Business Context and Reporting Period
This Form 8-K Current Report was filed by Saratoga Investment Corp. on January 13, 2022, with the earliest event reported on that date. The filing details the entry into a material definitive agreement and the creation of a direct financial obligation. The transaction closed on January 19, 2022.
Key Financial Metrics
- Debt Issuance: $75 million aggregate principal amount of 4.35% Notes due 2027.
- Net Proceeds: Approximately $72.7 million.
- Offering Costs: Underwriting discount of $1.5 million and estimated offering expenses of approximately $250,000.
- Public Offering Price: 99.317% of par.
- Interest Rate: 4.35% per year, payable semi-annually in arrears beginning August 28, 2022.
- Maturity Date: February 28, 2027.
Material Changes
The Company entered into an underwriting agreement and a Ninth Supplemental Indenture to issue the new Notes. These Notes are direct unsecured obligations ranking pari passu with existing unsubordinated unsecured indebtedness. They are effectively subordinated to secured indebtedness and structurally subordinated to subsidiary obligations. The filing does not provide comparative financial data for prior periods as this is a transaction-specific report.
Guidance, Outlook, and Covenants
- Use of Proceeds: Net proceeds will be used for investments in middle-market companies (including through SBIC subsidiaries) and for general corporate purposes.
- Dividend Restrictions: The Indenture covenants restrict the Company from declaring cash dividends or purchasing stock unless asset coverage requirements under the Investment Company Act of 1940 are met.
- Redemption: The Company may redeem the Notes prior to November 28, 2026, at par plus a "make-whole" premium, and thereafter at par.
- Change of Control: Holders have the right to require repurchase at 100% of principal plus accrued interest upon a "Change of Control Repurchase Event."
Investor Verification Checklist
- Verify the full text of the Ninth Supplemental Indenture and Underwriting Agreement filed as exhibits.
- Confirm the Company's current asset coverage ratio to assess dividend eligibility under the new covenants.
- Review the Company's existing secured indebtedness to understand the effective subordination of the new Notes.
- Monitor the deployment of the $72.7 million in net proceeds into middle-market investments.