UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
x |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended November 30, 2013
|
o |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 1-33376
SARATOGA INVESTMENT CORP.
(Exact name of registrant as specified in its charter)
|
Maryland |
|
20-8700615 |
|
(State or other jurisdiction of |
|
(I.R.S. Employer |
|
535 Madison Avenue |
|
10022 |
|
(Address of principal executive office) |
|
(Zip Code) |
(212) 906-7800
(Registrant’s telephone number, including area code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
|
Large Accelerated Filer o |
|
Accelerated Filer o |
|
|
|
|
|
Non-Accelerated Filer x |
|
Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of January 14, 2014 was 5,379,616.
Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities
|
|
|
As of |
| ||||
|
|
|
November 30, 2013 |
|
February 28, 2013 |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Investments at fair value |
|
|
|
|
| ||
|
Non-control/non-affiliate investments (amortized cost of $180,323,606 and $130,465,086, respectively) |
|
$ |
179,759,938 |
|
$ |
129,563,428 |
|
|
Control investments (cost of $16,555,808 and $18,944,966 respectively) |
|
19,018,842 |
|
25,516,959 |
| ||
|
Total investments at fair value (amortized cost of $196,879,414 and $149,410,052 respectively) |
|
198,778,780 |
|
155,080,387 |
| ||
|
Cash and cash equivalents |
|
3,359,983 |
|
149,025 |
| ||
|
Cash and cash equivalents, reserve accounts |
|
1,599,132 |
|
12,086,142 |
| ||
|
Interest receivable, (net of reserve of $310,146 and $53,543, respectively) |
|
2,751,138 |
|
2,889,358 |
| ||
|
Due from manager |
|
4,929 |
|
— |
| ||
|
Deferred debt financing costs, net |
|
4,008,926 |
|
2,090,184 |
| ||
|
Management fee receivable |
|
166,682 |
|
215,853 |
| ||
|
Other assets |
|
99,597 |
|
83,407 |
| ||
|
Receivable from unsettled trades |
|
— |
|
1,817,074 |
| ||
|
Total assets |
|
$ |
210,769,167 |
|
$ |
174,411,430 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES |
|
|
|
|
| ||
|
Revolving credit facility |
|
$ |
4,000,000 |
|
$ |
24,300,000 |
|
|
SBA debentures payable |
|
40,000,000 |
|
36,000,000 |
| ||
|
Notes payable |
|
48,300,000 |
|
— |
| ||
|
Dividend payable |
|
2,507,112 |
|
— |
| ||
|
Management and incentive fees payable |
|
3,587,061 |
|
4,509,322 |
| ||
|
Accounts payable and accrued expenses |
|
381,485 |
|
435,038 |
| ||
|
Interest and debt fees payable |
|
514,333 |
|
257,796 |
| ||
|
Due to manager |
|
273,083 |
|
222,513 |
| ||
|
Total liabilities |
|
$ |
99,563,074 |
|
$ |
65,724,669 |
|
|
|
|
|
|
|
| ||
|
NET ASSETS |
|
|
|
|
| ||
|
Common stock, par value $.001, 100,000,000 common shares authorized, 5,379,616 and 4,730,116 common shares issued and outstanding, respectively |
|
$ |
5,380 |
|
$ |
4,730 |
|
|
Capital in excess of par value |
|
184,851,122 |
|
174,824,076 |
| ||
|
Distribution in excess of net investment income |
|
(29,418,170 |
) |
(24,522,951 |
) | ||
|
Accumulated net realized loss from investments and derivatives |
|
(46,131,603 |
) |
(47,289,427 |
) | ||
|
Net unrealized appreciation on investments and derivatives |
|
1,899,364 |
|
5,670,333 |
| ||
|
Total Net Assets |
|
111,206,093 |
|
108,686,761 |
| ||
|
|
|
|
|
|
| ||
|
Total liabilities and Net Assets |
|
$ |
210,769,167 |
|
$ |
174,411,430 |
|
|
|
|
|
|
|
| ||
|
NET ASSET VALUE PER SHARE |
|
$ |
20.67 |
|
$ |
22.98 |
|
See accompanying notes to consolidated financial statements.
Saratoga Investment Corp.
Consolidated Statements of Operations
(unaudited)
|
|
|
For the three months ended |
|
For the nine months ended |
| ||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
INVESTMENT INCOME |
|
|
|
|
|
|
|
|
| ||||
|
Interest from investments |
|
|
|
|
|
|
|
|
| ||||
|
Non-control/Non-affiliate investments |
|
$ |
4,279,445 |
|
$ |
2,190,350 |
|
$ |
11,534,271 |
|
$ |
6,129,508 |
|
|
Payment-in-kind interest income from Non-control/Non-affiliate investments |
|
161,485 |
|
276,245 |
|
634,408 |
|
821,830 |
| ||||
|
Control investments |
|
556,291 |
|
1,046,285 |
|
2,791,830 |
|
3,186,751 |
| ||||
|
Total interest income |
|
4,997,221 |
|
3,512,880 |
|
14,960,509 |
|
10,138,089 |
| ||||
|
Interest from cash and cash equivalents |
|
1,316 |
|
731 |
|
7,181 |
|
5,368 |
| ||||
|
Management fee income |
|
421,198 |
|
500,454 |
|
1,400,039 |
|
1,500,519 |
| ||||
|
Other income |
|
381,480 |
|
19,750 |
|
838,956 |
|
172,310 |
| ||||
|
Total investment income |
|
5,801,215 |
|
4,033,815 |
|
17,206,685 |
|
11,816,286 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EXPENSES |
|
|
|
|
|
|
|
|
| ||||
|
Interest and debt financing expenses |
|
1,611,221 |
|
529,858 |
|
4,342,657 |
|
1,808,586 |
| ||||
|
Base management fees |
|
876,345 |
|
528,735 |
|
2,424,167 |
|
1,492,345 |
| ||||
|
Professional fees |
|
312,992 |
|
347,459 |
|
879,247 |
|
986,781 |
| ||||
|
Administrator expenses |
|
250,000 |
|
250,000 |
|
750,000 |
|
750,000 |
| ||||
|
Incentive management fees |
|
(561,539 |
) |
(412,654 |
) |
219,813 |
|
887,020 |
| ||||
|
Insurance |
|
117,955 |
|
128,891 |
|
357,184 |
|
389,506 |
| ||||
|
Directors fees and expenses |
|
35,978 |
|
53,705 |
|
131,978 |
|
155,705 |
| ||||
|
General & administrative |
|
251,058 |
|
117,357 |
|
440,844 |
|
265,720 |
| ||||
|
Other expense |
|
9,172 |
|
1,311 |
|
21,207 |
|
4,434 |
| ||||
|
Total expenses |
|
2,903,182 |
|
1,544,662 |
|
9,567,097 |
|
6,740,097 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET INVESTMENT INCOME |
|
2,898,033 |
|
2,489,153 |
|
7,639,588 |
|
5,076,189 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: |
|
|
|
|
|
|
|
|
| ||||
|
Net realized gain from investments |
|
82,882 |
|
95,372 |
|
1,157,824 |
|
542,720 |
| ||||
|
Net realized loss from derivatives |
|
— |
|
— |
|
— |
|
(131,000 |
) | ||||
|
Net unrealized appreciation (depreciation) on investments |
|
(1,713,025 |
) |
(1,838,957 |
) |
(3,770,968 |
) |
3,188,543 |
| ||||
|
Net unrealized appreciation on derivatives |
|
— |
|
— |
|
— |
|
130,925 |
| ||||
|
Net gain (loss) on investments |
|
(1,630,143 |
) |
(1,743,585 |
) |
(2,613,144 |
) |
3,731,188 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
1,267,890 |
|
$ |
745,568 |
|
$ |
5,026,444 |
|
$ |
8,807,377 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE |
|
$ |
0.26 |
|
$ |
0.19 |
|
$ |
1.05 |
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED |
|
4,851,451 |
|
3,970,447 |
|
4,770,267 |
|
3,907,696 |
| ||||
See accompanying notes to consolidated financial statements.
Saratoga Investment Corp.
Consolidated Schedule of Investments
November 30, 2013
(unaudited)
|
Company (a) |
|
Industry |
|
Investment Interest Rate / Maturity |
|
Principal/ |
|
Cost |
|
Fair Value (c) |
|
% of |
| ||||
|
Non-control/Non-affiliated investments - 161.6% (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
PATS Aircraft, LLC (d, g) |
|
Aerospace |
|
Common Stock |
|
51,813 |
|
89,636 |
|
89,636 |
|
0.1 |
% | ||||
|
PATS Aircraft, LLC (d) |
|
Aerospace |
|
First Lien Term Loan 8.50% Cash, 10/6/2016 |
|
$ |
|
254,598 |
|
$ |
254,598 |
|
$ |
254,598 |
|
0.2 |
% |
|
|
|
|
|
Total Aerospace |
|
|
|
344,234 |
|
344,234 |
|
0.3 |
% | ||||
|
National Truck Protection Co., Inc. (d, g) |
|
Automotive |
|
Common Stock |
|
1,116 |
|
1,000,000 |
|
1,120,330 |
|
1.0 |
% | ||||
|
National Truck Protection Co., Inc. (d) |
|
Automotive |
|
First Lien Term Loan 15.50% (13.50% Cash/2.00% PIK), 9/13/2018 |
|
$ |
|
8,250,000 |
|
8,250,000 |
|
8,250,000 |
|
7.4 |
% | ||
|
Take 5 Oil Change, L.L.C. (d, g) |
|
Automotive |
|
Common Stock |
|
7,128 |
|
712,800 |
|
1,091,154 |
|
1.0 |
% | ||||
|
|
|
|
|
Total Automotive |
|
|
|
9,962,800 |
|
10,461,484 |
|
9.4 |
% | ||||
|
Legacy Cabinets Holdings (d, g) |
|
Building Products |
|
Common Stock Voting A-1 |
|
2,535 |
|
220,900 |
|
302,020 |
|
0.3 |
% | ||||
|
Legacy Cabinets Holdings (d, g) |
|
Building Products |
|
Common Stock Voting B-1 |
|
1,600 |
|
139,424 |
|
190,624 |
|
0.2 |
% | ||||
|
Legacy Cabinets, Inc. (d) |
|
Building Products |
|
First Lien Term Loan 7.25% (1.00% Cash/6.25% PIK), 5/3/2014 |
|
$ |
|
260,521 |
|
260,521 |
|
260,521 |
|
0.2 |
% | ||
|
|
|
|
|
Total Building Products |
|
|
|
620,845 |
|
753,165 |
|
0.7 |
% | ||||
|
ARSloane Acquistion, LLC (d) |
|
Business Services |
|
First Lien Term Loan 7.50% Cash, 10/1/2019 |
|
$ |
|
1,000,000 |
|
990,265 |
|
1,001,300 |
|
0.9 |
% | ||
|
BMC Software, Inc. (d) |
|
Business Services |
|
First Lien Term Loan 5.00% Cash, 9/10/2020 |
|
$ |
|
6,000,000 |
|
5,941,650 |
|
6,051,000 |
|
5.4 |
% | ||
|
Dispensing Dynamics International (d) |
|
Business Services |
|
Senior Secured Note 12.50% Cash, 1/1/2018 |
|
$ |
|
7,000,000 |
|
6,877,686 |
|
7,385,000 |
|
6.7 |
% | ||
|
Easy Ice, LLC (d) |
|
Business Services |
|
First Lien Term Loan 14.00% (11.00% Cash 3.00% PIK), 3/29/2018 |
|
$ |
|
7,451,002 |
|
7,324,751 |
|
7,451,002 |
|
6.7 |
% | ||
|
Emily Street Enterprises, L.L.C. (d) |
|
Business Services |
|
Senior Secured Note 14.00% (13.00% Cash/1.00% PIK), 12/28/2017 |
|
$ |
|
5,753,427 |
|
5,660,528 |
|
5,753,427 |
|
5.2 |
% | ||
|
Emily Street Enterprises, L.L.C. (d, g) |
|
Business Services |
|
Warrant Membership Interests |
|
49,318 |
|
400,000 |
|
488,741 |
|
0.4 |
% | ||||
|
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) |
|
Business Services |
|
First Lien Term Loan 5.50% Cash, 6/28/2019 |
|
$ |
|
4,000,000 |
|
3,962,643 |
|
3,990,000 |
|
3.6 |
% | ||
|
Help/Systems Holdings, Inc.(Help/Systems, LLC) (d) |
|
Business Services |
|
Second Lien Term Loan 9.50% Cash, 6/28/2020 |
|
$ |
|
2,000,000 |
|
1,971,697 |
|
2,000,000 |
|
1.8 |
% | ||
|
Knowland Technology Holdings, L.L.C. (d) |
|
Business Services |
|
First Lien Term Loan 11.00% Cash, 11/29/2017 |
|
$ |
|
6,200,000 |
|
6,100,922 |
|
6,200,000 |
|
5.6 |
% | ||
|
Trinet HR Corporation (SOI Holdings, Inc.) (d) |
|
Business Services |
|
First Lien Term Loan 5.00% Cash, 8/20/2020 |
|
$ |
|
5,000,000 |
|
4,951,958 |
|
5,000,000 |
|
4.5 |
% | ||
|
Trinet HR Corporation (SOI Holdings, Inc.) (d) |
|
Business Services |
|
Second Lien Term Loan 8.75% Cash, 2/20/2021 |
|
$ |
|
2,500,000 |
|
2,451,490 |
|
2,472,000 |
|
2.2 |
% | ||
|
Vector Controls Holding Co., LLC (d) |
|
Business Services |
|
First Lien Term Loan, 14.00% (12.00% Cash, 2.00% PIK), 3/6/2018 |
|
$ |
|
9,554,517 |
|
9,394,118 |
|
9,554,517 |
|
8.6 |
% | ||
|
Vector Controls Holding Co., LLC (d, g) |
|
Business Services |
|
Warrants to Purchase Limited Liability Company Interests |
|
101 |
|
— |
|
— |
|
0.0 |
% | ||||
|
|
|
|
|
Total Business Services |
|
|
|
56,027,708 |
|
57,346,987 |
|
51.6 |
% | ||||
|
Targus Group International, Inc. (d) |
|
Consumer Products |
|
First Lien Term Loan 11.00% Cash, 5/24/2016 |
|
$ |
|
3,776,785 |
|
3,738,991 |
|
3,635,156 |
|
3.3 |
% | ||
|
Targus Holdings, Inc. (d, g) |
|
Consumer Products |
|
Common Stock |
|
62,413 |
|
566,765 |
|
680,302 |
|
0.6 |
% | ||||
|
Targus Holdings, Inc. (d) |
|
Consumer Products |
|
Unsecured Note 10.00% PIK, 6/14/2019 |
|
$ |
|
1,914,341 |
|
1,914,341 |
|
1,320,582 |
|
1.2 |
% | ||
|
Targus Holdings, Inc. (d) |
|
Consumer Products |
|
Unsecured Note 16.00% Cash, 10/26/2018 |
|
$ |
|
371,073 |
|
366,112 |
|
345,148 |
|
0.3 |
% | ||
|
|
|
|
|
Total Consumer Products |
|
|
|
6,586,209 |
|
5,981,188 |
|
5.4 |
% | ||||
|
CFF Acquisition L.L.C. (d) |
|
Consumer Services |
|
First Lien Term Loan 7.50% Cash, 7/31/2015 |
|
$ |
|
1,606,766 |
|
1,540,599 |
|
1,606,766 |
|
1.4 |
% | ||
|
Expedited Travel L.L.C. (d) |
|
Consumer Services |
|
First Lien Term Loan 12.00% Cash, 12/28/2017 |
|
$ |
|
4,642,500 |
|
4,557,379 |
|
4,642,500 |
|
4.2 |
% | ||
|
PrePaid Legal Services, Inc. (d) |
|
Consumer Services |
|
First Lien Term Loan 6.25% Cash, 7/1/2019 |
|
$ |
|
4,596,774 |
|
4,553,840 |
|
4,596,774 |
|
4.1 |
% | ||
|
PrePaid Legal Services, Inc. (d) |
|
Consumer Services |
|
Second Lien Term Loan 9.75% Cash, 7/1/2020 |
|
$ |
|
5,000,000 |
|
4,929,239 |
|
5,000,000 |
|
4.5 |
% | ||
|
|
|
|
|
Total Consumer Services |
|
|
|
15,581,057 |
|
15,846,040 |
|
14.2 |
% | ||||
|
M/C Acquisition Corp., L.L.C. (d, g) |
|
Education |
|
Class A Common Stock |
|
544,761 |
|
30,241 |
|
— |
|
0.0 |
% | ||||
|
Company (a) |
|
Industry |
|
Investment Interest Rate / Maturity |
|
Principal/ |
|
Cost |
|
Fair Value (c) |
|
% of |
| ||||||
|
M/C Acquisition Corp., L.L.C. (d) |
|
Education |
|
First Lien Term Loan 1.00% Cash, 3/13/14 |
|
$ |
2,519,667 |
|
1,365,733 |
|
90,426 |
|
0.1 |
% | |||||
|
|
|
|
|
Total Education |
|
|
|
1,395,974 |
|
90,426 |
|
0.1 |
% | ||||||
|
Group Dekko, Inc. (d) |
|
Electronics |
|
Second Lien Term Loan 11.00% (10.00% Cash/1.00% PIK), 5/1/2016 |
|
$ |
6,883,558 |
|
6,883,558 |
|
6,752,082 |
|
6.1 |
% | |||||
|
|
|
|
|
Total Electronics |
|
|
|
6,883,558 |
|
6,752,082 |
|
6.1 |
% | ||||||
|
USS Parent Holding Corp. (d, g) |
|
Environmental |
|
Non Voting Common Stock |
|
765 |
|
133,002 |
|
192,577 |
|
0.2 |
% | ||||||
|
USS Parent Holding Corp. (d, g) |
|
Environmental |
|
Voting Common Stock |
|
17,396 |
|
3,025,798 |
|
4,381,122 |
|
3.9 |
% | ||||||
|
|
|
|
|
Total Environmental |
|
|
|
3,158,800 |
|
4,573,699 |
|
4.1 |
% | ||||||
|
DS Waters of America, Inc. (d) |
|
Food and Beverage |
|
First Lien Term Loan 5.25% Cash, 8/30/2020 |
|
$ |
2,500,000 |
|
2,475,815 |
|
2,512,500 |
|
2.2 |
% | |||||
|
HOA Restaurant Group, L.L.C. (d) |
|
Food and Beverage |
|
Senior Secured Note 11.25% Cash, 4/1/2017 |
|
$ |
4,000,000 |
|
3,912,548 |
|
4,220,000 |
|
3.8 |
% | |||||
|
TB Corp. (d) |
|
Food and Beverage |
|
First Lien Term Loan 5.75% Cash, 6/19/2018 |
|
$ |
5,114,855 |
|
5,093,700 |
|
5,080,585 |
|
4.6 |
% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
TB Corp. (d) |
|
Food and Beverage |
|
Unsecured Note 13.50% (12.00% Cash/1.50% PIK), 12/20/2018 |
|
$ |
2,533,219 |
|
2,501,656 |
|
2,533,219 |
|
2.3 |
% | |||||
|
TM Restaurant Group L.L.C. (d) |
|
Food and Beverage |
|
First Lien Term Loan 7.75% Cash, 7/16/2017 |
|
$ |
2,864,440 |
|
2,848,866 |
|
2,850,118 |
|
2.6 |
% | |||||
|
|
|
|
|
Total Food and Beverage |
|
|
|
16,832,585 |
|
17,196,422 |
|
15.5 |
% | ||||||
|
Bristol Hospice, LLC (d) |
|
Healthcare Services |
|
First Lien Term Loan 11.00%(10.00% Cash/1.00% PIK), 11/29/2018 |
|
$ |
5,500,000 |
|
5,390,120 |
|
5,500,000 |
|
4.9 |
% | |||||
|
Oceans Acquisition, Inc. (d) |
|
Healthcare Services |
|
First Lien Term Loan 10.75% Cash, 12/27/2017 |
|
$ |
6,500,000 |
|
6,391,338 |
|
6,500,000 |
|
5.8 |
% | |||||
|
Smile Brands Group Inc. (d) |
|
Healthcare Services |
|
First Lien Term Loan 7.50% Cash, 8/16/2019 |
|
$ |
4,500,000 |
|
4,413,884 |
|
4,421,250 |
|
4.0 |
% | |||||
|
Surgical Specialties Corporation (US), Inc. (d) |
|
Healthcare Services |
|
First Lien Term Loan 7.25% Cash, 8/22/2018 |
|
$ |
2,468,750 |
|
2,445,338 |
|
2,474,922 |
|
2.2 |
% | |||||
|
Zest Holdings, LLC (d) |
|
Healthcare Services |
|
First Lien Term Loan 6.50% Cash, 8/16/2020 |
|
$ |
4,500,000 |
|
4,412,915 |
|
4,432,500 |
|
4.0 |
% | |||||
|
|
|
|
|
Total Healthcare Services |
|
|
|
23,053,595 |
|
23,328,672 |
|
20.9 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
McMillin Companies L.L.C. (d, g) |
|
Homebuilding |
|
Senior Secured Note 0% Cash, 12/31/2013 |
|
$ |
550,000 |
|
556,046 |
|
375,705 |
|
0.3 |
% | |||||
|
|
|
|
|
Total Homebuilding |
|
|
|
556,046 |
|
375,705 |
|
0.3 |
% | ||||||
|
Keystone Automotive Operations, Inc. (d) |
|
Logistics |
|
First Lien Term Loan 7.00% Cash, 8/15/2019 |
|
$ |
5,000,000 |
|
4,928,468 |
|
5,056,500 |
|
4.5 |
% | |||||
|
|
|
|
|
Total Logistics |
|
|
|
4,928,468 |
|
5,056,500 |
|
4.5 |
% | ||||||
|
Distribution International, Inc. (d) |
|
Manufacturing |
|
First Lien Term Loan 7.50% Cash, 7/16/2019 |
|
$ |
5,985,000 |
|
5,928,481 |
|
5,955,075 |
|
5.4 |
% | |||||
|
|
|
|
|
Total Manufacturing |
|
|
|
5,928,481 |
|
5,955,075 |
|
5.4 |
% | ||||||
|
Elyria Foundry Company, L.L.C. (d) |
|
Metals |
|
Senior Secured Note 17.00% (13.00% Cash/4.00% PIK), 9/14/2014 |
|
$ |
8,859,614 |
|
8,859,614 |
|
6,685,465 |
|
6.0 |
% | |||||
|
Elyria Foundry Company, L.L.C. (d, g) |
|
Metals |
|
Warrants to Purchase Limited Liability Company Interests (2008) |
|
7,000 |
|
20 |
|
— |
|
0.0 |
% | ||||||
|
Elyria Foundry Company, L.L.C. (d, g) |
|
Metals |
|
Warrants to Purchase Limited Liability Company Interests (2013) |
|
18,227 |
|
— |
|
— |
|
0.0 |
% | ||||||
|
|
|
|
|
Total Metals |
|
|
|
8,859,634 |
|
6,685,465 |
|
6.0 |
% | ||||||
|
Network Communications, Inc. (d, g) |
|
Publishing |
|
Common Stock |
|
380,572 |
|
— |
|
— |
|
0.0 |
% | ||||||
|
Network Communications, Inc. (d) |
|
Publishing |
|
Unsecured Notes 8.60% PIK, 1/14/2020 |
|
$ |
2,553,597 |
|
2,142,163 |
|
1,179,794 |
|
1.1 |
% | |||||
|
|
|
|
|
Total Publishing |
|
|
|
2,142,163 |
|
1,179,794 |
|
1.1 |
% | ||||||
|
Community Investors, Inc. (d, g) |
|
Software |
|
Common Stock |
|
1,282 |
|
1,282 |
|
1,564 |
|
0.0 |
% | ||||||
|
Community Investors, Inc. (d) |
|
Software |
|
First Lien Term Loan 9.75% Cash, 5/9/2018 |
|
$ |
6,150,000 |
|
6,040,876 |
|
6,150,000 |
|
5.5 |
% | |||||
|
Community Investors, Inc. (d) |
|
Software |
|
Revolver |
|
$ |
166,667 |
|
— |
|
— |
|
0.0 |
% | |||||
|
Community Investors, Inc. (d, g) |
|
Software |
|
Preferred Stock |
|
148,718 |
|
148,718 |
|
181,436 |
|
0.2 |
% | ||||||
|
Pen-Link, Ltd. (d) |
|
Software |
|
Second Lien Term Loan 12.50% Cash, 5/26/2019 |
|
$ |
11,500,000 |
|
11,270,573 |
|
11,500,000 |
|
10.3 |
% | |||||
|
|
|
|
|
Total Software |
|
|
|
17,461,449 |
|
17,833,000 |
|
16.0 |
% | ||||||
|
Sub Total Non-control/Non-affiliated investments |
|
|
|
|
|
|
|
180,323,606 |
|
179,759,938 |
|
161.6 |
% | ||||||
|
Control investments - 17.1% (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Saratoga Investment Corp. CLO 2013-1, Ltd. (d, e, f) |
|
Structured Finance Securities |
|
Other/Structured Finance Securities 14.78%, 10/17/2023 |
|
$ |
30,000,000 |
|
16,555,808 |
|
19,018,842 |
|
17.1 |
% | |||||
|
Sub Total Control investments |
|
|
|
|
|
|
|
16,555,808 |
|
19,018,842 |
|
17.1 |
% | ||||||
|
TOTAL INVESTMENTS - 178.7% (b) |
|
|
|
|
|
|
|
$ |
196,879,414 |
|
$ |
198,778,780 |
|
178.7 |
% | ||||
(a) All of our equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except Saratoga Investment Corp. CLO 2013-1, Ltd.
(b) Percentages are based on net assets of $111,206,093 as of November 30, 2013.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors. (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) 14.78% represents the modeled effective interest rate that is expected to be earned over the life of the investment.
(f) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:
|
|
|
|
|
|
|
|
|
Interest |
|
Management |
|
Net Realized |
|
Net Unrealized |
| |||||||
|
Company |
|
Purchases |
|
Redemptions |
|
Sales (cost) |
|
Income |
|
fee income |
|
gains/(losses) |
|
gains/(losses) |
| |||||||
|
Saratoga Investment Corp. CLO 2013-1, Ltd. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
2,791,830 |
|
$ |
1,400,039 |
|
$ |
— |
|
$ |
2,463,034 |
|
(g) Non-income producing at November 30, 2013.
Saratoga Investment Corp.
Consolidated Schedule of Investments
February 28, 2013
|
Company (a) |
|
Industry |
|
Investment Interest Rate / Maturity |
|
Principal/ |
|
Cost |
|
Fair Value (c) |
|
% of |
| |||
|
Non-control/Non-affiliated investments - 119.2% (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Coast Plating, Inc. (d) |
|
Aerospace |
|
First Lien Term Loan 11.70% Cash, 9/13/2014 |
|
$ |
2,550,000 |
|
$ |
2,550,000 |
|
$ |
2,550,000 |
|
2.3 |
% |
|
Coast Plating, Inc. (d) |
|
Aerospace |
|
First Lien Term Loan 13.20% Cash, 9/13/2014 |
|
$ |
950,000 |
|
950,000 |
|
950,000 |
|
0.9 |
% | ||
|
|
|
|
|
Total Aerospace |
|
|
|
3,500,000 |
|
3,500,000 |
|
3.2 |
% | |||
|
National Truck Protection Co., Inc. (d), (h) |
|
Automotive |
|
Common Stock |
|
589 |
|
500,000 |
|
591,827 |
|
0.5 |
% | |||
|
National Truck Protection Co., Inc. (d) |
|
Automotive |
|
First Lien Term Loan 15.50% Cash 8/10/2017 |
|
$ |
5,500,000 |
|
5,500,000 |
|
5,500,000 |
|
5.1 |
% | ||
|
Take 5 Oil Change, L.L.C. (d) |
|
Automotive |
|
First Lien Term Loan 9.00% Cash, 11/28/2016 |
|
$ |
6,000,000 |
|
6,000,000 |
|
6,000,000 |
|
5.5 |
% | ||
|
Take 5 Oil Change, L.L.C. (d) |
|
Automotive |
|
First Lien Term Loan 13.00% Cash, 11/28/2016 |
|
$ |
2,000,000 |
|
1,961,761 |
|
2,000,000 |
|
1.8 |
% | ||
|
Take 5 Oil Change, L.L.C. (d), (h) |
|
Automotive |
|
Common Stock |
|
7,128 |
|
712,800 |
|
712,800 |
|
0.7 |
% | |||
|
|
|
|
|
Total Automotive |
|
|
|
14,674,561 |
|
14,804,627 |
|
13.6 |
% | |||
|
Legacy Cabinets Holdings (d), (h) |
|
Building Products |
|
Common Stock Voting A-1 |
|
2,535 |
|
220,900 |
|
— |
|
0.0 |
% | |||
|
Legacy Cabinets Holdings (d), (h) |
|
Building Products |
|
Common Stock Voting B-1 |
|
1,600 |
|
139,424 |
|
— |
|
0.0 |
% | |||
|
Legacy Cabinets, Inc. (d) |
|
Building Products |
|
First Lien Term Loan 7.25% (1.00% Cash/6.25% PIK), 5/3/2014 |
|
$ |
332,229 |
|
332,229 |
|
267,378 |
|
0.2 |
% | ||
|
|
|
|
|
Total Building Products |
|
|
|
692,553 |
|
267,378 |
|
0.2 |
% | |||
|
Emily Street Enterprises, L.L.C. (d) |
|
Business Services |
|
Senior Secured Note 14.00% (13.00% Cash/1.00% PIK), 12/28/2017 |
|
$ |
5,705,384 |
|
5,595,317 |
|
5,705,384 |
|
5.2 |
% | ||
|
Emily Street Enterprises, L.L.C. (d), (h) |
|
Business Services |
|
Warrant Membership Interests |
|
49,318 |
|
400,000 |
|
399,969 |
|
0.4 |
% | |||
|
Dispensing Dynamics International (d) |
|
Business Services |
|
Senior Secured Note 12.50% Cash, 1/1/2018 |
|
$ |
7,000,000 |
|
6,860,186 |
|
7,000,000 |
|
6.4 |
% | ||
|
Knowland Technology Holdings, L.L.C. (d) |
|
Business Services |
|
First Lien Term Loan 11.00% Cash, 11/29/2017 |
|
$ |
6,200,000 |
|
6,082,248 |
|
6,200,000 |
|
5.7 |
% | ||
|
Sourcehov LLC (d) |
|
Business Services |
|
Second Lien Term Loan 10.50% Cash, 4/29/2018 |
|
$ |
3,000,000 |
|
2,648,298 |
|
2,850,000 |
|
2.6 |
% | ||
|
|
|
|
|
Total Business Services |
|
|
|
21,586,049 |
|
22,155,353 |
|
20.3 |
% | |||
|
C.H.I. Overhead Doors, Inc. (d) |
|
Consumer Products |
|
First Lien Term Loan 7.25% Cash, 8/17/2017 |
|
$ |
4,974,747 |
|
4,930,481 |
|
5,024,495 |
|
4.7 |
% | ||
|
Targus Group International, Inc. (d) |
|
Consumer Products |
|
First Lien Term Loan 11.00% Cash, 5/24/2016 |
|
$ |
3,940,003 |
|
3,888,460 |
|
3,956,551 |
|
3.6 |
% | ||
|
Targus Holdings, Inc. (d) |
|
Consumer Products |
|
Unsecured Note 10.00% PIK, 6/14/2019 |
|
$ |
1,914,341 |
|
1,914,341 |
|
1,116,252 |
|
1.0 |
% | ||
|
Targus Holdings, Inc. (d) |
|
Consumer Products |
|
Unsecured Note 16.00% Cash, 10/26/2018 |
|
$ |
332,500 |
|
326,320 |
|
305,334 |
|
0.3 |
% | ||
|
Targus Holdings, Inc. (d), (h) |
|
Consumer Products |
|
Common Stock |
|
62,413 |
|
566,765 |
|
3,324,741 |
|
3.1 |
% | |||
|
|
|
|
|
Total Consumer Products |
|
|
|
11,626,367 |
|
13,727,373 |
|
12.7 |
% | |||
|
CFF Acquisition L.L.C. (d) |
|
Consumer Services |
|
First Lien Term Loan 7.50% Cash, 7/31/2015 |
|
$ |
2,161,391 |
|
2,032,060 |
|
2,154,475 |
|
2.0 |
% | ||
|
Expedited Travel L.L.C. (d) |
|
Consumer Services |
|
First Lien Term Loan 12.00% Cash, 12/28/2017 |
|
$ |
5,500,000 |
|
5,380,520 |
|
5,500,000 |
|
5.0 |
% | ||
|
PrePaid Legal Services, Inc. (d) |
|
Consumer Services |
|
First Lien Term Loan 11.00% Cash, 12/31/2016 |
|
$ |
3,000,000 |
|
2,936,860 |
|
3,000,000 |
|
2.8 |
% | ||
|
|
|
|
|
Total Consumer Services |
|
|
|
10,349,440 |
|
10,654,475 |
|
9.8 |
% | |||
|
Company (a) |
|
Industry |
|
Investment Interest Rate / Maturity |
|
Principal/ |
|
Cost |
|
Fair Value (c) |
|
% of |
| |
|
M/C Acquisition Corp., L.L.C. (d) |
|
Education |
|
First Lien Term Loan 1.00% Cash, 12/31/2012 |
|
$ |
2,740,780 |
|
1,586,846 |
|
291,893 |
|
0.3 |
% |
|
M/C Acquisition Corp., L.L.C. (d), (h) |
|
Education |
|
Class A Common Stock |
|
544,761 |
|
30,242 |
|
— |
|
0.0 |
% | |
|
|
|
|
|
Total Education |
|
|
|
1,617,088 |
|
291,893 |
|
0.3 |
% | |
|
Group Dekko, Inc. (d) |
|
Electronics |
|
Second Lien Term Loan 11.00% (10.00% Cash/1.00% PIK), 5/1/2016 |
|
$ |
6,824,717 |
|
6,824,717 |
|
6,720,981 |
|
6.2 |
% |
|
|
|
|
|
Total Electronics |
|
|
|
6,824,717 |
|
6,720,981 |
|
6.2 |
% | |
|
USS Parent Holding Corp. (d), (h) |
|
Environmental |
|
Non Voting Common Stock |
|
765 |
|
133,002 |
|
125,981 |
|
0.1 |
% | |
|
USS Parent Holding Corp. (d), (h) |
|
Environmental |
|
Voting Common Stock |
|
17,396 |
|
3,025,798 |
|
2,866,065 |
|
2.7 |
% | |
|
|
|
|
|
Total Environmental |
|
|
|
3,158,800 |
|
2,992,046 |
|
2.8 |
% | |
|
DS Waters of America, Inc. (d) |
|
Food and Beverage |
|
First Lien Term Loan 10.50% Cash, 8/29/2017 |
|
$ |
3,970,000 |
|
3,994,704 |
|
4,049,400 |
|
3.7 |
% |
|
HOA Restaurant Group, L.L.C. (d) |
|
Food and Beverage |
|
Senior Secured Note 11.25% Cash, 4/1/2017 |
|
$ |
4,000,000 |
|
3,897,940 |
|
3,560,000 |
|
3.3 |
% |
|
TB Corp. (d) |
|
Food and Beverage |
|
First Lien Term Loan 5.81% Cash, 6/19/2018 |
|
$ |
5,153,506 |
|
5,128,662 |
|
5,140,622 |
|
4.7 |
% |
|
TB Corp. (d) |
|
Food and Beverage |
|
Unsecured Note 13.50% (12.00% Cash/1.50% PIK), 2/19/2017 |
|
$ |
2,504,585 |
|
2,468,317 |
|
2,492,062 |
|
2.3 |
% |
|
TM Restaurant Group L.L.C. (d) |
|
Food and Beverage |
|
First Lien Term Loan 7.75% Cash, 7/17/2017 |
|
$ |
2,962,500 |
|
2,943,045 |
|
2,956,871 |
|
2.7 |
% |
|
|
|
|
|
Total Food and Beverage |
|
|
|
18,432,668 |
|
18,198,955 |
|
16.7 |
% | |
|
Oceans Acquisition, Inc. (d) |
|
Healthcare Services |
|
First Lien Term Loan 10.75% Cash, 12/27/2017 |
|
$ |
7,500,000 |
|
7,351,433 |
|
7,500,000 |
|
6.9 |
% |
|
Maverick Healthcare Group (d) |
|
Healthcare Services |
|
First Lien Term Loan 10.75% Cash, 12/31/2016 |
|
$ |
4,900,000 |
|
4,835,389 |
|
4,900,000 |
|
4.5 |
% |
|
|
|
|
|
Total Healthcare Services |
|
|
|
12,186,822 |
|
12,400,000 |
|
11.4 |
% | |
|
McMillin Companies L.L.C. (d), (h) |
|
Homebuilding |
|
Senior Secured Note 0% Cash, 12/31/2013 |
|
$ |
550,000 |
|
536,764 |
|
315,370 |
|
0.3 |
% |
|
|
|
|
|
Total Homebuilding |
|
|
|
536,764 |
|
315,370 |
|
0.3 |
% | |
|
Capstone Logistics, L.L.C. (d) |
|
Logistics |
|
First Lien Term Loan 7.50% Cash, 9/16/2016 |
|
$ |
899,769 |
|
889,798 |
|
908,766 |
|
0.8 |
% |
|
Capstone Logistics, L.L.C. (d) |
|
Logistics |
|
First Lien Term Loan 13.50% Cash, 9/16/2016 |
|
$ |
3,693,369 |
|
3,652,443 |
|
3,767,236 |
|
3.5 |
% |
|
Worldwide Express Operations, L.L.C. (d) |
|
Logistics |
|
First Lien Term Loan 7.50% Cash, 6/30/2013 |
|
$ |
6,527,979 |
|
6,461,295 |
|
6,504,478 |
|
6.0 |
% |
|
|
|
|
|
Total Logistics |
|
|
|
11,003,536 |
|
11,180,480 |
|
10.3 |
% | |
|
Elyria Foundry Company, L.L.C. (d) |
|
Metals |
|
Senior Secured Note 17.00% (13.00% Cash/4.00% PIK), 3/1/2013 |
|
$ |
7,728,566 |
|
7,728,566 |
|
6,723,852 |
|
6.2 |
% |
|
Elyria Foundry Company, L.L.C. (d), (h) |
|
Metals |
|
Warrants to Purchase Limited Liability Company Interests |
|
3,000 |
|
— |
|
— |
|
0.0 |
% | |
|
|
|
|
|
Total Metals |
|
|
|
7,728,566 |
|
6,723,852 |
|
6.2 |
% | |
|
Network Communications, Inc. (d) |
|
Publishing |
|
Unsecured Note 8.60% PIK, 1/14/2020 |
|
$ |
2,500,198 |
|
2,049,660 |
|
960,827 |
|
0.9 |
% |
|
Network Communications, Inc. (d), (h) |
|
Publishing |
|
Common Stock |
|
211,429 |
|
— |
|
— |
|
0.0 |
% | |
|
Penton Media, Inc. (d) |
|
Publishing |
|
First Lien Term Loan 6.00% (4.00% Cash/2.00% PIK), 8/1/2014 |
|
$ |
4,839,189 |
|
4,497,495 |
|
4,669,818 |
|
4.3 |
% |
|
|
|
|
|
Total Publishing |
|
|
|
6,547,155 |
|
5,630,645 |
|
5.2 |
% | |
|
Company (a) |
|
Industry |
|
Investment Interest Rate / Maturity |
|
Principal/ |
|
Cost |
|
Fair Value (c) |
|
% of |
| |||
|
Sub Total Non-control/Non-affiliated investments |
|
|
|
|
|
|
|
130,465,086 |
|
129,563,428 |
|
119.2 |
% | |||
|
Control investments - 23.5% (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
GSC Partners CDO GP III, LP (g), (h) |
|
Financial Services |
|
100% General Partnership Interest |
|
— |
|
— |
|
— |
|
0.0 |
% | |||
|
GSC Investment Corp. CLO 2007 LTD. (d), (e), (g) |
|
Structured Finance Securities |
|
Other/Structured Finance Securities 23.06%, 1/21/2020 |
|
$ |
30,000,000 |
|
18,944,966 |
|
25,516,959 |
|
23.5 |
% | ||
|
Sub Total Control investments |
|
|
|
|
|
|
|
18,944,966 |
|
25,516,959 |
|
23.5 |
% | |||
|
Affiliate investments - 0.0% (b) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
GSC Partners CDO GP III, LP (f), (h) |
|
Financial Services |
|
6.24% Limited Partnership Interest |
|
— |
|
— |
|
— |
|
0.0 |
% | |||
|
Sub Total Affiliate investments |
|
|
|
|
|
|
|
— |
|
— |
|
0.0 |
% | |||
|
TOTAL INVESTMENTS - 142.7% (b) |
|
|
|
|
|
|
|
$ |
149,410,052 |
|
$ |
155,080,387 |
|
142.7 |
% | |
|
(a) |
|
All of our equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except GSC Investment Corp. CLO 2007 Ltd. and GSC Partners CDO GP III, LP. |
|
(b) |
|
Percentages are based on net assets of $108,686,761 as of February 28, 2013. |
|
(c) |
|
Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors. (see Note 3 to the consolidated financial statements). |
|
(d) |
|
These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements). |
|
(e) |
|
23.06% represents the modeled effective interest rate that is expected to be earned over the life of the investment. |
|
(f) |
|
As defined in the Investment Company Act, we are an “Affiliate” of this portfolio company because we own 5% or more of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was an Affiliate are as follows: |
|
|
|
|
|
|
|
|
|
Interest |
|
Management |
|
Net Realized |
|
Net Unrealized |
| |||||||
|
Company |
|
Purchases |
|
Redemptions |
|
Sales (cost) |
|
Income |
|
fee income |
|
gains/(losses) |
|
gains/(losses) |
| |||||||
|
GSC Partners CDO GP III, LP |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
(g) |
|
As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows: |
|
|
|
|
|
|
|
|
|
Interest |
|
Management |
|
Net Realized |
|
Net Unrealized |
| |||||||
|
Company |
|
Purchases |
|
Redemptions |
|
Sales (cost) |
|
Income |
|
fee income |
|
gains/(losses) |
|
gains/(losses) |
| |||||||
|
GSC Investment Corp. CLO 2007 LTD. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
4,205,509 |
|
$ |
2,000,072 |
|
$ |
— |
|
$ |
6,571,992 |
|
|
GSC Partners CDO GP III, LP |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
(h) |
|
Non-income producing at February 28, 2013. |
Saratoga Investment Corp.
Consolidated Statements of Changes in Net Assets
(unaudited)
|
|
|
For the nine months ended |
|
For the nine months ended |
| ||
|
INCREASE FROM OPERATIONS: |
|
|
|
|
| ||
|
Net investment income |
|
$ |
7,639,588 |
|
$ |
5,076,189 |
|
|
Net realized gain from investments |
|
1,157,824 |
|
542,720 |
| ||
|
Net realized loss from derivatives |
|
— |
|
(131,000 |
) | ||
|
Net unrealized appreciation (depreciation) on investments |
|
(3,770,968 |
) |
3,188,543 |
| ||
|
Net unrealized appreciation on derivatives |
|
— |
|
130,925 |
| ||
|
Net increase in net assets from operations |
|
5,026,444 |
|
8,807,377 |
| ||
|
DECREASE FROM SHAREHOLDER DISTRIBUTIONS: |
|
|
|
|
| ||
|
Distributions declared |
|
(12,534,807 |
) |
(16,475,809 |
) | ||
|
Net decrease in net assets from shareholder distributions |
|
(12,534,807 |
) |
(16,475,809 |
) | ||
|
CAPITAL SHARE TRANSACTIONS: |
|
|
|
|
| ||
|
Stock dividend distribution |
|
10,027,695 |
|
13,180,503 |
| ||
|
Net increase in net assets from capital share transactions |
|
10,027,695 |
|
13,180,503 |
| ||
|
|
|
|
|
|
| ||
|
Total increase in net assets |
|
2,519,332 |
|
5,512,071 |
| ||
|
Net assets at beginning of period |
|
108,686,761 |
|
97,380,150 |
| ||
|
Net assets at end of period |
|
$ |
111,206,093 |
|
$ |
102,892,221 |
|
|
|
|
|
|
|
| ||
|
Net asset value per common share |
|
$ |
20.67 |
|
$ |
21.75 |
|
|
Common shares outstanding at end of period |
|
5,379,616 |
|
4,730,116 |
| ||
|
|
|
|
|
|
| ||
|
Distribution in excess of net investment income |
|
$ |
(29,418,170 |
) |
$ |
(25,319,688 |
) |
See accompanying notes to consolidated financial statements.
Saratoga Investment Corp.
Consolidated Statements of Cash Flows
(unaudited)
|
|
|
For the nine months |
|
For the nine months |
| ||
|
Operating activities |
|
|
|
|
| ||
|
NET INCREASE IN NET ASSETS FROM OPERATIONS |
|
$ |
5,026,444 |
|
$ |
8,807,377 |
|
|
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES: |
|
|
|
|
| ||
|
Paid-in-kind interest income |
|
(634,408 |
) |
(821,830 |
) | ||
|
Net accretion of discount on investments |
|
(543,999 |
) |
(710,418 |
) | ||
|
Amortization of deferred debt financing costs |
|
660,568 |
|
342,505 |
| ||
|
Net realized gain from investments |
|
(1,157,824 |
) |
(542,720 |
) | ||
|
Net realized loss from derivatives |
|
— |
|
131,000 |
| ||
|
Net unrealized (appreciation) depreciation on investments |
|
3,770,968 |
|
(3,188,543 |
) | ||
|
Net unrealized appreciation on derivatives |
|
— |
|
(130,925 |
) | ||
|
Proceeds from sale and redemption of investments |
|
64,989,332 |
|
15,990,963 |
| ||
|
Purchase of investments |
|
(110,122,464 |
) |
(34,658,367 |
) | ||
|
(Increase) decrease in operating assets: |
|
|
|
|
| ||
|
Cash and cash equivalents, reserve accounts |
|
10,487,010 |
|
21,747,012 |
| ||
|
Interest receivable |
|
138,220 |
|
(216,782 |
) | ||
|
Due from manager |
|
(4,929 |
) |
— |
| ||
|
Management fee receivable |
|
49,171 |
|
10,634 |
| ||
|
Other assets |
|
(16,190 |
) |
75,850 |
| ||
|
Receivable from unsettled trades |
|
1,817,074 |
|
59,511 |
| ||
|
Increase (decrease) in operating liabilities: |
|
|
|
|
| ||
|
Payable for unsettled trades |
|
— |
|
(4,072,500 |
) | ||
|
Management and incentive fees payable |
|
(922,261 |
) |
479,049 |
| ||
|
Accounts payable and accrued expenses |
|
(53,553 |
) |
(196,907 |
) | ||
|
Interest and debt fees payable |
|
256,537 |
|
87,162 |
| ||
|
Due to manager |
|
50,570 |
|
(276,217 |
) | ||
|
NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES |
|
(26,209,734 |
) |
2,915,854 |
| ||
|
|
|
|
|
|
| ||
|
Financing activities |
|
|
|
|
| ||
|
Borrowings on debt |
|
8,000,000 |
|
7,350,000 |
| ||
|
Paydowns on debt |
|
(24,300,000 |
) |
(8,500,000 |
) | ||
|
Issuance of notes |
|
48,300,000 |
|
— |
| ||
|
Debt financing cost |
|
(2,579,308 |
) |
(597,000 |
) | ||
|
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES |
|
29,420,692 |
|
(1,747,000 |
) | ||
|
|
|
|
|
|
| ||
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
3,210,958 |
|
1,168,854 |
| ||
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
149,025 |
|
1,325,698 |
| ||
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
3,359,983 |
|
$ |
2,494,552 |
|
|
|
|
|
|
|
| ||
|
Supplemental Information: |
|
|
|
|
| ||
|
Interest paid during the period |
|
$ |
3,425,552 |
|
$ |
1,378,919 |
|
|
|
|
|
|
|
| ||
|
Supplemental non-cash information: |
|
|
|
|
| ||
|
Paid-in-kind interest income |
|
$ |
634,408 |
|
$ |
821,830 |
|
|
Net accretion of discount on investments |
|
$ |
543,999 |
|
$ |
710,418 |
|
|
Amortization of deferred debt financing costs |
|
$ |
660,568 |
|
$ |
342,505 |
|
|
Stock dividend distribution |
|
$ |
10,027,695 |
|
$ |
13,180,503 |
|
|
Cash dividend payable |
|
$ |
2,507,112 |
|
$ |
3,295,306 |
|
See accompanying notes to consolidated financial statements.
SARATOGA INVESTMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2013
(unaudited)
Note 1. Organization and Basis of Presentation
Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We commenced operations on March 23, 2007 as GSC Investment Corp. and completed our initial public offering (“IPO”) on March 28, 2007. We have elected to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code”). We expect to continue to qualify and to elect to be treated for tax purposes as a RIC. Our investment objective is to generate current income and, to a lesser extent, capital appreciation from our investments.
GSC Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.
On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC’s limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.
On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.” in conjunction with the transaction described in “Note 12. Recapitalization Transaction” below.
We are externally managed and advised by our investment adviser, Saratoga Investment Advisors, LLC (the “Manager”), pursuant to an investment advisory and management agreement. Prior to July 30, 2010, we were managed and advised by GSCP (NJ), L.P.
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”).
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company, its special purpose financing subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC), and SBIC LP. 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.
Note 2. Summary of Significant Accounting Policies
Use of Estimates in the Preparation of Financial Statements
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company, such as a money market fund, if such investment would cause the Company to exceed any of the following limitations:
· we were to own more than 3.0% of the total outstanding voting stock of the money market fund;
· we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets; or
· we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.
Cash and Cash Equivalents, Reserve Accounts
Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid investments in money market funds representing payments received on secured investments or other reserved amounts associated with our $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.
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 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold at the statement of assets and liabilities date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.
We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:
· Each investment is initially valued by the responsible investment professionals of our Manager and preliminary valuation conclusions are documented and discussed with the senior management of our Manager; and
· An independent valuation firm engaged by our board of directors reviews approximately one quarter of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least annually.
In addition, all our investments are subject to the following valuation process:
· The audit committee of our board of directors reviews each preliminary valuation and our Manager and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and
· Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.
Our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flows analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.
Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.
Derivative Financial Instruments
We account for derivative financial instruments in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires recognizing all derivative instruments as either assets or liabilities on the consolidated statements of assets and liabilities at fair value. The Company values derivative contracts at the closing fair value provided by the counterparty. Changes in the values of derivative contracts are included in the consolidated statements of operations.
Investment Transactions and Income Recognition
Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.
Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.
Paid-in-Kind Interest
The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.
Deferred Debt Financing Costs
Financing costs incurred in connection with our credit facility, SBA debentures and notes offering are deferred and amortized using the straight line method, which approximates the effective interest method, over the life of their respective debt instrument.
Contingencies
In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.
In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.
Income Taxes
The Company has filed an election to be treated for tax purposes as a RIC under Subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes.
In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.
Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.
In accordance with certain applicable Treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.
ASC 740, Income Taxes, (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. As of November 30, 2013 and February 28, 2013, there were no uncertain tax positions.
Dividends
Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.
We have adopted a dividend reinvestment plan 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 our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. If our common stock is
trading below net asset value at the time of valuation, the plan administrator may receive the dividend or distribution in cash and purchase common stock in the open market, on the New York Stock Exchange or elsewhere, for the account of each participant in our dividend reinvestment plan.
Capital Gains Incentive Fee
The Company records an expense accrual in the consolidated statements of operations relating to the capital gains incentive fee payable by the Company to its investment adviser when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s investment adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.
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 hig