Saratoga Investment Corp. Reports Financial Results for the Quarter Ended August 31, 2025
Saratoga Investment Corp. (the “Company”) filed its quarterly report for the period ended August 31, 2025, which includes consolidated financial statements for the three and six months ended August 31, 2025, and August 31, 2024. The Company reported net assets of $1.23 billion as of August 31, 2025, and net investment income of $14.1 million and $27.4 million for the three and six months ended August 31, 2025, respectively. The Company’s net asset value per share decreased by 1.4% and 2.1% for the three and six months ended August 31, 2025, respectively, compared to the same periods in the prior year. The Company’s investment portfolio consists of debt securities, equity securities, and other investments, with a total fair value of $1.23 billion as of August 31, 2025. The Company’s management’s discussion and analysis of financial condition and results of operations provides an overview of the Company’s financial performance and highlights the key factors that affected its results.
OVERVIEW
We are a Maryland corporation that has elected to be regulated as a BDC under the Investment Company Act of 1940. 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. We may also invest up to 30% of the portfolio in opportunistic investments such as distressed debt, foreign debt, private equity, and structured finance vehicles.
Corporate History
We commenced operations in 2007 and completed an initial public offering. In 2010, we engaged Saratoga Investment Advisors to replace our former investment adviser and changed our name to Saratoga Investment Corp. Our wholly owned subsidiaries, SBIC II LP and SBIC III LP, received SBIC licenses from the SBA in 2019 and 2022, respectively, allowing them to obtain leverage through SBA-guaranteed debentures.
We have 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. We have also formed a joint venture, Saratoga Senior Loan Fund I JV LLC, with TJHA JV I LLC to invest in a diversified portfolio of broadly syndicated first lien and second lien term loans or bonds.
Critical Accounting Policies and Estimates
Our most critical accounting estimates are investment valuation, revenue recognition, and the recognition of capital gains incentive fee expense. We account for investments at fair value and use multiple techniques, including market comparables, discounted cash flows, and enterprise value waterfalls, to determine fair value. We recognize interest income, including PIK interest, on an accrual basis to the extent it is expected to be collected. We record an expense accrual relating to the capital gains incentive fee payable to the Manager when our unrealized gains exceed all realized capital losses.
Portfolio and Investment Activity
As of August 31, 2025, our 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%. Our non-performing or delinquent investments had a fair value of $1.8 million.
Results of Operations
For the three months ended August 31, 2025, total investment income was $30.6 million, a decrease of 28.8% from the prior year period, primarily due to lower interest income from investments. Net investment income was $9.1 million, and we recorded a net increase in net assets resulting from operations of $13.3 million.
For the six months ended August 31, 2025, total investment income was $62.9 million, a decrease of 22.9% from the prior year period, again driven by lower interest income from investments. Net investment income was $19.2 million, and we recorded a net increase in net assets resulting from operations of $27.2 million.
Financial Condition, Liquidity and Capital Resources
We intend to continue generating cash primarily from operations, the Encina and Live Oak credit facilities, our SBIC subsidiaries, and future debt and equity offerings. As of August 31, 2025, we had $105.7 million in cash and cash equivalents and $95.1 million in cash and cash equivalents, reserve accounts. Our asset coverage ratio was 166.6% as of August 31, 2025.
We have 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 help fund our operations. We have also issued 8.50% 2028 Notes most recently.
We have distributed sufficient dividends to eliminate taxable income for our completed tax years and intend to continue doing so. Shareholders have the option to receive payment of dividends in cash or shares of common stock.
