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Saratoga Investment Corp. Announces Fiscal Third Quarter 2013 Financial Results

NEW YORK, Jan. 14, 2013 /PRNewswire/ -- Saratoga Investment Corp. (NYSE: SAR) ("Saratoga Investment" or "the Company"), a business development company, today announced financial results for its 2013 fiscal third quarter.

Operating Results

For the fiscal quarter ended November 30, 2012, Saratoga Investment reported net investment income of $2.5 million or $0.63 on a weighted average per share basis, and net loss on investments of $1.7 million, or $0.44 on a weighted average per share basis, resulting in an increase in net assets from operations of $0.8 million, or $0.19 on a weighted average per share basis.  The $1.7 million net loss on investments was comprised of $1.8 million in net unrealized depreciation on investments and $0.1 million in net realized gains from investments.

Net asset value ("NAV") was $102.9 million as of November 30, 2012, compared to $105.4 million as of August 31, 2012 and $100.6 million as of May 31, 2012.  NAV per share was $21.75 ($27.39 before the effect of the dividend described below) as of November 30, 2012 and $27.20 as of August 31, 2012 and $25.94 as of May 31, 2012. 

The decrease in reported NAV per share from August 31, 2012 was primarily the result of the $16.5 million cash/stock dividend (which consisted of $3.3 million in cash and 853,455 shares of common stock) declared by Saratoga Investment's Board of Directors on November 9, 2012 and paid on December 31, 2012. In accordance with generally accepted accounting principles ("GAAP"), the number of shares outstanding used to calculate NAV per share as of November 30, 2012 was retroactively adjusted to reflect the additional shares issued in connection with the cash/stock dividend.

Christian L. Oberbeck, Chairman, Chief Executive Officer and President of Saratoga Investment, said, "Our growing pipeline and financial strength enabled us to make another $6.4 million of investments in new and existing portfolio companies during the quarter, plus an additional $30 million of investments during December in four new and one existing portfolio company. We continue to see attractive opportunities, and the trend of improving credit quality within the overall portfolio continues. During this quarter, we have increased both the amount and proportion of internally rated strong credits."

Portfolio and Investment Activity

As of November 30, 2012, the fair value of the Company's investment portfolio was $119.3 million, principally invested in 23 portfolio companies and one collateralized loan obligation fund (the "CLO"). The overall portfolio composition consisted of 53.7% of first lien term loans, 8.4% of second lien term loans, 8.8% of senior secured notes, 1.9% of unsecured notes, 20.7% of subordinated notes of the CLO and 6.5% of common equity.  

During the 2013 fiscal third quarter, the Company invested $6.4 million in new or existing portfolio companies and had $1.5 million in aggregate amount of exits and repayments on its investments, resulting in net investments of $4.9 million for the period.  The Company invested an additional $29.7 million in December with $0.7 million of exits and repayments resulting in net investments of $29.0 million for the month of December 2012.

As of November 30, 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 10.0%, 11.3%, 16.8%, 19.9%, and 22.9%, respectively, which resulted in an aggregate weighted average current yield of 12.9%. 

Liquidity and Capital Resources

As of November 30, 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 Investment had an aggregate of $2.5 million in cash and cash equivalents and $3.8 million in cash and cash equivalents, reserve accounts, at November 30, 2012.  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 November 30, 2012, the Company's Small Business Investment Company subsidiary had $25 million in regulatory capital and $4.0 million of debentures guaranteed by the Small Business Administration.

2013 Fiscal Third Quarter Conference Call/Webcast Information

When:  Jan. 15, 2013 at 9:00 a.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 11:00 a.m. ET on Jan. 15, 2013 through 11:59 p.m. ET on Jan. 22, 2013 by dialing (800) 585-8367 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada). Passcode for both replay numbers is 88743795.

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 Investment 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 Investment 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  




November 30, 2012


February 29, 2012




 (unaudited) 




ASSETS











Investments at fair value






Non-control/non-affiliate investments (amortized cost of $97,083,018 and $73,161,722, respectively)

$            94,649,656


$          69,513,434



Control investments (cost of $20,361,593 and $23,540,517, respectively)

24,641,107


25,846,414



Total investments at fair value (amortized cost of $117,444,611 and $96,702,239, respectively)

119,290,763


95,359,848


Cash and cash equivalents

2,494,552


1,325,698


Cash and cash equivalents, reserve accounts

3,787,183


25,534,195


Outstanding interest rate cap at fair value (cost of $0 and $131,000, respectively)

-


75


Interest receivable, (net of reserve of $228,113 and $273,361, respectively)

1,906,186


1,689,404


Deferred credit facility financing costs, net

1,453,985


1,199,490


Management fee receivable

216,947


227,581


Other assets

18,973


94,823


Receivable from unsettled trades

-


59,511



Total assets

$          129,168,589


$        125,490,625








LIABILITIES





Revolving credit facility

$            14,850,000


$          20,000,000


SBA debentures payable

4,000,000


-


Payable for unsettled trades

-


4,072,500


Dividend payable

3,295,306


-


Management and incentive fees payable

3,364,719


2,885,670


Accounts payable and accrued expenses

508,042


704,949


Interest and credit facility fees payable

140,424


53,262


Due to manager

117,877


394,094



Total liabilities

$            26,276,368


$          28,110,475








NET ASSETS





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






authorized, 4,730,116 and 3,876,661 common shares issued and outstanding, respectively

$                     4,730


$                   3,877


Capital in excess of par value

174,824,076


161,644,426


Distribution in excess of net investment income

(25,319,688)


(13,920,068)


Accumulated net realized loss from investments and derivatives

(48,463,047)


(48,874,767)


Net unrealized appreciation (depreciation) on investments and derivatives

1,846,150


(1,473,318)



Total Net Assets

102,892,221


97,380,150








Total liabilities and Net Assets

$          129,168,589


$        125,490,625








NET ASSET VALUE PER SHARE

$                     21.75


$                   25.12









Saratoga Investment Corp.












Consolidated Statements of Operations














For the three months ended  November 30,


For the nine months ended  November 30,



2012


2011


2012


2011



(unaudited)


(unaudited)


(unaudited)


(unaudited)










INVESTMENT INCOME








Interest from investments









Non-control/Non-affiliate investments

$  2,466,595


$  1,877,650


$  6,951,338


$     5,212,182


Control investments

1,046,285


1,155,241


3,186,751


3,095,304


     Total interest income

3,512,880


3,032,891


10,138,089


8,307,486

Interest from cash and cash equivalents

731


1,567


5,368


6,815

Management fee income

500,454


501,920


1,500,519


1,512,091

Other income

19,750


92,671


172,310


238,579


Total investment income

4,033,815


3,629,049


11,816,286


10,064,971










EXPENSES








Interest and credit facility financing expenses

529,858


307,221


1,808,586


987,042

Base management fees

528,735


393,888


1,492,345


1,203,820

Professional fees

347,459


356,144


986,781


1,282,009

Administrator expenses

250,000


250,000


750,000


730,000

Incentive management fees

(412,654)


1,178,750


887,020


842,097

Insurance

128,891


145,105


389,506


448,786

Directors fees and expenses

53,705


51,000


155,705


153,000

General & administrative

117,357


121,019


265,720


290,232

Other expense

1,311


2,150


4,434


5,340


Total expenses

1,544,662


2,805,277


6,740,097


5,942,326











NET INVESTMENT INCOME

2,489,153


823,772


5,076,189


4,122,645










REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:








Net realized gain (loss) from investments

95,372


(5,831,905)


542,720


(5,839,864)

Net realized loss from derivatives

-


-


(131,000)


-

Net unrealized appreciation (depreciation) on investments

(1,838,957)


11,221,387


3,188,543


11,927,052

Net unrealized appreciation (depreciation) on derivatives

-


166


130,925


(15,108)


Net gain (loss) on investments

(1,743,585)


5,389,648


3,731,188


6,072,080










NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

$     745,568


$  6,213,420


$  8,807,377


$   10,194,725










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

$           0.19


$           1.88


$           2.25


$              3.10










WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED

3,970,447


3,310,021


3,907,696


3,287,979




















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

Roland Tomforde
Broadgate Consultants
212-232-2222

SOURCE Saratoga Investment Corp.

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