Overview

Saratoga Investment Corp. is a business development company (BDC) that invests in middle-market companies, primarily through senior and unitranche leveraged loans. As of February 29, 2024, the company had $1.14 billion invested across 55 portfolio companies, with an average investment size of $20.1 million.

The investment portfolio had exposure across 43 industries, with the largest allocations to healthcare software (10.8%), IT services (6.9%), and consumer services (5.7%). Approximately 99.5% of the interest earning portfolio was invested in floating rate debt.

Key Figures
Total Investments	$1.14 billion
Number of Portfolio Companies	55
Average Investment per Portfolio Company	$20.1 million
Percentage in Floating Rate Debt	99.5%

Financial History and Recent Developments

Saratoga Investment Corp. commenced operations in March 2007 and was externally managed until July 2010, when it engaged Saratoga Investment Advisors as its current investment adviser.

The company has raised additional capital over time and expanded its borrowing capacity by forming SBIC subsidiaries to access lower cost SBA debentures. The SBIC subsidiaries had up to $350 million in approved SBA debenture capacity at year end.

Recent notable developments include:

• Upsized its Saratoga CLO fund from $500 million to $650 million in assets in February 2021
• Entered into a $65 million senior secured credit facility with Encina Lender Finance in October 2021
• Formed a joint venture with TJHA to co-manage Saratoga Senior Loan Fund I JV LLC, which invests in a diversified portfolio of broadly syndicated loans
• The Saratoga Senior Loan Fund issued $402.1 million of debt through a CLO trust in October 2022

Key Financial Metrics

Metric	FY 2024	FY 2023
Total Investment Income	$143.7 million	$99.1 million
Net Investment Income	$56.9 million	$35.2 million
Net Increase in Net Assets from Operations	$8.9 million	$24.7 million

Investment Portfolio

As of February 29, 2024, the investment portfolio had a fair value of $1.14 billion invested across 139 positions. On a fair value basis, 85.7% of the portfolio was invested in first lien term loans, 1.6% in second lien term loans, and 8.6% in equity interests.

The largest portfolio company exposures were to healthcare software (10.8% of the portfolio), IT services (6.9%), and consumer services (5.7%).

Financial Condition

As of February 29, 2024, Saratoga Investment Corp. had $8.7 million of cash on hand and $31.8 million in reserve accounts. It had $35 million drawn on its $65 million credit facility and $214 million in outstanding SBA debentures.

The company has been able to access diverse sources of capital, including through its ATM equity program, unsecured notes issuances, and CLO transactions. It has used these capital sources to support portfolio growth and operations.

Maintaining adequate liquidity and capital to support future growth remains an area of focus. Saratoga Investment Corp.’s asset coverage ratio was 161.1% as of year end, above the 150% minimum required for a BDC.

Outlook

Saratoga Investment Corp. has a long track record of sourcing attractive risk-adjusted middle market investment opportunities. The BDC has grown its asset base steadily and produces a consistent stream of investment income to support its dividend.

Near term headwinds include rising interest rates, market volatility, and the potential for an economic slowdown. However, the investment portfolio is comprised primarily of floating rate debt which helps insulate against rising rates. The company’s experienced management team and strong underwriting standards position it well to navigate choppy market environments.