%   2.93%  1/25/2027   967,053    967,053    939,492 
Zodiac Pool Solutions  Consumer goods: Durable  Term Loan (1/22)  Loan   1M USD SOFR+   2.00%   0.50%   3.03%  1/29/2029   498,750    497,611    485,553 
                                              
                                      $639,686,300   $600,926,629 

 

46

 

 

   Number of Shares  Cost  Fair
Value
Cash and cash equivalents         
U.S. Bank Money Market (c)   8,708,940   $8,708,940   $8,708,940 
Total cash and cash equivalents   8,708,940   $8,708,940   $8,708,940 

 

(a)All or a portion of this investment has an unfunded commitment as of May 31, 2022
(b)As of May 31, 2022, the investment was in default and on non-accrual status.
(c)Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of May 31, 2022.
(d)Investments include Payment-in-Kind Interest.

 

LIBOR—London Interbank Offered Rate

SOFR - Secured Overnight Financing Rate

WIBOR - Warsaw Interbank Offered Rate

 

1M USD LIBOR—The 1 month USD LIBOR rate as of May 31, 2022 was 1.12%.

2M USD LIBOR—The 2 month USD LIBOR rate as of May 31, 2022 was 1.11%.

3M USD LIBOR—The 3 month USD LIBOR rate as of May 31, 2022 was 1.63%.

6M USD LIBOR—The 6 month USD LIBOR rate as of May 31, 2022 was 1.38%.

12M USD LIBOR - The 12 month USD LIBOR rate as of May 31, 2022 was 0.99%.

3 PL WIBOR - The 3 month PL WIBOR rate as of May 31, 2022 was 1.03%.

Daily SOFR- The daily SOFR rate as of May 31, 2022 was 0.79%.

1M SOFR - The 1 month SOFR rate as of May 31, 2022 was 1.13%.

3M SOFR - The 3 month SOFR rate as of May 31, 2022 was 0.80%.

Prime—The Prime Rate as of May 31, 2022 was 3.25%.

 

47

 

 

Saratoga Investment Corp. CLO 2013-1, Ltd.

Schedule of Investments

February 28, 2022

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Fusion Connect Warrant  Telecommunications  Warrants  Equity   -   -    -    -   -   32,832    -    - 
J Jill Common Stock  Retail  Common stock  Equity   -   -    -    -   -   2,107    -    33,691 
19TH HOLDINGS GOLF, LLC  Consumer goods: Durable  Term Loan  Loan   3M USD SOFR+   3.25%   0.50%   3.75%  2/7/2029   500,000    497,530    493,750 
ADMI Corp.  Healthcare & Pharmaceuticals  Term Loan B  Loan   1M USD LIBOR+   2.75%   0.00%   2.96%  4/30/2025   1,930,276    1,925,558    1,892,886 
Adtalem Global Education Inc.  Services: Business  Term Loan B (02/21)  Loan   1M USD LIBOR+   4.50%   0.75%   5.25%  8/11/2028   2,000,000    1,981,559    1,977,920 
Aegis Sciences Corporation  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   5.50%   1.00%   6.50%  5/9/2025   2,737,038    2,723,587    2,686,403 
Agiliti Health Inc.  Healthcare & Pharmaceuticals  Term Loan (1/19)  Loan   1M USD LIBOR+   2.75%   0.00%   2.88%  1/4/2026   1,483,686    1,476,852    1,470,704 
Agiliti Health Inc.  Healthcare & Pharmaceuticals  Term Loan (09/20)  Loan   1M USD LIBOR+   2.75%   0.75%   3.50%  1/4/2026   285,714    283,586    283,571 
AHEAD DB Holdings, LLC  Services: Business  Term Loan (04/21)  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  10/18/2027   2,985,000    2,885,411    2,962,135 
AI Convoy (Luxembourg) S.a.r.l.  Aerospace & Defense  Term Loan B (USD)  Loan   6M USD LIBOR+   3.50%   1.00%   4.50%  1/18/2027   1,469,671    1,464,591    1,460,485 
AIS HoldCo, LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   5.00%   0.00%   5.30%  8/15/2025   4,789,642    4,670,148    4,705,823 
Alchemy Copyrights, LLC  Media: Diversified & Production  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.50%   3.50%  3/10/2028   493,763    490,886    489,442 
Alchemy US Holdco 1, LLC  Metals & Mining  Term Loan  Loan   1M USD LIBOR+   5.50%   0.00%   5.60%  10/10/2025   1,654,803    1,640,863    1,644,874 
AlixPartners, LLP  Banking, Finance, Insurance & Real Estate  Term Loan B (01/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  2/4/2028   248,125    247,608    245,217 
Alkermes, Inc.  Healthcare & Pharmaceuticals  Term Loan B (3/21)  Loan   3M USD LIBOR+   2.50%   0.50%   3.00%  3/12/2026   2,147,859    2,130,749    2,110,271 
Allen Media, LLC  Media: Diversified & Production  Term Loan (7/21)  Loan   3M USD LIBOR+   5.50%   0.00%   5.72%  2/10/2027   4,439,454    4,407,744    4,412,639 
Alliant Holdings I, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B4  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  11/5/2027   997,500    996,393    987,944 
Allied Universal Holdco LLC  Services: Business  Term Loan 4/21  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  5/12/2028   1,995,000    1,985,516    1,966,412 
Altisource Solutions S.a r.l.  Banking, Finance, Insurance & Real Estate  Term Loan B (03/18)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  4/3/2024   1,223,297    1,220,031    1,102,497 
Altium Packaging LLC  Containers, Packaging & Glass  Term Loan (01/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  1/29/2028   496,250    494,097    485,084 
American Greetings Corporation  Media: Advertising, Printing & Publishing  Term Loan  Loan   1M USD LIBOR+   4.50%   1.00%   5.50%  4/6/2024   3,012,861    3,011,323    3,011,355 
American Trailer World Corp  Automotive  Term Loan  Loan   1M USD LIBOR+   3.75%   0.75%   4.50%  3/3/2028   1,990,000    1,984,442    1,954,558 
AmeriLife Holdings LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.00%   0.00%   4.11%  3/18/2027   1,976,415    1,967,087    1,956,651 

 

48

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
AmWINS Group, LLC  Banking, Finance, Insurance & Real Estate  Term Loan 2/21  Loan   1M USD LIBOR+   2.25%   0.75%   3.00%  2/17/2028   1,980,006    1,957,163    1,946,900 
Anastasia Parent LLC  Consumer goods: Non-durable  Term Loan  Loan   3M USD LIBOR+   3.75%   0.00%   3.97%  8/11/2025   967,500    964,919    832,253 
Anchor Glass Container Corporation  Containers, Packaging & Glass  Term Loan (07/17)  Loan   3M USD LIBOR+   2.75%   1.00%   3.75%  12/7/2023   475,113    474,420    406,882 
Anchor Packaging, LLC  Containers, Packaging & Glass  Term Loan B  Loan   1M USD LIBOR+   4.00%   0.00%   4.21%  7/18/2026   987,342    979,469    972,532 
ANI Pharmaceuticals, Inc.  Healthcare & Pharmaceuticals  Term Loan B  Loan   1M USD LIBOR+   6.00%   0.75%   6.75%  11/19/2027   3,000,000    2,943,100    3,000,000 
AP Core Holdings II LLC  High Tech Industries  Term Loan B1  Loan   1M USD LIBOR+   5.50%   0.75%   6.25%  9/1/2027   1,975,000    1,947,406    1,965,125 
AP Core Holdings II LLC  High Tech Industries  Term Loan B2  Loan   1M USD LIBOR+   5.50%   0.75%   6.25%  9/1/2027   500,000    493,024    498,125 
APi Group DE, Inc. (J2 Acquisition)  Services: Business  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  10/1/2026   1,950,000    1,942,029    1,927,575 
APLP Holdings Limited Partnership  Energy: Electricity  Term Loan B (3/21)  Loan   1M USD LIBOR+   3.75%   1.00%   4.75%  5/14/2027   828,378    821,051    826,655 
Apollo Commercial Real Estate Finance, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   2.75%   0.00%   2.86%  5/15/2026   2,969,543    2,937,176    2,887,881 
Apollo Commercial Real Estate Finance, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B1 (2/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  3/6/2028   992,500    983,643    982,575 
AppLovin Corporation  High Tech Industries  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  8/15/2025   989,796    989,796    982,066 
AppLovin Corporation  High Tech Industries  Term Loan (10/21)  Loan   1M USD LIBOR+   3.00%   0.50%   3.50%  10/21/2028   1,496,250    1,492,669    1,481,288 
Aramark Corporation  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  1/15/2027   2,331,250    2,268,549    2,279,776 
Aramark Corporation  Services: Consumer  Term Loan B (4/21)  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  4/1/2028   1,753,715    1,746,008    1,743,491 
ARC FALCON I INC.  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   3.75%   0.50%   4.25%  9/23/2028   872,611    868,610    855,526 
ARC FALCON I INC. (a)  Chemicals, Plastics, & Rubber  Delayed Draw Term Loan  Loan   N/A    N/A      N/A      N/A    9/22/2028   -    (601)   (2,494)
Arches Buyer Inc.  Services: Consumer  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.50%   3.75%  12/6/2027   1,500,000    1,490,625    1,473,570 
Arctic Glacier U.S.A., Inc.  Beverage, Food & Tobacco  Term Loan (3/18)  Loan   3M USD LIBOR+   3.50%   1.00%   4.50%  3/20/2024   3,350,967    3,341,474    3,103,833 
Aretec Group, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/18)  Loan   1M USD LIBOR+   4.25%   0.00%   4.46%  10/1/2025   2,436,164    2,430,830    2,425,518 

 

49

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
ASP BLADE HOLDINGS, INC.  Capital Equipment  Term Loan  Loan   1M USD LIBOR+   4.00%   0.50%   4.50%  10/7/2028   100,000    99,530    99,542 
Asplundh Tree Expert, LLC  Services: Business  Term Loan 2/21  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  9/7/2027   987,500    983,579    973,458 
AssuredPartners Capital, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B (2/20)  Loan   1M USD LIBOR+   3.50%   0.00%   3.71%  2/12/2027   1,000,000    996,250    984,580 
Assuredpartners Inc.  Banking, Finance, Insurance & Real Estate  Incremental Term Loan (7/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  2/12/2027   995,006    995,006    978,837 
Assuredpartners Inc.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD SOFR+   3.50%   0.50%   4.00%  2/12/2027   500,000    498,811    491,875 
ASTRO ONE ACQUISITION CORPORATION  Consumer goods: Durable  Term Loan  Loan   1M USD LIBOR+   5.50%   0.75%   6.25%  9/15/2028   3,000,000    2,971,643    2,968,140 
Asurion, LLC  Banking, Finance, Insurance & Real Estate  Term Loan B6  Loan   1M USD LIBOR+   3.13%   0.00%   3.33%  11/3/2023   266,824    266,095    264,767 
Asurion, LLC  Banking, Finance, Insurance & Real Estate  Term Loan B8  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  12/18/2026   2,995,112    2,984,120    2,939,882 
ATHENAHEALTH GROUP INC.  Healthcare & Pharmaceuticals  Term Loan B (2/22)  Loan   1M USD SOFR+   3.50%   0.50%   4.00%  2/15/2029   1,282,609    1,276,322    1,269,462 
ATHENAHEALTH GROUP INC. (a)  Healthcare & Pharmaceuticals  Delayed Draw Term Loan (02/22)  Loan   N/A    N/A      N/A      N/A    2/15/2029   -    -    (2,228)
Avast Software S.R.O. (Sybil Finance)  High Tech Industries  Term Loan (Sybil Software)  Loan   3M USD LIBOR+   2.00%   0.00%   2.22%  3/22/2028   1,925,000    1,920,766    1,916,819 
Avaya, Inc.  Telecommunications  Term Loan B1  Loan   1M USD LIBOR+   4.25%   0.00%   4.44%  12/15/2027   1,755,766    1,747,367    1,739,859 
Avaya, Inc.  Telecommunications  Term Loan B-2 (2/21)  Loan   1M USD LIBOR+   4.00%   0.00%   4.19%  12/15/2027   1,000,000    1,000,000    988,590 
Avison Young (Canada) Inc  Services: Business  Term Loan  Loan   3M USD LIBOR+   5.75%   0.00%   5.97%  1/31/2026   3,405,995    3,370,219    3,371,935 
Avolon TLB Borrower 1 (US) LLC  Capital Equipment  Term Loan B3  Loan   1M USD LIBOR+   1.75%   0.75%   2.50%  1/15/2025   1,000,000    900,020    990,630 
Avolon TLB Borrower 1 (US) LLC  Capital Equipment  Term Loan B5 (7/21)  Loan   1M USD LIBOR+   2.25%   0.50%   2.75%  12/1/2027   495,000    490,860    491,466 
AZURITY PHARMACEUTICALS, INC.  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD LIBOR+   6.00%   0.75%   6.75%  9/20/2027   500,000    485,751    495,000 
B&G Foods, Inc.  Beverage, Food & Tobacco  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  10/10/2026   706,458    701,732    701,605 

 

50

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
B.C. Unlimited Liability Co (Burger King)  Beverage, Food & Tobacco  Term Loan B4  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  11/19/2026   1,470,000    1,438,969    1,440,968 
BAKELITE UK INTERMEDIATE LTD.  Chemicals, Plastics, & Rubber  Term Loan  Loan   3M USD SOFR+   4.25%   0.00%   4.75%  2/1/2029   1,000,000    995,000    992,500 
Baldwin Risk Partners, LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  10/14/2027   1,238,775    1,225,981    1,222,522 
Belfor Holdings Inc.  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  4/6/2026   248,092    247,897    246,851 
Belron Finance US LLC  Automotive  Term Loan B (3/21)  Loan   3M USD LIBOR+   2.75%   0.50%   3.25%  4/13/2028   1,985,000    1,967,341    1,968,247 
Bengal Debt Merger Sub LLC  Beverage, Food & Tobacco  Term Loan  Loan   3M USD SOFR+   3.25%   0.50%   3.75%  1/24/2029   1,890,909    1,889,030    1,873,191 
Bengal Debt Merger Sub LLC  Beverage, Food & Tobacco  Delayed Draw Term Loan  Loan   3M USD SOFR+   3.25%   0.50%   3.75%  1/24/2029   109,091    109,048    108,069 
Blackstone Mortgage Trust, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  4/23/2026   989,873    983,805    967,601 
Blackstone Mortgage Trust, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (6/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  4/23/2026   1,480,053    1,470,897    1,464,335 
Blucora, Inc.  Services: Consumer  Term Loan (11/17)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  5/22/2024   2,443,339    2,437,898    2,437,230 
Blue Tree Holdings, Inc.  Chemicals, Plastics, & Rubber  Term Loan (2/21)  Loan   3M USD LIBOR+   2.50%   0.00%   2.72%  3/4/2028   992,500    990,307    983,200 
Bombardier Recreational Products, Inc.  Consumer goods: Durable  Term Loan (1/20)  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  5/24/2027   1,470,049    1,461,460    1,442,486 
Boxer Parent Company, Inc.  High Tech Industries  Term Loan (2/21)  Loan   3M USD LIBOR+   3.75%   0.00%   3.97%  10/2/2025   522,846    522,846    516,310 
Bracket Intermediate Holding Corp  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   4.25%   0.00%   4.47%  9/5/2025   967,500    964,897    959,034 

 

51

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
BrightSpring Health Services (Phoenix Guarantor)  Healthcare & Pharmaceuticals  Term Loan B-3  Loan   1M USD LIBOR+   3.50%   0.00%   3.66%  3/5/2026   992,500    992,500    980,342 
BroadStreet Partners, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B3  Loan   1M USD LIBOR+   3.00%   0.00%   3.21%  1/22/2027   2,979,108    2,973,591    2,930,697 
Brookfield WEC Holdings Inc.  Energy: Electricity  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  8/1/2025   1,477,538    1,479,743    1,453,528 
Buckeye Partners, L.P.  Utilities: Oil & Gas  Term Loan (1/21)  Loan   1M USD LIBOR+   2.25%   0.00%   2.36%  11/1/2026   1,970,088    1,958,262    1,946,565 
BW Gas & Convenience Holdings LLC  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  3/31/2028   2,487,500    2,465,358    2,475,063 
Callaway Golf Company  Retail  Term Loan B  Loan   1M USD LIBOR+   4.50%   0.00%   4.71%  1/4/2026   682,500    673,958    681,005 
CareerBuilder, LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   6.75%   1.00%   7.75%  7/31/2023   5,393,388    5,246,921    4,159,650 
CareStream Health, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   6M USD LIBOR+   6.75%   1.00%   7.75%  5/8/2023   2,184,163    2,181,757    2,184,163 
Casa Systems, Inc  Telecommunications  Term Loan  Loan   1M USD LIBOR+   4.00%   1.00%   5.00%  12/20/2023   1,391,125    1,387,217    1,349,391 
Castle US Holding Corporation  Media: Advertising, Printing & Publishing  Term Loan B (USD)  Loan   3M USD LIBOR+   3.75%   0.00%   3.97%  1/27/2027   1,980,130    1,968,915    1,934,864 
CBI BUYER, INC.  Consumer goods: Durable  Term Loan  Loan   3M USD LIBOR+   3.25%   0.50%   3.75%  1/6/2028   995,000    992,948    963,906 
CCC Intelligent Solutions Inc.  Services: Business  Term Loan B  Loan   3M USD LIBOR+   2.50%   0.50%   3.00%  9/16/2028   250,000    249,432    246,875 
CCI Buyer, Inc  Telecommunications  Term Loan  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  12/17/2027   248,125    246,017    245,257 
CCRR Parent, Inc.  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  3/5/2028   992,500    988,070    986,297 
CCS-CMGC Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD LIBOR+   5.50%   0.00%   5.71%  9/25/2025   2,425,000    2,412,003    2,371,456 
Cengage Learning, Inc.  Media: Advertising, Printing & Publishing  Term Loan B (6/21)  Loan   6M USD LIBOR+   4.75%   1.00%   5.75%  7/14/2026   2,992,500    2,966,179    2,985,019 
CENTURI GROUP, INC.  Construction & Building  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.50%   3.00%  8/27/2028   931,998    923,210    923,647 

 

52

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
CenturyLink, Inc.  Telecommunications  Term Loan B (1/20)  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  3/15/2027   3,929,899    3,924,411    3,823,045 
Chemours Company, (The)  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  4/3/2025   915,661    880,331    896,780 
Churchill Downs Incorporated  Hotel, Gaming & Leisure  Term Loan B1 (3/21)  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  3/17/2028   496,250    495,147    489,427 
CIMPRESS PUBLIC LIMITED COMPANY  Media: Advertising, Printing & Publishing  USD Term Loan  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  5/17/2028   995,000    986,097    987,538 
CITADEL SECURITIES LP  Banking, Finance, Insurance & Real Estate  Term Loan B (01/21)  Loan   1M USD SOFR+   2.50%   0.00%   2.69%  2/2/2028   4,962,500    4,957,863    4,911,089 
Clarios Global LP  Automotive  Term Loan B1  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  4/30/2026   1,267,812    1,259,559    1,253,549 
Claros Mortgage Trust, Inc  Banking, Finance, Insurance & Real Estate  Term Loan B-1 (11/21)  Loan   1M USD SOFR+   4.50%   0.50%   5.00%  8/9/2026   3,474,709    3,452,852    3,457,336 
Cole Haan  Consumer goods: Non-durable  Term Loan B  Loan   3M USD LIBOR+   5.50%   0.00%   6.01%  2/7/2025   925,000    919,273    811,688 
Columbus McKinnon Corporation  Capital Equipment  Term Loan (4/21)  Loan   3M USD LIBOR+   2.75%   0.50%   3.25%  5/14/2028   487,192    486,099    482,929 
Compass Power Generation, LLC  Utilities: Electric  Term Loan B (08/18)  Loan   1M USD LIBOR+   3.50%   1.00%   4.50%  12/20/2024   1,707,152    1,704,898    1,686,120 
Conduent, Inc.  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.50%   4.75%  10/16/2028   1,000,000    990,409    990,310 
Connect Finco SARL  Telecommunications  Term Loan (1/21)  Loan   1M USD LIBOR+   3.50%   1.00%   4.50%  12/11/2026   2,947,500    2,823,770    2,906,972 
Consolidated Communications, Inc.  Telecommunications  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.75%   4.25%  10/2/2027   714,005    705,262    704,187 
CORAL-US CO-BORROWER LLC  Telecommunications  Term Loan B-5  Loan   1M USD LIBOR+   2.25%   0.00%   2.44%  1/31/2028   4,000,000    3,986,739    3,914,280 
CoreCivic, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (12/19)  Loan   1M USD LIBOR+   4.50%   1.00%   5.50%  12/18/2024   1,872,727    1,852,319    1,857,127 
Corelogic, Inc.  Services: Business  Term Loan (4/21)  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  6/2/2028   2,493,750    2,482,238    2,459,461 
Cortes NP Acquisition Corp (Vertiv)  Capital Equipment  Term Loan 2/21  Loan   1M USD LIBOR+   2.75%   0.00%   2.86%  3/2/2027   1,980,000    1,980,000    1,913,175 
COWEN INC.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   6M USD LIBOR+   3.25%   0.00%   4.00%  3/24/2028   3,967,481    3,944,804    3,898,050 
CROCS INC  Consumer goods: Durable  Term Loan  Loan   3M USD SOFR+   3.50%   0.50%   4.03%  1/26/2029   1,000,000    995,000    987,500 
Cross Financial Corp  Banking, Finance, Insurance & Real Estate  Term Loan B (3/21)  Loan   6M USD LIBOR+   4.00%   0.75%   4.81%  9/15/2027   497,500    497,013    495,634 

 

53

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Crown Subsea Communications Holding, Inc.  Construction & Building  Term Loan (4/21)  Loan   1M USD LIBOR+   4.75%   0.75%   5.50%  4/27/2027   2,404,110    2,382,506    2,402,114 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B (03/17)  Loan   1M USD LIBOR+   2.25%   0.00%   2.44%  7/15/2025   1,934,010    1,919,923    1,873,263 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   2.44%  1/15/2026   485,000    484,359    469,946 
CSC Holdings LLC (Neptune Finco Corp.)  Media: Broadcasting & Subscription  Term Loan B-5  Loan   1M USD LIBOR+   2.50%   0.00%   2.69%  4/15/2027   490,000    490,000    475,035 
CTS Midco, LLC  High Tech Industries  Term Loan B  Loan   3M USD LIBOR+   6.00%   1.00%   7.00%  11/2/2027   1,980,000    1,929,799    1,952,775 
Daseke Inc  Transportation: Cargo  Term Loan 2/21  Loan   1M USD LIBOR+   4.00%   0.75%   4.75%  3/5/2028   1,488,750    1,482,131    1,473,863 
DCert Buyer, Inc.  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   4.00%   0.00%   4.21%  10/16/2026   1,484,887    1,484,887    1,477,046 
Dealer Tire, LLC  Automotive  Term Loan B-1  Loan   1M USD LIBOR+   4.25%   0.00%   4.46%  12/12/2025   2,940,000    2,935,370    2,926,211 
Delek US Holdings, Inc.  Utilities: Oil & Gas  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  3/31/2025   6,315,361    6,274,862    6,148,699 
DexKo Global, Inc. (Dragon Merger)  Automotive  Term Loan (9/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  10/4/2028   840,000    836,119    828,450 
DexKo Global, Inc. (Dragon Merger) (a)  Automotive  Delayed Draw Term Loan (9/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  10/4/2028   130,905    134,906    132,706 
Diamond Sports Group, LLC (b)  Media: Broadcasting & Subscription  Term Loan  Loan   Prime+   2.25%   0.00%   5.50%  8/24/2026   3,408,970    2,964,398    1,264,728 
DIRECTV FINANCING, LLC  Media: Broadcasting & Subscription  Term Loan  Loan   3M USD LIBOR+   5.00%   0.75%   5.75%  8/2/2027   3,910,000    3,874,543    3,896,823 
Dispatch Acquisition Holdings, LLC  Environmental Industries  Term Loan B (3/21)  Loan   3M USD LIBOR+   4.25%   0.75%   5.00%  3/25/2028   497,500    493,121    493,769 
DOMTAR CORPORATION  Forest Products & Paper  Term Loan 9/21  Loan   1M USD LIBOR+   5.50%   0.75%   6.25%  11/30/2028   840,645    832,557    837,140 
DRI HOLDING INC.  Media: Advertising, Printing & Publishing  Term Loan (12/21)  Loan   1M USD LIBOR+   5.25%   0.50%   5.75%  12/15/2028   3,000,000    2,970,701    2,944,500 
DRW Holdings, LLC  Banking, Finance, Insurance & Real Estate  Term Loan (2/21)  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  3/1/2028   6,500,000    6,454,552    6,467,500 
DTZ U.S. Borrower, LLC  Construction & Building  Term Loan  Loan   1M USD LIBOR+   2.75%   0.00%   2.96%  8/21/2025   3,876,012    3,865,362    3,838,880 

 

54

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
EAB Global, Inc.  Services: Business  Term Loan (08/21)  Loan   6M USD LIBOR+   3.50%   0.50%   4.00%  8/16/2028   1,000,000    995,320    989,250 
Echo Global Logistics, Inc.  Services: Business  Term Loan  Loan   1M USD LIBOR+   3.75%   0.50%   4.25%  11/23/2028   2,000,000    1,995,444    1,978,500 
Edelman Financial Group Inc., The  Banking, Finance, Insurance & Real Estate  Term Loan B (3/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.25%  4/7/2028   2,210,766    2,203,181    2,190,603 
Electrical Components Inter., Inc.  Capital Equipment  Term Loan (6/18)  Loan   1M USD LIBOR+   4.25%   0.00%   4.46%  6/26/2025   1,903,934    1,903,934    1,874,575 
ELECTRON BIDCO INC.  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD LIBOR+   3.25%   0.50%   3.75%  11/1/2028   500,000    497,610    494,455 
ELO Touch Solutions, Inc.  Media: Diversified & Production  Term Loan (12/18)  Loan   1M USD LIBOR+   6.50%   0.00%   6.71%  12/14/2025   2,341,935    2,266,272    2,334,137 
Embecta Corp  Healthcare & Pharmaceuticals  Term Loan B  Loan   3M USD SOFR+   3.00%   0.50%   3.50%  1/26/2029   750,000    746,250    742,688 
Endo Luxembourg Finance Company I S.a.r.l.  Healthcare & Pharmaceuticals  Term Loan (3/21)  Loan   3M USD LIBOR+   5.00%   0.75%   5.75%  3/27/2028   2,347,110    2,338,792    2,264,421 
Endure Digital, Inc.  High Tech Industries  Term Loan B  Loan   6M USD LIBOR+   3.50%   0.75%   4.25%  2/10/2028   2,487,500    2,476,721    2,394,219 
Enterprise Merger Sub Inc.  Healthcare & Pharmaceuticals  Term Loan B (06/18)  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  10/10/2025   4,850,000    4,844,205    3,516,638 
Equiniti Group PLC  Services: Business  Term Loan B  Loan   3M USD LIBOR+   4.50%   0.50%   5.00%  12/11/2028   500,000    495,392    497,085 
EyeCare Partners, LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   3.75%   0.00%   3.97%  2/18/2027   1,967,959    1,967,595    1,945,820 
Finco I LLC  Banking, Finance, Insurance & Real Estate  Term Loan B (9/20)  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  6/27/2025   3,793,978    3,787,136    3,743,708 
First Brands Group, LLC  Automotive  1st Lien Term Loan (3/21)  Loan   3M USD LIBOR+   5.00%   1.00%   6.00%  3/30/2027   4,962,500    4,891,260    4,925,281 
First Eagle Investment Management  Banking, Finance, Insurance & Real Estate  Refinancing Term Loan  Loan   3M USD LIBOR+   2.50%   0.00%   2.72%  2/1/2027   5,200,639    5,184,839    5,109,628 
First Student Bidco Inc.  Transportation: Consumer  Term Loan B  Loan   3M USD LIBOR+   3.00%   0.50%   3.50%  7/21/2028   730,392    725,495    719,663 
First Student Bidco Inc.  Transportation: Consumer  Term Loan C  Loan   3M USD LIBOR+   3.00%   0.50%   3.50%  7/21/2028   269,608    267,800    265,647 
Fitness International, LLC (LA Fitness)  Services: Consumer  Term Loan B (4/18)  Loan   3M USD LIBOR+   3.25%   1.00%   4.25%  4/18/2025   1,330,058    1,325,610    1,235,292 
FOCUS FINANCIAL PARTNERS, LLC  Banking, Finance, Insurance & Real Estate  Term Loan (1/20)  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  7/3/2024   494,872    494,493    488,122 

 

55

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Franchise Group, Inc.  Services: Consumer  First Out Term Loan  Loan   3M USD LIBOR+   4.75%   0.75%   5.50%  3/10/2026   815,445    808,696    813,406 
Franklin Square Holdings, L.P.  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   2.25%   0.00%   2.50%  8/1/2025   4,353,736    4,335,125    4,310,199 
Froneri International (R&R Ice Cream)  Beverage, Food & Tobacco  Term Loan B-2  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  1/29/2027   1,970,000    1,966,736    1,927,428 
Garrett LX III S.a r.l.  Automotive  Dollar Term Loan  Loan   3M USD LIBOR+   3.25%   0.50%   3.75%  4/28/2028   1,496,250    1,489,649    1,470,066 
Gemini HDPE LLC  Chemicals, Plastics, & Rubber  Term Loan B (12/20)  Loan   3M USD LIBOR+   3.00%   0.50%   3.50%  12/31/2027   2,392,656    2,376,261    2,370,715 
General Nutrition Centers, Inc. (d)  Retail  Second Lien Term Loan  Loan   1M USD LIBOR+   6.00%   0.00%   6.11%  10/7/2026   376,605    376,605    351,342 
Genesee & Wyoming, Inc.  Transportation: Cargo  Term Loan (11/19)  Loan   3M USD LIBOR+   2.00%   0.00%   2.22%  12/30/2026   1,473,750    1,468,685    1,451,305 
GEO Group, Inc., The  Banking, Finance, Insurance & Real Estate  Term Loan Refinance  Loan   1M USD LIBOR+   2.00%   0.75%   2.75%  3/22/2024   3,922,786    3,717,418    3,615,828 
GGP Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  8/27/2025   3,775,280    3,197,869    3,684,031 
Gigamon Inc.  Services: Business  Term Loan B  Loan   6M USD LIBOR+   3.50%   0.75%   4.25%  12/27/2024   2,900,607    2,887,935    2,889,730 
Global Business Travel (GBT) III Inc.  Hotel, Gaming & Leisure  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  8/13/2025   4,353,750    4,353,165    4,065,314 
Global Tel*Link Corporation  Telecommunications  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.00%   4.46%  11/29/2025   4,938,649    4,748,435    4,788,959 
Go Daddy Operating Company, LLC  High Tech Industries  Term Loan 2/21  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  8/10/2027   1,979,899    1,979,899    1,948,657 
Go Wireless Holdings, Inc.  Telecommunications  Term Loan  Loan   1M USD LIBOR+   6.50%   1.00%   7.50%  12/22/2024   2,846,753    2,824,354    2,828,961 
GOLDEN WEST PACKAGING GROUP LLC  Forest Products & Paper  Term Loan (11/21)  Loan   1M USD LIBOR+   5.25%   0.75%   6.00%  11/23/2027   2,000,000    1,980,672    1,980,000 
Graham Packaging Co Inc  Containers, Packaging & Glass  Term Loan (2/21)  Loan   1M USD LIBOR+   3.00%   0.75%   3.75%  8/7/2027   972,314    966,607    961,647 
Great Outdoors Group, LLC  Retail  Term Loan B2  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  3/6/2028   990,019    985,574    984,079 
Greenhill & Co., Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  4/12/2024   2,844,231    2,829,223    2,826,454 
Griffon Corporation  Consumer goods: Durable  Term Loan B  Loan   3M USD SOFR+   2.75%   0.50%   3.27%  1/24/2029   250,000    249,378    248,063 
Grosvenor Capital Management Holdings, LLLP  Banking, Finance, Insurance & Real Estate  Amendment 5 Term Loan  Loan   1M USD LIBOR+   2.50%   0.50%   3.00%  2/24/2028   3,870,741    3,867,368    3,845,581 

 

56

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Harbor Freight Tools USA, Inc.  Retail  Term Loan B (06/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  10/19/2027   3,473,618    3,452,200    3,414,393 
Harland Clarke Holdings Corp.  Media: Advertising, Printing & Publishing  Term Loan (08/21)  Loan   3M USD LIBOR+   7.75%   1.00%   8.75%  6/16/2026   1,262,555    1,260,655    1,121,149 
Helix Gen Funding, LLc  Energy: Electricity  Term Loan B (02/17)  Loan   1M USD LIBOR+   3.75%   1.00%   4.75%  6/3/2024   226,716    226,626    218,895 
Hillman Group Inc. (The) (New)  Consumer goods: Durable  Term Loan B-1 (2/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  7/14/2028   3,514,399    3,506,291    3,471,101 
Hillman Group Inc. (The) (New) (a)  Consumer goods: Durable  Delayed Draw Term Loan (2/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  7/14/2028   67,342    67,342    56,947 
HLF Financing SARL (Herbalife)  Consumer goods: Non-durable  Term Loan B (08/18)  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  8/18/2025   3,550,000    3,541,488    3,505,625 
Holley Purchaser, Inc  Automotive  Term Loan (11/21)  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  11/17/2028   2,137,500    2,127,187    2,117,899 
Holley Purchaser, Inc (a)  Automotive  Delayed Draw Term Loan  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  11/17/2028   106,875    106,875    103,602 
Howden Group Holdings  Banking, Finance, Insurance & Real Estate  Term Loan (1/21)  Loan   1M USD LIBOR+   3.25%   0.75%   4.00%  11/12/2027   2,174,152    2,164,312    2,148,192 
Hudson River Trading LLC  Banking, Finance, Insurance & Real Estate  Term Loan (3/21)  Loan   1M USD SOFR+   3.00%   0.00%   3.30%  3/17/2028   5,955,000    5,902,173    5,843,344 
Idera, Inc.  High Tech Industries  Term Loan (02/21)  Loan   6M USD LIBOR+   3.75%   0.75%   4.50%  3/2/2028   4,860,079    4,848,914    4,811,478 
IMA Financial Group, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/21)  Loan   1M USD LIBOR+   3.75%   0.50%   4.25%  11/1/2028   2,000,000    1,990,546    1,973,760 
INDY US BIDCO, LLC  Services: Business  Term Loan (11/21)  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  3/6/2028   2,238,141    2,237,925    2,221,355 
INEOS US PETROCHEM LLC  Chemicals, Plastics, & Rubber  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.25%  1/29/2026   995,000    991,113    983,189 
Informatica Inc.  High Tech Industries  Term Loan B (10/21)  Loan   1M USD LIBOR+   2.75%   0.00%   3.00%  10/27/2028   500,000    499,441    493,440 
Ingram Micro Inc.  High Tech Industries  Term Loan  Loan   3M USD LIBOR+   3.50%   0.50%   4.00%  6/30/2028   1,492,500    1,478,709    1,483,172 
Inmar Acquisition Sub, Inc.  Services: Business  Term Loan B  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  5/1/2024   3,386,129    3,343,519    3,356,501 

 

57

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Innophos, Inc.  Chemicals, Plastics, & Rubber  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  2/4/2027   491,250    489,509    487,973 
INSTANT BRANDS HOLDINGS INC.  Consumer goods: Durable  Term Loan 4/21  Loan   3M USD LIBOR+   5.00%   0.75%   5.75%  4/7/2028   4,368,033    4,346,269    4,018,591 
INSTRUCTURE HOLDINGS, INC.  High Tech Industries  Term Loan B  Loan   3M USD LIBOR+   2.75%   0.50%   3.27%  10/21/2028   500,000    498,797    492,500 
Isagenix International, LLC  Beverage, Food & Tobacco  Term Loan  Loan   3M USD LIBOR+   5.75%   1.00%   6.75%  6/14/2025   2,427,552    2,401,608    1,775,900 
Ivory Merger Sub, Inc.  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   3.67%  3/14/2025   2,949,539    2,931,462    2,870,285 
J Jill Group, Inc  Retail  Priming Term Loan  Loan   3M USD LIBOR+   5.00%   1.00%   6.00%  5/8/2024   1,574,907    1,573,650    1,409,542 
Jane Street Group  Banking, Finance, Insurance & Real Estate  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.00%   2.96%  1/31/2028   3,960,000    3,954,873    3,906,778 
Journey Personal Care Corp.  Consumer goods: Non-durable  Term Loan B  Loan   3M USD LIBOR+   4.25%   0.75%   5.00%  3/1/2028   995,000    990,570    945,250 
JP Intermediate B, LLC  Consumer goods: Non-durable  Term Loan  Loan   3M USD LIBOR+   5.50%   1.00%   6.50%  11/15/2025   4,154,019    4,125,538    3,620,933 
KAR Auction Services, Inc.  Automotive  Term Loan B (09/19)  Loan   1M USD LIBOR+   2.25%   0.00%   2.50%  9/19/2026   244,375    243,989    241,931 
Klockner-Pentaplast of America, Inc.  Containers, Packaging & Glass  Term Loan (1/21) (USD)  Loan   6M USD LIBOR+   4.75%   0.50%   5.55%  2/12/2026   1,488,750    1,482,629    1,391,981 
Kodiak BP, LLC  Construction & Building  Term Loan  Loan   3M USD LIBOR+   3.25%   0.75%   4.00%  3/13/2028   496,250    494,732    489,054 
KREF Holdings X LLC  Banking, Finance, Insurance & Real Estate  Term Loan (11/21)  Loan   3M USD LIBOR+   3.50%   0.50%   4.00%  9/1/2027   496,250    486,145    491,288 
Lakeland Tours, LLC (d)  Hotel, Gaming & Leisure  Priority Exit PIK Term Loan (9/20)  Loan   3M USD LIBOR+   6.00%   1.25%   7.25%  9/25/2023   299,904    288,132    300,054 
Lakeland Tours, LLC (d)  Hotel, Gaming & Leisure  2nd Out Take Back PIK Term Loan  Loan   3M USD LIBOR+   1.50%   1.25%   2.75%  9/25/2025   616,465    528,040    592,115 
Lakeland Tours, LLC (d)  Hotel, Gaming & Leisure  Third Out PIK Term Loan  Loan   3M USD LIBOR+   1.50%   1.25%   2.75%  9/25/2025   818,373    540,076    720,987 
Lakeland Tours, LLC (d)  Hotel, Gaming & Leisure  Holdco Fixed Term Loan  Loan   Fixed   0.00%   0.00%   13.25%  9/27/2027   869,977    228,303    594,847 
Lealand Finance Company B.V. (d)  Energy: Oil & Gas  Exit Term Loan  Loan   1M USD LIBOR+   1.00%   0.00%   1.21%  6/30/2025   334,753    334,753    155,422 

 

58

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Learfield Communications, Inc  Media: Advertising, Printing & Publishing  Initial Term Loan (A-L Parent)  Loan   1M USD LIBOR+   3.25%   1.00%   4.25%  12/1/2023   475,000    474,352    449,616 
Lifetime Brands, Inc  Consumer goods: Non-durable  Term Loan B  Loan   1M USD LIBOR+   3.50%   1.00%   4.50%  2/28/2025   2,694,077    2,673,038    2,667,136 
Lightstone Generation LLC  Energy: Electricity  Term Loan B  Loan   3M USD LIBOR+   3.75%   1.00%   4.75%  1/30/2024   1,322,520    1,321,594    1,099,212 
Lightstone Generation LLC  Energy: Electricity  Term Loan C  Loan   3M USD LIBOR+   3.75%   1.00%   4.75%  1/30/2024   74,592    74,542    61,997 
Liquid Tech Solutions Holdings, LLC  Services: Business  Term Loan  Loan   12M USD LIBOR+   4.75%   0.00%   5.50%  3/17/2028   995,000    991,612    991,269 
LogMeIn, Inc.  High Tech Industries  Term Loan (8/20)  Loan   1M USD LIBOR+   4.75%   0.00%   4.89%  8/31/2027   3,960,000    3,897,792    3,888,482 
LOYALTY VENTURES INC.  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.50%   0.50%   5.00%  11/3/2027   3,340,141    3,320,925    3,294,214 
LPL Holdings, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B1  Loan   1M USD LIBOR+   1.75%   0.00%   1.86%  11/11/2026   1,220,308    1,218,289    1,200,857 
LSF11 A5 HOLDCO LLC  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD SOFR+   3.75%   0.50%   4.25%  10/16/2028   250,000    248,837    246,875 
MA FinanceCo LLC  High Tech Industries  Term Loan B4  Loan   3M USD LIBOR+   4.25%   1.00%   5.25%  6/5/2025   2,234,660    2,228,836    2,208,582 
MAGNITE, INC.  Services: Business  Term Loan  Loan   6M USD LIBOR+   5.00%   0.75%   5.75%  4/28/2028   1,990,000    1,935,905    1,980,050 
Marriott Ownership Resorts, Inc.  Hotel, Gaming & Leisure  Term Loan (11/19)  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  8/29/2025   1,317,074    1,317,074    1,290,403 
Match Group, Inc, The  Services: Consumer  Term Loan (1/20)  Loan   3M USD LIBOR+   1.75%   0.00%   2.22%  2/15/2027   250,000    249,562    244,895 
Mayfield Agency Borrower Inc. (FeeCo)  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.50%   0.00%   4.71%  2/28/2025   3,392,071    3,369,794    3,375,823 
McAfee, LLC  Services: Business  Term Loan B  Loan   Prime+   2.75%   0.00%   6.00%  9/30/2024   1,642,423    1,638,322    1,638,054 
McGraw-Hill Education, Inc.  Media: Advertising, Printing & Publishing  Term Loan (07/21)  Loan   3M USD LIBOR+   4.75%   0.50%   5.26%  7/28/2028   1,995,000    1,976,108    1,975,050 
MedAssets Software Inter Hldg, Inc.  High Tech Industries  Term Loan (11/21) (USD)  Loan   3M USD LIBOR+   4.00%   0.50%   4.50%  11/17/2028   500,000    492,500    496,250 
Mermaid Bidco Inc.  High Tech Industries  Term Loan B2  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  12/22/2027   993,756    990,577    976,366 
Messer Industries, LLC  Chemicals, Plastics, & Rubber  Term Loan B  Loan   3M USD LIBOR+   2.50%   0.00%   2.72%  3/1/2026   3,381,477    3,366,633    3,341,677 
Michaels Companies Inc  Retail  Term Loan B (Magic Mergeco)  Loan   3M USD LIBOR+   4.25%   0.75%   5.00%  4/8/2028   2,492,500    2,474,302    2,312,492 

 

59

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Milk Specialties Company  Beverage, Food & Tobacco  Term Loan (6/21)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  8/15/2025   3,801,560    3,774,075    3,782,552 
MJH Healthcare Holdings, LLC  Healthcare & Pharmaceuticals  Term Loan B (01/22)  Loan   1M USD SOFR+   3.50%   0.50%   4.00%  1/28/2029   250,000    248,782    247,500 
MKS Instruments, Inc.  High Tech Industries  Term Loan B6  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  2/2/2026   868,529    863,296    862,562 
MRC Global Inc.  Metals & Mining  Term Loan B2  Loan   1M USD LIBOR+   3.00%   0.00%   3.21%  9/20/2024   351,484    351,116    348,848 
MW Industries, Inc. (Helix Acquisition Holdings)  Capital Equipment  Term Loan (2019 Incremental)  Loan   3M USD LIBOR+   3.75%   0.00%   3.97%  9/30/2024   2,842,097    2,812,930    2,765,730 
NAB Holdings, LLC (North American Bancard)  Banking, Finance, Insurance & Real Estate  Term Loan (11/21)  Loan   1M USD SOFR+   3.00%   0.50%   3.50%  11/17/2028   3,000,000    2,992,613    2,950,710 
Natgasoline LLC  Chemicals, Plastics, & Rubber  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   3.75%  11/14/2025   3,472,277    3,448,686    3,411,513 
National Mentor Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan 2/21  Loan   1M USD LIBOR+   3.75%   0.75%   4.50%  3/2/2028   2,763,891    2,753,599    2,704,771 
National Mentor Holdings, Inc.  Healthcare & Pharmaceuticals  Term Loan C 2/21  Loan   3M USD LIBOR+   3.75%   0.75%   4.50%  3/2/2028   87,464    87,078    85,593 
National Mentor Holdings, Inc. (a)  Healthcare & Pharmaceuticals  Delayed Draw Term Loan 2/21  Loan   N/A    N/A      N/A      N/A    3/2/2028   -    -    (2,758)
Neenah, Inc.  Forest Products & Paper  Term Loan B (03/21)  Loan   3M USD LIBOR+   3.00%   0.50%   3.50%  4/6/2028   1,990,000    1,981,133    1,960,150 
NEW ERA CAP, LLC  Consumer goods: Durable  Term Loan (01/22)  Loan   6M USD LIBOR+   6.00%   0.75%   6.75%  7/13/2027   1,000,000    998,828    997,500 
Nexstar Broadcasting, Inc. (Mission Broadcasting)  Media: Broadcasting & Subscription  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   2.61%  9/18/2026   1,113,795    1,103,364    1,107,146 
Next Level Apparel, Inc.  Retail  Term Loan  Loan   3M USD WIBOR+   5.50%   1.00%   6.50%  8/9/2024   1,725,340    1,717,025    1,690,834 
NM Z Parent Inc (Zep Inc)  Chemicals, Plastics, & Rubber  Term Loan  Loan   12M USD LIBOR+   4.00%   1.00%   5.00%  8/9/2024   871,151    869,399    842,838 
NorthPole Newco S.a.r.l (b), (d)  Aerospace & Defense  Term Loan  Loan   3M USD LIBOR+   7.00%   0.00%   7.22%  3/3/2025   5,348,887    5,028,659    1,537,805 
NortonLifeLock Inc.  High Tech Industries  Term Loan B  Loan   3M USD SOFR+   2.00%   0.50%   2.50%  1/28/2029   1,500,000    1,492,500    1,480,620 
Novae LLC  Automotive  Term Loan B  Loan   1M USD SOFR+   5.00%   0.75%   5.75%  12/22/2028   1,555,556    1,540,210    1,540,000 

 

60

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Novae LLC (a)  Automotive  Delayed Draw Term Loan  Loan   N/A    N/A      N/A      N/A    12/22/2028   -    -    (4,444)
Novolex Holdings, Inc (Flex Acquisition)  Containers, Packaging & Glass  Term Loan (02/21)  Loan   3M USD LIBOR+   3.50%   0.50%   4.00%  3/2/2028   987,555    983,296    983,437 
Nuvei Technologies Corp.  High Tech Industries  US Term Loan  Loan   1M USD LIBOR+   2.50%   0.50%   3.00%  9/29/2025   2,238,750    2,234,198    2,210,766 
Olaplex, Inc.  Consumer goods: Non-durable  Term Loan (2/22)  Loan   1M USD SOFR+   3.75%   0.50%   4.25%  2/23/2029   1,000,000    997,500    996,250 
Organon & Co.  Healthcare & Pharmaceuticals  Term Loan USD  Loan   6M USD LIBOR+   3.00%   0.50%   3.50%  6/2/2028   2,410,417    2,399,629    2,397,617 
Pacific Gas and Electric Company  Utilities: Electric  Term Loan  Loan   3M USD LIBOR+   3.00%   0.50%   3.50%  6/18/2025   1,479,969    1,474,197    1,449,999 
PACTIV EVERGREEN GROUP HOLDINGS INC.  Containers, Packaging & Glass  Term Loan B  Loan   1M USD LIBOR+   3.50%   0.50%   4.00%  9/20/2028   997,500    992,792    984,473 
Padagis LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   3M USD LIBOR+   4.75%   0.50%   5.25%  7/6/2028   941,176    932,470    934,118 
Panther Guarantor II, L.P. (Forcepoint)  High Tech Industries  Term Loan 1/21  Loan   3M USD LIBOR+   4.50%   0.50%   5.00%  1/7/2028   497,500    494,346    493,520 
Pathway Partners Vet Management Company LLC  Services: Business  Term Loan  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  3/30/2027   491,473    482,640    486,804 
PCI Gaming Authority  Hotel, Gaming & Leisure  Term Loan  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  5/29/2026   809,038    806,361    800,188 
PEARLS (Netherlands) Bidco B.V.  Chemicals, Plastics, & Rubber  USD Term Loan (02/22)  Loan   3M USD SOFR+   4.00%   0.50%   4.50%  2/4/2029   1,000,000    997,500    989,580 
PECF USS INTERMEDIATE HOLDING III CORPORATION  Environmental Industries  Term Loan B  Loan   1M USD LIBOR+   4.25%   0.50%   4.75%  12/15/2028   100,000    99,777    99,391 
PEDIATRIC ASSOCIATES HOLDING COMPANY, LLC  Healthcare & Pharmaceuticals  Term Loan (12/22)  Loan   3M USD LIBOR+   3.50%   0.00%   3.84%  12/28/2028   1,302,632    1,296,159    1,291,234 

 

61

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
PEDIATRIC ASSOCIATES HOLDING COMPANY, LLC (a)  Healthcare & Pharmaceuticals  Delayed Draw Term Loan (12/21)  Loan   N/A    N/A      N/A      N/A    12/28/2028   -    -    (1,727)
Penn National Gaming  Hotel, Gaming & Leisure  Term Loan B-1  Loan   1M USD LIBOR+   2.25%   0.75%   3.00%  10/15/2025   1,762,675    1,715,292    1,746,370 
Peraton Corp.  Aerospace & Defense  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.75%   4.50%  2/1/2028   5,459,994    5,439,162    5,425,869 
PHYSICIAN PARTNERS, LLC  Healthcare & Pharmaceuticals  Term Loan  Loan   1M USD SOFR+   4.00%   0.50%   4.50%  12/23/2028   2,000,000    1,980,245    1,985,000 
Ping Identity Corporation  High Tech Industries  Term Loan B (11/21)  Loan   6M USD SOFR+   3.75%   0.50%   4.45%  11/22/2028   1,000,000    995,074    990,000 
Pitney Bowes Inc  Services: Business  Term Loan B  Loan   1M USD LIBOR+   4.00%   0.00%   4.21%  3/17/2028   2,977,500    2,960,793    2,944,003 
Pixelle Specialty Solutions LLC  Forest Products & Paper  Term Loan  Loan   1M USD LIBOR+   6.50%   1.00%   7.50%  10/31/2024   3,535,026    3,515,981    3,504,837 
Plastipak Holdings Inc.  Containers, Packaging & Glass  Term Loan B (11/21)  Loan   1M USD LIBOR+   2.50%   0.50%   3.00%  11/17/2028   2,000,000    1,990,299    1,974,380 
Playtika Holding Corp.  High Tech Industries  Term Loan B (3/21)  Loan   1M USD LIBOR+   2.75%   0.00%   2.96%  3/13/2028   4,466,250    4,457,371    4,415,513 
PMHC II, INC.  Chemicals, Plastics, & Rubber  Term Loan (02/22)  Loan   3M USD SOFR+   4.25%   0.50%   4.75%  2/2/2029   2,000,000    1,990,000    1,968,340 
PointClickCare Technologies, Inc.  High Tech Industries  Term Loan B  Loan   6M USD LIBOR+   3.00%   0.75%   3.75%  12/29/2027   496,250    494,183    486,945 
Polymer Process Holdings, Inc.  Containers, Packaging & Glass  Term Loan  Loan   1M USD LIBOR+   4.75%   0.75%   5.50%  2/12/2028   5,458,750    5,404,639    5,333,635 
Pre-Paid Legal Services, Inc.  Services: Consumer  Term Loan (12/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  12/15/2028   3,000,000    2,975,633    2,973,000 
Presidio, Inc.  Services: Business  Term Loan B (1/20)  Loan   1M USD LIBOR+   3.50%   0.00%   3.71%  1/22/2027   492,500    491,700    488,038 
Prime Security Services Borrower, LLC (ADT)  Services: Consumer  Term Loan (1/21)  Loan   6M USD LIBOR+   2.75%   0.75%   3.50%  9/23/2026   3,556,300    3,553,818    3,513,837 
PRIORITY HOLDINGS, LLC  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   5.75%   1.00%   6.75%  4/27/2027   2,985,000    2,957,411    2,973,806 
PriSo Acquisition Corporation  Construction & Building  Term Loan (01/21)  Loan   3M USD LIBOR+   3.25%   0.75%   4.00%  12/28/2027   496,248    494,100    487,832 
Project Leopard Holdings Inc  High Tech Industries  Term Loan  Loan   6M USD LIBOR+   4.75%   1.00%   5.75%  7/5/2024   495,000    494,242    492,678 
Prometric Inc. (Sarbacane Bidco)  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   3.00%   1.00%   4.00%  1/29/2025   481,388    480,315    474,017 
PUG LLC  Services: Consumer  Term Loan B (02/20)  Loan   1M USD LIBOR+   3.50%   0.00%   3.71%  2/12/2027   485,075    483,298    475,374 
QUEST BORROWER LIMITED  High Tech Industries  Term Loan (1/22)  Loan   3M USD SOFR+   4.25%   0.50%   4.75%  1/19/2029   2,000,000    1,980,237    1,968,760 
Rackspace Technology Global, Inc.  High Tech Industries  Term Loan (1/21)  Loan   1M USD LIBOR+   2.75%   0.75%   3.50%  2/15/2028   496,250    494,141    480,519 

 

62

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
RealPage, Inc.  High Tech Industries  Term Loan (04/21)  Loan   1M USD LIBOR+   3.25%   0.50%   3.75%  4/24/2028   997,500    995,328    985,720 
Renaissance Learning, Inc.  Services: Consumer  Term Loan (5/18)  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  5/30/2025   2,969,141    2,946,381    2,922,496 
Rent-A-Center, Inc.  Retail  Term Loan B2 (9/21)  Loan   1M USD LIBOR+   3.25%   0.50%   3.81%  2/17/2028   993,744    991,647    973,869 
Research Now Group, Inc  Media: Advertising, Printing & Publishing  Term Loan  Loan   6M USD LIBOR+   5.50%   1.00%   6.50%  12/20/2024   4,343,378    4,268,021    4,251,082 
Resideo Funding Inc.  Services: Consumer  Term Loan (1/21)  Loan   1M USD LIBOR+   2.25%   0.50%   2.75%  2/11/2028   1,488,750    1,486,251    1,481,306 
Resolute Investment Managers (American Beacon), Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/20)  Loan   3M USD LIBOR+   4.25%   1.00%   5.25%  4/30/2024   3,084,702    3,078,180    3,067,366 
Restoration Hardware, Inc.  Retail  Term Loan (9/21)  Loan   3M USD LIBOR+   2.50%   0.50%   3.00%  10/20/2028   3,497,500    3,489,704    3,456,509 
Reynolds Consumer Products LLC  Containers, Packaging & Glass  Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  1/29/2027   1,291,932    1,290,988    1,271,829 
Reynolds Group Holdings Inc.  Metals & Mining  Term Loan B2  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  2/5/2026   3,465,000    3,449,546    3,406,545 
Robertshaw US Holding Corp.  Consumer goods: Durable  Term Loan B  Loan   6M USD LIBOR+   3.50%   1.00%   4.50%  2/28/2025   962,500    961,492    877,800 
Rocket Software, Inc.  High Tech Industries  Term Loan (11/18)  Loan   1M USD LIBOR+   4.25%   0.00%   4.46%  11/28/2025   2,905,190    2,897,593    2,876,138 
Russell Investments US Inst’l Holdco, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (10/20)  Loan   6M USD LIBOR+   3.50%   1.00%   4.50%  6/2/2025   5,637,965    5,601,072    5,592,185 
RV Retailer LLC  Automotive  Term Loan  Loan   3M USD SOFR+   3.75%   0.75%   4.50%  2/8/2028   1,985,000    1,967,852    1,951,513 
Ryan Specialty Group LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   3.00%   0.75%   3.75%  9/1/2027   493,750    487,862    489,583 
S&S HOLDINGS LLC  Services: Business  Term Loan  Loan   3M USD LIBOR+   5.00%   0.50%   5.50%  3/10/2028   2,483,744    2,427,454    2,458,906 
Sally Holdings LLC  Retail  Term Loan B  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  7/5/2024   748,409    746,932    740,925 
Samsonite International S.A.  Consumer goods: Non-durable  Term Loan B2  Loan   1M USD LIBOR+   3.00%   0.75%   3.75%  4/25/2025   987,538    967,436    979,519 
Schweitzer-Mauduit International, Inc.  High Tech Industries  Term Loan B  Loan   1M USD LIBOR+   3.75%   0.75%   4.50%  4/20/2028   2,985,000    2,969,212    2,895,450 
Scientific Games Holdings LP  Hotel, Gaming & Leisure  Term Loan B  Loan   3M USD SOFR+   3.50%   0.50%   4.00%  2/3/2029   500,000    498,750    496,460 
SETANTA AIRCRAFT LEASING DAC  Aerospace & Defense  Term Loan  Loan   3M USD LIBOR+   2.00%   0.00%   2.14%  11/2/2028   1,000,000    997,653    993,440 
Signify Health, LLC  Healthcare & Pharmaceuticals  Term Loan B (6/21)  Loan   3M USD LIBOR+   3.25%   0.50%   3.75%  6/16/2028   498,750    496,482    492,206 
Sitel Worldwide Corporation  Services: Business  USD Term Loan (7/21)  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  8/28/2028   1,995,000    1,985,688    1,981,294 

 

63

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
SiteOne Landscape Supply, LLC  Services: Business  Term Loan (3/21)  Loan   3M USD LIBOR+   2.00%   0.50%   2.50%  3/18/2028   785,769    784,048    780,528 
SMG US Midco 2, Inc.  Services: Business  Term Loan (01/20)  Loan   3M USD LIBOR+   2.50%   0.00%   2.80%  1/23/2025   490,000    490,000    472,238 
Sotheby’s  Services: Business  Term Loan (7/21)  Loan   3M USD LIBOR+   4.50%   0.50%   5.00%  1/15/2027   3,256,472    3,207,096    3,240,190 
Sparta U.S. HoldCo LLC  Chemicals, Plastics, & Rubber  Term Loan (04/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.25%  8/2/2028   2,000,000    1,990,687    1,985,000 
Specialty Pharma III Inc.  Services: Business  Term Loan  Loan   1M USD LIBOR+   4.50%   0.75%   5.25%  3/31/2028   1,995,000    1,977,135    1,975,050 
Spectrum Brands, Inc.  Consumer goods: Durable  Term Loan (2/21)  Loan   3M USD LIBOR+   2.00%   0.50%   2.50%  3/3/2028   496,250    495,145    494,389 
Spin Holdco, Inc.  Services: Consumer  Term Loan 3/21  Loan   3M USD LIBOR+   4.00%   0.75%   4.75%  3/4/2028   2,977,500    2,962,439    2,958,474 
SRAM, LLC  Consumer goods: Durable  Term Loan (05/21)  Loan   1M USD LIBOR+   2.75%   0.50%   3.26%  5/12/2028   3,600,000    3,594,517    3,571,488 
SS&C Technologies, Inc.  Services: Business  Term Loan B3  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  4/16/2025   190,170    189,956    186,819 
SS&C Technologies, Inc.  Services: Business  Term Loan B4  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  4/16/2025   154,375    154,203    151,655 
SS&C Technologies, Inc.  Services: Business  Term Loan B-5  Loan   1M USD LIBOR+   1.75%   0.00%   1.96%  4/16/2025   477,615    477,001    469,376 
STANDARD INDUSTRIES INC.  Construction & Building  Term Loan B  Loan   3M USD LIBOR+   2.50%   0.50%   3.00%  9/22/2028   640,250    634,225    637,503 
Staples, Inc.  Wholesale  Term Loan (03/19)  Loan   3M USD LIBOR+   5.00%   0.00%   5.13%  4/16/2026   4,386,462    4,265,782    4,154,813 
Stars Group Inc. (The)  Hotel, Gaming & Leisure  Term Loan  Loan   3M USD LIBOR+   2.25%   0.00%   2.47%  7/21/2026   1,995,000    1,990,864    1,972,776 
Storable, Inc  High Tech Industries  Term Loan B  Loan   6M USD LIBOR+   3.25%   0.50%   3.75%  4/17/2028   500,000    498,861    494,375 
Superannuation & Investments US LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   3.75%   0.50%   4.25%  12/1/2028   1,000,000    990,274    995,940 
Sylvamo Corporation  Forest Products & Paper  Term Loan  Loan   1M USD LIBOR+   4.50%   0.50%   5.00%  8/18/2028   1,093,333    1,082,992    1,085,133 
Syncsort Incorporated  High Tech Industries  Term Loan B (10/21)  Loan   3M USD LIBOR+   4.00%   0.75%   4.75%  4/24/2028   2,495,000    2,493,770    2,465,684 
Syniverse Holdings, Inc.  Telecommunications  Term Loan  Loan   3M USD SOFR+   4.25%   0.50%   4.75%  2/1/2029   500,000    495,000    499,375 
Tenable Holdings, Inc.  Services: Business  Term Loan B (6/21)  Loan   6M USD LIBOR+   2.75%   0.50%   3.27%  7/7/2028   1,000,000    997,633    986,250 
Teneo Holdings LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD SOFR+   5.25%   1.00%   6.25%  7/15/2025   4,428,522    4,355,261    4,383,129 
Tenneco Inc  Capital Equipment  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.00%   3.21%  10/1/2025   1,455,000    1,447,215    1,444,088 
Ten-X, LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   4.00%   1.00%   5.00%  9/27/2024   1,920,000    1,918,652    1,881,600 
The Dun & Bradstreet Corporation  Services: Business  Term Loan  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  2/6/2026   1,000,000    998,750    988,330 

 

64

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
The Dun & Bradstreet Corporation  Services: Business  Term Loan B  Loan   1M USD SOFR+   3.25%   0.00%   3.44%  1/5/2029   250,000    248,180    246,668 
THE KNOT WORLDWIDE INC.  Services: Consumer  Term Loan (1/22)  Loan   1M USD SOFR+   4.50%   0.00%   4.67%  12/19/2025   4,869,796    4,863,346    4,829,231 
The Octave Music Group, Inc (Touchtunes)  Services: Business  Term Loan B  Loan   1M USD LIBOR+   6.00%   1.00%   7.00%  5/29/2025   2,893,526    2,872,208    2,871,824 
Thor Industries, Inc.  Automotive  USD Term Loan (3/21)  Loan   1M USD LIBOR+   3.00%   0.00%   3.25%  2/1/2026   2,810,435    2,763,310    2,797,563 
Tosca Services, LLC  Containers, Packaging & Glass  Term Loan (2/21)  Loan   1M USD LIBOR+   3.50%   0.75%   4.25%  8/18/2027   495,000    489,079    487,575 
Trans Union LLC  Banking, Finance, Insurance & Real Estate  Term Loan  Loan   1M USD LIBOR+   2.00%   0.50%   2.50%  12/1/2028   870,968    868,877    860,804 
Transdigm, Inc.  Aerospace & Defense  Term Loan G (02/20)  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  8/22/2024   4,024,167    4,026,414    3,959,700 
Travel Leaders Group, LLC  Hotel, Gaming & Leisure  Term Loan B (08/18)  Loan   1M USD LIBOR+   4.00%   0.00%   4.21%  1/25/2024   2,412,500    2,411,191    2,268,353 
TRITON WATER HOLDINGS, INC.  Beverage, Food & Tobacco  Term Loan (03/21)  Loan   3M USD LIBOR+   3.50%   0.50%   4.00%  3/31/2028   1,492,500    1,485,884    1,454,352 
Tronox Pigments (Netherlands) B.V.  Chemicals, Plastics, & Rubber  Term Loan  Loan   3M USD LIBOR+   2.25%   0.00%   2.47%  3/10/2028   346,923    346,183    341,719 
TruGreen Limited Partnership  Services: Consumer  Term Loan  Loan   1M USD LIBOR+   4.00%   0.75%   4.75%  10/29/2027   964,241    957,748    961,830 

 

65

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Uber Technologies, Inc.  Transportation: Consumer  Term Loan B (2/21)  Loan   1M USD LIBOR+   3.50%   0.00%   3.71%  2/25/2027   3,947,943    3,909,627    3,905,740 
Ultra Clean Holdings, Inc.  High Tech Industries  Incremental Term Loan 3/21  Loan   1M USD LIBOR+   3.75%   0.00%   3.96%  8/27/2025   884,205    880,505    882,366 
Unimin Corporation  Metals & Mining  Term Loan (12/20)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  7/31/2026   496,815    471,432    490,853 
United Natural Foods, Inc  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.25%   0.00%   3.46%  10/22/2025   1,624,974    1,562,482    1,616,166 
United Road Services Inc.  Transportation: Cargo  Term Loan (10/17)  Loan   6M USD LIBOR+   5.75%   1.00%   6.75%  9/1/2024   920,843    915,490    826,457 
Univar Inc.  Chemicals, Plastics, & Rubber  Term Loan B6  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  6/2/2028   1,990,000    1,980,782    1,974,458 
Univision Communications Inc.  Media: Broadcasting & Subscription  Term Loan B (6/21)  Loan   1M USD LIBOR+   3.25%   0.75%   4.00%  3/15/2026   2,471,487    2,464,765    2,451,913 
US Ecology, Inc.  Environmental Industries  Term Loan B  Loan   1M USD LIBOR+   2.50%   0.00%   2.71%  11/2/2026   490,000    489,302    488,040 
Utz Quality Foods, LLC  Beverage, Food & Tobacco  Term Loan B  Loan   1M USD LIBOR+   3.00%   0.00%   3.21%  1/20/2028   1,847,121    1,844,606    1,827,264 
Vaco Holdings, LLC  Services: Business  Term Loan (01/22)  Loan   1M USD SOFR+   5.00%   0.75%   5.75%  1/19/2029   250,000    248,777    248,124 
Verifone Systems, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan (7/18)  Loan   3M USD LIBOR+   4.00%   0.00%   4.50%  8/20/2025   1,382,319    1,377,042    1,354,672 
Vertex Aerospace Services Corp  Aerospace & Defense  Term Loan (10/21)  Loan   1M USD LIBOR+   4.00%   0.75%   4.75%  12/6/2028   1,000,000    995,345    992,080 
VFH Parent LLC  Banking, Finance, Insurance & Real Estate  Term Loan (01/22)  Loan   Daily SOFR+   3.00%   0.50%   3.50%  1/12/2029   3,100,888    3,092,414    3,071,833 
Virtus Investment Partners, Inc.  Banking, Finance, Insurance & Real Estate  Term Loan B (9/21)  Loan   1M USD LIBOR+   2.25%   0.00%   2.36%  9/28/2028   2,992,500    2,982,995    2,971,942 
Vistra Energy Corp  Utilities: Electric  2018 Incremental Term Loan  Loan   1M USD LIBOR+   1.75%   0.00%   1.87%  12/31/2025   907,176    906,677    890,075 
Vizient, Inc  Healthcare & Pharmaceuticals  Term Loan B-6  Loan   1M USD LIBOR+   2.00%   0.00%   2.21%  5/6/2026   486,250    485,567    480,779 
VM Consolidated, Inc.  Construction & Building  Term Loan B (3/21)  Loan   6M USD LIBOR+   3.25%   0.00%   3.60%  3/19/2028   2,339,327    2,336,223    2,322,951 
Vouvray US Finance LLC  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   3.00%   1.00%   4.00%  3/11/2024   476,250    476,250    411,837 

 

66

 

 

Issuer Name  Industry  Asset Name  Asset
Type
  Reference Rate/Spread  LIBOR Floor   Current Rate (All In)   Maturity Date  Principal/
Number of Shares
   Cost   Fair Value 
Warner Music Group Corp. (WMG Acquisition Corp.)  Hotel, Gaming & Leisure  Term Loan G  Loan   1M USD LIBOR+   2.13%   0.00%   2.33%  1/20/2028   1,250,000    1,249,760    1,234,763 
Wastequip, LLC (HPCC Merger/Patriot Container)  Environmental Industries  Term Loan (3/18)  Loan   1M USD LIBOR+   3.75%   1.00%   4.75%  3/15/2025   489,822    488,550    469,004 
Watlow Electric Manufacturing Company  High Tech Industries  Term Loan B  Loan   3M USD LIBOR+   3.75%   0.50%   4.25%  3/2/2028   2,481,250    2,470,270    2,452,294 
West Corporation  Telecommunications  Term Loan B (Olympus Merger)  Loan   3M USD LIBOR+   4.00%   1.00%   5.00%  10/10/2024   1,086,078    1,047,433    967,424 
West Corporation  Telecommunications  Term Loan B  Loan   3M USD LIBOR+   3.50%   1.00%   4.50%  10/10/2024   2,599,274    2,562,059    2,301,449 
WEX Inc.  Services: Business  Term Loan B (3/21)  Loan   1M USD LIBOR+   2.25%   0.00%   2.46%  3/31/2028   2,985,000    2,974,005    2,937,419 
WildBrain Ltd.  Media: Diversified & Production  Term Loan  Loan   1M USD LIBOR+   4.25%   0.75%   5.00%  3/27/2028   1,985,000    1,949,907    1,966,401 
WP CITYMD BIDCO LLC  Services: Consumer  Term Loan B  Loan   6M USD LIBOR+   3.25%   0.50%   3.75%  12/22/2028   7,424,013    7,399,065    7,355,340 
Xperi Corporation  High Tech Industries  Term Loan  Loan   1M USD LIBOR+   3.50%   0.00%   3.71%  6/8/2028   2,741,617    2,730,066    2,719,355 
ZEBRA BUYER LLC  Banking, Finance, Insurance & Real Estate  Term Loan 4/21  Loan   3M USD LIBOR+   3.25%   0.50%   3.75%  11/1/2028   887,097    883,013    882,661 
Zekelman Industries, Inc.  Metals & Mining  Term Loan (01/20)  Loan   1M USD LIBOR+   2.00%   0.00%   2.14%  1/25/2027   968,914    968,914    954,622 
Zodiac Pool Solutions  Consumer goods: Durable  Term Loan (1/22)  Loan   1M USD SOFR+   2.00%   0.50%   2.50%  1/19/2029   500,000    498,783    493,440 
                                              
                                      $653,022,265   $638,963,350 

 

67

 

 

   Number of Shares   Cost   Fair Value 
Cash and cash equivalents            
U.S. Bank Money Market (c)   6,171,793   $6,171,793   $6,171,793 
Total cash and cash equivalents   6,171,793   $6,171,793   $6,171,793 

 

(a)All or a portion of this investment has an unfunded commitment as of February 28, 2022
(b)As of February 28, 2022, the investment was in default and on non-accrual status.
(c)Included within cash and cash equivalents in Saratoga CLO’s Statements of Assets and Liabilities as of February 28, 2022.
(d)Investments include Payment-in-Kind Interest.

 

LIBOR—London Interbank Offered Rate

SOFR - Secured Overnight Financing Rate

WIBOR - Warsaw Interbank Offered Rate

 

1M USD LIBOR—The 1 month USD LIBOR rate as of February 28, 2022 was 0.23%.

2M USD LIBOR—The 2 month USD LIBOR rate as of February 28, 2022 was 0.50%.

3M USD LIBOR—The 3 month USD LIBOR rate as of February 28, 2022 was 0.51%.

6M USD LIBOR—The 6 month USD LIBOR rate as of February 28, 2022 was 0.80%.

12M USD LIBOR - The 12 month USD LIBOR rate as of February 28, 2022 was 1.28%.

3 PL WIBOR - The 3 month PL WIBOR rate as of February 28, 2022 was 3.65%.

Daily SOFR- The daily SOFR rate as of February 28, 2022 was 0.05%.

1M SOFR - The 1 month SOFR rate as of February 28, 2022 was 0.05%.

3M SOFR - The 3 month SOFR rate as of February 28, 2022 was 0.04%.

Prime—The Prime Rate as of February 28, 2022 was 3.25%.

 

68

 

 

Note 5. Investment in SLF JV

 

On October 26, 2021, the Company and TJHA entered into the LLC Agreement to co-manage SLF JV. SLF JV is invested in SLF 2021, which is a wholly owned subsidiary of SLF JV. SLF 2021 was formed for the purpose of making investments in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds in the primary and secondary markets.

 

The Company and TJHA have equal voting interest on all material decisions with respect to SLF JV, including those involving its investment portfolio, and equal control of corporate governance. No management fee is charged to SLF JV as control and management of SLF JV is shared equally.

 

The Company and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, with the Company providing $43.75 million and TJHA providing $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed rate of 10.0% per annum and is due and payable in full on June 15, 2023. As of May 31, 2022, the Company and TJHA’s investment in SLF JV consisted of an unsecured note of $13.1 million and $1.9 million, respectively; and membership interest of $13.1 million and $1.9 million, respectively. As of May 31, 2022 and February 28, 2022, the Company’s investment in the unsecured note of SLF JV had a fair value of $13.1 million and $13.1 million, respectively, and the Company’s investment in the membership interests of SLF JV had a fair value of $6.6 million and $12.0, respectively.

 

As of May 31, 2022, the Company earned approximately $0.3 million of interest income related to SLF JV, which is included in interest income. As of May 31, 2022 and February 28, 2022, $0.1 million and $0.09 million, respectively, of interest income related to SLF JV was included in interest receivable.

 

SLF JV’s investment in SLF 2021 is in the form of an unsecured loan. The unsecured note will pay a floating rate of SOFR plus 7.00% per annum and is due and payable in full on June 9, 2023. As of May 31, 2022, SLF JV’s investment in SLF 2021 had an aggregate fair value of approximately $19.8 million.

 

The Company has determined that SLF JV is an investment company under ASC 946; however, in accordance with such guidance the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary. SLF JV is not a wholly-owned investment company subsidiary as the Company and TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest. Furthermore, ASC 810, Consolidation concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, the Company does not consolidate SLF JV.

 

Note 6. Income Taxes

 

SIA-Avionte, Inc., SIA-AX, Inc., SIA-GH, Inc., SIA-MAC, Inc., SIA-PEP Inc., SIA-PP Inc., SIA-TG, Inc., SIA-TT Inc., SIA-Vector, Inc., and SIA-VR, Inc. each 100% owned by the Company, are each filing standalone C Corporation tax returns for federal and state purposes. As separately regarded entities for tax purposes, these entities are taxed at normal corporate rates. For tax purposes, any distributions by the entities to the parent company would generally need to be distributed to the Company’s shareholders. Generally, such distributions of the entities’ income to the Company’s shareholders will be considered as qualified dividends for tax purposes. The entities’ taxable net income will differ from U.S. GAAP net income because of deferred tax temporary differences arising from net operating losses and unrealized appreciation and deprecation of securities held. Deferred tax assets and liabilities are measured using enacted corporate federal and state tax rates expected to apply to taxable income in the years in which those net operating losses are utilized and the unrealized gains and losses are realized. Deferred tax assets and deferred tax liabilities are netted off by entity, as allowed. The recoverability of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized on the basis of a history of operating losses combined with insufficient projected taxable income or other taxable events in the taxable blockers. In February 2022, SIA-GH, Inc., SIA-TT Inc. and SIA-VR, Inc. received an approved plan of liquidation following the sale of equity held by each of the portfolio companies.

 

The Company may distribute a portion of its realized net long term capital gains in excess of realized net short term capital losses to its stockholders, but may also decide to retain a portion, or all, of its net capital gains and elect to pay the 21% U.S. federal tax on the net capital gain, potentially in the form of a “deemed distribution” to its stockholders. Income tax (provision) relating to an election to retain its net capital gains, including in the form of a deemed distribution, is included as a component of income tax (provision) benefit from realized gains on investments, depending on the character of the underlying taxable income (ordinary or capital gains), on the consolidated statements of operations.

 

69

 

 

Deferred tax assets and liabilities, and related valuation allowance as of May 31, 2022 and February 28, 2022 were as follows:

 

   May 31, 2022   February 28, 2022 
Total deferred tax assets  $2,023,885   $1,991,241 
Total deferred tax liabilities   (1,655,447)   (1,293,496)
Valuation allowance on net deferred tax assets   (1,946,761)   (1,946,760)
Net deferred tax liability  $(1,578,323)  $(1,249,015)

 

As of May 31, 2022, the valuation allowance on deferred tax assets was $1.9 million, which represents the federal and state tax effect of net operating losses and unrealized losses that we do not believe we will realize through future taxable income. Any adjustments to the Company’s valuation allowance will depend on estimates of future taxable income and will be made in the period such determination is made.

 

Net income tax expense for the three months ended May 31, 2022 includes $0.4 million deferred tax expense (benefit) on net change in unrealized appreciation (depreciation) on investments, $0.1 million income tax benefit from realized gain (loss) on investments and ($0.1) million net change in total operating expense, in the consolidated statement of operations, respectively. Net deferred tax (benefit) expense for the three months ended May 31, 2021 includes $0.2 million net change in unrealized appreciation (depreciation) on investments and $0.0 million net change in total operating expense, in the consolidated statement of operations, respectively.

 

Deferred tax temporary differences may include differences for state taxes and joint venture interests.

 

Federal and state income tax (provisions) benefit on investments for the three months ended May 31, 2022 and May 31, 2021:

 

   For the three months ended 
   May 31, 2022   May 31, 2021 
Current        
Federal  $213,842   $- 
State   (78,503)   - 
Net current expense   135,339    - 
Deferred          
Federal   (296,071)   (127,850)
State   (33,236)   (130,213)
Net deferred expense   (329,307)   (258,063)
Net tax provision  $(193,968)  $(258,063)

 

Note 7. Agreements and Related Party Transactions

 

Investment Advisory and Management Agreement

 

On July 30, 2010, the Company entered into the Management Agreement with our Manager. The initial term of the Management Agreement was two years from its effective date, with one-year renewals thereafter subject to certain approvals by our board of directors and/or the Company’s stockholders. Most recently, on July 5, 2022, our board of directors approved the renewal of the Management Agreement for an additional one-year term. Pursuant to the Management Agreement, our Manager implements our business strategy on a day-to-day basis and performs certain services for us, subject to oversight by our board of directors. Our Manager is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investments transactions, asset sales, financings and performing asset management duties. Under the Management Agreement, we have agreed to pay our Manager a management fee for investment advisory and management services consisting of a base management fee and an incentive management fee.

 

70

 

 

Base Management Fee and Incentive Management Fee

 

The base management fee of 1.75% per year is calculated based on the average value of our gross assets (other than cash or cash equivalents, but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters. The base management fee is paid quarterly following the filing of the most recent quarterly report on Form 10-Q.

 

The incentive management fee consists of the following two parts:

 

The first, payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, that exceeds a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter, subject to a “catch-up” provision. Under this provision, in any fiscal quarter, our Manager receives no incentive fee unless our pre-incentive fee net investment income exceeds the hurdle rate of 1.875%. Our Manager will receive 100.0% of pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 2.344% in any fiscal quarter; and 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.344% in any fiscal quarter. There is no accumulation of amounts on the hurdle rate from quarter to quarter, and accordingly there is no claw back of amounts previously paid if subsequent quarters are below the quarterly hurdle rate, and there is no delay of payment if prior quarters are below the quarterly hurdle rate.

 

The second part of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Management Agreement) and equals 20.0% of our “incentive fee capital gains,” which equals our realized capital gains on a cumulative basis from May 31, 2010 through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of any previously paid capital gain incentive fee. Importantly, the capital gains portion of the incentive fee is based on realized gains and realized and unrealized losses from May 31, 2010. Therefore, realized and unrealized losses incurred prior to such time will not be taken into account when calculating the capital gains portion of the incentive fee, and our Manager will be entitled to 20.0% of incentive fee capital gains that arise after May 31, 2010. In addition, for the purpose of the “incentive fee capital gains” calculations, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 will equal the fair value of such investments as of such date.

 

For the three months ended May 31, 2022, the Company did not incur any incentive fees related to pre-incentive fee net investment income. For the three months ended May 31, 2021, the Company incurred $1.6 million in incentive fees related to pre-incentive fee net investment income. For the three months ended May 31, 2022 and May 31, 2021, the Company accrued a (benefit) of $(1.9) million and an expense of $3.7 million in incentive fees related to capital gains.

 

The accrual is calculated using both realized and unrealized capital gains for the period. The actual incentive fee related to capital gains will be determined and payable in arrears at the end of the fiscal year and will include only realized capital gains for the period. As of May 31, 2022, the base management fees accrual was $3.8 million and the incentive fees accrual was $4.9 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities. As of February 28, 2022, the base management fees accrual was $3.2 million and the incentive fees accrual was $9.8 million and is included in base management and incentive fees payable in the accompanying consolidated statements of assets and liabilities.

 

Administration Agreement

 

On July 30, 2010, the Company entered into a separate administration agreement (the “Administration Agreement”) with our Manager, pursuant to which our Manager, as our administrator, has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide managerial assistance on our behalf to those portfolio companies to which we are required to provide such assistance. The initial term of the Administration Agreement was two years from its effective date, with one-year renewals thereafter subject to certain approvals by our board of directors and/or our stockholders. The amount of expenses payable or reimbursable thereunder by the Company was capped at $1.0 million for the initial two-year term of the Administration Agreement and subsequent renewals. On July 8, 2015, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company thereunder, which had not been increased since the inception of the agreement, to $1.3 million. On July 7, 2016, our board of directors approved the renewal of the Administration Agreement for an additional one-year term. On October 5, 2016, our board of directors determined to increase the cap on the payment or reimbursement of expenses by the Company under the Administration Agreement, from $1.3 million to $1.5 million, effective November 1, 2016. On July 11, 2017, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.5 million to $1.75 million, effective August 1, 2017. On July 9, 2018, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $1.75 million to $2.0 million, effective August 1, 2018. On July 9, 2019, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.0 million to $2.225 million effective August 1, 2019. On July 7, 2020, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.225 million to $2.775 million effective August 1, 2020. On July 6, 2021, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $2.775 million to $3.0 million effective August 1, 2021. On July 5, 2022, our board of directors approved the renewal of the Administration Agreement for an additional one-year term and determined to increase the cap on the payment or reimbursement of expenses by the Company from $3.0 million to $3.275 million effective August 1, 2022.

 

71

 

 

For the three months ended May 31, 2022 and May 31, 2021, we recognized $0.8 million and $0.7 million in administrator expenses, respectively, pertaining to bookkeeping, record keeping and other administrative services provided to us in addition to our allocable portion of rent and other overhead related expenses. As of May 31, 2022, $0.1 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities. As of February 28, 2022, $0.3 million of administrator expenses were accrued and included in due to manager in the accompanying consolidated statements of assets and liabilities.

 

Saratoga CLO

 

On December 14, 2018, the Company completed the third refinancing and issuance of the 2013-1 Reset CLO Notes. This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period ending January 2020 was also added. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes and $20.0 million CLO 2013-1 Warehouse Loan were repaid. The Company also paid $2.0 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. During the year ended February 29, 2020, the Company received full payment of $1.7 million from the Saratoga CLO for such transaction costs.

 

In conjunction with the third refinancing and issuance of the 2013-1 Reset CLO Notes on December 14, 2018, the Company is no longer entitled to receive an incentive management fee from Saratoga CLO. See Note 4 for additional information.

 

On February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO. This refinancing, among other things, extended the Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033. The non-call period was extended to February 2022. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million. As part of this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par. Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse 2 Loan were repaid. The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. At August 31, 2021, the outstanding receivable of 2.6 million was repaid in full.

 

On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 million.

 

For the three months ended May 31, 2022 and May 31, 2021, we recognized management fee income of $0.8 million and $0.8 million, respectively, related to the Saratoga CLO.

 

For the three months ended May 31, 2022 and May 31, 2021, the Company neither bought nor sold any investments from the Saratoga CLO.

 

SLF JV

 

On October 26, 2021, the Company and TJHA entered into an LLC Agreement to co-manage the SLF JV. SLF JV is a joint venture that is expected to invest in the debt or equity interests of collateralized loan obligations, loan, notes and other debt instruments.

 

As of May 31, 2022, the Company’s investment in the SLF JV had a fair value of $19.8 million, consisting of an unsecured loan of $13.1 million and membership interest of $6.6 million. In addition, the Company has a receivable of $0.1 million outstanding from the SLF JV, included in Due from Affiliate in the consolidated statements of assets and liabilities.

 

72

 

 

Note 8. Borrowings

 

Credit Facility

 

As a BDC, we are only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage, or, 150% if certain requirements under the 1940 Act are met. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our board of directors, including a majority of our directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act”) of the Company (“independent directors”), approved a minimum asset coverage ratio of 150%. The 150% asset coverage ratio became effective on April 16, 2019. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing. Our asset coverage ratio, as defined in the 1940 Act, was 179.3% as of May 31, 2022 and 209.3% as of February 28, 2022.

 

On April 11, 2007, we entered into a $100.0 million revolving securitized credit facility (the “Revolving Facility”). On May 1, 2007, we entered into a $25.7 million term securitized credit facility (the “Term Facility” and, together with the Revolving Facility, the “Facilities”), which was fully drawn at closing. In December 2007, we consolidated the Facilities by using a draw under the Revolving Facility to repay the Term Facility. In response to the market wide decline in financial asset prices, which negatively affected the value of our portfolio, we terminated the revolving period of the Revolving Facility effective January 14, 2009 and commenced a two-year amortization period during which all principal proceeds from the collateral were used to repay outstanding borrowings. A significant percentage of our total assets had been pledged under the Revolving Facility to secure our obligations thereunder. Under the Revolving Facility, funds were borrowed from or through certain lenders and interest was payable monthly at the greater of the commercial paper rate and our lender’s prime rate plus 4.00% plus a default rate of 2.00% or, if the commercial paper market was unavailable, the greater of the prevailing LIBOR rates and our lender’s prime rate plus 6.00% plus a default rate of 3.00%.

 

On July 30, 2010, we used the net proceeds from (i) the stock purchase transaction and (ii) a portion of the funds available to us under the $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC (the “Madison Credit Facility”), in each case, to pay the full amount of principal and accrued interest, including default interest, outstanding under the Revolving Facility. As a result, the Revolving Facility was terminated in connection therewith. Substantially all of our total assets, other than those held by SBIC LP and SBIC II LP, was pledged under the Madison Credit Facility to secure our obligations thereunder.

 

On February 24, 2012, we amended the Madison Credit Facility to, among other things:

 

expand the borrowing capacity under the Madison Credit Facility from $40.0 million to $45.0 million;

 

extend the period during which we may make and repay borrowings under the Madison Credit Facility from July 30, 2013 to February 24, 2015 (the “Revolving Period”). The Revolving Period may, upon the occurrence of an event of default, by action of the lenders or automatically, be terminated. All borrowings and other amounts payable under the Madison Credit Facility are due and payable five years after the end of the Revolving Period; and

 

remove the condition that we may not acquire additional loan assets without the prior written consent of Madison Capital Funding LLC.

 

On September 17, 2014, we entered into a second amendment to the Madison Credit Facility to, among other things:

 

extend the commitment termination date from February 24, 2015 to September 17, 2017;

 

extend the maturity date of the Madison Credit Facility from February 24, 2020 to September 17, 2022 (unless terminated sooner upon certain events);

 

reduce the applicable margin rate on base rate borrowings from 4.50% to 3.75%, and on LIBOR borrowings from 5.50% to 4.75%; and

 

reduce the floor on base rate borrowings from 3.00% to 2.25%, and on LIBOR borrowings from 2.00% to 1.25%.

 

On May 18, 2017, we entered into a third amendment to the Madison Credit Facility to, among other things:

 

extend the commitment termination date from September 17, 2017 to September 17, 2020;

 

extend the final maturity date of the Madison Credit Facility from September 17, 2022 to September 17, 2025 (unless terminated sooner upon certain events);

 

reduce the floor on base rate borrowings from 2.25% to 2.00%;

 

reduce the floor on LIBOR borrowings from 1.25% to 1.00%; and

 

reduce the commitment fee rate from 0.75% to 0.50% for any period during which the ratio of advances outstanding to aggregate commitments, expressed as a percentage, is greater than or equal to 50%.

 

73

 

 

On April 24, 2020, we entered into a fourth amendment to the Madison Credit Facility to, among other things:

 

permit certain amendments related to the Paycheck Protection Program (“Permitted PPP Amendment”) to Loan Asset Documents;

 

exclude certain debt and interest amounts allowed by the Permitted PPP Amendments from certain calculations related to Net Leverage Ratio, Interest Coverage Ratio and EBITDA; and

 

exclude such Permitted PPP Amendments from constituting a Material Modification.

 

On September 14, 2020, we entered into a fifth amendment to the Madison Credit Facility to, among other things:

 

extend the commitment termination date of the Madison Credit Facility from September 17, 2020 to September 17, 2021, with no change to the maturity date of September 17, 2025.

 

provide for the transition away from the LIBOR Rate in the market, and

 

expand the definition of “Eligible Loan Asset” to allow investments with certain recurring revenue features to qualify as collateral and be included in the borrowing base.

 

On September 13, 2021, we entered into a sixth amendment to the Madison Credit Facility to, among other things:

 

Extend the commitment termination date of the Madison Credit Facility from September 17, 2021 to October 1, 2021, with no change to maturity date of September 17, 2025.

 

On October 4, 2021, all outstanding amounts on the Madison Credit Facility were repaid and the Madison Credit Facility was terminated. The repayment and termination of the Madison Credit Facility resulted in a realized loss on the extinguishment of debt of $0.8 million. 

 

On October 4, 2021, the Company entered into a $50.0 million senior secured revolving credit facility with the Lender, supported by loans held by SIF II and pledged to the Encina Credit Facility. During the first two years following the closing date, SIF II may request an increase in the commitment amount to up to $75.0 million. The terms of the Encina Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of the commitment amount in effect at any time thereafter. The term of the Encina Credit Facility is three years. Advances under the Encina Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary provisions related to the selection by the Lender and the Company of a replacement benchmark rate. The commitment termination date is October 4, 2024.

 

In addition to any fees or other amounts payable under the terms of the Encina Credit Facility, an administrative agent fee per annum equal to $0.1 million is payable in equal monthly installments in arrears.

 

As of May 31, 2022 and February 28, 2022, there were $25.0 million and $12.5 million outstanding under the Encina Credit Facility.

 

During the applicable periods, the Company was in compliance with all of the limitations and requirements of the Encina Credit Facility. Financing costs of $1.4 million related to the Encina Credit Facility have been capitalized and are being amortized over the term of the Encina Credit Facility.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.2 million and $0.2 million of interest expense related to the Encina Credit Facility and the Madison Credit Facility, respectively, which includes commitment and administrative agent fees. For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.1  million and $0.04 million of amortization of deferred financing costs related to the Encina Credit Facility and the Madison Credit Facility, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022, the weighted average interest rate on the outstanding borrowings under the Encina Credit Facility was 4.86%, and the average dollar amount of outstanding borrowings under the Encina Credit Facility was $20.0  million.

 

The Encina Credit Facility contains limitations as to how borrowed funds may be used, such as restrictions on industry concentrations, asset size, weighted average life, currency denomination and collateral interests. The Encina Credit Facility also includes certain requirements relating to portfolio performance, the violation of which could result in the limit of further advances and, in some cases, result in an event of default, allowing the lenders to accelerate repayment of amounts owed thereunder. Availability on the Encina Credit Facility will be subject to a borrowing base calculation, based on, among other things, applicable advance rates (which vary from 50.0% to 75.0% of par or fair value depending on the type of loan asset) and the value of certain “eligible” loan assets included as part of the borrowing base. The Company will pay the lender a commitment fee of 0.75% per year (or 0.50% if the ratio of advances outstanding to aggregate commitments is greater than or equal to 50%) on the unused amount of the Encina Credit Facility.

 

74

 

 

Our borrowing base under the Encina Credit Facility was $58.3 million subject to the Encina Credit Facility cap of $50.0 million at May 31, 2022. For purposes of determining the borrowing base, most assets are assigned the values set forth in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, the May 31, 2022 borrowing base relies upon the valuations set forth in the Annual Report on Form 10-K for the period ended February 28, 2022. The valuations presented in this Quarterly Report on Form 10-Q will not be incorporated into the borrowing base until after this Quarterly Report on Form 10-Q is filed with the SEC.

 

SBA Debentures

 

Our wholly owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which generally approximates equity capital in respective SBIC) and is subject to customary regulatory requirements, including, but not limited to, a periodic examination by the SBA.

 

On August 14, 2019, the Company’s wholly owned subsidiary, SBIC II LP, received an SBIC license from the SBA. SBIC II LP’s SBIC license provides up to $175.0 million in additional long-term capital in the form of SBA debentures. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million, subject to SBA approval. With this license approval, Saratoga can grow its SBA relationship from $150.0 million to $325.0 million of committed capital.

 

As of May 31, 2022, we have funded SBIC LP and SBIC II LP with an aggregate total of equity capital of $75.0 million and $87.5 million, respectively, and have $217.0 million in SBA-guaranteed debentures outstanding, of which $86.0 million is held in SBIC LP and $131.0 million held in SBIC II LP. SBA debentures are non-recourse to us, have a 10-year maturity, and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. SBA current regulations limit the amount that SBIC LP and SBIC II LP may borrow to a maximum of $150.0 million and $175.0 million, respectively, which is up to twice its potential regulatory capital.

 

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25.0% of its investment activity to “smaller enterprises” as defined by the SBA. A smaller enterprise is one that has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

 

SBIC LP and SBIC II LP are subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. Receipt of an SBIC license does not assure that SBIC II LP will receive SBA-guaranteed debenture funding, which is dependent upon SBIC II LP continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to SBIC LP and SBIC II LP assets over our stockholders and debtholders in the event we liquidate SBIC LP and SBIC II LP or the SBA exercises its remedies under the SBA-guaranteed debentures issued by SBIC LP and SBIC II LP upon an event of default.

 

The Company received exemptive relief from the SEC to permit it to exclude the senior securities issued by SBIC subsidiaries from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. This allows the Company increased flexibility under the asset coverage requirement by permitting it to borrow up to $325.0 million more than it would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, the independent directors of the Company approved of the Company becoming subject to a minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150.0% asset coverage ratio became effective on April 16, 2019.

 

As noted above, as of May 31, 2022, there was $217.0 million of SBA debentures outstanding and as of February 28, 2022, there was $185.0 million of SBA debentures outstanding. The carrying amount of the amount outstanding of SBA debentures approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy. Financing costs of $5.0 million and $4.9 million related to the SBA debentures issued by SBIC LP and SBIC II LP, respectively, have been capitalized and are being amortized over the term of the commitment and drawdown.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $1.4 million and $1.2 million of interest expense related to the SBA debentures, respectively. For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.2 million and $0.2 million of amortization of deferred financing costs related to the SBA debentures, respectively. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. The weighted average interest rate during the three months ended May 31, 2022 and May 31, 2021 on the outstanding borrowings of the SBA debentures was 2.58% and 2.93%, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of SBA debentures outstanding was $214.9 million and $158.4 million, respectively.

 

75

 

 

In December 2015, the 2016 omnibus spending bill approved by Congress and signed into law by the President increased the amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding from $225.0 million to $350.0 million, subject to SBA approval. SBA regulations previously limited the amount of SBA-guaranteed debentures that an SBIC may issue to $150.0 million when it has at least $75.0 million in regulatory capital but this has increased to $175.0 million for new licenses when it has at least $87.5 million in regulatory capital. Affiliated SBICs are permitted to issue up to a combined maximum amount of $350.0 million in SBA-guaranteed debentures when they have at least $175.0 million in combined regulatory capital.

 

Notes

 

In May 10, 2013, the Company issued $48.3 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”). The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the New York Stock Exchange (the “NYSE”).

 

On May 29, 2015, the Company entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. Inc. through which the Company may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 2022 Notes with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

 

On December 21, 2016, the Company issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes (as described above), and for general corporate purposes in accordance with our investment objective and strategies.

 

On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of the issued and outstanding 2023 Notes. The 2023 Notes were listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share, and have been delisted following the full redemption on February 7, 2020.

 

At February 29, 2020, the debt was extinguished. As such, it was not fair valued with market quotes and is not fair value leveled. The repayment of the 2023 Notes resulted in a realized loss on the extinguishment of debt of $1.6 million.

 

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “6.25% 2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 6.25% 2025 Notes have been capitalized and were amortized over the term of the 6.25% 2025 Notes.

 

On February 5, 2019, the Company issued an additional $20.0 million in aggregate principal amount of the 6.25% 2025 Notes for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The additional 6.25% 2025 Notes were treated as a single series with the existing 6.25% 2025 Notes under the indenture and had the same terms as the existing 6.25% 2025 Notes. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 6.25% 2025 Notes have been capitalized and were amortized over the term of the 6.25% 2025 Notes.

 

On August 31, 2021, the Company redeemed $60.0 million in aggregate principal amount of the issued and outstanding 6.25% 2025 Notes.  The 6.25% 2025 Notes were listed on the NYSE under the trading symbol of “SAF”, and have been delisted following the full redemption on August 31, 2021.

 

At August 31, 2021, the debt was extinguished. As such, it was not fair valued with market quotes and is not fair value leveled. The repayment of the 6.25% 2025 Notes resulted in a realized loss on the extinguishment of debt of $1.5 million.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.0 million and $0.9 million, respectively, of interest expense and $0.0 million and $0.1 million, respectively, of amortization of deferred financing costs related to the 6.25% 2025 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of 6.25% 2025 Notes outstanding was $0.00 million and $60.0 million, respectively.

 

76

 

 

On June 24, 2020, the Company issued $37.5 million in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25% 2025 Notes”) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million. Offering costs incurred were approximately $0.3 million. On July 6, 2020, the underwriters exercised their option in full to purchase an additional $5.625 million in aggregate principal amount of its 7.25% 2025 Notes. Net proceeds to the Company were $5.4 million after deducting underwriting commissions of approximately $0.2 million. Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020. The 7.25% 2025 Notes mature on June 30, 2025 and commencing June 24, 2022, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 7.25% 2025 Notes have been capitalized and are being amortized over the term of the 7.25% 2025 Notes.

 

As of May 31, 2022, the total 7.25% 2025 Notes outstanding was $43.1 million. The 7.25% 2025 Notes are listed on the NYSE under the trading symbol “SAK” with a par value of $25.00 per share.

 

As of May 31, 2022, the carrying amount and fair value of the 7.25% 2025 Notes was $43.1 million and $43.5 million, respectively. The fair value of the 7.25% 2025 Notes, which are publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy. As of February 28, 2022, the carrying amount and fair value of the 7.25% 2025 Notes was $43.1 million and $43.9 million, respectively.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.8 million and $0.8 million, respectively, of interest expense and $0.08 million and $0.08 million, respectively, of amortization of deferred financing costs related to the 7.25% 2025 Notes. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of the 7.25% 2025 Notes outstanding was $43.1 million and $43.1 million respectively.

 

On July 9, 2020, the Company issued $5.0 million in aggregate principal amount of our 7.75% fixed-rate notes due in 2025 (the “7.75% Notes 2025”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million. Offering costs incurred were approximately $0.1 million. Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020. The 7.75% Notes 2025 mature on July 9, 2025 and may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the 7.75% Notes 2025 have been capitalized and are being amortized over the term of the Notes.

 

77

 

 

As of May 31, 2022, the total 7.75% Notes 2025 outstanding was $5.0 million. The 7.75% Notes 2025 are not listed and have a par value of $25.00 per share. As of February 28, 2022, there was $5.0 million outstanding of the 7.75% Notes 2025. The carrying amount of the amount outstanding of 7.75% Notes 2025 approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.1 million and $0.1 million, respectively, of interest expense and $0.01 million and $0.02 million, respectively, of amortization of deferred financing costs related to the 7.75% Notes 2025. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of 7.75% Notes 2025 outstanding was $5.0 million and $5.0 million respectively.

 

On December 29, 2020, the Company issued $5.0 million in aggregate principal amount of our 6.25% fixed-rate notes due in 2027 (the “6.25% Notes 2027”). Offering costs incurred were approximately $0.1 million. Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021. The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option, on or after December 29, 2024. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the 6.25% Notes 2027. The 6.25% Notes 2027 are not listed and have a par value of $25.00 per share.

 

On January 28, 2021, the Company issued $10.0 million in aggregate principal amount of our 6.25% fixed rate notes due in 2027 (the “6.25% Notes 2027”) for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million. Offering costs incurred were approximately $0.0 million. Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021. The 6.25% Notes 2027 mature on January 28, 2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the 6.25% Notes 2027.

 

As of May 31, 2022, the total 6.25% Notes 2027 outstanding was $15.0 million. The 6.25% Notes 2027 are not listed and have a par value of $25.00 per share. As of February 28, 2022, there was $15.0 million outstanding of the 6.25% Notes 2027. The carrying amount of the amount outstanding of 6.25% Notes 2027 approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.2 million and $0.2 million, respectively, of interest expense and $0.02 million and $0.02 million, respectively, of amortization of deferred financing costs related to the 6.25% Notes 2027. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021 the average dollar amount of 6.25% Notes 2027 outstanding was $15.0 million and $15.0 million respectively.

 

78

 

 

On March 10, 2021, the Company issued $50.0 million in aggregate principal amount of our 4.375% fixed-rate Notes due in 2026 (the “4.375% Notes 2026”) for net proceeds of $49.0 million after deducting underwriting commissions of approximately $1.0 million. Offering costs incurred were approximately $0.2 million.  Interest on the 4.375% Notes 2026 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.375% per year, beginning August 28, 2021. The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed in whole or in part at any time on or after November 28, 2025 at par plus a “make-whole” premium, and thereafter at par. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.2 million related to the 4.375% Notes 2026 have been capitalized and are being amortized over the term of the Notes.

 

On July 15, 2021, the Company issued an additional $125.0 million in aggregate principal amount of the Company’s 4.375% Notes 2026 (the “Additional 4.375% 2026 Notes”) for net proceeds for approximately $123.5 million, based on the public offering price of 101.00% of the aggregate principal amount of the Additional 4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and the offering expenses payable by the Company. The net proceeds from the offering were used to redeem all of the outstanding 6.25% 2025 Notes (as described above), and for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $2.7 million have been capitalized and are being amortized over the term of the Notes.

 

As of May 31, 2022, the total 4.375% Notes 2026 outstanding was $175.0 million. The 4.375% Notes 2026 are not listed and are issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. As of February 28, 2022, there was $175.0 million outstanding of the 4.375% Notes 2026. The carrying amount of the amount outstanding of 4.375% Notes 2026 approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $1.9 million and $0.5 million, respectively, of interest expense, $0.2 million and $0.1 million, respectively, of amortization of deferred financing costs and $0.05 million and $0.0 million, respectively, of amortization of premium on issuance of 4.375% Notes due 2026 (inclusive of the issuance of the Additional 4.375% 2026 Notes). Interest expense, amortization of deferred financing costs and amortization of premium on issuance of notes are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of 4.375% Notes 2026 outstanding was $175.0 million and $50.0 million, respectively.

 

On January 19, 2022, the Company issued $75.0 million in aggregate principal amount of our 4.35% fixed-rate Notes due in 2027 (the “4.35% Notes 2027”) for net proceeds of $73.0 million, based on the public offering price of 99.317% of the aggregate principal amount of the 4.35% Notes 2027, after deducting the underwriting commissions of approximately $1.5 million. Offering costs incurred were approximately $0.2 million. Interest on the 4.35% Notes 2027 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per year, beginning August 28, 2022. The 4.35% Notes 2027 mature on February 28, 2027 and may be redeemed in whole or in part at the Company’s option at any time prior to November 28, 2026, at par plus a “make-whole” premium, and thereafter at par. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.7 million related to the 4.35% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

 

As of May 31, 2022, the total 4.35% Notes 2027 outstanding was $75.0 million. The 4.35% Notes 2027 are not listed and are issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. As of February 28, 2022, there was $75.0 million outstanding. The carrying amount of the amount outstanding of 4.35% Notes 2027 approximates its fair value, which is based on a waterfall analysis showing adequate collateral coverage and would be classified as a Level 3 liability within the fair value hierarchy.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.8 million and $0.0 million, respectively, of interest expense and $0.1 million and $0.0 million, respectively, of amortization of deferred financing costs related to the 4.35% Notes 2027. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of 4.35% Notes 2027 outstanding was $75.0 million and $0.0 million, respectively.

 

On April 27, 2022, the Company issued $87.5 million in aggregate principal amount of our 6.00% fixed-rate notes due 2027 (the “6.00% 2027 Notes”) for net proceeds of $84.8 million after deducting underwriting commissions of approximately $2.7 million. Offering costs incurred were approximately $0.1 million. On May 10, 2022, the underwriters partially exercised their option to purchase an additional $10.0 million in aggregate principal amount of the 6.00% 2027 Notes. Net proceeds to the Company were $9.7 million after deducting underwriting commissions of approximately $0.3 million. Interest on the 6.00% 2027 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.00% per year, beginning August 31, 2022.  The 6.00% 2027 Notes mature on April 30, 2027 and commencing April 27, 2024, may be redeemed in whole or in part at any time or from time to time at our option. We expect to use the net proceeds from this offering to make investments in middle-market companies (including investments made through our SBIC Subsidiaries) in accordance with our investment objective and strategies and for general corporate purposes. We may use the net proceeds from this offering to redeem all of the outstanding 7.25% 2025 Notes, which are redeemable by us commencing June 24, 2022. Financing costs of $3.3 million related to the 6.00% 2027 Notes have been capitalized and are being amortized over the term of the 6.00% 2027 Notes. The 6.00% 2027 Notes are listed on the NYSE under the trading symbol “SAT” with a par value of $25.00 per share.

 

As of May 31, 2022, the carrying amount and fair value of the 6.00% 2027 Notes was $97.5 million and $94.6 million, respectively. The fair value of the 6.00% 2027 Notes, which are publicly traded, is based upon closing market quotes as of the measurement date and would be classified as a Level 1 liability within the fair value hierarchy. As of February 28, 2022, the carrying amount and fair value of the 6.00% 2027 Notes was $0.0 million and $0.0 million, respectively.

 

For the three months ended May 31, 2022 and May 31, 2021, we recorded $0.5 million and $0.0 million, respectively, of interest expense and $0.06 million and $0.0 million, respectively, of amortization of deferred financing costs related to the 6.00% Notes 2027. Interest expense and amortization of deferred financing costs are reported as interest and debt financing expense on the consolidated statements of operations. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of 6.00% Notes 2027 outstanding was $43.8 million and $0.0 million, respectively.

 

79

 

 

SENIOR SECURITIES

(dollar amounts in thousands, except per share data)

 

Class and Year (1)(2)  Total Amount
Outstanding
Exclusive of
Treasury
Securities(3)
   Asset
Coverage
per Unit(4)
   Involuntary
Liquidating
Preference per
Share(5)
   Average
Market
Value per
Share(6)
 
   (in thousands)     
Credit Facility with Encina Lender Finance, LLC                    
Fiscal year 2023 (as of May 31, 2022)  $25,000   $1,793    -    N/A 
Fiscal year 2022 (as of February 28, 2022)  $12,500   $2,093    -    N/A 
Credit Facility with Madison Capital Funding(14)                    
Fiscal year 2021 (as of February 28, 2021)  $-   $3,471    -    N/A 
Fiscal year 2020 (as of February 29, 2020)  $-   $6,071    -    N/A 
Fiscal year 2019 (as of February 28, 2019)  $-   $2,345    -    N/A 
Fiscal year 2018 (as of February 28, 2018)  $-   $2,930    -    N/A 
Fiscal year 2017 (as of February 28, 2017)  $-   $2,710    -    N/A 
Fiscal year 2016 (as of February 29, 2016)  $-   $3,025    -    N/A 
Fiscal year 2015 (as of February 28, 2015)  $9,600   $3,117    -    N/A 
Fiscal year 2014 (as of February 28, 2014)  $-   $3,348    -    N/A 
Fiscal year 2013 (as of February 28, 2013)  $24,300   $5,421    -    N/A 
Fiscal year 2012 (as of February 29, 2012)  $20,000   $5,834    -    N/A 
Fiscal year 2011 (as of February 28, 2011)  $4,500   $20,077    -    N/A 
Fiscal year 2010 (as of February 28, 2010)  $-   $-    -    N/A 
Fiscal year 2009 (as of February 28, 2009)  $-   $-    -    N/A 
Fiscal year 2008 (as of February 29, 2008)  $-   $-    -    N/A 
Fiscal year 2007 (as of February 28, 2007)  $-   $-    -    N/A 
7.50% Notes due 2020(7)                         
Fiscal year 2017 (as of February 28, 2017)  $-   $-    -    N/A 
Fiscal year 2016 (as of February 29, 2016)  $61,793   $3,025    -   $25.24(8)
Fiscal year 2015 (as of February 28, 2015)  $48,300   $3,117    -   $25.46(8)
Fiscal year 2014 (as of February 28, 2014)  $48,300   $3,348    -   $25.18(8)
Fiscal year 2013 (as of February 28, 2013)  $-   $-    -    N/A 
Fiscal year 2012 (as of February 29, 2012)  $-   $-    -    N/A 
Fiscal year 2011 (as of February 28, 2011)  $-   $-    -    N/A 
Fiscal year 2010 (as of February 28, 2010)  $-   $-    -    N/A 
Fiscal year 2009 (as of February 28, 2009)  $-   $-    -    N/A 
Fiscal year 2008 (as of February 29, 2008)  $-   $-    -    N/A 
Fiscal year 2007 (as of February 28, 2007)  $-   $-    -    N/A 
6.75% Notes due 2023(9)                    
Fiscal year 2020 (as of February 29, 2020)  $-   $-    -    N/A 
Fiscal year 2019 (as of February 28, 2019)  $74,451   $2,345    -   $25.74(10)
Fiscal year 2018 (as of February 28, 2018)  $74,451   $2,930    -   $26.05(10)
Fiscal year 2017 (as of February 28, 2017)  $74,451   $2,710    -   $25.89(10)
6.25% Notes due 2025(13)                    
Fiscal year 2022 (as of February 28, 2022)   -    -    -     N/A  
Fiscal year 2021 (as of February 28, 2021)  $60,000   $3,471    -   $24.24(11)
Fiscal year 2020 (as of February 29, 2020)  $60,000   $6,071    -   $25.75(11)
Fiscal year 2019 (as of February 28, 2019)  $60,000   $2,345    -   $24.97(11)
7.25% Notes due 2025                    
Fiscal year 2023 (as of May 31, 2022)  $43,125   $1,793    -   $25.20(11)
Fiscal year 2022 (as of February 28, 2022)  $43,125   $2,093    -   $25.46(11)
Fiscal year 2021 (as of February 28, 2021)  $43,125   $3,471    -   $25.77(11)
7.75% Notes due 2025                    
Fiscal year 2023 (as of May 31, 2022)  $5,000   $1,793    -   $25.00(12)
Fiscal year 2022 (as of February 28, 2022)  $5,000   $2,093    -   $25.00(12)
Fiscal year 2021 (as of February 28, 2021)  $5,000   $3,471    -   $25.00(12)
4.375% Notes due 2026                    
Fiscal year 2023 (as of May 31, 2022)  $175,000   $1,793    -   $25.00(12)
Fiscal year 2022 (as of February 28, 2022)  $175,000   $2,093    -   $25.00(12)
4.35% Notes due 2027                    
Fiscal year 2023 (as of May 31, 2022)  $75,000   $1,793    -   $25.00(12)
Fiscal year 2022 (as of February 28, 2022)  $75,000   $2,093    -   $25.00(12)
6.25% Notes due 2027                    
Fiscal year 2023 (as of May 31, 2022)  $15,000   $1,793    -   $25.00(12)
Fiscal year 2022 (as of February 28, 2022)  $15,000   $2,093    -   $25.00(12)
Fiscal year 2021 (as of February 28, 2021)  $15,000   $3,471    -   $25.00(12)
6.00% Notes due 2027                    
Fiscal year 2023 (as of May 31, 2022)  $97,500   $1,793        $24.73(15)

80

 

 

 

(1) We have excluded our SBA-guaranteed debentures from this table because the SEC has granted us exemptive relief that permits us to exclude such debentures from the definition of senior securities in the 150% asset coverage ratio we are required to maintain under the 1940 Act.

 

(2) This table does not include the senior securities of our predecessor entity, GSC Investment Corp., relating to a revolving securitized credit facility with Deutsche Bank, in light of the fact that the Company was under different management during the time that such credit facility was outstanding.
   
(3) Total amount of senior securities outstanding at the end of the period presented.
   
(4) Asset coverage per unit is the ratio of our total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness, calculated on a total basis.
   
(5) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “—” indicates information which the Securities and Exchange Commission expressly does not require to be disclosed for certain types of senior securities.
   
(6) Not applicable for credit facility because not registered for public trading.
   
(7) On January 13, 2017, the Company redeemed in full its 2020 Notes. The Company used a portion of the net proceeds from the 2023 Notes offering, which was completed in December 2016, to redeem the 2020 Notes in full.
   
(8) Based on the average daily trading price of the 2020 Notes on the NYSE.
   
(9) On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.45 million, respectively, in aggregate principal amount of the $74.45 million in aggregate principal amount of issued and outstanding 2023 Notes.
   
(10) Based on the average daily trading price of the 2023 Notes on the NYSE.    
   
(11) Based on the average daily trading price of the 2025 Notes on the NYSE.    
   
(12) The carrying value of this unlisted security approximates its fair value, based on a waterfall analysis showing adequate collateral coverage.
   
(13) On August 31, 2021, the Company redeemed $60.0 million in aggregate principal amount of the issued and outstanding 6.25% 2025 Notes. The Company used a portion of the net proceeds from the 4.375% 2026 Notes offering, which was completed in July 2021, to redeem the 6.25% 2025 Notes in full.
   
(14) On October 4, 2021, the Company repaid all remaining amounts outstanding under the Madison Credit Facility and the credit agreement relating to the Madison Credit Facility was terminated.
   
(15) Based on the average daily trading price of the 2027 Notes on the NYSE.    

 

Note 9. Commitments and Contingencies

 

Contractual Obligations

 

The following table shows our payment obligations for repayment of debt and other contractual obligations at May 31, 2022:

 

       Payment Due by Period 
Long-Term Debt Obligations  Total   Less Than
1 Year
   1 - 3
Years
   3 - 5
Years
   More Than
5 Years
 
   ($ in thousands) 
Revolving credit facility   $25,000   $                  -   $25,000   $-   $- 
SBA debentures   217,000       -    15,000    33,660    168,340 
7.25% 2025 Notes   43,125    -    -    43,125    - 
7.75% 2025 Notes   5,000    -    -    5,000    - 
4.375% 2026 Notes   175,000    -    -    175,000    - 
4.35% 2027 Notes   75,000    -    -    75,000    - 
6.25% 2027 Notes   15,000    -    -    -    15,000 
6.00% 2027 Notes   97,500    -    -    97,500    - 
Total Long-Term Debt Obligations  $652,625   $-   $40,000   $429,285   $183,340 

 

Off-Balance Sheet Arrangements

 

As of May 31, 2022 and February 28, 2022, the Company’s off-balance sheet arrangements consisted of $96.0 million and $83.4 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

 

81

 

 

A summary of the unfunded commitments outstanding as of May 31, 2022 and February 28, 2022 is shown in the table below (dollars in thousands):

 

   May 31,
2022
   February 28,
2022
 
At Company’s discretion          
Artemis Wax  $15,000   $3,700 
Ascend Software LLC   5,000    5,000 
Axero Holdings   3,000    3,000 
Davisware   2,000    2,000 
Granite Comfort   5,000    - 
JDXpert   5,000    - 
Lee’s Famous Recipe Chicken   4,000    10,000 
Netreo Holdings, LLC   1,500    4,000 
Pepper Palace   3,000    3,000 
Procrement Partners   2,800    2,800 
Saratoga Senior Loan Fund I JV LLC   17,500    17,500 
Sceptre Hospitality Resources   250    1,000 
Book4Time, Inc.   -    2,000 
Total   64,050    54,000 
           
At portfolio company’s discretion - satisfaction of certain financial and nonfinancial covenants required
Ascend Software LLC   5,200    6,500 
Axero Holdings   900    2,000 
Axero Holdings - Revolver   500    500 
Davisware, LLC   1,000    1,000 
Exigo - DDTL   4,167    - 
Exigo - Revolver   833    - 
GDS Holdings US, Inc.   1,786    2,786 
Granite Comfort   5,000    - 
GoReact   500    2,500 
JDXpert   1,000    - 
Madison Logic - Revolver   1,084    1,084 
New England Dental Partners   4,500    4,500 
Pepper Palace - DDTL   2,000    2,000 
Pepper Palace - Revolver   2,500    2,500 
Zollege   1,000    1,000 
Lee’s Famous Recipe Chicken   -    3,000 
    31,970    29,370 
Total  $96,020   $83,370 

 

The Company believes its assets will provide adequate coverage to satisfy these unfunded commitments. As of May 31, 2022, the Company had cash and cash equivalents of $94.9 million and $6.6 in available borrowings under the Encina Credit Facility.

 

Note 10. Directors Fees

 

The independent directors each receive an annual fee of $70,000. They also receive $3,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and receive $1,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the Audit Committee receives an annual fee of $12,500 and the chairman of each other committee receives an annual fee of $6,000 for their additional services in these capacities. In addition, we have purchased directors’ and officers’ liability insurance on behalf of our directors and officers. Independent directors have the option to receive their directors’ fees in the form of our common stock issued at a price per share equal to the greater of net asset value or the market price at the time of payment. No compensation is paid to directors who are “interested persons” of the Company (as such term is defined in Section 2(a)(19) of the 1940 Act). For the three months ended May 31, 2022 and May 31, 2021, we incurred $0.1 million and $0.09 million for directors’ fees and expenses, respectively. As of May 31, 2022, and February 28, 2022, $0.1 million and $0.07 million in directors’ fees and expenses were accrued and unpaid, respectively. As of May 31, 2022, we had not issued any common stock to our directors as compensation for their services.

 

82

 

 

Note 11. Stockholders’ Equity

 

On May 16, 2006, GSC Group, Inc. capitalized the LLC, by contributing $1,000 in exchange for 67 shares, constituting all of the issued and outstanding shares of the LLC.

 

On March 20, 2007, the Company issued 95,995.5 and 8,136.2 shares of common stock, priced at $150.00 per share, to GSC Group and certain individual employees of GSC Group, respectively, in exchange for the general partnership interest and a limited partnership interest in GSC Partners CDO III GP, LP, collectively valued at $15.6 million. At this time, the 6.7 shares owned by GSC Group in the LLC were exchanged for 6.7 shares of the Company.

 

On March 28, 2007, the Company completed its IPO of 725,000 shares of common stock, priced at $150.00 per share, before underwriting discounts and commissions. Total proceeds received from the IPO, net of $7.1 million in underwriter’s discount and commissions, and $1.0 million in offering costs, were $100.7 million.

 

On July 30, 2010, our Manager and its affiliates purchased 986,842 shares of common stock at $15.20 per share. Total proceeds received from this sale were $15.0 million.

 

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

 

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements (the “Share Repurchase Plan”). On October 7, 2015, our board of directors extended the Share Repurchase Plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, our board of directors extended the Share Repurchase Plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, our board of directors extended the Share Repurchase Plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On May 4, 2020, our board of directors increased the Share Repurchase Plan to 1.3 million shares of common stock. On January 5, 2021, our board of directors extended the Share Repurchase Plan for another year to January 15, 2022, leaving the number of shares unchanged at 1.3 million shares of common stock. On January 4, 2022, our board of directors extended the Shares Repurchase Plan for another year to January 15, 2023, leaving the number of shares unchanged at 1.3 million shares of common stock. As of May 31, 2022, the Company purchased 650,612 shares of common stock, at the average price of $20.86 for approximately $13.6 million pursuant to the Share Repurchase Plan. During the three months ended May 31, 2022 the Company purchased 142,177 shares of common stock, at the average price of $26.27 for approximately $3.8 million pursuant to the Share Repurchase Plan.

 

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were also added to the agreement. On July 11, 2019, the amount of the common stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. This agreement was terminated as of July 29, 2021, and as of that date, the Company had sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).

 

On July 30, 2021, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc. and Compass Point Research and Trading, LLC (collectively the “Agents”), through which we may offer for sale, from time to time, up to $150.0 million of our common stock through the Agents, or to them, as principal for their account. As of May 31, 2022, the Company sold 4,840,361 shares for gross proceeds of $124.0 million at an average price of $25.61 for aggregate net proceeds of $122.4 million (net of transaction costs). During the three months ended May 31, 2022, there were no shares sold pursuant to the equity distribution agreement with the Agents.

 

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised. 

 

83

 

 

The Company adopted Rule 3-04/Rule 8-03(a)(5) under Regulation S-X (Note 2). Pursuant to the regulation, the Company has presented a reconciliation of the changes in each significant caption of stockholders’ equity as shown in the tables below:

 

       Capital   Total     
   Common Stock   in Excess   Distributable     
   Shares   Amount   of Par Value   Earnings (Loss)   Net Assets 
Balance at February 28, 2021   11,161,416   $11,161   $304,874,957   $(700,348)  $304,185,770 
Increase (Decrease) from Operations:                         
Net investment income     -    -    -    2,555,935    2,555,935 
Net realized gain (loss) from investments   -    -    -    1,910,141    1,910,141 
Net change in unrealized appreciation (depreciation) on investments   -    -    -    16,812,577    16,812,577 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   -    -    -    (230,144)   (230,144)
Decrease from Shareholder Distributions:                           
Distributions of investment income – net   -    -    -    (4,799,405)   (4,799,405)
Capital Share Transactions:                           
Proceeds from issuance of common stock   -    -    -    -    - 
Stock dividend distribution     38,580    39    914,063    -    914,102 
Repurchases of common stock   (40,000)   (40)   (1,003,380)   -    (1,003,420)
Repurchase fees     -    -    (800)   -    (800)
Offering costs   -    -    -    -    - 
Balance at May 31, 2021   11,159,995   $11,160   $304,784,840   $15,548,756   $320,344,756 
Increase (Decrease) from Operations:                         
Net investment income     -    -    -    6,393,261    6,393,261 
Net realized gain (loss) from investments   -    -    -    1,501,597    1,501,597 
Income tax (provision) benefit from realized gain on investments     -    -    -    (448,883)   (448,883)
Realized losses on extinguishment of debt                  (1,552,140)   (1,552,140)
Net change in unrealized appreciation (depreciation) on investments   -    -    -    3,376,540    3,376,540 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   -    -    -    (1,328,711)   (1,328,711)
Decrease from Shareholder Distributions:                           
Distributions of investment income – net   -    -    -    (4,910,394)   (4,910,394)
Capital Share Transactions:                           
Proceeds from issuance of common stock   5,441    6    157,034    -    157,040 
Stock dividend distribution     33,099    33    828,479    -    828,512 
Repurchases of common stock   (9,623)   (10)   (248,713)   -    (248,723)
Repurchase fees     -    -    (192)   -    (192)
Offering costs   -    -    (817)   -    (817)
Balance at August 31, 2021   11,188,912   $11,189   $305,520,631   $18,580,025   $324,111,845 

 

84

 

 

           Capital   Total     
   Common Stock   in Excess   Distributable     
   Shares   Amount   of Par Value   Earnings (Loss)   Net Assets 
Increase (Decrease) from Operations:                    
Net investment income     -    -    -    5,196,635    5,196,635 
Net realized gain (loss) from investments   -    -    -    9,916,925    9,916,925 
Income tax (provision) benefit from realized gain on investments     -    -    -    (2,447,173)   (2,447,173)
Realized losses on extinguishment of debt                  (764,123)   (764,123)
Net change in unrealized appreciation (depreciation) on investments   -    -    -    (6,042,616)   (6,042,616)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   -    -    -    2,480,465    2,480,465 
Decrease from Shareholder Distributions:                           
Distributions of investment income – net   -    -    -    (5,889,329)   (5,889,329)
Capital Share Transactions:                           
Proceeds from issuance of common stock   520,076    520    15,163,259    -    15,163,779 
Stock dividend distribution     38,016    38    1,017,625    -    1,017,663 
Repurchases of common stock   -    -    -    -    - 
Repurchase fees     -    -    -    -    - 
Offering costs   -    -    (142,326)   -    (142,326)
Balance at November 30, 2021   11,747,004   $11,747   $321,559,189   $21,030,809   $342,601,745 
Increase (Decrease) from Operations:                         
Net investment income     -    -    -    5,796,910    5,796,910 
Net realized gain (loss) from investments   -    -    -    69,664    69,664 
Income tax (provision) benefit from realized gain on investments     -    -    -    9,612    9,612 
Realized losses on extinguishment of debt                  (118,147)   (118,147)
Net change in unrealized appreciation (depreciation) on investments   -    -    -    2,873,561    2,873,561 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   -    -    -    (226,702)   (226,702)
Decrease from Shareholder Distributions:                           
Distributions of investment income – net   -    -    -    (6,434,106)   (6,434,106)
Capital Share Transactions:                           
Proceeds from issuance of common stock   392,826    392    11,513,992    -    11,514,383 
Stock dividend distribution     41,520    42    1,114,886    -    1,114,929 
Repurchases of common stock   (50,000)   (50)   (1,292,843)   -    (1,292,893)
Repurchase fees               (1,000)   -    (1,000)
Offering costs             (127,433)   -    (127,433)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles     -    -    (4,704,545)   4,704,545    - 
Balance at February 28, 2022   12,131,350   $12,131   $328,062,246   $27,706,146   $355,780,523 
Increase (Decrease) from Operations:                         
Net investment income     -    -    -    7,976,222    7,976,222 
Net realized gain (loss) from investments   -    -    -    162,509    162,509 
Income tax (provision) benefit from realized gain on investments     -    -    -    69,250    69,250 
Net change in unrealized appreciation (depreciation) on investments   -    -    -    (9,333,449)   (9,333,449)
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments     -    -    -    (361,951)   (361,951)
Decrease from Shareholder Distributions:                         
Distributions of investment income – net     -    -    -    (6,428,817)   (6,428,817)
Capital Share Transactions:                         
Proceeds from issuance of common stock     -    -    -    -    - 
Stock dividend distribution   42,825    43    1,108,637    -    1,108,680 
Repurchases of common stock     (142,177)   (142)   (3,734,174)   -    (3,734,316)
Repurchase fees   -    -    (2,840)   -    (2,840)
Offering costs     -    -    -    -    - 
Balance at May 31, 2022   12,031,998    12,032    325,433,869    19,789,910    345,235,811 

 

85

 

 

Note 12. Earnings Per Share

 

In accordance with the provisions of FASB ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

 

The following information sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets resulting from operations per share for the three months ended May 31, 2022 and May 31, 2021 (dollars in thousands except share and per share amounts):

 

   For the three months ended 
Basic and Diluted  May 31,
2022
   May 31,
2021
 
Net increase (decrease) in net assets resulting from operations  $(1,487)  $21,049 
Weighted average common shares outstanding   12,112,372    11,170,045 
Weighted average earnings (loss) per common share  $(0.12)  $1.88 

 

Note 13. Dividend

 

On May 26, 2022, the Company declared a dividend of $0.53 per share payable on June 29, 2022, to common stockholders of record on June 14, 2022. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company's DRIP. Based on shareholder elections, the dividend consisted of approximately $5.1 million in cash and 48,590 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.40 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on June 15, 16, 17, 21, 22, 23, 24, 27, 28 and 29, 2022.

 

The following table summarizes dividends declared for the three months ended May 31, 2022 (dollars in thousands except per share amounts):

 

Date Declared  Record Date  Payment Date  Amount
Per Share
   Total Amount* 
May 26, 2022  June 14, 2022  June 29, 2022  $0.53   $6,370 
Total dividends declared        $0.53   $6,370 

 

 

*Totalamount is calculated based on the number of shares outstanding at the date of record.

 

The following table summarizes dividends declared for the three months ended May 31, 2021 (dollars in thousands except per share amounts):

 

Date Declared  Record Date  Payment Date  Amount
Per Share
   Total Amount* 
March 22, 2021  April 8, 2021  April 22, 2021  $0.43   $4,799 
Total dividends declared        $0.43   $4,799 

 

 

*Total amount is calculated based on the number of shares outstanding at the date of record.

 

86

 

 

Note 14. Financial Highlights

 

The following is a schedule of financial highlights as of and for the three months ended May 31, 2022 and May 31, 2021:

 

Per share data  May 31,
2022
   May 31,
2021
 
Net asset value at beginning of period  $29.33   $27.25 
Net investment income(1)   0.66    0.23 
Net realized and unrealized gain and losses on investments(1)   (0.78)   1.65 
Net increase in net assets resulting from operations   (0.12)   1.88 
Distributions declared from net investment income   (0.53)   (0.43)
Total distributions to stockholders   (0.53)   (0.43)
Issuance of common stock above net asset value (2)   -    - 
Repurchases of common stock(3)   0.04    0.01 
Dilution(4)   (0.02)   (0.01)
Net asset value at end of period  $28.69   $28.70 
Net assets at end of period  $345,235,811   $320,344,756 
Shares outstanding at end of period   12,031,998    11,159,995 
Per share market value at end of period  $26.57   $25.55 
Total return based on market value(5)(6)   (1.30)%   12.71%
Total return based on net asset value(5)(7)   (0.13)%   7.24%
Ratio/Supplemental data:          
Ratio of net investment income to average net assets(8)   7.42%   8.25%
Expenses:          
Ratio of operating expenses to average net assets(9)   6.49%   5.92%
Ratio of incentive management fees to average net assets(5)   (0.54)%   1.69%
Ratio of interest and debt financing expenses to average net assets(9)   7.77%   5.51%
Ratio of total expenses to average net assets(8)   13.73%   13.12%
Portfolio turnover rate(5)(10)   1.18%   2.43%
Asset coverage ratio per unit(11)   1,793    2,510 
Average market value per unit          
Revolving Credit Facility(12)    N/A     N/A 
SBA Debentures Payable(12)    N/A     N/A 
6.25% Notes Payable 2025(13)    N/A   $25.58 
7.25% Notes Payable 2025  $25.42   $26.61 
7.75% Notes Payable 2025(12)    N/A     N/A 
4.375% Notes Payable(12)   N/A    N/A 
6.25% Notes Payable 2027(12)   N/A    N/A 
6.00% Notes Payable 2027  $24.70    N/A 

 

 

(1) Per share amounts are calculated using the weighted average shares outstanding during the period.
   
(2) The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share data was derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date multiplied by (B) the differences between the net proceeds per share and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding during the period.
   
(3) Represents the anti-dilutive impact on the net asset value per share (“NAV”) of the Company due to the repurchase of common shares. See Note 11, Stockholders’ Equity.
   
(4) Represents the dilutive effect of issuing common stock below net asset value per share during the period in connection with the satisfaction of the Company’s annual RIC distribution requirement and may include the impact of the different share amounts used for different items (weighted average basic common shares outstanding for the corresponding year and actual common shares outstanding at the end of the year) in the per common share data calculation and rounding impacts. See Note 13, Dividend.
   
(5) Ratios are not annualized.
   
(6) Total investment return is calculated assuming a purchase of common shares at the current market value on the first day and a sale at the current market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.

 

87

 

 

(7) Total investment return is calculated assuming a purchase of common shares at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total investment return does not reflect brokerage commissions.
   
(8) Ratios are annualized. Incentive management fees included within the ratio are not annualized.
   
(9) Ratios are annualized.

 

(10)  Portfolio turnover rate is calculated using the lesser of year-to-date sales or year-to-date purchases over the average of the invested assets at fair value.

 

(11)  Asset coverage ratio per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage ratio per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. Asset coverage ratio per unit does not include unfunded commitments. The inclusion of unfunded commitments in the calculation of the asset coverage ratio per unit would not cause us to be below the required amount of regulatory coverage.
   
(12)  The Revolving Credit Facility, SBA Debentures, 7.75% Notes Payable 2025, 4.375% Notes Payable and 6.25% Notes Payable are not registered for public trading.
   
(13)  On August 31, 2021, the Company redeemed $60.0 million in aggregate principal amount of the issued and outstanding 6.25% 2025 Notes and, as a result of the full redemption, the 6.25% 2025 Notes are no longer listed on the NYSE.

 

Note 15. Subsequent Events

 

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company’s consolidated financial statements and disclosures in the consolidated financial statements except for the following:

 

On June 14, 2022, the Company caused notices to be issued to the holders of 7.25% 2025 Notes regarding the Company’s exercise of its option to redeem, in whole, the issued and outstanding 7.25% 2025 Notes. The Company will redeem $43.125 million in aggregate principal amount of the issued and outstanding 7.25% 2025 Notes on July 14, 2022 (the “Redemption Date”). The 7.25% 2025 Notes will be redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon, through, but excluding, the Redemption Date.

 

88

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Note about Forward-Looking Statements” and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022.

 

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.

 

The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

 

our future operating results and the continued impact of coronavirus (“COVID-19”) pandemic thereon;

 

the introduction, withdrawal, success and timing of business initiatives and strategies;

 

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

 

the impact of geopolitical conditions, including the ongoing conflict between Ukraine and Russia and its impact on financial market volatility, global economic markets, and various sectors, industries and markets for commodities globally, such as oil and natural gas;

 

the relative and absolute investment performance and operations of our Manager;

 

the impact of increased competition;

 

our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

 

the unfavorable resolution of any future legal proceedings;

 

our business prospects and the operational and financial performance of our portfolio companies, including their ability to achieve our respective objectives as a result of the current COVID-19 pandemic and the effects of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business;

 

the impact of investments that we expect to make and future acquisitions and divestitures;

 

our contractual arrangements and relationships with third parties;

 

the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

 

the ability of our portfolio companies to achieve their objectives;

 

89

 

 

our expected financings and investments;

 

our regulatory structure and tax treatment, including our ability to operate as a business development company (“BDC”), or to operate our small business investment company (“SBIC”) subsidiaries, and to continue to qualify to be taxed as a regulated investment company (“RIC”);

 

the adequacy of our cash resources and working capital;

 

the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon;

 

the impact of interest rate volatility, including the decommissioning of LIBOR and the rising interest rate environment, on our results, particularly because we use leverage as part of our investment strategy;

 

the impact of supply chain constraints and labor difficulties on our portfolio companies and the global economy;

 

the elevated level of inflation, and its impact on our portfolio companies and on the industries in which we invest;

 

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our Manager;

 

the impact of changes to tax legislation and, generally, our tax position;

 

our ability to access capital and any future financings by us;

 

the ability of our Manager to attract and retain highly talented professionals; and

 

the ability of our Manager to locate suitable investments for us and to monitor and effectively administer our investments and the impacts of the COVID-19 pandemic thereon.

 

The following statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

 

changes in laws and regulations, changes in political, economic, geopolitical or industry conditions, and changes in the interest rate environment, including with respect to the decommissioning of LIBOR and interest rate hikes by the U.S. Federal Reserve, or other conditions affecting the financial and capital markets, including with respect to changes resulting from or in response to, or potentially even the absence of changes as a result of, the impact of the COVID-19 pandemic;

 

the length and duration of the COVID-19 outbreak in the United States as well as worldwide, and the magnitude of its impact and time required for economic recovery, including with respect to the impact of travel restrictions, business closures and other restrictions on the ability of the Manager’s investment professionals to conduct in-person diligence on, and otherwise monitor, existing and future investments;

 

an economic downturn and the time period required for robust economic recovery therefrom, including from increasing inflation, a shifting interest rate environment, geopolitical events (including the war in Ukraine), and the ongoing impact of the COVID-19 pandemic, which may have a material impact on our portfolio companies’ results of operations and financial condition, which could lead to the loss of some or all of our investments in certain portfolio companies and have a material adverse effect on our results of operations and financial condition;

 

90

 

 

a contraction of available credit, an inability or unwillingness of our lenders to fund their commitments to us and/or an inability to access capital markets or additional sources of liquidity, including as a result of the impact and duration of the COVID-19 pandemic, could have a material adverse effect on our results of operations and financial condition and impair our lending and investment activities;

 

risks associated with possible disruption in our portfolio companies’ operations due to wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics; and

 

the risks, uncertainties and other factors we identify in “Risk Factors” in our most recent Annual Report on Form 10-K under Part I, Item 1A, in our quarterly reports on Form 10-Q, including this report, and in our other filings with the SEC that we make from time to time.

 

Such forward-looking statements may include statements preceded by, followed by or that otherwise include terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

 

We have based the forward-looking statements included in this Quarterly Report on Form 10-Q on information available to us on the date of this Quarterly Report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

 

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.

 

OVERVIEW

 

We are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle market companies, which we define as companies having earnings before interest, tax, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, which may include securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of its net assets. We have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

 

91

 

 

Corporate History

 

We commenced operations, at the time known as GSC Investment Corp., on March 23, 2007 and completed an initial public offering of shares of common stock on March 28, 2007. Prior to July 30, 2010, we were externally managed and advised by GSCP (NJ), L.P., an entity affiliated with GSC Group, Inc. In connection with the consummation of a recapitalization transaction on July 30, 2010, as described below we engaged Saratoga Investment Advisors to replace GSCP (NJ), L.P. as our investment adviser and changed our name to Saratoga Investment Corp.

 

As a result of the event of default under a revolving securitized credit facility with Deutsche Bank we previously had in place, in December 2008 we engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate strategic transaction opportunities and consider alternatives for us. On April 14, 2010, GSC Investment Corp. entered into a stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates and an assignment, assumption and novation agreement with Saratoga Investment Advisors, pursuant to which GSC Investment Corp. assumed certain rights and obligations of Saratoga Investment Advisors under a debt commitment letter Saratoga Investment Advisors received from Madison Capital Funding LLC, which indicated Madison Capital Funding’s willingness to provide GSC Investment Corp. with a $40.0 million senior secured revolving credit facility, subject to the satisfaction of certain terms and conditions. In addition, GSC Investment Corp. and GSCP (NJ), L.P. entered into a termination and release agreement, to be effective as of the closing of the transaction contemplated by the stock purchase agreement, pursuant to which GSCP (NJ), L.P., among other things, agreed to waive any and all accrued and unpaid deferred incentive management fees up to and as of the closing of the transaction contemplated by the stock purchase agreement but continued to be entitled to receive the base management fees earned through the date of the closing of the transaction contemplated by the stock purchase agreement.

 

On July 30, 2010, the transactions contemplated by the stock purchase agreement with Saratoga Investment Advisors and certain of its affiliates were completed, the private sale of 986,842 shares of our common stock for $15.0 million in aggregate purchase price to Saratoga Investment Advisors and certain of its affiliates closed, the Company entered into the Madison Credit Facility, and the Company began doing business as Saratoga Investment Corp.

 

We used the net proceeds from the private sale transaction and a portion of the funds available to us under the Madison Credit Facility to pay the full amount of principal and accrued interest, including default interest, outstanding under our revolving securitized credit facility with Deutsche Bank. The revolving securitized credit facility with Deutsche Bank was terminated in connection with our payment of all amounts outstanding thereunder on July 30, 2010.

 

On August 12, 2010, we effected a one-for-ten reverse stock split of our outstanding common stock. As a result of the reverse stock split, every ten shares of our common stock were converted into one share of our common stock. Any fractional shares received as a result of the reverse stock split were redeemed for cash. The total cash payment in lieu of shares was $230. Immediately after the reverse stock split, we had 2,680,842 shares of our common stock outstanding.

 

In January 2011, we registered for public resale of the 986,842 shares of our common stock issued to Saratoga Investment Advisors and certain of its affiliates.

 

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received an SBIC license from the Small Business Administration (“SBA”). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA.

 

In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50% fixed-rate unsecured notes due 2020 (the “2020 Notes”) for net proceeds of $46.1 million after deducting underwriting commissions of $1.9 million and offering costs of $0.3 million. The proceeds included the underwriters’ full exercise of their overallotment option. The 2020 Notes were listed on the New York Stock Exchange (“NYSE”) under the trading symbol “SAQ” with a par value of $25.00 per share. The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the NYSE.

 

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co. Inc. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an At-the-Market (“ATM”) offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 2022 Notes with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

 

92

 

 

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 6.75% fixed-rate notes due 2023 (the “2023 Notes”) for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The issuance included the partial exercise of the underwriters’ option to purchase an additional $9.8 million in aggregate principal amount of 2023 Notes within 30 days. The 2023 Notes were listed on the NYSE under the trading symbol “SAB” with a par value of $25.00 per share. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of the issued and outstanding 2023 Notes and are no longer listed on the NYSE.

 

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were added to the equity ATM program. On July 11, 2019, the amount of the common stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. This agreement was terminated as of July 29, 2021, and as of that date, the Company had sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).

 

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised.

 

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of our 6.25% fixed-rate notes due 2025 (the “6.25% 2025 Notes”) for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 6.25% 2025 Notes have been capitalized were amortized over the term of the 6.25% 2025 Notes.

 

On February 5, 2019, the Company issued an additional $20.0 million in aggregate principal amount of the 6.25% 2025 Notes for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. The additional 6.25% 2025 Notes were treated as a single series with the existing 6.25% 2025 Notes under the indenture and had the same terms as the existing 6.25% 2025 Notes. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 6.25% 2025 Notes have been capitalized and were amortized over the term of the 6.25% 2025 Notes. On August 31, 2021, the 6.25% 2025 Notes were redeemed and are no longer listed on the NYSE.

 

On December 14, 2018, the Company completed the third refinancing of the Saratoga CLO (the “2013-1 Reset CLO Notes”). This refinancing, among other things, extended the Saratoga CLO reinvestment period to January 2021, and extended its legal maturity to January 2030. A non-call period of January 2020 was also added. In addition to and as part of the refinancing, the Saratoga CLO was also upsized from $300 million in assets to approximately $500 million. As part of this refinancing and upsizing, the Company invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes tranche at par. Concurrently, the existing $4.5 million of Class F notes were repaid.

 

On August 14, 2019, our wholly owned subsidiary, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”), also received an SBIC license from the SBA. SBIC II LP’s SBIC license provides up to $175.0 million in additional long-term capital in the form of SBA debentures.

 

93

 

 

On June 24, 2020, the Company issued $37.5 million in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25% 2025 Notes”) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million. Offering costs incurred were approximately $0.3 million. On July 6, 2020, the underwriters exercised their option in full to purchase an additional $5.625 million in aggregate principal amount of its 7.25% unsecured notes due 2025. Net proceeds to the Company were $5.4 million after deducting underwriting commissions of approximately $0.2 million. Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.25% per year. The 7.25% 2025 Notes mature on June 30, 2025 and commencing June 24, 2022, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 7.25% 2025 Notes have been capitalized and are being amortized over the term of the 7.25% 2025 Notes. As of May 31, 2022, the total 7.25% 2025 Notes outstanding was $43.1 million. The 7.25% 2025 Notes are listed on the NYSE under the trading symbol “SAK” with a par value of $25.00 per share.

 

On July 9, 2020, the Company issued $5.0 million in aggregate principal amount of our 7.75% fixed-rate notes due in 2025 (the “7.75% Notes 2025”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million. Offering costs incurred were approximately $0.1 million. Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020. The 7.75% Notes 2025 mature on July 9, 2025 and may be redeemed in whole or in part at any time or from time to time at our option, subject to a fee depending on the date of repayment. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the 7.75% Notes 2025 have been capitalized and are being amortized over the term of the Notes. As of May 31, 2022, the total 7.25% 2025 Notes outstanding was $5.0 million. The 7.75% Notes 2025 are not listed and has a par value of

$25.00 per share.

 

On December 29, 2020, the Company issued $5.0 million in aggregate principal amount of our 6.25% fixed-rate notes due in 2027 (the “6.25% Notes 2027”). Offering costs incurred were approximately $0.1 million. Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year. The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option on or after December 29, 2024. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the 6.25% Notes 2027. The 6.25% 2027 Notes are not listed and have a par value of $25.00 per share.

 

On January 28, 2021, the Company issued $10.0 million in aggregate principal amount of our 6.25% fixed rate notes due in 2027 (the “Second 6.25% Notes 2027”) for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million. Offering costs incurred were approximately $0.0 million. Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year. The Second 6.25% Notes 2027 mature on January 28, 2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the Second 6.25% Notes 2027 have been capitalized and are being amortized over the term of the Notes. The Second 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.

 

On February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO. This refinancing, among other things, extended the Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033. A non-call period ending February 2022 was also added. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million. As part of this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par. Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse 2 Loan were repaid. The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions.

 

On March 10, 2021, the Company issued $50.0 million in aggregate principal amount of our 4.375% fixed-rate Notes due in 2026 (the “4.375% Notes 2026”) for net proceeds of $49.0 million after deducting underwriting commissions of approximately $1.0 million. Offering costs incurred were approximately $0.2 million. Interest on the 4.375% Notes 2026 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.375% per year, beginning August 28, 2021. The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed in whole or in part at any time on or after November 28, 2025 at par plus a “make-whole” premium, and thereafter at par. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.2 million related to the 4.375% Notes 2026 have been capitalized and are being amortized over the term of the Notes. At August 31, 2021, the outstanding receivable of $2.6 million was paid in full.

 

94

 

 

On July 15, 2021, the Company issued an additional $125.0 million in aggregate principal amount of the Company’s 4.375% Notes 2026 (the “Additional 4.375% 2026 Notes”) for net proceeds for approximately $123.5 million, based on the public offering price of 101.00% of the aggregate principal amount of the Additional 4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and the offering expenses payable by the Company. The net proceeds from the offering were used redeem all of the outstanding 6.25% 2025 Notes (as described above), and for general corporate purposes in accordance with our investment objective and strategies. The Additional 4.375% 2026 Notes were treated as a single series with the existing 4.375% 2026 Notes under the indenture and had the same terms as the existing 4.375% 2026 Notes.

 

On July 30, 2021, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc. and Compass Point Research and Trading, LLC (the “Agents”), through which we may offer for sale, from time to time, up to $150.0 million of our common stock through the Agents, or to them, as principal for their account. As of May 31, 2022, the Company sold 4,840,361 shares for gross proceeds of $124.0 million at an average price of $25.61 for aggregate net proceeds of $122.4 million (net of transaction costs). During the three months ended May 31, 2022, there were no shares sold pursuant to the equity distribution agreement with the Agents.

 

On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 million.

 

The Company has formed a wholly owned special purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering into a $50.0 million senior secured revolving credit facility with Encina Lender Finance, LLC (the “Lender”), supported by loans held by SIF II and pledged to the Lender under the credit facility (the “Encina Credit Facility). The Encina Credit Facility closed on October 4, 2021. During the first two years following the closing date, SIF II may request an increase in the commitment amount under the Encina Credit Facility to up to $75.0 million. The terms of the Encina Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of the commitment amount in effect at any time thereafter. The term of the Encina Credit Facility is three years. Advances under the Encina Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary provisions related to the selection by the Lender and the Company of a replacement benchmark rate. Concurrently with the closing of the Encina Credit Facility, all remaining amounts outstanding on the Company’s existing revolving credit facility with Madison Capital Funding, LLC were repaid and the facility terminated.

 

On October 26, 2021, the Company and TJHA JV I LLC (“TJHA”) entered into a Limited Liability Company Agreement (the “LLC Agreement”) to co-manage Saratoga Senior Loan Fund I JV LLC (“SLF JV”). SLF JV is invested in Saratoga Investment Corp Senior Loan Fund 2021-1 Ltd (“SLF 2021”), which is a wholly owned subsidiary of SLF JV. SLF 2021 was formed for the purpose of making investments in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds in the primary and secondary markets.

 

The Company and TJHA have equal voting interest on all material decisions with respect to SLF JV, including those involving its investment portfolio, and equal control of corporate governance. No management fee is charged to SLF JV as control and management of SLF JV is shared equally.

 

The Company and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, with the Company providing $43.75 million and TJHA providing $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed rate of 10.0% per annum and is due and payable in full on June 15, 2023. As of May 31, 2022, the Company and TJHA’s investment in SLF JV consisted of an unsecured note of $13.1 million and $1.9 million, respectively; and membership interest of $13.1 million and $1.9 million, respectively.

 

As of May 31, 2022, the Company earned approximately $0.3 million of interest income related to SLF JV, which is included in interest income.

 

SLF JV’s investment in SLF 2021 is in the form of an unsecured loan. The unsecured note will pay a floating rate of SOFR plus 7.00% per annum and is due and payable in full on June 9, 2023. As of May 31, 2022, SLF JV’s investment in SLF 2021 had an aggregate fair value of approximately $19.8 million.

 

95

 

 

The Company has determined that SLF JV is an investment company under ASC 946; however, in accordance with such guidance the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary. SLF JV is not a wholly-owned investment company subsidiary as the Company and TJHA each have an equal 50% voting interest in SLF JV and thus neither party has a controlling financial interest. Furthermore, ASC 810 concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, the Company does not consolidate SLF JV.

 

Recent COVID-19 Developments 

 

We have been closely monitoring, and will continue to monitor, the impact of the COVID-19 pandemic (including new variants of COVID-19) and its impact on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets. Given the continued fluidity of the pandemic, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time. Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. We believe our portfolio companies have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related restrictions imposed by state and local governments and other private businesses, including developing liquidity plans supported by internal cash reserves, and shareholder support. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain disruptions, labor difficulties and shortages, commodity inflation and elements of economic and financial market instability in the United States and globally. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

 

Critical Accounting Policies and Use of Estimates

 

Basis of Presentation

 

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make certain estimates and assumptions affecting amounts reported in the Company’s consolidated financial statements. We have identified investment valuation, revenue recognition and the recognition of capital gains incentive fee expense as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies and estimates follows.

 

Investment Valuation

 

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

 

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third-party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from Saratoga Investment Advisors, the audit committee of our board of directors and a third party independent valuation firm. We use multiple techniques for determining fair value based on the nature of the investment and experience with those types of investments and specific portfolio companies. The selections of the valuation techniques and the inputs and assumptions used within those techniques often require subjective judgements and estimates. These techniques include market comparables, discounted cash flows and enterprise value waterfalls. Fair value is best expressed as a range of values from which the Company determines a single best estimate. The types of inputs and assumptions that may be considered in determining the range of values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis and volatility in future interest rates, call and put features, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flows and other relevant factors.

 

96

 

 

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

 

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

 

An independent valuation firm engaged by our board of directors independently reviews a selection of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least once each fiscal year. We use a third-party independent valuation firm to value our investment in the subordinated notes of Saratoga CLO and the Class F-2-R-3 Notes tranche of the Saratoga CLO every quarter.

 

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

 

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

 

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

 

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flows 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 market comparables for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by Saratoga Investment Advisors and recommended to our board of directors. Specifically, we use Intex cash flows, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The cash flows use a set of inputs including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated valuations. The inputs 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 the valuation for our investment in Saratoga CLO.

 

The SEC has adopted new Rule 2a-5 under the 1940 Act. This rule establishes requirements for determining fair value in good faith for purposes of the 1940 Act. We will comply with the new rule’s valuation requirements on or before the SEC’s compliance date in September 2022.

 

Revenue Recognition

 

Income Recognition

 

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

 

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

 

97

 

 

Payment-in-Kind Interest

 

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

 

Revenues

 

We generate revenue in the form of interest income and capital gains on the debt investments that we hold and capital gains, if any, on equity interests that we may acquire. We expect our debt investments, whether in the form of leveraged loans or mezzanine debt, to have terms of up to ten years, and to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either quarterly or semi-annually. In some cases, our debt or preferred equity investments may provide for a portion or all of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned. We may also invest in preferred equity or common equity securities that pay dividends on a current basis.

 

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

 

On December 14, 2018, we completed a third refinancing and upsize of the Saratoga CLO. The third Saratoga CLO refinancing, among other things, extended its reinvestment period to January 2021, and extended its legal maturity date to January 2030. A non-call period of January 2020 was also added. Following this refinancing, the Saratoga CLO portfolio increased from approximately $300.0 million in aggregate principal amount to approximately $500.0 million of predominantly senior secured first lien term loans. In addition to refinancing its liabilities, we invested an additional $13.8 million in all of the newly issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in aggregate principal amount of the Class F-R-2 and $7.5 million in aggregate principal amount of the Class G-R-2 notes tranches at par, with a coupon of 3M USD LIBOR plus 8.75% and 3M USD LIBOR plus 10.00%, respectively. As part of this refinancing, we also redeemed our existing $4.5 million in aggregate amount of the Class F notes tranche at par and the $20.0 million CLO 2013-1 Warehouse Loan was repaid.

 

On February 11, 2020, the Company entered into an unsecured loan agreement with Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. (“CLO 2013-1 Warehouse 2”), a wholly owned subsidiary Saratoga CLO.

 

On February 26, 2021, the Company completed the fourth refinancing of the Saratoga CLO. This fourth Saratoga CLO refinancing, among other things, extended the Saratoga CLO reinvestment period to April 2024, and extended its legal maturity to April 2033. The non-call period was extended to February 2022. In addition, and as part of the refinancing, the Saratoga CLO has also been upsized from $500 million in assets to approximately $650 million. As part of this refinancing and upsizing, the Company invested an additional $14.0 million in all of the newly issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at par. Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of Class G-R-2 Notes and $25.0 million of the CLO 2013-1 Warehouse 2 Loan were repaid. The Company also paid $2.6 million of transaction costs related to the refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity distributions. At August 31, 2021, the outstanding receivable of $2.6 million was repaid in full.

 

98

 

 

On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3 Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third parties, resulting in a realized loss of $0.1 million.

 

The Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the 2013-1 Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLO’s assets, paid quarterly to the extent of available proceeds.

 

Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes on December 14, 2018, we are no longer entitled to an incentive management fee equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated notes receive an internal rate of return paid in cash equal to or greater than 12.0%.

 

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

 

Expenses

 

Our primary operating expenses include the payment of investment advisory and management fees, professional fees, directors and officers insurance, fees paid to directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company (“independent directors”) and administrator expenses, including our allocable portion of our administrator’s overhead. Our investment advisory and management fees compensate our Manager for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions, including those relating to:

 

organization;

 

calculating our net asset value (including the cost and expenses of any independent valuation firm);

 

expenses incurred by our Manager payable to third parties, including agents, consultants or other advisers, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

 

expenses incurred by our Manager payable for travel and due diligence on our prospective portfolio companies;

 

interest payable on debt, if any, incurred to finance our investments;

 

offerings of our common stock and other securities;

 

investment advisory and management fees;

 

fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with, evaluating and making investments;

 

transfer agent and custodial fees;

 

federal and state registration fees;

 

99

 

 

all costs of registration and listing our common stock on any securities exchange;

 

federal, state and local taxes;

 

independent directors’ fees and expenses;

 

costs of preparing and filing reports or other documents required by governmental bodies (including the U.S. Securities and Exchange Commission (“SEC”) and the SBA);

 

costs of any reports, proxy statements or other notices to common stockholders including printing costs;

 

our fidelity bond, directors and officers errors and omissions liability insurance, and any other insurance premiums;

 

direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs; and

 

administration fees and all other expenses incurred by us or, if applicable, the administrator in connection with administering our business (including payments under the Administration Agreement based upon our allocable portion of the administrator’s overhead in performing its obligations under an Administration Agreement, including rent and the allocable portion of the cost of our officers and their respective staffs (including travel expenses)).

 

Pursuant to the investment advisory and management agreement that we had with GSCP (NJ), L.P., our former investment adviser and administrator, we had agreed to pay GSCP (NJ), L.P. as investment adviser a quarterly base management fee of 1.75% of the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed fiscal quarters and an incentive fee.

 

The incentive fee had two parts:

 

A fee, payable quarterly in arrears, equal to 20.0% of our pre-incentive fee net investment income, expressed as a rate of return on the value of the net assets at the end of the immediately preceding quarter, that exceeded a 1.875% quarterly hurdle rate measured as of the end of each fiscal quarter. Under this provision, in any fiscal quarter, our investment adviser received no incentive fee unless our pre-incentive fee net investment income exceeded the hurdle rate of 1.875%. Amounts received as a return of capital were not included in calculating this portion of the incentive fee. Since the hurdle rate was based on net assets, a return of less than the hurdle rate on total assets could still have resulted in an incentive fee.

 

A fee, payable at the end of each fiscal year, equal to 20.0% of our net realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation, in each case on a cumulative basis on each investment in the Company’s portfolio, less the aggregate amount of capital gains incentive fees paid to the investment adviser through such date.

 

We deferred cash payment of any incentive fee otherwise earned by our former investment adviser if, during the then most recent four full fiscal quarters ending on or prior to the date such payment was to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less liabilities) (before taking into account any incentive fees payable during that period) was less than 7.5% of our net assets at the beginning of such period. These calculations were appropriately pro-rated for the first three fiscal quarters of operation and adjusted for any share issuances or repurchases during the applicable period. Such incentive fee would become payable on the next date on which such test had been satisfied for the most recent four full fiscal quarters or upon certain terminations of the investment advisory and management agreement. We commenced deferring cash payment of incentive fees during the quarterly period ended August 31, 2007 and continued to defer such payments through the quarterly period ended May 31, 2010. As of July 30, 2010, the date on which GSCP (NJ), L.P. ceased to be our investment adviser and administrator, we owed GSCP (NJ), L.P. $2.9 million in fees for services previously provided to us; of which $0.3 million has been paid by us. GSCP (NJ), L.P. agreed to waive payment by us of the remaining $2.6 million in connection with the consummation of the stock purchase transaction with Saratoga Investment Advisors and certain of its affiliates described elsewhere in this Quarterly Report.

 

100

 

 

The terms of the investment advisory and management agreement with Saratoga Investment Advisors, our current investment adviser, are substantially similar to the terms of the investment advisory and management agreement we had entered into with GSCP (NJ), L.P., our former investment adviser, except for the following material distinctions in the fee terms:

 

The capital gains portion of the incentive fee was reset with respect to gains and losses from May 31, 2010, and therefore losses and gains incurred prior to such time will not be taken into account when calculating the capital gains fee payable to Saratoga Investment Advisors and, as a result, Saratoga Investment Advisors will be entitled to 20.0% of net gains that arise after May 31, 2010. In addition, the cost basis for computing realized gains and losses on investments held by us as of May 31, 2010 equal the fair value of such investment as of such date. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P., the capital gains fee was calculated from March 21, 2007, and the gains were substantially outweighed by losses.

 

Under the “catch up” provision, 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income that exceeds 1.875% but is less than or equal to 2.344% in any fiscal quarter is payable to Saratoga Investment Advisors. This will enable Saratoga Investment Advisors to receive 20.0% of all net investment income as such amount approaches 2.344% in any quarter, and Saratoga Investment Advisors will receive 20.0% of any additional net investment income. Under the investment advisory and management agreement with our former investment adviser, GSCP (NJ), L.P. only received 20.0% of the excess net investment income over 1.875%.

 

We will no longer have deferral rights regarding incentive fees in the event that the distributions to stockholders and change in net assets is less than 7.5% for the preceding four fiscal quarters.

 

Capital Gains Incentive Fee

 

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

 

Recent Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and under the Encina Credit Facility. Many of these agreements (including the credit agreements relating to the Encina Credit Facility) include an alternative successor rate or language for choosing an alternative successor rate when LIBOR reference is no longer considered to be appropriate. With respect to other agreements, the Company intends to work with its portfolio companies to modify agreements to choose an alternative successor rate. Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The standard is effective as of March 12, 2020 through December 31, 2022. Management does not believe this optional guidance has a material impact on the Company’s consolidated financial statements and disclosures.

 

101

 

 

Portfolio and Investment Activity

 

Investment Portfolio Overview

 

   May 31,
2022
    February 28,
2022
   ($ in millions)  
Number of investments(1)   103     94 
Number of portfolio companies(2)   47     45 
Average investment per portfolio company(2)  $18.1    $17.3 
Average investment size(1)  $8.5    $8.4 
Weighted average maturity(3)   2.9 yrs     2.9 yrs 
Number of industries(5)   38     38 
Non-performing or delinquent investments (fair value)  $10.1    $-   
Fixed rate debt (% of interest earning portfolio)(3)  $11.8(1.5%)    $16.9(2.5%)
Fixed rate debt (weighted average current coupon)(3)   9.5%     10.0%
Floating rate debt (% of interest earning portfolio)(3)  $757.1(98.5%)    $671.2(97.5%)
Floating rate debt (weighted average current spread over LIBOR)(3)(4)   7.0%     7.1%

 

 

(1) Excludes our investment in the subordinated notes of Saratoga CLO.
(2) Excludes our investment in the subordinated notes of Saratoga CLO and Class F-R-3 Note tranche, as well as the unsecured notes and equity interests in the SLF JV.
(3) Excludes our investment in the subordinated notes of Saratoga CLO and equity interests, as well as the unsecured notes and equity interests in the SLF JV.
(4) Calculation uses either 1-month or 3-month LIBOR, depending on the contractual terms, and after factoring in any existing LIBOR floors.
(5)Our investment in the subordinated notes of Saratoga CLO and Class F-R-3 Note tranche, as well as the unsecured notes and equity interests in the SLF JV are included in Structured Finance Securities industry.

 

During the three months ended May 31, 2022, we invested $97.2 million in new or existing portfolio companies and had $10.1 million in aggregate amount of exits and repayments resulting in net investment of $87.1 million for the period. During the three months ended May 31, 2021, we invested $119.2 million in new or existing portfolio companies and had $14.9 million in aggregate amount of exits and repayments resulting in net investment of $104.3 million for the period.

 

102

 

 

Portfolio Composition

 

Our portfolio composition at May 31, 2022 and February 28, 2022 at fair value was as follows:

 

   May 31, 2022   February 28, 2022 
   Percentage
of Total
Portfolio
   Weighted
Average
Current Yield
   Percentage
of Total
Portfolio
   Weighted
Average Current Yield
 
First lien term loans   80.3%   8.6%   77.3%   8.3%
Second lien term loans   4.3    7.0    5.4    11.1 
Unsecured term loans   1.8    9.7    1.9    9.7 
Structured finance securities   3.7    8.0    4.7    10.5 
Equity interests   9.9    -    10.7    - 
Total   100.0%   7.7%   100.0%   7.7%

 

At May 31, 2022, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $24.1 million and constituted 2.7% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of May 31, 2022 and February 28, 2022, was composed of $647.3 million and $660.2 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of May 31, 2022, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.

 

This investment is subject to unique risks. (See Part 1. Item 1A. Risk Factors—“Our investment in Saratoga CLO constitutes a leveraged investment in a portfolio of predominantly senior secured first lien term loans and is subject to additional risks and volatility” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022).

 

We do not consolidate the Saratoga CLO portfolio in our consolidated financial statements. Accordingly, the metrics below do not include the underlying Saratoga CLO portfolio investments. However, at May 31, 2022, $593.2 million or 98.7% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow. At February 28, 2022, $630.3 million or 98.7% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and four Saratoga CLO portfolio investments were in default with a fair value of $2.8 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022.

 

Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system (“CMR”). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)—performing credit; (Yellow)—underperforming credit; (Red)—in principal payment default and/or expected loss of principal.

 

103

 

 

Portfolio CMR distribution

 

The CMR distribution for our investments at May 31, 2022 and February 28, 2022 was as follows:

 

Saratoga Investment Corp.

 

   May 31, 2022   February 28, 2022 
Color Score  Investments at Fair Value   Percentage of Total Portfolio   Investments at Fair Value   Percentage of Total Portfolio 
   ($ in thousands) 
Green  $743,116    83.1%  $690,672    84.5%
Yellow   38,888    4.3    10,593    1.3 
Red   -    0.0    -    0.0 
N/A(1)   112,529    12.6    116,302    14.2 
Total  $894,533    100.0%  $817,567    100.0%

 

 

(1)Comprised of our investment in the subordinated notes of Saratoga CLO and equity interests.

 

The change in reserve from $0.0 million as of February 28, 2022 to $0.7 million as of May 31, 2022 was related to the non-accrual of interest income related to the Knowland Group.

 

The CMR distribution of Saratoga CLO investments at May 31, 2022 and February 28, 2022 was as follows:

 

Saratoga CLO

 

   May 31, 2022   February 28, 2022 
Color Score  Investments at Fair Value   Percentage of Total Portfolio   Investments at Fair Value   Percentage of Total Portfolio 
   ($ in thousands) 
Green  $568,023    94.5%  $595,324    93.2%
Yellow   25,164    4.2    34,983    5.5 
Red   7,739    1.3    8,622    1.3 
N/A(1)   -    0.0    34    0.0 
Total  $600,926    100.0%  $638,963    100.0%

 

 

(1)Comprised of Saratoga CLO’s equity interests.

 

104

 

 

Portfolio composition by industry grouping at fair value

 

The following table shows our portfolio composition by industry grouping at fair value at May 31, 2022 and February 28, 2022:

 

Saratoga Investment Corp.

 

   May 31, 2022   February 28, 2022 
   Investments At Fair Value   Percentage of Total Portfolio   Investments At Fair Value   Percentage of Total Portfolio 
   ($ in thousands) 
Healthcare Software  $90,008    10.1%  $90,126    11.0%
IT Services   82,743    9.1    80,804    9.9 
Dental Practice Management Software   58,995    6.5    35,038    4.3 
Real Estate Services   53,399    6.0    53,506    6.6 
Consumer Services   44,522    5.0    38,234    4.7 
Healthcare Services   38,237    4.3    42,054    5.1 
Education Services   35,511    4.0    35,309    4.3 
Education Software   35,864    4.0    33,656    4.1 
HVAC Services and Sales   35,063    3.9    29,976    3.7 
Structured Finance Securities(1)   33,493    3.7    38,030    4.7 
Specialty Food Retailer   28,986    3.2    34,013    4.2 
Marketing Orchestration Software   28,705    3.2    28,777    3.5 
Sports Management   26,695    3.0    26,654    3.3 
Direct Selling Software   25,998    2.9    -    - 
Talent Acquisition Software   25,516    2.9    19,652    2.4 
Restaurant   24,721    2.8    15,686    1.9 
Financial Services   24,560    2.7    23,540    2.9 
Hospitality/Hotel   22,000    2.5    19,925    2.4 
Legal Software   21,194    2.4    7,425    0.9 
Investment Fund   19,770    2.2    25,140    3.1 
Mentoring Software   18,310    2.0    18,321    2.2 
Marketing Services   17,131    1.9    17,327    2.1 
Payroll Services   16,488    1.8    17,000    2.1 
Employee Collaboration Software   11,524    1.3    10,000    1.2 
Insurance Software   11,197    1.3    10,921    1.3 
Non-profit Services   9,940    1.1    10,039    1.2 
Waste Services   8,994    1.0    9,000    1.1 
Industrial Products   8,683    1.0    8,427    1.0 
Dental Practice Management   8,658    1.0    8,403    1.0 
Financial Services Software   7,227    0.8    5,940    0.7 
Field Service Management   6,925    0.8    6,981    0.9 
Office Supplies   3,760    0.4    3,726    0.5 
Corporate Education Software   3,448    0.4    3,306    0.4 
Cyber Security   2,375    0.3    1,636    0.2 
Staffing Services   2,060    0.2    1,912    0.2 
Consumer Products   699    0.1    693    0.1 
Healthcare Products Manufacturing   634    0.1    714    0.1 
Facilities Maintenance   500    0.1    482    0.1 
Healthcare Supply   -    -    5,194    0.6 
Total  $894,533    100.0%  $817,567    100.0%

 

 

(1)As of May 31, 2022 and February 28, 2022, comprised of our investment in the subordinated notes and F-2-R-3 Notes of Saratoga CLO, as well as the unsecured notes and equity interests in the SLF JV.

 

105

 

 

The following table shows Saratoga CLO’s portfolio composition by industry grouping at fair value at May 31, 2022 and February 28, 2022:

 

Saratoga CLO

 

   May 31, 2022   February 28, 2022 
   Investments at Fair Value   Percentage of Total Portfolio   Investments at Fair Value   Percentage of Total Portfolio 
   ($ in thousands) 
Banking, Finance, Insurance & Real Estate  $113,563    19.0%  $123,124    19.4%
Services: Business   60,341    10.0    69,491    10.9 
High Tech Industries   59,399    9.9    60,048    9.4 
Services: Consumer   41,306    7.0    41,393    6.5 
Healthcare & Pharmaceuticals   39,275    6.5    43,136    6.9 
Telecommunications   25,150    4.3    27,058    4.2 
Consumer goods: Durable   24,427    4.1    21,085    3.2 
Automotive   23,881    4.0    24,207    3.7 
Beverage, Food & Tobacco   20,957    3.4    22,086    3.4 
Chemicals, Plastics, & Rubber   19,197    3.1    22,669    3.5 
Media: Advertising, Printing & Publishing   18,541    3.1    19,660    3.1 
Retail   17,997    2.9    16,050    2.5 
Containers, Packaging & Glass   15,056    2.4    15,253    2.4 
Hotel, Gaming & Leisure   14,748    2.5    16,572    2.6 
Consumer goods: Non-durable   13,477    2.2    14,359    2.2 
Aerospace & Defense   12,791    2.1    14,369    2.2 
Media: Broadcasting & Subscription   12,258    2.0    11,539    1.8 
Construction & Building   10,736    1.8    11,102    1.7 
Capital Equipment   9,770    1.6    10,062    1.6 
Media: Diversified & Production   8,732    1.5    9,203    1.4 
Utilities: Oil & Gas   7,960    1.3    8,095    1.3 
Metals & Mining   6,658    1.1    6,846    1.1 
Forest Products & Paper   5,597    0.9    9,367    1.5 
Transportation: Consumer   4,756    0.8    4,891    0.8 
Wholesale   3,983    0.7    4,155    0.7 
Transportation: Cargo   3,492    0.6    3,752    0.6 
Energy: Electricity   3,409    0.6    3,660    0.6 
Utilities: Electric   2,306    0.4    4,026    0.6 
Environmental Industries   996    0.2    1,550    0.2 
Energy: Oil & Gas   167    0.0    155    0.0 
Total  $600,926    100.0%  $638,963    100.0%

 

106

 

 

Portfolio composition by geographic location at fair value

 

The following table shows our portfolio composition by geographic location at fair value at May 31, 2022 and February 28, 2022. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

 

   May 31, 2022   February 28, 2022 
   Investments
at Fair Value
   Percentage
of Total
Portfolio
   Investments
at Fair Value
   Percentage
of Total
Portfolio
 
   ($ in thousands) 
Southeast  $267,304    29.9%  $257,199    31.5%
West   213,499    23.9    183,643    22.5 
Midwest   155,510    17.4    160,718    19.7 
Southwest   103,875    11.6    62,475    7.6 
Northeast   93,409    10.4    85,414    10.4 
Northwest   2,375    0.3    1,636    0.2 
Other(1)   58,561    6.5    66,482    8.1 
Total  $894,533    100.0%  $817,567    100.0%

 

 

(1)Comprised of our investment in the subordinated notes and F-2-R-3 Notes of Saratoga CLO, as well as the unsecured notes and equity interests in the SLF JV.

 

Results of operations

 

Operating results for the three months ended May 31, 2022 and May 31, 2021 was as follows:

 

   For the three months
ended
 
   May 31,
2022
   May 31,
2021
 
   ($ in thousands) 
Total investment income  $18,679   $16,816 
Total operating expenses   10,703    14,260 
Net investment income   7,976    2,556 
Net realized gain (loss) from investments   163    1,910 
Income tax (provision) benefit from realized gain on investments   69    - 
Net change in unrealized appreciation (depreciation) on investments   (9,333)   16,813 
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments   (362)   (230)
Net increase (decrease) in net assets resulting from operations  $(1,487)  $21,049 

 

107

 

 

Investment income

 

The composition of our investment income for three months ended May 31, 2022 and May 31, 2021 was as follows:

 

   For the three months
ended
 
   May 31,
2022
   May 31,
2021
 
   ($ in thousands) 
Interest from investments  $16,606   $13,687 
Interest from cash and cash equivalents   -    - 
Management fee income   816    818 
Dividend Income   300    399 
Structuring and advisory fee income   853    1,302 
Other income   104    610 
Total investment income  $18,679   $16,816 

 

For the three months ended May 31, 2022, total investment income increased $1.9 million, or 11.1%, to $18.7 million from $16.8 million for the three months ended May 31, 2021. Interest income from investments increased $2.9 million, or 21.3%, to $16.6 million for the three months ended May 31, 2022 from $13.7 million for the three months ended May 31, 2021. Interest income from investment increased due to the increase of $216.8 million, or 32.0%, in total investments at May 31, 2022 from $677.9 million at May 31, 2021, partially offset by (i) the reduction in LIBOR and interest spreads during this same period and (ii) the increase in equity positions that are not interest-bearing. At May 31, 2022, the weighted average current yield on investments was 7.7%, down from 8.6% at May 31, 2021, which partially offset the increase in interest income due to the increased investments.

 

For the three months ended May 31, 2022 and May 31, 2021, total PIK income was $0.2 million and $0.3 million, respectively.

 

Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended May 31, 2022 and May 31, 2021, total management fee income was $0.8 million and $0.8 million, respectively.

 

For the three months ended May 31, 2022 and May 31, 2021, total dividend income was $0.3 million and $0.4 million, respectively. Dividends received is recorded in the consolidated statements of operations when earned, and the decrease primarily reflects dividend income received on various preferred equity investments last year that were not received this year.

 

For the three months ended May 31, 2022 and May 31, 2021, total structuring and advisory fee income was $0.9 million and $1.3 million, respectively. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.

 

For the three months ended May 31, 2022 and May 31, 2021, other income was $0.1 million and $0.6 million, respectively. Other income includes origination fees and prepayment income fees and is recorded in the consolidated statements of operations when earned. The decrease was driven primarily by prepayment penalties earned from certain redemptions in the prior year that did not recur this year.

 

108

 

 

Operating expenses

 

The composition of our operating expenses for the three months ended May 31, 2022 and May 31, 2021 was as follows:

 

   For the three months ended 
   May 31, 2022   May 31, 2021 
   ($ in thousands) 
Interest and debt financing expenses  $6,872   $4,341 
Base management fees   3,802    2,759 
Incentive management fees expense (benefit)   (1,903)   5,263 
Professional fees   417    507 
Administrator expenses   750    694 
Insurance   87    86 
Directors fees and expenses   110    92 
General & administrative and other expenses   667    491 
Income tax expense (benefit)   (99)   28 
Total operating expenses  $10,703   $14,260 

 

For the three months ended May 31, 2022, total operating expenses decreased $3.5 million, or 24.7%, compared to the three months ended May 31, 2021.

 

For the three months ended May 31, 2022, interest and debt financing expenses increased $2.5 million, or 58.3%, compared to the three months ended May 31, 2021. The increase is primarily attributable to an increase in average outstanding debt from $286.2 million for the three months ended May 31, 2021 to $591.3 million for the three months ended May 31, 2022, primarily reflecting (i) the issuance of the 4.375% 2026 Notes and the 4.35% 2027 Notes during the year ended February 28, 2022, and (ii) the issuance of the 6.00% 2027 Notes during the three months ended May 31, 2022.

 

For the three months ended May 31, 2022 and May 31, 2021, the weighted average interest rate on our outstanding indebtedness was 4.06% and 5.27%, respectively. The decrease in weighted average interest rate was primarily driven by the issuance of the lower-rate 4.375% 2026 Notes and 4.35% 2026 Notes, the redemption of the 6.25% 2025 Notes, and the issuance of lower cost SBA debentures over the past year.

 

As of May 31, 2022 and February 28, 2022, the SBA debentures represented 33.3%  and 36.2% of overall debt, respectively.

 

For the three months ended May 31, 2022, base management fees increased $1.0 million, or 37.8%, from $2.8 million to $3.8 million compared to the three months ended May 31, 2021. The increase in base management fees results from the 25.8% increase in the average value of our total assets, less cash and cash equivalents, from $625.5 million for the three months ended May 31, 2021 to $862.0 million  for the three months ended May 31, 2022.

 

For the three months ended May 31, 2022, incentive management fees decreased $7.1 million, or 135.5%, compared to the three months ended May 31, 2021. The incentive fee on income decreased from $1.6 million for the three months ended May 31, 2021 to $0.0 million for the three months ended May 31, 2022, reflecting the Company’s net investment income being below the hurdle based on net asset value for incentive fee purposes. The incentive fee on capital gains decreased from a $3.7 million expense for the three months ended May 31, 2021 to a $(1.8) million benefit for the three months ended May 31, 2022, both reflecting the incentive fee income on net unrealized appreciation and depreciation recognized during both these periods.

 

For the three months ended May 31, 2022, professional fees decreased $0.1 million, or 17.7%, compared to the three months ended May 31, 2021. This decrease primarily reflects optimization across accounting, legal and consulting fees in connection with an increase in our assets and the Company bringing certain services in-house.

 

For the three months ended May 31, 2021, administrator expenses increased $0.05 million, or 8.1%, compared to the three months ended May 31, 2021.

 

109

 

 

As discussed above, the increase in interest and debt financing expenses for the three months ended May 31, 2022 compared to the three months ended May 31, 2021 is primarily attributable to an increase in the average dollar amount of outstanding debt. During the three months ended May 31, 2022 and May 31, 2021, the average borrowings outstanding under the Encina Credit Facility and the Madison Credit Facility was $20.0 million and $4.1 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Credit Facility was 4.86% and 6.37%, respectively. For the three months ended May 31, 2022 and May 31, 2021, the average borrowings outstanding of SBA debentures was $214.9 million and $158.4 million, respectively. For the three months ended May 31, 2022 and May 31, 2021, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 2.58% and 2.93%, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was $0.0 million and $60.0 million, respectively. During the three months ended May 31, 2022 and May 31, 2021, the weighted average dollar amount of our 7.25% fixed-rate 2025 Notes outstanding was $43.1 million and $43.1 million, respectively.

 

During the three months ended May 31, 2022 and May 31, 2021, the weighted average dollar amount of our 7.75% fixed-rate 2025 Notes outstanding was $5.0 million and $5.0 million, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of our 6.25% fixed-rate 2027 Notes outstanding was $15.0 million and $15.0 million, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of our 4.375% fixed-rate 2026 Notes outstanding was $175.0 million and $50.0 million, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of our 4.35% fixed-rate 2027 Notes outstanding was $75.0 million and $0.0 million, respectively. During the three months ended May 31, 2022 and May 31, 2021, the average dollar amount of our 6.00% fixed-rate 2027 Notes outstanding was $43.8 million and $0.0 million, respectively.

 

For the three months ended May 31, 2022 and May 31, 2021, there were income tax expense (benefits) of $(0.1) million and $0.03 million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in the taxable blockers, as well as current federal and state income taxes on those operating gains and losses when realized.

 

Net realized gains (losses) on sales of investments

 

For the three months ended May 31, 2022, the Company had $10.1 million of sales, repayments, exits or restructurings resulting in $0.2 million of net realized gains.

 

Three Months ended May 31, 2022
                
Issuer  Asset Type  Gross Proceeds   Cost   Net
Realized
Gain (Loss)
 
Censis Technologies  Equity Interests  $      -   $             -   $68,731 
Texas Teachers of Tomorrow, LLC  Equity Interests   -    -    24,977 
V Rental Holdings LLC  Equity Interests   -    -    68,800 

 

The Company received escrow payments from the prior sales of its investments in Censis Technologies, Texas Teachers of Tomorrow, LLC and V Rental Holdings, LLC.

 

110

 

 

For the three months ended May 31, 2021, the Company had $14.9 million of sales, repayments, exits or restructurings resulting in $1.9 million of net realized gains.  

 

Three Months ended May 31, 2021

 

Issuer  Asset Type  Gross Proceeds   Cost   Net
Realized
Gain
 
V Rental Holdings LLC  Equity Interests  $2,276,055   $365,914   $1,910,141 

 

The $1.9 million of net realized gains was from the sales of the equity position in the Company’s V Rental Holdings LLC investment.

 

Net change in unrealized appreciation (depreciation) on investments

 

For the three months ended May 31, 2022, our investments had a net change in unrealized depreciation of $9.2 million versus a net change in unrealized appreciation of $16.8 million for the three months ended May 31, 2021. The most significant cumulative net change in unrealized appreciation (depreciation) for the three months ended May 31, 2022 were the following (dollars in thousands):

 

Three Months ended May 31, 2022
Issuer  Asset Type  Cost   Fair Value   Total Unrealized Appreciation (Depreciation)   YTD Change in Unrealized  Appreciation (Depreciation) 
PDDS Buyer, LLC  First Lien Term Loan & Equity Interests   50,787    58,995              8,208                 3,113 
Pepper Palace, Inc.  First Lien Term Loan & Equity Interests   34,458    28,986    (5,472)   (4,954)
Saratoga Senior Loan Fund I JV, LLC  Equity Interests   13,125    6,645    (6,480)   (5,371)
Saratoga Investment Corp. CLO 2013-1, Ltd.  Structured Finance Securities  $30,974   $24,118   $(6,856)  $(3,238)

 

The $4.3 million net change in unrealized appreciation in our investment in PDDS Buyer, LLC was primarily driven by overall strong company performance and a recent acquisition.

 

The $4.9 million net change in unrealized depreciation in our investment in Pepper Palace, Inc. was primarily driven by overall company performance.

 

The $5.3 million net change in unrealized depreciation in our investment in Saratoga Senior Loan Fund I JV, LLC was primarily driven by the decrease in market prices of the underlying CLO warehouse assets.

 

The $3.2 million net change in unrealized depreciation in our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. was primarily driven by the increase in discount rates, impact of LIBOR changes and overall market conditions. 

 

111

 

 

The most significant cumulative net change in unrealized appreciation for the three months ended May 31, 2021 were the following (dollars in thousands):

 

Three Months ended May 31, 2021
Issuer  Asset Type  Cost   Fair Value   Total Unrealized Appreciation   YTD Change in Unrealized  Appreciation 
Saratoga Investment Corp. CLO 2013-1, Ltd.  Structured Finance Securities  $33,412   $35,546   $2,134   $             4,531 
Passageways, Inc.  First Lien Term Loan & Equity Interests   10,954    17,598    6,645    4,333 
Netreo Holdings, LLC  First Lien Term Loan & Equity Interests   23,792    33,604    9,812    4,224 
Schoox, Inc.  Equity Interests   1,050    3,108    2,058    2,058 
GreyHeller LLC  First Lien Term Loan & Equity Interests   14,032    19,131    5,098    1,996 
Top Gun Pressure Washing, LLC  First Lien Term Loan & Equity Interests   10,902    10,731    (171)   896 
Destiny Solutions Inc.  First Lien Term Loan & Equity Interests   45,709    47,395    1,686    659 
V Rental Holdings LLC  Equity Interests   -    -    -    (1,843)

 

The $4.5 million of unrealized appreciation in our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. was primarily driven by improved market performance, combined with outperformance achieved from the assets in the CLO.

 

The $4.3 million net change in unrealized appreciation in our investment in Passageways, Inc. was primarily driven by growth, including a potential upcoming acquisition.

 

The $4.2 million net change in unrealized appreciation in our investment in Netreo Holdings, LLC was primarily driven by growth and improved financial performance.

 

The $2.1 million net change in unrealized appreciation in our investment in Schoox, Inc. was primarily driven by new customers and increased customer demand.

 

The $2.0 million net change in unrealized appreciation in our investment in GreyHeller LLC was primarily driven by improved financial performance.

 

The $0.9 million net change in unrealized appreciation in our investment in Top Gun Pressure Washing, LLC was primarily driven by improved financial performance.

 

The $0.7 million net change in unrealized appreciation in our investment in Destiny Solutions Inc. was primarily driven by improved financial performance and the potential of an upcoming acquisition.

 

The $1.8 million net change in unrealized depreciation in our investment in Village Realty Holdings, LLC was primarily driven by the sale of that investment, resulting in a reversal of previously recognized unrealized appreciation reclassified to realized gains.

 

Changes in net assets resulting from operations

 

For the three months ended May 31, 2022, we recorded a net decrease in net assets resulting from operations of $1.5 million. Based on 12,112,372 weighted average common shares outstanding as of May 31, 2022, our per share net decrease in net assets resulting from operations was $0.12 for the three months ended May 31, 2022. For the three months ended May 31, 2021, we recorded a net increase in net assets resulting from operations of $21.0 million. Based on 11,170,045 weighted average common shares outstanding as of May 31, 2021, our per share net increase in net assets resulting from operations was $1.88 for the three months ended May 31, 2021. 

 

112

 

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

We intend to continue to generate cash primarily from cash flows from operations, including interest earned from our investments in debt in middle market companies, interest earned from the temporary investment of cash in U.S. government securities and other high- quality debt investments that mature in one year or less, the Encina Credit Facility, our continued access to the SBA debentures, future borrowings and future offerings of debt and equity securities.

 

Although we expect to fund the growth of our investment portfolio through the net proceeds from future equity offerings, including our dividend reinvestment plan (“DRIP”) and our equity ATM program, and issuances of senior securities or future borrowings, to the extent permitted by the 1940 Act, we cannot assure you that our plans to raise capital will be successful. In this regard, because our common stock has historically traded at a price below our current net asset value per share and we are limited in our ability to sell our common stock at a price below net asset value per share, we have been and may continue to be limited in our ability to raise equity capital.

 

In addition, we intend to distribute to our stockholders substantially all of our operating taxable income in order to satisfy the distribution requirement applicable to RICs under the Code. In satisfying this distribution requirement, in accordance with certain applicable provisions of the Code and the Treasury regulations and a revenue procedure issued by the Internal Revenue Service (“IRS”), a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. We may rely on the revenue procedure in future periods to satisfy our RIC distribution requirement.

 

Also, as a BDC, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200.0%, reduced to 150.0% effective April 16, 2019 following the approval received from the board of directors, including a majority of our independent directors, on April 16, 2018. This requirement limits the amount that we may borrow. Our asset coverage ratio, as defined in the 1940 Act, was 179.3% as of May 31, 2022 and 209.2% as of February 28, 2022. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources, including the equity markets and other debt-related markets, which may or may not be available on favorable terms, if at all.

 

Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies, to pay dividends or to repay borrowings. Also, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

 

Due to the diverse capital sources available to us at this time, we believe we have adequate liquidity to support our near-term capital requirements. As the impact of COVID-19 continues to evolve, we will continually evaluate our overall liquidity position and take proactive steps to maintain that position based on the current circumstances. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with “Recent COVID-19 Developments” above, as well as with the notes of our consolidated financial statements.

 

113

 

 

Madison Revolving Credit Facility

 

The senior secured revolving credit facility we entered into with Madison Capital Funding LLC (the “Madison Credit Facility”) on June 30, 2010, was most recently amended on September 3, 2021 and then fully repaid and terminated on October 4, 2021.

 

Encina Credit Facility

 

Below is a summary of the terms of the senior secured revolving credit facility we entered into with Encina Lender Finance, LLC on October 4, 2021.

 

Commitment. The Company entered into a senior secured revolving credit facility in the initial facility amount of $50.0 million (the “Facility Amount”). The Company has the ability to request an increase in the Facility Amount during the first two years following the closing date to up to $75.0 million. The commitment termination date is October 4, 2024.

 

Availability. The Company can draw up to the lesser of (i) the Facility Amount and (ii) the Borrowing Base. The Borrowing Base is an amount equal to (i) the difference of (A) the product of the applicable advance rate which varies from 50.0% to 75.0% depending on the type of loan asset (Defaulted Loans being excluded in that they carry an advance rate of 0%) and the value, determined in accordance with the Encina Credit Facility (the “Adjusted Borrowing Value”), of certain “eligible” loan assets pledged as security for the loan (the “Borrowing Base Value”) and (B) the Excess Concentration Amount, as calculated in accordance with the Encina Credit Facility, plus (ii) any amounts held in the Prefunding Account and, without duplication, Excess Cash held in the Collection Account, less (iii) the product of (a) the amount of any undrawn funding commitments the Company has under any loan asset and (b) the Unfunded Exposure Haircut Percentage, and less (iv) $100,000. Each loan asset held by the Company as of the date on which the Encina Credit Facility was closed was valued as of that date and each loan asset that the Company acquires after such date will be valued at the lowest of its fair value, its face value (excluding accrued interest) and the purchase price paid for such loan asset. Adjustments to the value of a loan asset will be made to reflect, among other things and under certain circumstances, changes in its fair value, a default by the obligor on the loan asset, insolvency of the obligor, acceleration of the loan asset, and certain modifications to the terms of the loan asset.

 

The Encina Credit Facility contains limitations on the type of loan assets that are “eligible” to be included in the Borrowing Base and as to the concentration level of certain categories of loan assets in the Borrowing Base such as restrictions on geographic and industry concentrations, asset size and quality, payment frequency, status and terms, average life, and collateral interests. In addition, if an asset is to remain an “eligible” loan asset, the Company may not make changes to the payment, amortization, collateral and certain other terms of the loan assets without the consent of the administrative agent that will either result in subordination of the loan asset or be materially adverse to the lenders.

 

The Encina Credit Facility requires certain minimum drawn amounts. For the period beginning on the closing date and ended April 4, 2022, the minimum funding amount was $12.5 million. For the period beginning on April 5, 2022 through maturity, the minimum funding amount is the greater of $25.0 million and 50% of the Facility Amount in effect from time to time.

 

Collateral. The Encina Credit Facility is secured by assets of Saratoga Investment Funding II LLC (“SIF II”) and pledged to the lender under the credit facility. SIF II is a wholly owned special purpose entity formed by the Company for the purpose of entering into the Encina Credit Facility.

 

Interest Rate and Fees. Under the Encina Credit Facility, funds are borrowed from or through certain lenders at the greater of the prevailing LIBOR rate and 0.75%, plus an applicable margin of 4.00%. The Encina Credit Facility includes benchmark replacement provisions which permit the Administrative Agent and the Borrower to select a replacement rate upon the unavailability of LIBOR. In addition, the Company pays the lenders a commitment fee of 0.75% per year (or 0.50% if the ratio of advances outstanding to aggregate commitments is greater than or equal to 50%) on the unused amount of the Encina Credit Facility for the duration of the term of the credit facility. Accrued interest and commitment fees are payable monthly in arrears. The Company was also obligated to pay certain other fees to the lenders in connection with the closing of the Encina Credit Facility.

 

114

 

 

Collateral Tests. It is a condition precedent to any borrowing under the Encina Credit Facility that the principal amount outstanding under the Encina Credit Facility, after giving effect to the proposed borrowings, not exceed the Borrowing Base (the “Borrowing Base Test”). In addition to satisfying the Borrowing Base Test, the following tests must also be satisfied (together with Borrowing Base Test, the “Collateral Tests”):

 

oInterest Coverage Ratio. The ratio (expressed as a percentage) of interest collections with respect to pledged loan assets, less certain fees and expenses relating to the Encina Credit Facility, to accrued interest and commitment fees payable to the lenders under the Encina Credit Facility for the last 6 payment periods must equal at least 175.0%.

 

oOvercollateralization Ratio. The ratio (expressed as a percentage) of the aggregate Adjusted Borrowing Value of “eligible” pledged loan assets plus the fair value of certain ineligible pledged loan assets (in each case, subject to certain adjustments) to outstanding borrowings under the Encina Credit Facility plus the Unfunded Exposure Amount must equal at least 200.0%.

 

The Encina Credit Facility also may require payment of outstanding borrowings or replacement of pledged loan assets upon the Company’s breach of its representation and warranty that pledged loan assets included in the Borrowing Base are “eligible” loan assets. Such ineligible collateral loans will be excluded from the calculation of the Borrowing Base and may lead to a Borrowing Base Deficiency, which may be cured by effecting one or more (or any combination thereof) of the following actions: (A) deposit into or credit to the collection account cash and eligible investments, (B) repay outstanding borrowings (together with certain costs and expenses), (C) sell or substitute loan assets in accordance with the Encina Credit Facility, or (D) pledge additional loan assets as collateral. Compliance with the Collateral Tests is also a condition to the discretionary sale of pledged loan assets by the Company.

 

Priority of Payments. The priority of payments provisions of the Encina Credit Facility require, after payment of specified fees and expenses, that collections of interest from the loan assets and, to the extent that these are insufficient, collections of principal from the loan assets, be applied on each payment date to payment of outstanding borrowings if the Borrowing Base Test, the Overcollateralization Ratio and the Interest Coverage Ratio would not otherwise be met.

 

Operating Expenses. The priority of payments provision of the Encina Credit Facility provides for the payment of certain operating expenses of the Company out of collections on interest and principal in accordance with the priority established in such provision. The operating expenses payable pursuant to the priority of payment provisions is limited to $200,000 per annum.

 

Covenants; Representations and Warranties; Events of Default. The Encina Credit Facility contains customary representations and warranties, affirmative covenants, negative covenants and events of default. The Encina Credit Facility does not contain grace periods for breach by the Company of any negative covenants or of certain of the affirmative covenants, including, without limitation, those related to preservation of the existence and separateness of the Company. Other events of default under the Encina Credit Facility include, among other things, the following:

 

ofailure of the Company to maintain an Interest Coverage Ratio of less than 175.0%;

 

ofailure of the Company to maintain an Overcollateralization Ratio of less than 200.0%;

 

othe filing of certain ERISA or tax liens on assets of the Company or the Equityholder;

 

ofailure by Specified Holders to collectively, directly or indirectly, own and control at least 51% of the outstanding equity interests of Saratoga Investment Advisor, or (y) possess the right to elect (through contract, ownership of voting securities or otherwise) at all times a majority of the board of directors (or similar governing body) of Saratoga Investment Advisor and to direct the management policies and decisions of Saratoga Investment Advisor, or (ii) the dissolution, termination or liquidation in whole or in part, transfer or other disposition, in each case, of all or substantially all of the assets of, Saratoga Investment Advisor;

 

115

 

 

oindictment or conviction of Saratoga Investment Advisors or any “key person” for a felony offense, or any fraud, embezzlement or misappropriation of funds by Saratoga Investment Advisors or any “key person” and, in the case of “key persons,” without a reputable, experienced individual reasonably satisfactory to Encina Lender Finance appointed to replace such key person within 30 days;

 

oresignation, termination, disability or death of a “key person” or failure of any “key person” to provide active participation in Saratoga Investment Advisors’ daily activities, all without a reputable, experienced individual reasonably satisfactory to Encina Lender Finance appointed within 30 days.

 

Fees and Expenses. The Company paid certain fees and reimbursed Encina Lender Finance, LLC for the aggregate amount of all documented, out-of-pocket costs and expenses, including the reasonable fees and expenses of lawyers, incurred by Encina Lender Finance, LLC in connection with the Encina Credit Facility and the carrying out of any and all acts contemplated thereunder up to and as of the date of closing. These amounts totaled $1.4 million.

 

As of May 31, 2022, we had $25.0 million outstanding borrowings under the Encina Credit Facility and $217.0 million of SBA- guaranteed debentures outstanding (which are discussed below).

 

SBA-guaranteed debentures

 

In addition, we, through two wholly owned subsidiaries, sought and obtained licenses from the SBA to operate an SBIC. In this regard, on March 28, 2012, our wholly owned subsidiary, Saratoga Investment Corp. SBIC LP, received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958 and on August 14, 2019, our wholly owned subsidiary, Saratoga Investment Corp. SBIC II LP, also received a license. SBICs are designated to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses.

 

The SBIC licenses allows our SBIC subsidiaries to obtain leverage by issuing SBA-guaranteed debentures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten-year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities.

 

SBA regulations previously limited the amount that our SBIC subsidiary may borrow to a maximum of $150.0 million when it has at least $75.0 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. This maximum has been increased by SBA regulators for new licenses to $175.0 million of SBA debentures when it has at least $87.5 million in regulatory capital. SBIC II LP’s SBIC license provides up to $175.0 million in additional long-term capital in the form of SBA-guaranteed debentures. The SBIC LP and SBIC II LP are regulated by the SBA. As a result of the 2016 omnibus spending bill signed into law in December 2015, the maximum amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding was increased from $225.0 million to $350.0 million, subject to SBA approval. Our wholly owned SBIC subsidiaries are able to borrow funds from the SBA against regulatory capital (which generally approximates equity capital in the respective SBIC) and is subject to customary regulatory requirements, including, but not limited to, a periodic examination by the SBA. With this license approval, Saratoga can grow its SBA relationship from $150.0 million to $325.0 million of committed capital.

 

We received exemptive relief from the SEC to permit us to exclude the senior securities issued by of our SBIC subsidiaries from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. This allows us increased flexibility under the asset coverage requirement by permitting us to borrow up to $325.0 million more than we would otherwise be able to absent the receipt of this exemptive relief. On April 16, 2018, as permitted by the Small Business Credit Availability Act, which was signed into law on March 23, 2018, our independent directors approved of our becoming subject to a reduced minimum asset coverage ratio of 150.0% from 200% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150% asset coverage ratio became effective on April 16, 2019.

 

116

 

 

As of May 31, 2022, our SBIC LP subsidiary had $75.0 million in regulatory capital and $86.0 million in SBA-guaranteed debentures outstanding and our SBIC II LP subsidiary had $87.5 million in regulatory capital and $131.0 million in SBA-guaranteed debentures outstanding.

 

Unsecured notes

 

In May 2013, the Company issued $48.3 million in aggregate principal amount of 7.50% fixed-rate notes due 2020 (the “2020 Notes”). The 2020 Notes were redeemed in full on January 13, 2017 and are no longer listed on the NYSE.

 

On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg Thalmann & Co Inc. through which we may offer for sale, from time to time, up to $20.0 million in aggregate principal amount of the 2020 Notes through an ATM offering. Prior to the 2020 Notes being redeemed in full, the Company had sold 539,725 bonds with a principal of $13.5 million at an average price of $25.31 for aggregate net proceeds of $13.4 million (net of transaction costs).

 

On December 21, 2016, we issued $74.5 million in aggregate principal amount of our 2023 Notes for net proceeds of $71.7 million after deducting underwriting commissions of approximately $2.3 million and offering costs of approximately $0.5 million. The net proceeds from the offering were used to repay all of the outstanding indebtedness under the 2020 Notes (as described above), and for general corporate purposes in accordance with our investment objective and strategies. On December 21, 2019 and February 7, 2020, the Company redeemed $50.0 million and $24.5 million, respectively, in aggregate principal amount of the $74.5 million in aggregate principal amount of the issued and outstanding 2023 Notes and are no longer listed on the NYSE.

 

On August 28, 2018, the Company issued $40.0 million in aggregate principal amount of the 6.25% 2025 Notes for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.3 million. Offering costs incurred were approximately $0.3 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $5.0 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 6.25% 2025 Notes have been capitalized and were amortized over the term of the 6.25% 2025 Notes.

 

On February 5, 2019, the Company issued an additional $20.0 million in aggregate principal amount of the 6.25% 2025 Notes for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. The additional 6.25% 2025 Notes were treated as a single series with the existing 6.25% 2025 Notes under the indenture and had the same terms as the existing 6.25% 2025 Notes. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters’ option to purchase an additional $2.5 million in aggregate principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from this offering were used for general corporate purposes in accordance with our investment objective and strategies. The financing costs and discount of $1.0 million related to the 6.25% 2025 Notes have been capitalized and were amortized over the term of the 6.25% 2025 Notes.

 

On August 31, 2021, the Company redeemed $60.0 million in aggregate principal amount of the issued and outstanding 6.25% 2025 Notes at par. The 6.25% 2025 Notes were listed on the NYSE under the trading symbol of “SAF” with a par value of $25.00 per share and have been delisted following the full redemption on August 31, 2021.

 

On June 24, 2020, the Company issued $37.5 million in aggregate principal amount of our 7.25% fixed-rate notes due 2025 (the “7.25% 2025 Notes”) for net proceeds of $36.3 million after deducting underwriting commissions of approximately $1.2 million. Offering costs incurred were approximately $0.3 million. On July 6, 2020, the underwriters exercised their option in full to purchase an additional $5.625 million in aggregate principal amount of its 7.25% unsecured notes due 2025. Net proceeds to the Company were $5.4 million after deducting underwriting commissions of approximately $0.2 million. Interest on the 7.25% 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.25% per year, beginning August 31, 2020. The 7.25% 2025 Notes mature on June 30, 2025 and commencing June 24, 2022, may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.6 million related to the 7.25% 2025 Notes have been capitalized and are being amortized over the term of the 7.25% 2025 Notes. The Company has received an investment grade private rating of “BBB+” from Egan-Jones Ratings Company, an independent, unaffiliated rating agency. The 7.25% 2025 Notes are listed on the NYSE under the trading symbol “SAK” with a par value of $25.00 per share.

 

At May 31, 2022, the total 7.25% 2025 Notes outstanding was $43.1 million.

 

On July 9, 2020, the Company issued $5.0 million in aggregate principal amount of our 7.75% fixed-rate Notes due in 2025 (the “7.75% 2025 Notes”) for net proceeds of $4.8 million after deducting underwriting commissions of approximately $0.2 million. Offering costs incurred were approximately $0.1 million. Interest on the 7.75% Notes 2025 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 7.75% per year, beginning August 31, 2020. The 7.75% Notes 2025 mature on July 9, 2025 and may be redeemed in whole or in part at any time or from time to time at our option. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the 7.75% Notes 2025 have been capitalized and are being amortized over the term of the Notes. The 7.75% 2025 Notes are unlisted and have a par value of $25.00 per share.

 

117

 

 

At May 31, 2022, the total 7.75% 2025 Notes outstanding was $5.0 million.

 

On December 29, 2020, the Company issued $5.0 million in aggregate principal amount of our 6.25% fixed-rate notes due in 2027 (the “6.25% Notes 2027”).  Offering costs incurred were approximately $0.1 million.  Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning February 28, 2021. The 6.25% Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part at any time or from time to time at our option, on or after December 29, 2024. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.1 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the 6.25% Notes 2027.

 

On January 28, 2021, the Company issued $10.0 million in aggregate principal amount of the 6.25% Notes 2027 for net proceeds of $9.7 million after deducting underwriting commissions of approximately $0.3 million. Offering costs incurred were approximately $0.0 million. Interest on the 6.25% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year. The 6.25% Notes 2027 mature on January 28, 2027 and commencing January 28, 2023, may be redeemed in whole or in part at any time or from time to time at our option on or after December 29, 2024. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $0.3 million related to the 6.25% Notes 2027 have been capitalized and are being amortized over the term of the 6.25% Notes 2027.

 

At May 31, 2022, the total 6.25% 2027 Notes outstanding was $15.0 million.

 

On March 10, 2021, the Company issued $50.0 million in aggregate principal amount of the 4.375% Notes 2026 for net proceeds of $49.0 million after deducting underwriting commissions of approximately $1.0 million. Offering costs incurred were approximately $0.2 million.  Interest on the 4.375% Notes 2026 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.375% per year. The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed in whole or in part at any time on or after November 28, 2025 at par plus a “make-whole” premium, and thereafter at par. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.2 million related to the 4.375% Notes 2026 have been capitalized and are being amortized over the term of the Notes.

 

On July 15, 2021, the Company issued an additional $125.0 million in aggregate principal amount of the Company’s 4.375% Notes 2026 (the “Additional 4.375% 2026 Notes”) for net proceeds for approximately $123.5 million, based on the public offering price of 101.00% of the aggregate principal amount of the Additional 4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and offering expenses of $0.2 million payable by the Company. The net proceeds from the offering were used to redeem all of the outstanding 6.25% 2025 Notes (as described above), and for general corporate purposes in accordance with our investment objective and strategies. The Additional 4.375% 2026 Notes were treated as a single series with the existing 4.375% 2026 Notes under the indenture and had the same terms as the existing 4.375% 2026 Notes.

 

At May 31, 2022, the total 4.375% Notes 2027 outstanding was $175.0 million.

 

On January 19, 2022, the Company issued $75.0 million in aggregate principal amount of our 4.35% fixed-rate Notes due in 2027 (the “4.35% Notes 2027”) for net proceeds of $73.0 million, based on the public offering price of 99.317% of the aggregate principal amount of the 4.35% Notes 2027, after deducting the underwriting commissions of approximately $1.5 million. Offering costs incurred were approximately $0.2 million.  Interest on the 4.35% Notes 2027 is paid semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per year, beginning August 28, 2022. The 4.35% Notes 2027 mature on February 28, 2027 and may be redeemed in whole or in part at the Company’s option at any time prior to November 28, 2026, at par plus a “make-whole” premium, and thereafter at par. The net proceeds from the offering were used for general corporate purposes in accordance with our investment objective and strategies. Financing costs of $1.7 million related to the 4.35% Notes 2027 have been capitalized and are being amortized over the term of the Notes.

 

118

 

 

At May 31, 2022 the total 4.35% Notes 2027 outstanding was $75.0 million.

 

On April 27, 2022, the Company issued $87.5 million in aggregate principal amount of our 6.00% fixed-rate notes due 2027 (the “6.00% Notes 2027”) for net proceeds of $84.8 million after deducting underwriting commissions of approximately $2.7 million. Offering costs incurred were approximately $0.1 million. On May 10, 2022, the underwriters partially exercised their option to purchase an additional $10.0 million in aggregate principal amount of its 6.00% Notes 2027. Net proceeds to the Company were $9.7 million after deducting underwriting commissions of approximately $0.3 million. Interest on the 6.00% Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.00% per year, beginning August 31, 2022. The 6.00% Notes 2027 mature on April 30, 2027 and commencing April 27, 2024, may be redeemed in whole or in part at any time or from time to time at our option. We expect to use the net proceeds from this offering to make investments in middle-market companies (including investments made through our SBIC Subsidiaries) in accordance with our investment objective and strategies and for general corporate purposes. We may use the net proceeds from this offering to redeem all of the outstanding 7.25% 2025 Notes, which are redeemable by us commencing June 24, 2022.  Financing costs of $3.0 million related to the 6.00% Notes 2027 have been capitalized and are being amortized over the term of the 6.00% 2027 Notes. The 6.00% 2027 Notes are listed on the NYSE under the trading symbol “SAT” with a par value of $25.00 per share.

 

At May 31, 2022 the total 6.00% Notes 2027 outstanding was $97.5 million.

 

At May 31, 2022 and February 28, 2022, the fair value of investments, cash and cash equivalents and cash and cash equivalents, reserve accounts were as follows:

 

   May 31, 2022   February 28, 2022 
   Fair Value   Percentage of
Total
   Fair Value   Percentage of
Total
 
   ($ in thousands) 
Cash and cash equivalents  $94,939    9.5%  $47,258    5.4%
Cash and cash equivalents, reserve accounts   6,550    0.7    5,613    0.6 
First lien term loans   718,090    72.0    631,573    72.6 
Second lien term loans   38,629    3.9    44,385    5.1 
Unsecured term loans   15,910    1.6    38,030    4.4 
Structured finance securities   33,493    3.4    15,931    1.8 
Equity interests   88,411    8.9    87,648    10.1 
Total  $996,022    100.0%  $870,438    100.0%

 

On July 13, 2018, the Company issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised. 

 

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to time, up to $30.0 million of our common stock through an ATM offering. Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were added to the equity ATM program. On July 11, 2019, the amount of the common stock to be offered was increased to $70.0 million, and on October 8, 2019, the amount of the common stock to be offered was increased to $130.0 million. This agreement was terminated as of July 29, 2021, and as of that date, the Company had sold 3,922,018 shares for gross proceeds of $97.1 million at an average price of $24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).

 

On July 30, 2021, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc. and Compass Point Research and Trading, LLC (the “Agents”), through which we may offer for sale, from time to time, up to $150.0 million of our common stock through the Agents, or to them, as principal for their account. As of May 31, 2022, the Company sold 4,840,361 shares for gross proceeds of $124.0 million at an average price of $25.61 for aggregate net proceeds of $122.4 million (net of transaction costs). During the three months ended May 31, 2022, there were no shares sold pursuant to the equity distribution agreement with the Agents.

 

119

 

 

On September 24, 2014, the Company announced the approval of an open market share repurchase plan that allowed it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published consolidated financial statements (the “Share Repurchase Plan”). On October 7, 2015, our board of directors extended the Share Repurchase Plan for another year and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 400,000 shares of its common stock. On October 5, 2016, our board of directors extended the Share Repurchase Plan for another year to October 15, 2017 and increased the number of shares the Company is permitted to repurchase at prices below its NAV, as reported in its then most recently published consolidated financial statements, to 600,000 shares of its common stock. On October 10, 2017, January 8, 2019 and January 7, 2020, our board of directors extended the Share Repurchase Plan for another year to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each time leaving the number of shares unchanged at 600,000 shares of its common stock. On May 4, 2020, our board of directors increased the Share Repurchase Plan to 1.3 million shares of common stock. On January 5, 2021, our board of directors extended the Shares Repurchase Plan for another year to January 15, 2022, leaving the number of shares unchanged at 1.3 million shares of common stock. On January 4, 2022, our board of directors extended the Shares Repurchase Plan for another year to January 15, 2023, leaving the number of shares unchanged at 1.3 million shares of common stock. As of May 31, 2022, the Company purchased 650,612 shares of common stock, at the average price of $20.86 for approximately $13.6 million pursuant to the Share Repurchase Plan. During the three months ended May 31, 2022, the Company purchased 142,177 shares of common stock, at the average price of $26.27 for approximately $3.8 million pursuant to the Share Repurchase Plan.

 

On May 26, 2022, the Company declared a dividend of $0.53 per share payable on June 29, 2022, to common stockholders of record on June 14, 2022. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company's DRIP. Based on shareholder elections, the dividend consisted of approximately $5.1 million in cash and 48,590 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.40 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on June 15, 16, 17, 21, 22, 23, 24, 27, 28 and 29, 2022.

 

On February 24, 2022, the Company declared a dividend of $0.53 per share payable on March 28, 2022, to common stockholders of record on March 14, 2022. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.3 million in cash and 42,825 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.89 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on March 15, 16, 17, 18, 21, 22, 23, 24, 25 and 28, 2022.

 

On November 30, 2021, the Company declared a dividend of $0.53 per share payable on January 19, 2022, to common stockholders of record on January 4, 2021. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.3 million in cash and 41,520 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $26.85 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on January 5, 6, 7, 10, 11, 12, 13, 14, 18 and 19, 2022.

 

On August 26, 2021, the Company declared a dividend of $0.52 per share payable on September 28, 2021, to common stockholders of record on September 14, 2021. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.9 million in cash and 38,016 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $26.76 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on September 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2021.

 

On May 27, 2021, the Company declared a dividend of $0.44 per share payable on June 29, 2021, to common stockholders of record on June 15, 2021. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.1 million in cash and 33,100 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.03 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on June 16, 17, 18, 21, 22, 23, 24, 25, 28 and 29, 2021.

 

120

 

 

On March 22, 2021, the Company declared a dividend of $0.43 per share payable on April 22, 2021, to common stockholders of record on April 8, 2021. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.9 million in cash and 38,580 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.69 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on April 9,12, 13, 14, 15, 16, 19, 20, 21 and 22, 2021.

 

On January 5, 2021, our board of directors declared a dividend of $0.42 per share, which was paid on February 10, 2021, to common stockholders of record as of January 26, 2021. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 41,388 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.75 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on January 28, 29 and February 1, 2, 3, 4, 5, 8, 9 and 10, 2021.

 

On October 7, 2020, our board of directors declared a dividend of $0.41 per share, which was paid on November 10, 2020, to common stockholders of record as of October 26, 2020. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.8 million in cash and 45,706 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.63 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on October 28, 29, 30 and November 2, 3, 4, 5, 6, 9 and 10, 2020.

 

On July 7, 2020, the Company declared a dividend of $0.40 per share payable on August 12, 2020, to common stockholders of record on July 27, 2020. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.7 million in cash and 47,098 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.45 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on July 30, 31 and August 3, 4, 5, 6, 7, 10, 11 and 12, 2020.

 

On January 8, 2020, the Company declared a dividend of $0.56 per share, which was paid on February 6, 2020, to common stockholders of record on January 24, 2020. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $5.4 million in cash and 35,682 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $25.44 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on January 24, 27, 28, 29, 30, 31 and February 3, 4, 5 and 6, 2020.

 

On August 27, 2019, the Company declared a dividend of $0.56 per share, which was paid on September 26, 2019, to common stockholders of record on September 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $4.5 million in cash and 34,575 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.34 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24, 25 and 26, 2019.

 

On May 28, 2019, our board of directors declared a dividend of $0.55 per share, which was paid on June 27, 2019, to common stockholders of record as of June 13, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.6 million in cash and 31,545 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.65 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.

 

121

 

 

On February 26, 2019, our board of directors declared a dividend of $0.54 per share, which was paid on March 28, 2019, to common stockholders of record as of March 14, 2019. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.5 million in cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.36 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.

 

On November 27, 2018, our board of directors declared a dividend of $0.53 per share, which was paid on January 2, 2019, to common stockholders of record on December 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the Company’s DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 30,796 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $18.88 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28, 31, 2018 and January 2, 2019.

 

On August 28, 2018, our board of directors declared a dividend of $0.52 per share, which was paid on September 27, 2018, to common stockholders of record as of September 17, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.3 million in cash and 25,862 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $22.35 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2018.

 

On May 30, 2018, our board of directors declared a dividend of $0.51 per share, which was paid on June 27, 2018, to common stockholders of record as of June 15, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.7 million in cash and 21,562 newly issued shares of common stock, or 0.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $23.72 per share, which equaled 95.0% of the volume weighted average trading price per share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2018.

 

On February 26, 2018, our board of directors declared a dividend of $0.50 per share, which was paid on March 26, 2018, to common stockholders of record as of March 14, 2018. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.6 million in cash and 25,354 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $19.91 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.

 

On November 29, 2017, our board of directors declared a dividend of $0.49 per share, which was paid on December 27, 2017, to common stockholders of record on December 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 25,435 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.14 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and 27, 2017.

 

On August 28, 2017, our board of directors declared a dividend of $0.48 per share, which was paid on September 26, 2017, to common stockholders of record on September 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.2 million in cash and 33,551 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.19 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22, 25 and 26, 2017.

 

122

 

 

On May 30, 2017, our board of directors declared a dividend of $0.47 per share, which was paid on June 27, 2017, to common stockholders of record on June 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.3 million in cash and 26,222 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.04 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.

 

On February 28, 2017, our board of directors declared a dividend of $0.46 per share, which was paid on March 28, 2017, to common stockholders of record as of March 15, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $2.0 million in cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $21.38 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.

 

On January 12, 2017, our board of directors declared a dividend of $0.45 per share, which was paid on February 9, 2017, to common stockholders of record as of January 31, 2017. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.6 million in cash and 50,453 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $20.25 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7, 8 and 9, 2017.

 

On October 5, 2016, our board of directors declared a dividend of $0.44 per share, which was paid on November 9, 2016, to common stockholders of record as of October 31, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,548 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.12 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7, 8 and 9, 2016.

 

On August 8, 2016, our board of directors declared a special dividend of $0.20 per share, which was paid on September 5, 2016, to common stockholders of record as of August 24, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $0.7 million in cash and 24,786 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.06 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and September 1 and 2, 2016.

 

On July 7, 2016, our board of directors declared a dividend of $0.43 per share, which was paid on August 9, 2016, to common stockholders of record as of July 29, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.32 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.

 

On March 31, 2016, our board of directors declared a dividend of $0.41 per share, which was paid on April 27, 2016, to common stockholders of record as of April 15, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.5 million in cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.43 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.

 

On January 12, 2016, our board of directors declared a dividend of $0.40 per share, which was paid on February 29, 2016, to common stockholders of record as of February 1, 2016. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.4 million in cash and 66,765 newly issued shares of common stock, or 1.2% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.11 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and 29, 2016.

 

123

 

 

On October 7, 2015, our board of directors declared a dividend of $0.36 per share, which was paid on November 30, 2015, to common stockholders of record as of November 2, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 61,029 newly issued shares of common stock, or 1.1% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.53 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and 30, 2015.

 

On July 8, 2015, our board of directors declared a dividend of $0.33 per share, which was paid on August 31, 2015, to common stockholders of record as of August 3, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $1.1 million in cash and 47,861 newly issued shares of common stock, or 0.9% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.28 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.

 

On May 14, 2015, our board of directors declared a special dividend of $1.00 per share, which was paid on June 5, 2015, to common stockholders of record on as of May 26, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $3.4 million in cash and 126,230 newly issued shares of common stock, or 2.3% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.47 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4 and 5, 2015.

 

On April 9, 2015, our board of directors declared a dividend of $0.27 per share, which was paid on May 29, 2015, to common stockholders of record as of May 4, 2015. Shareholders had the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $0.9 million in cash and 33,766 newly issued shares of common stock, or 0.6% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $16.78 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.

 

On September 24, 2014, our board of directors declared a dividend of $0.22 per share, which was paid on February 27, 2015, to common stockholders of record on February 2, 2015. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $0.8 million in cash and 26,858 newly issued shares of common stock, or 0.5% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.97 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and 27, 2015.

 

Also, on September 24, 2014, our board of directors declared a dividend of $0.18 per share, which was paid on November 28, 2014, to common stockholders of record on November 3, 2014. Shareholders had the option to receive payment of the dividend in cash or receive shares of common stock pursuant to the DRIP. Based on shareholder elections, the dividend consisted of approximately $0.6 million in cash and 22,283 newly issued shares of common stock, or 0.4% of our outstanding common stock prior to the dividend payment. The number of shares of common stock comprising the stock portion was calculated based on a price of $14.37 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and 28, 2014.

 

On October 30, 2013, our board of directors declared a dividend of $2.65 per share, which was paid on December 27, 2013, to common stockholders of record as of November 13, 2013. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $2.5 million or $0.53 per share. This dividend was declared in reliance on certain private letter rulings issued by the IRS concluding that a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. Based on shareholder elections, the dividend consisted of approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.439 per share, which 95% of equaled the volume weighted average trading price per share of the common stock on December 11, 13, and 16, 2013.

 

On November 9, 2012, our board of directors declared a dividend of $4.25 per share, which was paid on December 31, 2012, to common stockholders of record as of November 20, 2012. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to approximately $3.3 million or $0.85 per share. Based on shareholder elections, the dividend consisted of $3.3 million in cash and 853,455 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $15.444 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on December 14, 17 and 19, 2012.

 

124

 

 

On November 15, 2011, our board of directors declared a dividend of $3.00 per share, which was paid on December 30, 2011, to common stockholders of record as of November 25, 2011. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.0 million or $0.60 per share. Based on shareholder elections, the dividend consisted of $2.0 million in cash and 599,584 shares of common stock, or 18.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 20.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $13.117067 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2011.

 

On November 12, 2010, our board of directors declared a dividend of $4.40 per share to shareholders payable in cash or shares of our common stock, in accordance with the provisions of the IRS Revenue Procedure 2010-12, which allows a publicly-traded regulated investment company to satisfy its distribution requirements with a distribution paid partly in common stock provided that at least 10.0% of the distribution is payable in cash. The dividend was paid on December 29, 2010 to common shareholders of record on November 19, 2010. Based on shareholder elections, the dividend consisted of $1.2 million in cash and 596,235 shares of common stock, or 22.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 10.0% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $17.8049 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on December 20, 21 and 22, 2010.

 

On November 13, 2009, our board of directors declared a dividend of $18.25 per share, which was paid on December 31, 2009, to common stockholders of record as of November 25, 2009. Shareholders had the option to receive payment of the dividend in cash, shares of common stock, or a combination of cash and shares of common stock, provided that the aggregate cash payable to all shareholders was limited to $2.1 million or $0.25 per share. Based on shareholder elections, the dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock, or 104.0% of our outstanding common stock prior to the dividend payment. The amount of cash elected to be received was greater than the cash limit of 13.7% of the aggregate dividend amount, thus resulting in the payment of a combination of cash and stock to shareholders who elected to receive cash. The number of shares of common stock comprising the stock portion was calculated based on a price of $1.5099 per share, which equaled 95% of the volume weighted average trading price per share of the common stock on December 24 and 28, 2009.

 

We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.

 

Our asset coverage ratio, as defined in the 1940 Act, was 179.3% as of May 31, 2022 and 209.3% as of February 28, 2022.

 

Subsequent Events

 

On June 14, 2022, the Company caused notices to be issued to the holders of the 7.25% 2025 Notes regarding the Company’s exercise of its option to redeem, in whole, the issued and outstanding 7.25% 2025. The Company will redeem $43.125 million in aggregate principal amount of the issued and outstanding 7.25% 2025 Notes on July 14, 2022 (the “Redemption Date”). The 7.25% 2025 Notes will be redeemed at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon, through, but excluding, the Redemption Date.

 

Contractual obligations

 

The following table shows our payment obligations for repayment of debt and other contractual obligations at May 31, 2022:

 

       Payment Due by Period 
Long-Term Debt Obligations  Total   Less Than
1 Year
   1 - 3
Years
   3 - 5
Years
   More Than
5 Years
 
           ($ in thousands)         
Revolving credit facility  $25,000   $             -   $25,000   $-   $- 
SBA debentures   217,000    -    15,000    33,660    168,340 
7.25% 2025 Notes   43,125    -    -    43,125    - 
7.75% 2025 Notes   5,000    -    -    5,000    - 
4.375% 2026 Notes   175,000    -    -    175,000    - 
4.35% 2027 Notes   75,000    -    -    75,000    - 
6.25% 2027 Notes   15,000    -    -    -    15,000 
6.00% 2027 Notes   97,500    -    -    97,500    - 
Total Long-Term Debt Obligations  $652,625   $-   $40,000   $429,285   $183,340 

 

125

 

 

Off-balance sheet arrangements

 

As of May 31, 2022 and February 28, 2022, the Company’s off-balance sheet arrangements consisted of $96.0 million and $83.4 million, respectively, of unfunded commitments outstanding to provide debt financing to its portfolio companies or to fund limited partnership interests. Such commitments are generally up to the Company’s discretion to approve, or the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statements of assets and liabilities.

 

A summary of the unfunded commitments outstanding as of May 31, 2022 and February 28, 2022 is shown in the table below (dollars in thousands):

 

   May 31,
2022
   February 28,
2022
 
At Company’s discretion        
Artemis Wax  $15,000   $3,700 
Ascend Software LLC   5,000    5,000 
Axero Holdings   3,000    3,000 
Davisware   2,000    2,000 
Granite Comfort   5,000    - 
JDXpert   5,000    - 
Lee’s Famous Recipe Chicken   4,000    10,000 
Netreo Holdings, LLC   1,500    4,000 
Pepper Palace   3,000    3,000 
Procrement Partners   2,800    2,800 
Saratoga Senior Loan Fund I JV LLC   17,500    17,500 
Sceptre Hospitality Resources   250    1,000 
Book4Time, Inc.   -    2,000 
Total   64,050    54,000 
           
At portfolio company’s discretion - satisfaction of certain financial and nonfinancial covenants required          
Ascend Software LLC   5,200    6,500 
Axero Holdings   900    2,000 
Axero Holdings - Revolver   500    500 
Davisware, LLC   1,000    1,000 
Exigo - DDTL   4,167    - 
Exigo - Revolver   833    - 
GDS Holdings US, Inc.   1,786    2,786 
Granite Comfort   5,000    - 
GoReact   500    2,500 
JDXpert   1,000    - 
Madison Logic - Revolver   1,084    1,084 
New England Dental Partners   4,500    4,500 
Pepper Palace - DDTL   2,000    2,000 
Pepper Palace - Revolver   2,500    2,500 
Zollege   1,000    1,000 
Lee’s Famous Recipe Chicken   -    3,000 
    31,970    29,370 
Total  $96,020   $83,370 

 

The Company believes its assets will provide adequate coverage to satisfy these unfunded commitments. As of May 31, 2022, the Company had cash and cash equivalents of $94.9 million and $6.6 million in available borrowings under the Encina Credit Facility.

 

126

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our business activities contain elements of market risk. We consider our principal market risk to be the fluctuation in interest rates. Managing this risk is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor this risk and thresholds by means of administrative and information technology systems and other policies and processes. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us.

 

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, including relative changes in different interest rates, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio.

 

Our investment income is affected by fluctuations in various interest rates, including LIBOR and the prime rate. Substantially all of our portfolio is, and we expect will continue to be, comprised of floating rate investments that utilize LIBOR. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. Our interest expense is affected by fluctuations in LIBOR only on our Encina Credit Facility. In addition, substantially all of our assets and our Encina Credit Facility have LIBOR transition language to include the use of an acceptable replacement rate, such as SOFR. At May 31, 2022, we had $627.6 million of borrowings outstanding. There were $25.0 million borrowings outstanding under the Encina Credit Facility as of May 31, 2022.

 

We have analyzed the potential impact of changes in interest rates on interest income from investments. Assuming that our investments as of May 31, 2022 were to remain constant for a full fiscal year and no actions were taken to alter the current interest rate terms, a hypothetical change of a 1.0% increase in interest rates would cause a corresponding increase of approximately $7.0 million to our interest income. Conversely, a hypothetical change of a 1.0% decrease in interest rates would cause a corresponding decrease of approximately $3.4 million to our interest income.

 

Changes in interest rates would have no impact to our current interest and debt financing expense, as all our borrowings, except for the Encina Credit Facility, are fixed rate.

 

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the statements of assets and liabilities and other business developments that could magnify or diminish our sensitivity to interest rate changes, nor does it account for divergences in LIBOR and the commercial paper rate, which have historically moved in tandem but, in times of unusual credit dislocations, have experienced periods of divergence. Accordingly, no assurances can be given that actual results would not materially differ from the potential outcome simulated by this estimate.

 

127

 

 

For further information, the following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of May 31, 2022. 

 

           Increase   Increase
(Decrease)
 
   Increase   (Increase)   (Decrease)   in Net 
Basis  (Decrease)   Decrease   in Net   Investment 
Point  in Interest   in Interest   Investment   Income 
Change  Income   Expense   Income   per Share 
   ($ in thousands)     
-100  $(3,375)  $-   $(3,375)  $(0.28)
-50   (2,578)   -    (2,578)   (0.21)
-25   (1,348)   -    (1,348)   (0.11)
25   1,571    -    1,571    0.13 
50   3,322    -    3,322    0.27 
100   6,978    (86)   6,892    0.57 
200   14,697    (336)   14,361    1.19 
300   22,416    (586)   21,830    1.80 
400   30,136    (836)   29,300    2.42 

 

ITEM 4. CONTROLS AND PROCEDURES

 

(a)As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on that evaluation, our chief executive officer and our chief financial officer have concluded that our current disclosure controls and procedures are effective in facilitating timely decisions regarding required disclosure of any material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

(b)There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of Exchange Act) that occurred during the quarter ended May 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

128

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Neither we nor our wholly owned subsidiaries, Saratoga Investment Funding LLC, Saratoga Investment Funding II, LLC, Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, are currently subject to any material legal proceedings.

 

Item 1A. Risk Factors

 

In addition to information set forth in this report, you should carefully consider the “Risk Factors” discussed in our most recent Annual Report on Form 10-K filed with the SEC, which could materially affect our business, financial condition and/or operating results. Other than as set forth below, there have been no material changes during the three months ended May 31, 2022 to the risk factors discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 28, 2022. Additional risks or uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Not applicable.

 

Item 3. Defaults Upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

129

 

 

ITEM 6. EXHIBITS

 

Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

 

EXHIBIT INDEX

 

Exhibit    
Number   Description
     
3.1(a)   Articles of Incorporation of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007).
     
3.1(b)   Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 3, 2010).
     
3.1(c)   Articles of Amendment of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed August 13, 2010).
     
3.2   Third Amended and Restated Bylaws of Saratoga Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 10-Q filed January 6, 2021)
     
4.1   Specimen certificate of Saratoga Investment Corp.’s common stock, par value $0.001 per share. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-169135, filed on September 1, 2010).
     
4.2   Registration Rights Agreement dated July 30, 2010 between GSC Investment Corp., GSC CDO III L.L.C., and the investors party thereto (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
     
4.3   Dividend Reinvestment Plan (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on September 24, 2014).
     
4.4   Form of Indenture by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Saratoga Investment Corp.’s Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2, File No. 333-186323 filed April 30, 2013).
     
4.5   Form of Articles Supplementary Establishing and Fixing the Rights and Preferences of Preferred Stock (incorporated by reference to Saratoga Investment Corp.’s registration statement on Form N-2 Pre-Effective Amendment No. 1, File No. 333-196526, filed on December 5, 2014).
     
4.6   Fourth Supplemental Indenture between the Saratoga Investment Corp. and U.S. Bank National Association, as trustee, relating to the 7.25% Note due 2025 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 814-00732) filed on June 24, 2020).
     
4.7   Form of 7.25% Notes due 2025 (incorporated by reference to Exhibit 4.11 hereto).
     
4.8   Eighth Supplemental Indenture between the Saratoga Investment Corp. and U.S. Bank National Association, as trustee, relating to the 4.375% Note due 2026 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 814-00732) filed on March 10, 2021).
     
4.9   Ninth Supplemental Indenture between Saratoga Investment Corp. and U.S. Bank National Association, as trustee, relating to the 4.375% Note due 2027 (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 814-00732) filed on January 19, 2022).
     
4.10   Tenth  Supplemental Indenture between Saratoga Investment Corp. and U.S. Bank National Association, as trustee, relating to the 6.00% Note due 2027 (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 814-00732) filed on April 27, 2022).
     
4.11   Form of 4.375% Notes due 2026 (incorporated by reference to Exhibit 4.8 hereto).
     
4.12   Form of 4.375% Notes due 2027 (incorporated by reference to Exhibit 4.9 hereto).
     
4.13   Form of 6.00% Notes due 2027 (incorporated by reference to Exhibit 4.10 hereto).
     
10.1   Investment Advisory and Management Agreement dated July 30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
     
10.2   Custodian Agreement dated March 21, 2007 between GSC Investment LLC and U.S. Bank National Association (incorporated by reference to Saratoga Investment Corp.’s Form 10-Q for the quarterly period ended May 31, 2007).
     
10.3   Administration Agreement dated July 30, 2010 between GSC Investment Corp. and Saratoga Investment Advisors, LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).

 

130

 

 

10.4   Trademark License Agreement dated July 30, 2010 between Saratoga Investment Advisors, LLC and GSC Investment Corp. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on August 3, 2010).
     
10.5   Form of Indemnification Agreement between Saratoga Investment Corp. and each officer and director of Saratoga Investment Corp. (incorporated by reference to Amendment No. 2 to Saratoga Investment Corp.’s Registration Statement on Form N-2 filed on January 12, 2007).
     
10.6   Amended and Restated Indenture, dated as of November 15, 2016, among Saratoga Investment Corp. CLO 2013-1, Ltd., Saratoga Investment Corp. CLO 2013-1, Inc. and U.S. Bank National Association. (incorporated by reference to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-216344, filed on February 28, 2017).
     
10.7   Amended and Restated Collateral Management Agreement, dated February 26, 2021, by and between Saratoga Investment Corp. and Saratoga Investment Corp. CLO 2013-1, Ltd. (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on March 4, 2021).
     
10.9   Credit and Security Agreement, dated as of October 4, 2021, by and among Saratoga Investment Funding II, LLC, Saratoga Investment Corp., as collateral manager and equityholder, the lenders party thereto, Encina Lender Finance, LLC, as administrative agent for the secured parties and the collateral agent, and U.S. Bank National Association, as collateral custodian for the secured parties thereto and as collateral administrator (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on October 7, 2021).
     
10.10   Equity Pledge Agreement, dated as of October 4, 2021, by and between Saratoga Investment Corp. and Encina Lender Finance, LLC, as collateral agent for the secured parties thereto (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on October 7, 2021).
     
10.11   Loan Sale and Contribution Agreement, dated as of October 4, 2021, by and between Saratoga Investment Corp., as seller, and Saratoga Investment Funding II LLC, as purchaser (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on October 7, 2021).
     
10.12   Saratoga Senior Loan Fund I JV LLC Limited Liability Company Agreement, dated October 26, 2021, by and between Saratoga Investment Corp. and TJHA JV I LLC (incorporated by reference to Saratoga Investment Corp.’s Current Report on Form 8-K filed on October 27, 2021).
     
14   Code of Ethics of the Company adopted under Rule 17j-1 (incorporated by reference to Amendment No.7 to Saratoga Investment Corp.’s Registration Statement on Form N-2, File No. 333-138051, filed on March 22, 2007).
     
31.1*   Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
     
31.2*   Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
     
32.1*   Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.1350)
     
32.2*   Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

 

 

*Filed herewith

 

131

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SARATOGA INVESTMENT CORP.
     
Date: July 6, 2022 By: /s/ CHRISTIAN L. OBERBECK 
    Christian L. Oberbeck
    Chief Executive Officer
     
  By: /s/ HENRI J. STEENKAMP 
    Henri J. Steenkamp
    Chief Financial Officer and
Chief Compliance Officer

 

132

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Christian L. Oberbeck, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of Saratoga Investment Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 6, 2022

 

  /s/ CHRISTIAN L. OBERBECK
  Christian L. Oberbeck
  Chief Executive Officer

 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Henri J. Steenkamp, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of Saratoga Investment Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 6, 2022

  /s/ HENRI J. STEENKAMP 
  Name: Henri J. Steenkamp
  Chief Financial Officer and Chief Compliance Officer

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The certification set forth below is being submitted in connection with the accompanying Quarterly Report of Saratoga Investment Corp. on Form 10-Q (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

 

Christian L. Oberbeck, the Chief Executive Officer, certifies that, to the best of his knowledge:

 

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

 

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Saratoga Investment Corp.

 

Date: July 6, 2022

 

  /s/ CHRISTIAN L. OBERBECK 
  Christian L. Oberbeck
  Chief Executive Officer

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The certification set forth below is being submitted in connection with the accompanying Quarterly Report of Saratoga Investment Corp. on Form 10-Q (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

 

Henri J. Steenkamp, the Chief Financial Officer, Chief Compliance Officer and Secretary of Saratoga Investment Corp. certifies that, to the best of his knowledge:

 

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

 

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Saratoga Investment Corp.

 

Date: July 6, 2022

 

  /s/ HENRI J. STEENKAMP 
  Name: Henri J. Steenkamp
  Chief Financial Officer and Chief Compliance Officer