Profile: Saratoga Investment Corp (SAR.N)
27 Feb 2015
Saratoga Investment Corp., incorporated on March 21, 2007, is a business development company (BDC) which provides customized financing solutions for middle market companies located in the United States. The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments. The Company’s portfolio consists of investments in leveraged loans (both first and second lien term loans) issued by middle market companies. The Company also purchases mezzanine debt and make equity investments in middle market companies. The Company is managed and advised by Saratoga Investment Advisors, LLC, a New York-based investment firm affiliated with Saratoga Partners, a middle market private equity investment firm.
The Company invests up to 30% of the portfolio in opportunistic investments. Such investments may include investments in distressed debt, including securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles such as collateralized loan obligation funds. The Company has a wholly owned subsidiary that is licensed as a small business investment company (SBIC).
The Company’s investments in leveraged loans (both first and second lien term loans) issued by middle market companies. Investments in middle market companies are generally less liquid than equivalent investments in companies with larger capitalizations. These investments are sourced in both the primary and secondary markets through a network of relationships with commercial and investment banks, commercial finance companies and financial sponsors. Leveraged loans are generally senior debt instruments that rank ahead of subordinated debt of the portfolio company. Leveraged loans also have the benefit of security interests on the assets of the Portfolio Company, which may rank ahead of, or junior to, other security interests. The Company’s leveraged loan portfolio is comprised primarily of first lien and second lien term loans. First lien term loans are secured by a first priority perfected security interest on all or substantially all of the assets of the borrower and typically include a first priority pledge of the capital stock of the borrower. First lien term loans hold a first priority with regard to right of payment. Second lien term loans are secured by a second priority perfected security interest on all or substantially all of the assets of the borrower and typically include a second priority pledge of the capital stock of the borrower. Second lien term loans hold a second priority with regard to right of payment. Second lien term loans offer either floating rate or fixed rate interest payments, generally have a stated maturity of five to eight years, and may or may not have a fixed amortization schedule. Second lien term loans have less restrictive financial and negative covenants than those that govern first lien term loans.
Mezzanine debt ranks subordinate in priority of payment to senior debt and is often unsecured. Mezzanine debt has fixed rate interest payments and a stated maturity of six to eight years and does not have fixed amortization schedules. In some cases, the Company’s debt investments may provide for a portion of the interest payable to be paid-in-kind interest (PIK). Equity investments may consist of preferred equity that is expected to pay dividends on a current basis or preferred equity that does not pay current dividends. Preferred equity generally has a preference over common equity as to distributions on liquidation and dividends. Opportunistic investments may include investments in distressed debt, which may include securities of companies in bankruptcy, debt and equity securities of public companies that are not thinly traded, emerging market debt, structured finance vehicles such as collateralized loan obligation funds and debt of middle market companies located outside the United States.
Saratoga Investment Corp
535 Madison Avenue
NEW YORK NY 10022