Saratoga Investment Corp. Reports Financial Results for the Quarter Ended August 31, 2025
Saratoga Investment Corp. filed its quarterly report for the period ended August 31, 2025, reporting net assets of $1.14 billion and net income of $14.1 million. The company’s net asset value per share increased by 2.1% to $7.08, and its net investment income per share decreased by 1.4% to $0.44. The company’s investment portfolio consists of 94.4% debt securities, 4.4% equity securities, and 1.2% cash and cash equivalents. The company’s debt securities are primarily comprised of senior loans, high-yield bonds, and investment-grade bonds. The company’s equity securities are primarily comprised of publicly traded stocks and private equity investments. The company’s cash and cash equivalents are primarily comprised of cash and commercial paper.
OVERVIEW
Saratoga Investment Corp. is a Maryland corporation that has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940. The company’s investment objective is to generate current income and long-term capital appreciation by investing primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies.
Corporate History
Saratoga Investment Corp. commenced operations in 2007 as GSC Investment Corp. and completed an initial public offering in 2007. In 2010, the company engaged Saratoga Investment Advisors as its investment adviser and changed its name to Saratoga Investment Corp. The company has formed two wholly-owned SBIC subsidiaries, SBIC II LP and SBIC III LP, which have received SBIC licenses from the SBA.
Saratoga Investment Corp. has also formed special purpose entities, Saratoga Investment Funding II LLC and Saratoga Investment Funding III LLC, to enter into senior secured revolving credit facilities with Encina Lender Finance, LLC and Live Oak Banking Company, respectively. Additionally, the company has formed a joint venture, Saratoga Senior Loan Fund I JV LLC, with TJHA JV I LLC to co-manage investments in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds.
Critical Accounting Policies and Estimates
Saratoga Investment Corp.’s critical accounting policies and estimates include investment valuation, revenue recognition, and the recognition of capital gains incentive fee expense. The company values investments at fair value in accordance with ASC 820 and undertakes a multi-step valuation process each quarter for investments without readily available market quotations. The company recognizes interest income, including PIK interest, on an accrual basis to the extent such amounts are expected to be collected. The company also records a capital gains incentive fee expense when the company has unrealized gains that exceed all realized capital losses on its investments.
Portfolio and Investment Activity
As of August 31, 2025, Saratoga Investment Corp.’s investment portfolio consisted of 101 investments across 44 portfolio companies, with an average investment size of $9.2 million and a weighted average maturity of 2.4 years. The portfolio was primarily composed of first lien term loans (84.3% of the total portfolio) with a weighted average current yield of 10.4%. The company’s non-performing or delinquent investments had a fair value of $1.8 million as of August 31, 2025.
The company’s investment portfolio is diversified across 39 different industries, with the largest exposures in Healthcare Services (9.7%), Structured Finance Securities (7.3%), and Consumer Services (6.0%). Geographically, the portfolio is concentrated in the Midwest (36.2%), Southeast (20.7%), and Northeast (12.8%) regions of the United States.
Results of Operations
For the three months ended August 31, 2025, Saratoga Investment Corp. reported total investment income of $30.6 million, a decrease of 28.8% compared to the prior year period, primarily due to lower interest income from investments. Net investment income for the period was $9.1 million, and the company recorded a net increase in net assets resulting from operations of $13.3 million.
For the six months ended August 31, 2025, the company reported total investment income of $62.9 million, a decrease of 22.9% compared to the prior year period, again driven by lower interest income from investments. Net investment income for the period was $19.2 million, and the company recorded a net increase in net assets resulting from operations of $27.2 million.
Financial Condition, Liquidity and Capital Resources
Saratoga Investment Corp. intends to continue generating cash primarily from operations, including interest income, as well as through the Encina Credit Facility, the Live Oak Credit Facility, and future issuances of debt and equity securities. As of August 31, 2025, the company had $105.7 million in cash and cash equivalents and $95.1 million in cash and cash equivalents, reserve accounts.
The company’s asset coverage ratio, a measure of leverage, was 166.6% as of August 31, 2025, providing the company with additional borrowing capacity. Saratoga Investment Corp. has also issued various unsecured notes, including 7.75% 2025 Notes, 6.25% 2027 Notes, 4.375% 2026 Notes, 4.35% 2027 Notes, 6.00% 2027 Notes, 7.00% 2025 Notes, 8.00% 2027 Notes, and 8.125% 2027 Notes, to fund its operations and investments.
The company has an active share repurchase plan and equity ATM program to provide additional sources of liquidity. Saratoga Investment Corp. has also distributed regular quarterly dividends to shareholders, with the most recent dividend of $0.25 per share paid on September 24, 2025.
Overall, Saratoga Investment Corp. appears to have a diversified investment portfolio, prudent leverage, and multiple sources of liquidity to support its operations and growth objectives.
