SARATOGA INVESTMENT CORP
For the period ended Aug 31, 2024. Filed Oct 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 31, 2024 · Filed Oct 8, 2024
SAR$12.96+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-05-31; filed 2024-07-09.
0001213900-24-060116
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-31; filed 2024-10-08.
0001213900-24-086270
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 230 previous paragraphs and 253 current paragraphs.
170 unchanged; 58 reworded; 20 added; 2 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 121 previous and 130 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
On June 10, 2024, the Company completed its fifth refinancing of the Saratoga CLO. This refinancing, among other things, did not extend the Saratoga CLO reinvestment period nor extend its legal maturity, while adjusting the interest rate of two of the existing Notes. The Issuer issued $422.5 million of notes (the “2013-1 2024 Reset CLO Notes”), consisting of Class A-1-R-4 and Class A-2-R-4. The 2013-1 2024 Reset CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance of the 2013-1 2024 Reset CLO Notes were used along with existing assets of the Saratoga CLO to redeem the existing Class A-1-R-3 and Class A-2-R-3 Notes. No other Notes were refinanced as part of this refinancing. The Saratoga CLO paid $0.5 million of transaction costs related to the refinancing.
Current report
On June 10, 2024, the Company completed its fifth refinancing of the Saratoga CLO. This refinancing, among other things, did not extend the Saratoga CLO reinvestment period nor extend its legal maturity, while adjusting the interest rate of two of the existing Notes. The Issuer issued $422.5 million of notes, consisting of Class A-1-R-4 and Class A-2-R-4. The 2013-1 2024 Reset CLO Notes were issued pursuant to the Indenture with the same Trustee. Proceeds of the issuance of the 2013-1 2024 Reset CLO Notes were used along with existing assets of the Saratoga CLO to redeem the existing Class A-1-R-3 and Class A-2-R-3 Notes. No other Notes were refinanced as part of this refinancing. The Saratoga CLO paid $0.5 million of transaction costs related to the refinancing.
Current report
Investment Portfolio Overview
Current report
For the six months ended August 31, 2024, total investment income increased $11.5 million, or 16.4%, to $81.7 million from $70.1 million for the six months ended August 31, 2023. Interest income from investments increased $11.8 million, or 19.0%, to $73.7 million for the six months ended August 31, 2024 from $61.9 million for the six months ended August 31, 2023. Interest income from investments primarily increased due to the increase of the weighted average current yield on investments to 11.5% as of August 31, 2024, up from 11.3% at August 31, 2023, mainly resulting from the recognition of $7.9 million interest income related to our Knowland investment that was previously on non-accrual.
Current report
For the three and six months ended August 31, 2024 and August 31, 2023, total PIK income was $1.9 million and $0.9 million, respectively and $2.5 million and $1.3 million, respectively. The increase in both periods primarily related to the recognition of PIK income on our Knowland investment that was previously on non-accrual.
Current report
For the six months ended August 31, 2024 and August 31, 2023, interest from cash and cash equivalents was $2.3 million and $1.3 million, respectively. The increase of $1.0 million for the quarter ended August 31, 2024 was due to increased cash and cash equivalents balances during this period as compared to last year, resulting from numerous repayments received during the six months period.
Current report
For the six months ended August 31, 2024, interest and debt financing expenses increased $2.0 million, or 8.2%, compared to the six months ended August 31, 2023. The increase is primarily attributable to an increase of 5.0% in average outstanding debt from $795.0 million for the six months ended August 31, 2023 to $835.0 million for the six months ended August 31, 2024.
Current report
For the six months ended August 31, 2024, base management fees increased $0.3 million, or 3.7%, from $9.7 million to $9.4 million compared to the six months ended August 31, 2023. The increase in base management fees results from the 3.4% increase in the average value of our total assets, less cash and cash equivalents, from $1,069.0 million for the six months ended August 31, 2023 to $1,105.1 million for the six months ended August 31, 2024.
Current report
For the six months ended August 31, 2024, professional fees increased $0.2 million, or 15.7%, from $1.0 million for the six months ended August 31, 2024 to $1.1 million for the six months ended August 31, 2023.
Current report
The most significant cumulative net change in realized gains (losses) for the six months ended August 31, 2024 were the following (dollars in thousands):
Current report
Six Months ended August 31, 2024
Current report
The $0.6 million of net realized gains was from the sale of the equity position in our Book4Time, Inc. investment.
Current report
The $34.0 million of net realized losses was from the restructuring of our Pepper Palace, Inc. investment.
Current report
Six Months ended August 31, 2023
Current report
The $31.8 million net change in unrealized appreciation in our investment in Pepper Palace, Inc. was driven by the restructuring of the investment, resulting in a reversal of previously recognized unrealized depreciation reclassified to realized loss.
Current report
The $2.7 million net change in unrealized depreciation in our investment Invita (fka HemaTerra Holding Company, LLC) was driven by strong financial results and market factors.
Current report
The $2.0 million net change in unrealized appreciation in our investment Axero Holdings, LLC was driven by strong financial performance.
Current report
The $1.0 million of net change in unrealized depreciation in our investment ETU Holdings, Inc. was driven by a decline in company performance and overall market conditions.
Current report
The $16.5 million of unrealized depreciation in our investment Pepper Palace, Inc. was driven by further declines in performance.
Current report
The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company’s consolidated financial statements and disclosures in the consolidated financial statements as of and for the quarter ended August 31, 2024.
Removed paragraphs (2)
Previous report
In June 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-03,Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)(“ASU 2022-03”), which clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value. In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. ASU 2022-03’s amendments are effective for fiscal years beginning after December 15, 2023, with early adoption permitted. With the adoption of ASU 2022-03, there was no significant impact to the consolidated financial statements.
Previous report
For the three months ended May 31, 2024 and May 31, 2023, total PIK income was $0.6 million and $0.5 million, respectively.
Reworded paragraphs (58)
Previous wording
We are a Maryland corporation that has elected to be treated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies, which we define as companies having earnings before interest, tax, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, which may include 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. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of our net assets. We have elected and qualified to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
Current wording
We are a Maryland corporation that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from our investments. We invest primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies, which we define as companies having earnings before interest, tax, depreciation and amortization (“EBITDA”) of between $2 million and $50 million, both through direct lending and through participation in loan syndicates. We may also invest up to 30.0% of the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments in distressed debt, which may include 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. Although we have no current intention to do so, to the extent we invest in private equity funds, we will limit our investments in entities that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which includes private equity funds, to no more than 15.0% of our net assets. We have elected and qualified to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
Previous wording
Our wholly owned subsidiaries, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”) and Saratoga Investment Corp. SBIC III LP (“SBIC III LP”, and together with SBIC II LP, the “SBIC Subsidiaries”), received SBIC licenses from the SBA on August 14, 2019 and September 29, 2022, respectively. Each of the SBIC Subsidiaries provides up to $175.0 million in long-term capital in the form of debentures guaranteed by the SBA. With all debentures repaid to the SBA, SBIC LP’s license was surrendered on January 3, 2024, providing the Company access to all undistributed capital of SBIC LP, and SBIC LP subsequently merged with and into the Company. Under current SBIC regulations, for two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million with at least $175.0 million in combined regulatory capital.
Current wording
Our wholly owned subsidiaries, Saratoga Investment Corp. SBIC II LP (“SBIC II LP”) and Saratoga Investment Corp. SBIC III LP (“SBIC III LP”, and together with SBIC II LP, the “SBIC Subsidiaries”), received SBIC licenses from the SBA on August 14, 2019 and September 29, 2022, respectively. Each of the SBIC Subsidiaries provides up to $175.0 million in long-term capital in the form of debentures guaranteed by the SBA. Our wholly owned subsidiary SBIC LP repaid its outstanding debentures and subsequently surrendered its license to the SBA on January 3, 2024, providing the Company access to all undistributed capital of SBIC LP, and SBIC LP subsequently merged with and into the Company. Under current SBIC regulations, for two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million with at least $175.0 million in combined regulatory capital.
Previous wording
We have formed a wholly owned special purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering into a $50.0 million senior secured revolving credit facility with Encina Lender Finance, LLC (“Encina”), supported by loans held by SIF II and pledged to Encina under the credit facility (the “Encina Credit Facility). The Encina Credit Facility closed on October 4, 2021. During the first two years following the closing date, SIF II may request an increase in the commitment amount under the Encina Credit Facility to up to $75.0 million. The terms of the Encina Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of the commitment amount in effect at any time thereafter. The term of the Encina Credit Facility is three years. Advances under the Encina Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary provisions related to our and Encina’s selection of a replacement benchmark rate. Concurrently with the closing of the Encina Credit Facility, all remaining amounts outstanding on our existing revolving credit facility with Madison Capital Funding, LLC were repaid and the facility was terminated. On January 27, 2023, among other things, the borrowings available under the Encina Credit Facility was increased from up to $50.0 million to up to $65.0 million, the underlying benchmark rate used to compute interest changed from LIBOR to Term SOFR for one-month tenor plus a 0.10% credit spread adjustment; the applicable effective margin rate on borrowings increased from 4.00% to 4.25% and the maturity date was extended from October 4, 2024 to January 27, 2026.
Current wording
We have formed a wholly owned special purpose entity, Saratoga Investment Funding II LLC, a Delaware limited liability company (“SIF II”), for the purpose of entering into a senior secured revolving credit facility with Encina Lender Finance, LLC (“Encina”), supported by loans held by SIF II and pledged to Encina under the credit facility (the “Encina Credit Facility). The Encina Credit Facility closed on October 4, 2021. During the first two years following the closing date, SIF II may request an increase in the commitment amount under the Encina Credit Facility to up to $75.0 million. The terms of the Encina Credit Facility require a minimum drawn amount of $12.5 million at all times during the first six months following the closing date, which increases to the greater of $25.0 million or 50% of the commitment amount in effect at any time thereafter. The term of the Encina Credit Facility is three years. Advances under the Encina Credit Facility bear interest at a floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of 0.75%, with customary provisions related to our and Encina’s selection of a replacement benchmark rate. Concurrently with the closing of the Encina Credit Facility, all remaining amounts outstanding on our existing revolving credit facility with Madison Capital Funding, LLC were repaid and the facility was terminated. On January 27, 2023, among other things, the borrowings available under the Encina Credit Facility was increased from up to $50.0 million to up to $65.0 million, the underlying benchmark rate used to compute interest changed from LIBOR to Term SOFR for one-month tenor plus a 0.10% credit spread adjustment; the applicable effective margin rate on borrowings increased from 4.00% to 4.25% and the maturity date was extended from October 4, 2024 to January 27, 2026.
Previous wording
We have formed a wholly owned special purpose entity, Saratoga Investment Funding III LLC, a Delaware limited liability company (“SIF III”), for the purpose of entering into a $50.0 million senior secured revolving credit facility with Live Oak Banking Company (“Live Oak”), supported by loans held by SIF III and pledged to Live Oak under the credit facility (the “Live Oak Credit Facility). The Live Oak Credit Facility closed on March 27, 2024. During the first two years following the closing date, SIF III may request an increase in the commitment amount under the Live Oak Credit Facility to up to $150.0 million. The terms of the Live Oak Credit Facility require a minimum drawn amount of $12.5 million at all times during the period ending March 27, 2025, which increases to the greater of $25.0 million or 50% of the facility amount in effect at any time thereafter. The term of the Live Oak Credit Facility is three years. Advances under the Live Oak Credit Facility bear interest at a floating rate per annum equal to Adjusted Term SOFR plus an applicable margin between 3.50% and 4.25% based on the Live Oak Credit Facility’s utilization.
Current wording
We have formed a wholly owned special purpose entity, Saratoga Investment Funding III LLC, a Delaware limited liability company (“SIF III”), for the purpose of entering into a senior secured revolving credit facility with Live Oak Banking Company (“Live Oak”), supported by loans held by SIF III and pledged to Live Oak under the credit facility (the “Live Oak Credit Facility). The Live Oak Credit Facility closed on March 27, 2024. During the first two years following the closing date, SIF III may request an increase in the commitment amount under the Live Oak Credit Facility to up to $150.0 million. The terms of the Live Oak Credit Facility require a minimum drawn amount of $12.5 million at all times during the period ending March 27, 2025, which increases to the greater of $25.0 million or 50% of the facility amount in effect at any time thereafter. The term of the Live Oak Credit Facility is three years. Advances under the Live Oak Credit Facility bear interest at a floating rate per annum equal to Adjusted Term SOFR plus an applicable margin between 3.50% and 4.25% based on the Live Oak Credit Facility’s utilization. On June 14, 2024, the Live Oak Credit Facility was amended to, among other things: (i) increase the borrowings available under the Live Oak Credit Facility from up to $50.0 million to up to $75.0 million, subject to a borrowing base requirement; (ii) add new lenders to the Live Oak Credit Agreement; (iii) replace administrative agent approval with “Required Lender” (as defined in the Live Oak Credit Agreement) approval with respect to certain matters; (iv) replace Required Lender approval with 100% lender approval with respect to certain matters; and (v) change the definition of Required Lender to require the approval of at least two unaffiliated lenders.
Previous wording
We and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, where we provided $43.75 million and TJHA provides $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed rate of 10.0% per annum and is due and payable in full on October 20, 2033. As of May 31, 2024 our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of February 29, 2024, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of May 31, 2024 and February 29, 2024, the Company’s investment in the unsecured note of SLF JV had a fair value of $15.8 million and $15.8 million, respectively, and the Company’s investment in the membership interests of SLF JV had a fair value of $8.8 million and $9.4 million, respectively.
Current wording
We and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV through cash contributions, where we provided $43.75 million and TJHA provides $6.25 million, resulting in an 87.5% and 12.5% ownership between the two parties. The financing is issued in the form of an unsecured note and equity. The unsecured note will pay a fixed rate of 10.0% per annum and is due and payable in full on October 20, 2033. As of August 31, 2024 our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of February 29, 2024, our and TJHA’s investment in SLF JV consisted of an unsecured note of $17.6 million and $2.5 million, respectively; and membership interest of $17.6 million and $2.5 million, respectively. As of August 31, 2024 and February 29, 2024, the Company’s investment in the unsecured note of SLF JV had a fair value of $16.3 million and $15.8 million, respectively, and the Company’s investment in the membership interests of SLF JV had a fair value of $5.1 million and $9.4 million, respectively.
Previous wording
During the three months ended May 31, 2024, we invested $39.3 million in new and existing portfolio companies and had $75.7 million in aggregate amount of exits and repayments resulting in net investments of $(36.4) million for the period. During the three months ended May 31, 2023, we invested $139.8 million in new and existing portfolio companies and had $11.1 million in aggregate amount of exits and repayments resulting in net repayments of $128.8 million for the period.
Current wording
During the three months ended August 31, 2024, we invested $2.6 million in new and existing portfolio companies and had $60.1 million in aggregate amount of exits and repayments resulting in net investments of $(57.5) million for the period. During the three months ended August 31, 2023, we invested $27.4 million in new and existing portfolio companies and had $6.0 million in aggregate amount of exits and repayments resulting in net repayments of $21.4 million for the period.
Previous wording
At May 31, 2024, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $4.4 million and constituted 0.4% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of May 31, 2024 and February 29, 2024, was composed of $615.1 million and $640.8 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of May 31, 2024, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.
Current wording
At August 31, 2024, our investment in the subordinated notes of Saratoga CLO, a collateralized loan obligation fund, had a fair value of $5.8 million and constituted 0.6% of our portfolio. This investment constitutes a first loss position in a portfolio that, as of August 31, 2024 and February 29, 2024, was composed of $586.3 million and $640.8 million, respectively, in aggregate principal amount of primarily senior secured first lien term loans. In addition, as of August 31, 2024, we also own $9.4 million in aggregate principal of the F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated notes.
Previous wording
We do not consolidate the Saratoga CLO portfolio in our consolidated financial statements. Accordingly, the metrics below do not include the underlying Saratoga CLO portfolio investments. However, at May 31, 2024, $578.2 million or 98.7% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and one Saratoga CLO portfolio investment was in default with a fair value of $0.02 million. At February 29, 2024, $603.0 million or 99.2% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and two Saratoga CLO portfolio investments were in default with a fair value of $0.3 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024.
Current wording
We do not consolidate the Saratoga CLO portfolio in our consolidated financial statements. Accordingly, the metrics below do not include the underlying Saratoga CLO portfolio investments. However, at August 31, 2024, $547.3 million or 98.8% of the Saratoga CLO portfolio investments in terms of market value had a CMR (as defined below) color rating of green or yellow and two Saratoga CLO portfolio investment was in default with a fair value of $0.06 million. At February 29, 2024, $603.0 million or 99.2% of the Saratoga CLO portfolio investments in terms of market value had a CMR color rating of green or yellow and two Saratoga CLO portfolio investments were in default with a fair value of $0.3 million. For more information relating to the Saratoga CLO, see the audited financial statements for Saratoga in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024.
Previous wording
Operating results for the three months ended May 31, 2024 and May 31, 2023 was as follows:
Current wording
Operating results for the three and six months ended August 31, 2024 and August 31, 2023 was as follows:
Previous wording
The composition of our investment income for three months ended May 31, 2024 and May 31, 2023 was as follows:
Current wording
The composition of our investment income for three and six months ended August 31, 2024 and August 31, 2023 was as follows:
Previous wording
For the three months ended May 31, 2024, total investment income increased $4.1 million, or 11.7%, to $38.7 million from $34.6 million for the three months ended May 31, 2023. Interest income from investments increased $4.7 million, or 16.1%, to $34.3 million for the three months ended May 31, 2024 from $29.6 million for the three months ended May 31, 2023. Interest income from investments increased due to the increase of $11.5 million, or 1.1%, in total investments at May 31, 2024 from $1,084.1 million at May 31, 2023 to $1,095.6 million as of May 31, 2024, combined with the increase in the weighted average current yield on investments to 11.5%, up from 11.4% at May 31, 2023.
Current wording
For the three months ended August 31, 2024, total investment income increased $7.5 million, or 21.1%, to $43.0 million from $35.5 million for the three months ended August 31, 2023. Interest income from investments increased $7.0 million, or 21.7%, to $39.4 million for the three months ended August 31, 2024 from $32.3 million for the three months ended August 31, 2023. Interest income from investments primarily increased due to the increase of the weighted average current yield on investments to 11.5% at August 31, 2024, up from 11.3% at August 31, 2023, mainly resulting from the recognition of $7.9 million interest income related to our Knowland investment that was previously on non-accrual.
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, interest from cash and cash equivalents was $0.6 million and $0.8 million, respectively. The decrease of $0.2 million for the quarter ended May 31, 2024 was due to decreased cash and cash equivalents balances during this period as compared to last year, as last year reflected heightened cash balances following various bond offerings completed during the quarter.
Current wording
For the three months ended August 31, 2024 and August 31, 2023, interest from cash and cash equivalents was $1.7 million and $0.5 million, respectively. The increase of $1.2 million for the quarter ended August 31, 2024 was due to increased cash and cash equivalents balances during this period as compared to last year, resulting from numerous repayments received during the quarter.
Previous wording
Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended May 31, 2024 and May 31, 2023, total management fee income was $0.8 million and $0.8 million, respectively.
Current wording
Management fee income reflects the fee income received for managing the Saratoga CLO. For the three months ended August 31, 2024 and August 31, 2023, total management fee income was $0.8 million and $0.8 million, respectively. For the six months ended August 31, 2024 and August 31, 2023, total management fee income was $1.6 million and $1.6 million, respectively.
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, total dividend income was $1.5 million and $1.8 million, respectively. Dividends received is recorded in the consolidated statements of operations when earned, and the decrease primarily reflects lower dividend income received on our membership interest in SLF JV during the three months ended May 31, 2024 as compared to the three months ended May 31, 2023.
Current wording
For the three and six months ended August 31, 2024 and August 31, 2023, total dividend income was $1.1 million and $1.6 million, respectively and $2.6 million and $3.5 million respectively. Dividends received is recorded in the consolidated statements of operations when earned, and the decrease primarily reflects lower dividend income received on our membership interest in SLF JV during the three and six months ended August 31, 2024 as compared to the three and six months ended August 31, 2023.
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, total structuring and advisory fee income was $0.4 million and $1.4 million, respectively. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.
Current wording
For the three and six months ended August 31, 2024 and August 31, 2023, total structuring and advisory fee income was $0.0 million and $0.0 million, respectively and $0.0 million and $1.5 million, respectively. Structuring and advisory fee income represents fee income earned and received performing certain investment and advisory activities during the closing of new investments.
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, other income was $1.0 million and $0.2 million, respectively. Other income includes origination fees, monitoring and amendment fees and prepayment fees and is recorded in the consolidated statements of operations when earned.
Current wording
For the three and six months ended August 31, 2024 and August 31, 2023, other income was $0.1 million and $0.1 million, respectively $1.0 million and $0.3 million, respectively. Other income includes origination fees, monitoring and amendment fees and prepayment fees and is recorded in the consolidated statements of operations when earned.
Previous wording
The composition of our operating expenses for the three months ended May 31, 2024 and May 31, 2023 was as follows:
Current wording
The composition of our operating expenses for the three and six months ended August 31, 2024 and August 31, 2023 was as follows:
Previous wording
For the three months ended May 31, 2024, total operating expenses increased $5.7 million, or 30.4%, compared to the three months ended May 31, 2023.
Current wording
For the three months ended August 31, 2024, total operating expenses increased $3.3 million, or 15.1%, compared to the three months ended August 31, 2023. For the six months ended August 31, 2024, total operating expenses increased $8.9 million, or 22.2%, compared to the three months ended August 31, 2023.
Previous wording
For the three months ended May 31, 2024, interest and debt financing expenses increased $1.3 million, or 10.9%, compared to the three months ended May 31, 2023. The increase is primarily attributable to an increase of 6.7% in average outstanding debt from $781.0 million for the three months ended May 31, 2023 to $833.0 million for the three months ended May 31, 2024.
Current wording
For the three months ended August 31, 2024, interest and debt financing expenses increased $0.7 million, or 5.8%, compared to the three months ended August 31, 2023. The increase is primarily attributable to an increase of 3.4% in average outstanding debt from $809.0 million for the three months ended August 31, 2023 to $836.9 million for the three months ended August 31, 2024.
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, the weighted average interest rate on our outstanding indebtedness was 5.58% and 5.34%, respectively. The increase in weighted average interest rate was primarily driven by the issuance of higher rate borrowings over the past year, primarily last year, reflecting the increase in base rates in the market at that time.
Current wording
For the three and six months ended August 31, 2024 and August 31, 2023, the weighted average interest rate on our outstanding indebtedness was 6.06% and 6.01%, respectively and 6.06% and 5.66%, respectively. The increase in weighted average interest rate was primarily driven by the issuance of higher rate borrowings over the past year, primarily last year, reflecting the increase in base rates in the market at that time.
Previous wording
As of May 31, 2024 and February 29, 2024, the SBA debentures represented 25.8% and 26.1% of overall debt, respectively.
Current wording
As of August 31, 2024 and February 29, 2024, the SBA debentures represented 25.5% and 26.1% of overall debt, respectively.
Previous wording
For the three months ended May 31, 2024, base management fees increased $0.4 million, or 9.2%, from $4.6 million to $5.0 million compared to the three months ended May 31, 2023. The increase in base management fees results from the 8.9% increase in the average value of our total assets, less cash and cash equivalents, from $1,037.6 million for the three months ended May 31, 2023 to $1,129.6 million for the three months ended May 31, 2024.
Current wording
For the three months ended August 31, 2024, base management fees decreased $0.07 million, or 1.5%, from $4.8 million to $4.8 million compared to the three months ended August 31, 2023. The decrease in base management fees results from the 1.8% decrease in the average value of our total assets, less cash and cash equivalents, from $1,100.5 million for the three months ended August 31, 2023 to $1,080.6 million for the three months ended August 31, 2024.
Previous wording
For the three months ended May 31, 2024, incentive management fees increased $3.5 million, or 3,368.6%, compared to the three months ended May 31, 2023. The incentive fee on income increased from $3.2 million to $3.5 million for the three months ended May 31, 2023 and 2024, respectively, reflecting the increase in net investment income during the three months ended May 31, 2024 as compared to the three months ended May 31, 2023. The incentive fee on capital gains increased from a $(3.1) million benefit for the three months ended May 31, 2023 to a $0.0 million expense for the three months ended May 31, 2024, both reflecting the incentive fee on net realized and unrealized depreciation recognized during both these periods, with the liability floor capped at zero.
Current wording
For the three months ended August 31, 2024, incentive management fees increased $2.1 million, or 83.4%, compared to the three months ended August 31, 2023. The incentive fee on income increased from $3.3 million to $4.6 million for the three months ended August 31, 2023 and 2024, respectively, reflecting the increase in net investment income during the three months ended August 31, 2024 as compared to the three months ended August 31, 2023. The incentive fee on capital gains decreased from a $(0.8) million benefit for the three months ended August 31, 2023 to a $(0.9) million benefit for the three months ended August 31, 2024, reflecting the incentive fee on net realized and unrealized depreciation recognized during both these periods, with the liability floor capped at zero.
Previous wording
For the three ended May 31, 2024, professional fees increased $0.5 million, or 105.6%, from $0.5 million for the three months ended May 31, 2024 to $1.0 million for the three months ended May 31, 2023, primarily related to legal fees incurred during the restructuring of our Pepper Palace and Zollege investments.
Current wording
For the three months ended August 31, 2024, professional fees decreased $0.4 million, or 74.1%, from $0.5 million for the three months ended August 31, 2024 to $0.1 million for the three months ended August 31, 2023.
Previous wording
For the three months ended May 31, 2024, administrator expenses increased $0.3 million, or 31.3% compared to the three months ended May 31, 2023, reflecting the contractual changes to the administrator agreement cap.
Current wording
For the three and six months ended August 31, 2024, administrator expenses increased $0.2 million, or 25.3% and $0.5 million, or 28.2%, respectively compared to the three and six months ended August 31, 2023, reflecting the contractual changes to the administrator agreement cap.
Previous wording
For the three months ended May 31, 2024, general and other expenses decreased $0.2 million, or 26.7% compared to the three months ended May 31, 2023.
Current wording
For the three and six months ended August 31, 2024, general and administrative expenses increased $0.4 million, or 75.9% and $0.1 million, or 10.2%, respectively compared to the three and six months ended August 31, 2023.
Previous wording
As discussed above, the increase in interest and debt financing expenses for the three months ended May 31, 2024 compared to the three months ended May 31, 2023 is attributable both to an increase in the average dollar amount of outstanding debt, as well as the higher cost of that debt. For the three months ended May 31, 2024 and May 31, 2023, the average borrowings outstanding under the Encina Credit Facility was $34.8 million and $46.7 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Encina Credit Facility was 9.89% and 9.41%, respectively. For the three months ended May 31, 2024 and May 31, 2023, the average borrowings outstanding under the Live Oak Credit Facility was $12.9 million and $0.0 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Live Oak Credit Facility was 9.53% and 0.0%, respectively. For the three months ended May 31, 2024 and May 31, 2023, the average borrowings outstanding of SBA debentures was $214.0 million and $202.0 million, respectively. For the three months ended May 31, 2024 and May 31, 2023, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.36% and 2.88%, respectively. For the three months ended May 31, 2024 and May 31, 2023, the average borrowings outstanding of our Notes Payable was $571.4 million and $532.3 million, respectively. For the three months ended May 31, 2024 and May 31, 2023, the weighted average interest rate on the Notes Payable was 6.06% and 5.92%, respectively.
Current wording
As discussed above, the increase in interest and debt financing expenses for the three months ended August 31, 2024 compared to the three months ended August 31, 2023 is attributable both to an increase in the average dollar amount of outstanding debt, as well as the higher cost of that debt. For the three months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding under the Encina Credit Facility was $32.5 million and $35.0 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Encina Credit Facility was 9.89% and 9.75%, respectively. For the three months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding under the Live Oak Credit Facility was $19.0 million and $0.0 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Live Oak Credit Facility was 9.55% and 0.0%, respectively. For the three months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding of SBA debentures was $214.0 million and $202.6 million, respectively. For the three months ended August 31, 2024 and August 31, 2023, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.34% and 2.89%, respectively. For the three months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding of our Notes Payable was $571.4 million and $571.4 million, respectively. For the three months ended August 31, 2024 and August 31, 2023, the weighted average interest rate on the Notes Payable was 6.06% and 5.92%, respectively.
Previous wording
The weighted average dollar amount of our unsecured notes for the three months ended May 31, 2024 and May 31, 2023 was as follows:
Current wording
The weighted average dollar amount of our unsecured notes for the three and six months ended August 31, 2024 and August 31, 2023 was as follows:
Previous wording
For the three months ended May 31, 2024 and May 31, 2023, there were income tax expense (benefits) of ($0.06) million and $0.01 million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in entities that are treated as corporations for U.S. federal income tax purposes, as well as current U.S. federal and state income taxes on those operating gains and losses when realized.
Current wording
For the three and six months ended August 31, 2024 and August 31, 2023, there were income tax expense (benefits) of $0.1 million and ($0.2) million, respectively and $0.1 million and ($0.2) million, respectively. This relates to net deferred federal and state income tax expense (benefit) with respect to operating gains and losses and income derived from equity investments held in entities that are treated as corporations for U.S. federal income tax purposes, as well as current U.S. federal and state income taxes on those operating gains and losses when realized.
Previous wording
For the three months ended May 31, 2024, we had $75.7 million of sales, repayments, exits or restructurings resulting in $21.2 million of net realized losses.
Current wording
For the three months ended August 31, 2024, we had $60.1 million of sales, repayments, exits or restructurings resulting in $33.4 million of net realized losses. For the six months ended August 31, 2024, we had $135.8 million of sales, repayments, exits or restructurings resulting in $54.6 million of net realized losses.
Previous wording
For the three months May 31, 2023, the Company had $11.1 million of sales, repayments, exits, or restructurings resulting in $0.09 million of net realized gains.
Current wording
For the three months ended August 31, 2023, we had $6.0 million of sales, repayments, exits or restructurings. For the six months ended August 31, 2023, we had $17.1 million of sales, repayments, exits or restructurings resulting in $0.09 million of net realized gains.
Previous wording
The Company received escrow payments from the prior sales of its investments in PPDS Buyer, LLC, Censis Technologies, Inc., Ohio Medical, LLC, GreyHeller LLC and Targus Holdings, Inc.
Current wording
The Company received escrow payments from the prior sales of its investments in PPDS Buyer, LLC, Censis Technologies, Inc., and GreyHeller LLC.
Previous wording
For the three months ended May 31, 2024, our investments had a net change in unrealized appreciation of $13.9 million compared to a net change in unrealized depreciation of $16.3 million for the three months ended May 31, 2023.
Current wording
For the six months ended August 31, 2024, our investments had a net change in unrealized appreciation of $42.7 million compared to a net change in unrealized depreciation of $22.1 million for the six months ended August 31, 2023.
Previous wording
The most significant cumulative net change in unrealized appreciation (depreciation) for the three months ended May 31, 2023 were the following (dollars in thousands):
Current wording
The most significant cumulative net change in unrealized appreciation (depreciation) for the six months ended August 31, 2024 were the following (dollars in thousands):
Previous wording
The $14.5 million net change in unrealized appreciation in our investment Zollege PBC was driven by the restructuring of the investment, resulting in a reversal of previously recognized unrealized depreciation reclassified to realized loss.
Current wording
The $14.3 million net change in unrealized appreciation in our investment Zollege PBC was driven by the restructuring of the investment, resulting in a reversal of previously recognized unrealized depreciation reclassified to realized loss.
Previous wording
The $1.5 million of net change in unrealized depreciation in our investment Artemis Wax Corp. was driven by the quarterly cash distribution, along with overall market conditions.
Current wording
The $4.7 million of net change in unrealized depreciation in our investment Artemis Wax Corp. was driven by a decline in company performance, overall market conditions and capital structure changes.
Previous wording
The $1.5 million net change in unrealized depreciation in our investment Saratoga Senior Loan Fund I, JV, LLC was driven by the impact of overall market conditions.
Current wording
The $3.8 million net change in unrealized depreciation in our investment Saratoga Senior Loan Fund I, JV, LLC was driven by the impact of overall market conditions.
Previous wording
The $2.9 million net change in unrealized depreciation in our investment Saratoga Investment Corp. CLO 2013-1, Ltd. was driven by the quarterly cash distribution, as well as a reduction in the carrying value of certain defaulted loans in the portfolio, as well as overall market conditions.
Current wording
The $3.6 million net change in unrealized depreciation in our investment Saratoga Investment Corp. CLO 2013-1, Ltd. was driven by the quarterly cash distribution, as well as a reduction in the carrying value of certain defaulted loans in the portfolio, as well as overall market conditions.
Previous wording
The $2.0 million of net change in unrealized depreciation in our investment ARC Health OpCo LLC was driven by declines in company performance and capital structure changes.
Current wording
The $3.5 million of net change in unrealized depreciation in our investment ARC Health OpCo LLC was driven by declines in company performance and capital structure changes.
Previous wording
The $5.4 million of unrealized depreciation in our investment Saratoga Senior Loan Fund I, JV, LLC was driven by the impact of overall market conditions.
Current wording
The $3.3 million of unrealized depreciation in our investment Saratoga Senior Loan Fund I, JV, LLC was driven by the impact of overall market conditions.
Showing the first 40 of 58 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
In November 2023, the FASB issued ASU 2023-07,Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances the disclosures required for reportable segments on an annual and interim basis. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted; however, the Company has not elected to adopt this provision as of the date of the financial statements contained in this quarterly report. The Company is still assessing the impact of the new guidance.
Current report — wording carried from elsewhere
During the six months ended August 31, 2024, we invested $41.9 million in new and existing portfolio companies and had $135.8 million in aggregate amount of exits and repayments resulting in net investments of $(93.9) million for the period. During the six months ended August 31, 2023, we invested $167.3 million in new and existing portfolio companies and had $17.1 million in aggregate amount of exits and repayments resulting in net repayments of $150.2 million for the period.
Current report — wording carried from elsewhere
For the six months ended August 31, 2024, incentive management fees increased $5.6 million, or 214.7%, compared to the six months ended August 31, 2023. The incentive fee on income increased from $6.5 million to $8.1 million for the six months ended August 31, 2023 and 2024, respectively, reflecting the increase in net investment income during the six months ended August 31, 2024 as compared to the six months ended August 31, 2023. The incentive fee on capital gains increased from a $(3.9) million benefit for the six months ended August 31, 2023 to a $(3.7) million benefit for the six months ended August 31, 2024, reflecting the incentive fee on net realized and unrealized depreciation recognized during both these periods, with the liability floor capped at zero.
Current report — wording carried from elsewhere
As discussed above, the increase in interest and debt financing expenses for the six months ended August 31, 2024 compared to the six months ended August 31, 2023 is attributable both to an increase in the average dollar amount of outstanding debt, as well as the higher cost of that debt. For the six months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding under the Encina Credit Facility was $33.6 million and $40.9 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Encina Credit Facility was 9.89% and 9.56%, respectively. For the six months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding under the Live Oak Credit Facility was $16.0 million and $0.0 million, respectively, and the average weighted average interest rate on the outstanding borrowing under the Live Oak Credit Facility was 9.54% and 0.0%, respectively. For the six months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding of SBA debentures was $214.0 million and $202.3 million, respectively. For the six months ended August 31, 2024 and August 31, 2023, the weighted average interest rate on the outstanding borrowings of the SBA debentures was 3.35% and 2.89%, respectively. For the six months ended August 31, 2024 and August 31, 2023, the average borrowings outstanding of our Notes Payable was $571.4 million and $551.8 million, respectively. For the six months ended August 31, 2024 and August 31, 2023, the weighted average interest rate on the Notes Payable was 6.06% and 5.99%, respectively.
Current report — wording carried from elsewhere
For the six months ended August 31, 2024, we recorded a net increase in net assets resulting from operations of $19.9 million. Based on 13,704,759 weighted average common shares outstanding as of August 31, 2024, our per share net increase in net assets resulting from operations was $1.45 for the six months ended August 31, 2024. For the six months ended August 31, 2023, we recorded a net decrease in net assets resulting from operations of $7.7 million. Based on 12,011,180 weighted average common shares outstanding as of August 31, 2023, our per share net decrease in net assets resulting from operations was $0.64 for the six months ended August 31, 2023.