Saratoga Investment Corp. 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Saratoga Investment Corp. on April 11, 2023, with the earliest event reported on that date. The filing details the entry into a material definitive agreement for a new debt offering and the creation of a direct financial obligation. The transaction closed on April 14, 2023.
Key Financial Metrics and Transaction Details
- Debt Issuance: The Company issued $50,000,000 aggregate principal amount of 8.50% Notes due 2028.
- Over-Allotment: Underwriters have an option to purchase up to an additional $7,500,000 of Notes within 30 days.
- Net Proceeds: Approximately $48.2 million, after deducting underwriting discounts of approximately $1.6 million and estimated offering expenses of approximately $0.2 million.
- Interest Rate: 8.50% per annum, payable quarterly beginning May 31, 2023.
- Maturity Date: April 15, 2028.
- Redemption: The Company may redeem the Notes in whole or in part on or after April 14, 2025, at par plus accrued interest.
- Trading Symbol: The Notes are expected to trade on the New York Stock Exchange under the symbol "SAZ."
Material Changes and Use of Proceeds
The primary material change is the addition of new senior unsecured indebtedness. The Company intends to use the net proceeds from the offering for the following purposes:
- Repay a portion of the outstanding indebtedness under the senior secured revolving credit facility with Encina Lender Finance, LLC.
- Make investments in middle-market companies, including through Saratoga Investment Corp. SBIC III LP.
- General corporate purposes.
Outlook, Risks, and Covenants
The Notes are direct unsecured obligations ranking pari passu with existing unsubordinated unsecured indebtedness. They are effectively subordinated to all existing and future secured indebtedness (including the Encina Credit Facility) and structurally subordinated to subsidiary obligations.
Key Covenants:
- The Company must comply with Section 18(a)(1)(A) of the Investment Company Act of 1940 regarding asset coverage.
- The Company is restricted from declaring cash dividends, making other distributions, or purchasing capital stock unless it maintains an asset coverage ratio of at least the threshold specified in Section 18(a)(1)(B) of the 1940 Act, after deducting the amount of such dividend or purchase.
Investor Verification Checklist
- Verify the exact amount of the Encina Credit Facility repaid using the $48.2 million in net proceeds.
- Confirm the exercise of the $7,500,000 over-allotment option by the underwriters within the 30-day window.
- Review the Company's current asset coverage ratio to ensure compliance with the new dividend and distribution restrictions.
- Monitor the listing status of the Notes under the symbol "SAZ" on the New York Stock Exchange.