October 15, 2012 at 11:17 AM EDT
Saratoga Investment Corp. Announces Fiscal Second Quarter 2013 Financial Results

NEW YORK, Oct. 15, 2012 /PRNewswire/ -- Saratoga Investment Corp. (NYSE: SAR) ("Saratoga Investment" or "the Company"), a business development company, today announced financial results for its 2013 fiscal second quarter.

Operating Results

For the fiscal quarter ended August 31, 2012, Saratoga Investment reported net investment income of $1.3 million or $0.34 on a weighted average per share basis, and net gain on investments of $3.6 million, or $0.92 on a weighted average per share basis, resulting in an increase in net assets from operations of $4.9 million, or $1.26 on a weighted average per share basis.  The $3.6 million net gain on investments was comprised of $3.3 million in net unrealized appreciation on investments and $0.3 million in net realized gains from investments.

Net asset value ("NAV") was $105.4 million as of August 31, 2012, compared to $100.6 million as of May 31, 2012 and $97.4 million as of February 29, 2012.  NAV per share was $27.20 as of August 31, 2012 and $25.94 as of May 31, 2012 and $25.12 as of February 29, 2012. 

Christian L. Oberbeck, Chairman, Chief Executive Officer and President of Saratoga Investment, said, "Our growing pipeline and financial strength enabled us to make another $14.9 million of investments in new and existing portfolio companies during the quarter, and we have maintained the improving trend in credit quality of the overall portfolio as we have increased both the amount and proportion of internally rated strong credits.  We continue to see opportunities for investment in leveraged loans and mezzanine debt issued by U.S. middle-market companies."

Portfolio and Investment Activity

As of August 31, 2012, the fair value of Saratoga Investment's investment portfolio was $115.7 million, principally invested in 22 portfolio companies and one collateralized loan obligation fund (the "CLO"). The overall portfolio composition consisted of 49.8% of first lien term loans, 8.5% of second lien term loans, 9.2% of senior secured notes, 1.7% of unsecured notes, 23.4% of subordinated notes of the CLO and 7.4% of common equity.  At the end of the 2013 fiscal second quarter the Company had no investments in senior unsecured loans.

During the 2013 fiscal second quarter, Saratoga Investment invested $14.9 million in new or existing portfolio companies and had $10.0 million in aggregate amount of exits and repayments on its investments, resulting in net investments of $4.9 million for the period. 

As of August 31, 2012, the weighted average current yield on Saratoga Investment's first lien term loans, second lien term loans, senior secured notes, unsecured notes and the CLO subordinated notes were 10.3%, 11.4%, 16.3%, 20.3%, and 23.0%, respectively, which resulted in an aggregate weighted average current yield of 13.3%. 

Liquidity and Capital Resources

As of August 31, 2012, Saratoga Investment had $14.9 million in outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC.  In addition Saratoga had an aggregate of $0.7 million and $5.7 million in cash and cash equivalents, including reserve accounts, at August 31, 2012 respectively.  The Company is required to use the amounts held in cash and cash equivalents, reserve accounts to pay interest expense, reduce borrowings or pay other amounts in accordance with the terms of its senior secured revolving credit facility.  As of August 31, 2012, the Company's Small Business Investment Company ("SBIC") subsidiary had $25 million in regulatory capital and no SBIC debentures outstanding.

2013 Fiscal Second Quarter Conference Call/Webcast Information

When:  Oct. 15, 2012 at 4:15 p.m.  Eastern Time (ET)

Call:  Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada).

A replay of the call will be available from 7:00 p.m. ET on Oct. 15, 2012 through 11:59 p.m. ET on Oct. 22, 2012 by dialing (800) 585-8367 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada). Passcode for both replay numbers is 42760760.

Webcast: Interested parties may also access a simultaneous webcast of the call by going to http://ir.saratogainvestmentcorp.com/events.cfm.

About Saratoga Investment Corp.

Saratoga Investment Corp. is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses.  The Company invests primarily in mezzanine debt, leveraged loans and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment Corp.'s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment Corp. has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Within the BDC, Saratoga manages both an SBIC-licensed subsidiary and a $400 million Collateralized Loan Obligation (CLO) fund.  These diverse funding sources, combined with a permanent capital base, enable Saratoga to offer a broad range of financing solutions.

Forward Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release and the filings Saratoga Investment Corp. makes with the SEC.  Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financial Statements

 

Saratoga Investment Corp.







Consolidated Statements of Assets and Liabilities










 As of  




August 31, 2012


February 29, 2012




 (unaudited) 



ASSETS











Investments at fair value






Non-control/non-affiliate investments (amortized cost of 

   $90,404,979 and $73,161,722, respectively)


$            88,559,307


$          69,513,434


Control investments (cost of $21,567,800 and 

   $23,540,517, respectively)


27,098,581


25,846,414


Total investments at fair value (amortized cost of

   $111,972,779 and $96,702,239, respectively)


115,657,888


95,359,848

Cash and cash equivalents


674,057


1,325,698

Cash and cash equivalents, reserve accounts


5,737,872


25,534,195

Outstanding interest rate cap at fair value (cost of $0 and 

   $131,000, respectively)


-


75

Interest receivable, (net of reserve of $416,522 and $273,361, respectively)


2,052,811


1,689,404

Deferred credit facility financing costs, net


1,487,009


1,199,490

Management fee receivable


227,917


227,581

Other assets


59,096


94,823

Receivable from unsettled trades


-


59,511


Total assets


$          125,896,650


$        125,490,625







LIABILITIES





Revolving credit facility


$            14,850,000


$          20,000,000

Payable for unsettled trades


-


4,072,500

Management and incentive fees payable


4,051,383


2,885,670

Accounts payable and accrued expenses


1,074,176


704,949

Interest and credit facility fees payable


186,930


53,262

Due to manager


292,202


394,094


Total liabilities


$            20,454,691


$          28,110,475







NET ASSETS





Common stock, par value $.001, 100,000,000 common shares






authorized, 3,876,661 and 3,876,661 common shares

issued and outstanding, respectively


$                     3,877


$                   3,877

Capital in excess of par value


161,644,426


161,644,426

Distribution in excess of net investment income


(11,333,032)


(13,920,068)

Accumulated net realized loss from investments and derivatives


(48,558,419)


(48,874,767)

Net unrealized appreciation (depreciation) on investments and derivatives


3,685,107


(1,473,318)


Total Net Assets


105,441,959


97,380,150







Total liabilities and Net Assets


$          125,896,650


$        125,490,625







NET ASSET VALUE PER SHARE


$                     27.20


$                   25.12

 

Saratoga Investment Corp.




Consolidated Statements of Operations
















For the three months ended 

August 31


For the six months ended 

August 31




2012


2011


2012


2011




(unaudited)


(unaudited)


(unaudited)


(unaudited)











INVESTMENT INCOME










Interest from investments










     Non-control/Non-affiliate investments



$  2,419,758


$    1,836,643


$  4,484,743


$  3,334,532

     Control investments



1,094,681


1,050,486


2,140,466


1,940,063

          Total interest income



3,514,439


2,887,129


6,625,209


5,274,595

Interest from cash and cash equivalents



1,791


1,100


4,637


5,248

Management fee income



500,225


503,803


1,000,065


1,010,171

Other income



146,834


145,908


152,560


145,908

     Total investment income



4,163,289


3,537,940


7,782,471


6,435,922











EXPENSES










Interest and credit facility financing expenses



653,025


309,911


1,278,728


679,821

Base management fees



504,802


411,468


963,610


809,932

Professional fees



293,483


632,237


639,322


925,865

Administrator expenses



250,000


240,000


500,000


480,000

Incentive management fees



869,403


(1,058,378)


1,299,674


(336,653)

Insurance



130,308


146,699


260,615


303,681

Directors fees and expenses



51,000


51,000


102,000


102,000

General & administrative



97,022


82,859


148,363


169,213

Other expense



-


1,880


3,123


3,190

     Total expenses



2,849,043


817,676


5,195,435


3,137,049











     NET INVESTMENT INCOME



1,314,246


2,720,264


2,587,036


3,298,873











REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:










Net realized gain (loss) from investments



268,718


(105,967)


447,348


(7,959)

Net realized loss from derivatives



-


-


(131,000)


-

Net unrealized appreciation (depreciation)

   on investments



3,288,078


(4,337,470)


5,027,500


705,665

Net unrealized appreciation (depreciation) on derivatives



-


(4,732)


130,925


(15,274)

     Net gain (loss) on investments



3,556,796


(4,448,169)


5,474,773


682,432











NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS



$  4,871,042


$  (1,727,905)


$  8,061,809


$  3,981,305











WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE


$           1.26


$           (0.53)


$           2.08


$           1.22











WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED


3,876,661


3,277,077


3,876,661


3,277,077










Contact: Richard Petrocelli
Saratoga Investment Corp.
212-906-7800

Roland Tomforde
Broadgate Consultants
212-232-2222

SOURCE Saratoga Investment Corp.

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