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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended August 31, 2014

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-33376

 

 

SARATOGA INVESTMENT CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   20-8700615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

535 Madison Avenue

New York, New York

  10022
(Address of principal executive office)   (Zip Code)

(212) 906-7800

(Registrant’s telephone number, including area code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   x    Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of October 14, 2014 was 5,379,616.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

 

 

         Page  

PART I

  FINANCIAL INFORMATION   

Item 1.

  Financial Statements      3   
  Consolidated Statements of Assets and Liabilities as of August 31, 2014 (unaudited) and February 28, 2014      3   
  Consolidated Statements of Operations for the three and six months ended August 31, 2014 and August 31, 2013 (unaudited)      4   
  Consolidated Schedules of Investments as of August 31, 2014 (unaudited) and February 28, 2014      5   
  Consolidated Statements of Changes in Net Assets for the six months ended August 31, 2014 and August 31, 2013 (unaudited)      11   
  Consolidated Statements of Cash Flows for the six months ended August 31, 2014 and August 31, 2013 (unaudited)      12   
  Notes to Consolidated Financial Statements as of August 31, 2014 (unaudited)      13   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      38   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      58   

Item 4.

  Controls and Procedures      58   

PART II

  OTHER INFORMATION      59   

Item 1.

  Legal Proceedings      59   

Item 1A.

  Risk Factors      59   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      59   

Item 3.

  Defaults upon Senior Securities      59   

Item 4.

  Mine Safety Disclosures      59   

Item 5.

  Other Information      59   

Item 6.

  Exhibits      60   

Signatures

     61   

 

2


Table of Contents

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements

Saratoga Investment Corp.

Consolidated Statements of Assets and Liabilities

 

     As of  
     August 31, 2014     February 28, 2014  
     (unaudited)        

ASSETS

    

Investments at fair value

    

Non-control/non-affiliate investments (amortized cost of $215,422,798 and $185,266,607, respectively)

   $         216,229,627      $         186,275,106   

Control investments (cost of $16,555,808 and $16,555,808, respectively)

     20,090,075        19,569,596   
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $231,978,606 and $201,822,415, respectively)

     236,319,702        205,844,702   

Cash and cash equivalents

     271,378        3,293,898   

Cash and cash equivalents, reserve accounts

     3,215,671        3,293,113   

Interest receivable (net of reserve of $184,818 and $150,058, respectively)

     3,314,407        2,571,853   

Deferred debt financing costs, net

     3,879,035        4,008,704   

Management fee receivable

     167,031        150,106   

Other assets

     62,769        14,461   
  

 

 

   

 

 

 

Total assets

   $ 247,229,993      $ 219,176,837   
  

 

 

   

 

 

 

LIABILITIES

    

Revolving credit facility

   $ 8,900,000      $ —     

SBA debentures payable

     64,000,000        50,000,000   

Notes payable

     48,300,000        48,300,000   

Management and incentive fees payable

     4,221,591        3,856,962   

Accounts payable and accrued expenses

     536,355        824,568   

Interest and debt fees payable

     1,036,073        873,135   

Due to manager

     418,154        398,154   
  

 

 

   

 

 

 

Total liabilities

   $ 127,412,173      $ 104,252,819   
  

 

 

   

 

 

 

Commitments and contingencies (See Note 7)

  

NET ASSETS

    

Common stock, par value $.001, 100,000,000 common shares authorized, 5,379,616 and 5,379,616 common shares issued and outstanding, respectively

   $ 5,380      $ 5,380   

Capital in excess of par value

     184,851,154        184,851,154   

Distribution in excess of net investment income

     (25,494,426     (29,627,578

Accumulated net realized loss from investments and derivatives

     (43,885,384     (44,327,225

Net unrealized appreciation on investments and derivatives

     4,341,096        4,022,287   
  

 

 

   

 

 

 

Total Net Assets

     119,817,820        114,924,018   
  

 

 

   

 

 

 

Total liabilities and Net Assets

   $ 247,229,993      $ 219,176,837   
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE

   $ 22.27      $ 21.36   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

3


Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Operations

(unaudited)

 

     For the three months ended
August 31
    For the six months ended
August 31
 
     2014      2013     2014      2013  

INVESTMENT INCOME

          

Interest from investments

          

Non-control/Non-affiliate investments

   $ 5,047,571       $ 3,385,362      $ 9,755,465       $ 7,254,826   

Payment-in-kind interest income from Non-control/Non-affiliate investments

     329,614         296,802        582,542         472,923   

Control investments

     660,031         1,109,535        1,301,369         2,235,539   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total interest income

     6,037,216         4,791,699        11,639,376         9,963,288   

Interest from cash and cash equivalents

     1,120         3,959        1,714         5,865   

Management fee income

     375,459         480,750        767,493         978,841   

Other income

     61,495         111,300        210,830         457,476   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total investment income

     6,475,290         5,387,708        12,619,413         11,405,470   
  

 

 

    

 

 

   

 

 

    

 

 

 

EXPENSES

          

Interest and debt financing expenses

     1,809,516         1,603,581        3,597,103         2,731,436   

Base management fees

     1,037,186         811,106        2,005,665         1,547,822   

Professional fees

     275,933         235,191        711,307         566,255   

Administrator expenses

     250,000         250,000        500,000         500,000   

Incentive management fees

     789,714         (39,770     1,170,617         781,352   

Insurance

     84,127         119,234        168,614         239,229   

Directors fees and expenses

     55,586         45,000        108,761         96,000   

General & administrative

     100,568         91,425        224,194         189,786   

Other expense

     —           75        —           12,035   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total expenses

     4,402,630         3,115,842        8,486,261         6,663,915   
  

 

 

    

 

 

   

 

 

    

 

 

 

NET INVESTMENT INCOME

     2,072,660         2,271,866        4,133,152         4,741,555   
  

 

 

    

 

 

   

 

 

    

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

          

Net realized gain from investments

     360,161         545,642        441,841         1,074,942   

Net unrealized appreciation (depreciation) on investments

     703,506         (2,858,805     318,809         (2,057,943
  

 

 

    

 

 

   

 

 

    

 

 

 

Net gain/(loss) on investments

     1,063,667         (2,313,163     760,650         (983,001
  

 

 

    

 

 

   

 

 

    

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

   $ 3,136,327       $ (41,297   $ 4,893,802       $ 3,758,554   
  

 

 

    

 

 

   

 

 

    

 

 

 

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

   $ 0.58       $ (0.01   $ 0.91       $ 0.79   

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED

     5,379,616         4,730,116        5,379,616         4,730,116   

See accompanying notes to consolidated financial statements.

 

4


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

August 31, 2014

(unaudited)

 

Company

 

Industry

 

Investment Interest

Rate / Maturity

  Principal/
Number of Shares
    Cost     Fair Value ( c )     % of
Net Assets
 

Non-control/Non-affiliated investments - 180.5% (b)

           

National Truck Protection Co.,
Inc. (d), (g)

  Automotive   Common Stock     1,116      $ 1,000,000      $ 1,473,053        1.2

National Truck Protection Co.,
Inc. (d)

  Automotive   First Lien Term Loan 15.50% Cash, 9/13/2018   $ 7,737,848        7,737,848        7,737,848        6.5

Take 5 Oil Change, L.L.C. (d), (g)

  Automotive   Common Stock     7,128        712,800        1,460,954        1.2
       

 

 

   

 

 

   

 

 

 
   

Total Automotive

      9,450,648        10,671,855        8.9
       

 

 

   

 

 

   

 

 

 

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting A-1     2,535        220,900        1,199,055        1.0

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting B-1     1,600        139,424        756,800        0.6
       

 

 

   

 

 

   

 

 

 
   

Total Building Products

      360,324        1,955,855        1.6
       

 

 

   

 

 

   

 

 

 

BMC Software, Inc. (d)

  Business Services   First Lien Term Loan 5.00% Cash, 9/10/2020   $ 5,761,667        5,713,227        5,742,077        4.8

Dispensing Dynamics
International (d)

  Business Services   Senior Secured Note 12.50% Cash, 1/1/2018   $ 7,000,000        6,897,469        7,560,000        6.3

Easy Ice, LLC (d)

  Business Services   First Lien Term Loan 14.00% (11.00% Cash/3.00% PIK), 3/29/2018   $ 7,603,228        7,603,231        7,603,228        6.3

Emily Street Enterprises, L.L.C.

  Business Services   Senior Secured Note 12.00% (11.00% Cash/1.00% PIK), 12/28/2017   $ 5,792,538        5,709,596        5,792,538        4.8

Emily Street Enterprises,
L.L.C. (g)

  Business Services   Warrant Membership Interests     49,318        400,000        385,174        0.3

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   First Lien Term Loan 5.50% Cash, 6/28/2019   $ 3,970,000        3,936,883        3,930,300        3.3

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   Second Lien Term Loan 9.50% Cash, 6/28/2020   $ 2,000,000        1,973,818        2,000,000        1.7

Knowland Technology Holdings, L.L.C.

  Business Services   First Lien Term Loan 11.00% Cash, 11/29/2017   $ 5,259,171        5,215,608        5,259,171        4.4

Vector Controls Holding Co.,
LLC (d)

  Business Services   First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018   $ 9,340,061        9,195,124        9,340,061        7.8

Vector Controls Holding Co.,
LLC (d), (g)

  Business Services   Warrants to Purchase Limited Liability Company Interests     101        —          87,600        0.1
       

 

 

   

 

 

   

 

 

 
   

Total Business Services

      46,644,956        47,700,149        39.8
       

 

 

   

 

 

   

 

 

 

Targus Group International,
Inc. (d)

  Consumer Products   First Lien Term Loan 11.00% Cash, 5/24/2016   $ 3,661,247        3,612,910        3,503,447        2.9

Targus Holdings, Inc. (d), (g)

  Consumer Products   Common Stock     62,413        566,765        —          0.0

Targus Holdings, Inc. (d)

  Consumer Products   Unsecured Note 10.00% PIK, 6/14/2019   $ 2,054,158        2,054,158        1,499,104        1.3

Targus Holdings, Inc. (d)

  Consumer Products   Unsecured Note 16.00% Cash, 10/26/2018   $ 399,152        394,283        375,489        0.3
       

 

 

   

 

 

   

 

 

 
   

Total Consumer Products

      6,628,116        5,378,040        4.5
       

 

 

   

 

 

   

 

 

 

Avionte Holdings, LLC (g)

  Consumer Services   Common Stock     100,000        100,000        139,000        0.1

Avionte Holdings, LLC

  Consumer Services   First Lien Term Loan 8.25% Cash, 1/8/2019   $ 3,000,000        2,946,920        3,000,000        2.5

CFF Acquisition L.L.C. (d)

  Consumer Services   First Lien Term Loan 7.50% Cash, 7/31/2015   $ 996,679        990,974        996,679        0.9

Expedited Travel L.L.C.

  Consumer Services   First Lien Term Loan 9.00% Cash, 12/28/2017   $ 3,830,000        3,768,632        3,830,000        3.2

PrePaid Legal Services, Inc. (d)

  Consumer Services   First Lien Term Loan 6.25% Cash, 7/1/2019   $ 3,951,613        3,917,123        3,950,427        3.3

PrePaid Legal Services, Inc. (d)

  Consumer Services   Second Lien Term Loan 9.75% Cash, 7/1/2020   $ 5,000,000        4,933,418        5,047,000        4.2
       

 

 

   

 

 

   

 

 

 
   

Total Consumer Services

      16,657,067        16,963,106        14.2
       

 

 

   

 

 

   

 

 

 

M/C Acquisition Corp., L.L.C. (d), (g)

  Education   Class A Common Stock     544,761        30,241        —          0.0

M/C Acquisition Corp., L.L.C. (d)

  Education   First Lien Term Loan 1.00% Cash, 3/13/14   $ 2,444,027        1,295,285        100,597        0.1
       

 

 

   

 

 

   

 

 

 
   

Total Education

      1,325,526        100,597        0.1
       

 

 

   

 

 

   

 

 

 

Group Dekko, Inc. (d)

  Electronics   Second Lien Term Loan 11.00% (10.00% Cash/1.00% PIK), 5/1/2016   $ 6,935,934        6,935,934        6,554,458        5.5
       

 

 

   

 

 

   

 

 

 
   

Total Electronics

      6,935,934        6,554,458        5.5
       

 

 

   

 

 

   

 

 

 

USS Parent Holding Corp. (d), (g)

  Environmental   Non Voting Common Stock     765        133,002        244,698        0.2

 

5


Table of Contents

USS Parent Holding
Corp. (d), (g)

  Environmental   Voting Common Stock     17,396        3,025,798        5,566,864        4.7
       

 

 

   

 

 

   

 

 

 
   

Total Environmental

      3,158,800        5,811,562        4.9
       

 

 

   

 

 

   

 

 

 

DS Waters of America, Inc. (d)

  Food and Beverage   First Lien Term Loan 5.25% Cash, 8/30/2020   $ 2,481,250        2,459,770        2,487,453        2.2

TB Corp. (d)

  Food and Beverage   First Lien Term Loan 5.75% Cash, 6/19/2018   $ 5,076,203        5,064,962        5,076,203        4.2

TB Corp. (d)

  Food and Beverage   Unsecured Note 13.50% (12.00% Cash/1.50% PIK), 12/20/2018   $ 2,546,121        2,517,122        2,546,121        2.1

TM Restaurant Group L.L.C.

  Food and Beverage   First Lien Term Loan 7.75% Cash, 7/16/2017   $ 2,808,190        2,808,190        2,802,855        2.3
       

 

 

   

 

 

   

 

 

 
   

Total Food and Beverage

      12,850,044        12,912,632        10.8
       

 

 

   

 

 

   

 

 

 

Bristol Hospice, LLC

  Healthcare Services   Senior Secured Note 11.00%(10.00% Cash/1.00% PIK), 11/29/2018   $ 5,486,532        5,390,528        5,486,532        4.6

IDOC, LLC

  Healthcare Services   First Lien Term Loan 9.75% Cash, 8/2/2017   $ 13,831,583        13,831,583        13,831,583        11.5

Oceans Acquisition, Inc.

  Healthcare Services   First Lien Term A Loan 10.75% Cash, 12/27/2017   $ 6,246,226        6,154,475        6,121,301        5.1

Oceans Acquisition, Inc.

  Healthcare Services   First Lien Term B Loan 10.75% Cash, 12/27/2017   $ 1,000,000        991,202        980,000        0.8

Roscoe Medical, Inc. (d), (g)

  Healthcare Services   Common Stock     5,000        500,000        446,800        0.4

Roscoe Medical, Inc.

  Healthcare Services   Second Lien Term Loan 11.25% Cash, 9/26/2019   $ 4,200,000        4,123,141        4,160,100        3.5

Smile Brands Group Inc. (d)

  Healthcare Services   First Lien Term Loan 7.50% Cash, 8/16/2019   $ 4,466,250        4,390,964        4,354,594        3.6

Surgical Specialties Corporation
(US), Inc. (d)

  Healthcare Services   First Lien Term Loan 7.25% Cash, 8/22/2018   $ 2,375,000        2,355,380        2,369,063        2.0

Zest Holdings, LLC (d)

  Healthcare Services   First Lien Term Loan 6.50% Cash, 8/16/2020   $ 4,466,250        4,377,323        4,477,416        3.7
       

 

 

   

 

 

   

 

 

 
   

Total Healthcare Services

      42,114,596        42,227,389        35.2
       

 

 

   

 

 

   

 

 

 

McMillin Companies
L.L.C. (d), (g)

  Homebuilding   Senior Secured Note 0% Cash, 12/31/2013   $ 550,000        558,434        410,740        0.3
       

 

 

   

 

 

   

 

 

 
   

Total Homebuilding

      558,434        410,740        0.3
       

 

 

   

 

 

   

 

 

 

Distribution International,
Inc. (d)

  Manufacturing   First Lien Term Loan 7.50% Cash, 7/16/2019   $ 5,940,000        5,888,342        5,940,000        5.0
       

 

 

   

 

 

   

 

 

 
   

Total Manufacturing

      5,888,342        5,940,000        5.0
       

 

 

   

 

 

   

 

 

 

HMN Holdco, LLC

  Media   First Lien Term Loan 14.00% Cash, 5/16/2019   $ 9,540,696        9,360,503        9,206,771        7.7

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests (Common)     57,783        —          179,127        0.1

HMN Holdco, LLC (g)

  Media   Warrants to Purchase Limited Liability Company Interests     8,139        —          67,798        0.1
       

 

 

   

 

 

   

 

 

 
   

Total Media

      9,360,503        9,453,696        7.9
       

 

 

   

 

 

   

 

 

 

Elyria Foundry Company,
L.L.C. (d)

  Metals   Senior Secured Note 17.00% (13.00% Cash/4.00% PIK), 9/14/2014   $ 8,859,616        8,859,614        5,785,311        4.8

Elyria Foundry Company,

L.L.C. (d), (g)

  Metals   Warrants to Purchase Limited Liability Company Interests (2008)     7,000        20        —          0.0

Elyria Foundry Company,

L.L.C. (d), (g)

  Metals   Warrants to Purchase Limited Liability Company Interests (2013)     18,227        —          —          0.0
       

 

 

   

 

 

   

 

 

 
   

Total Metals

      8,859,634        5,785,311        4.8
       

 

 

   

 

 

   

 

 

 

Network Communications,
Inc. (d), (g)

  Publishing   Common Stock     380,572        —          —          0.0

Network Communications,
Inc. (d)

  Publishing   Unsecured Notes 8.60% PIK, 1/14/2020   $ 2,657,971        2,299,254        1,488,510        1.2
       

 

 

   

 

 

   

 

 

 
   

Total Publishing

      2,299,254        1,488,510        1.2
       

 

 

   

 

 

   

 

 

 

Community Investors, Inc. (g)

  Software   Common Stock     1,282        1,282        2,449        0.0

Community Investors, Inc.

  Software   First Lien Term Loan 9.75% Cash, 5/9/2018   $ 6,896,042        6,784,964        6,896,042        5.8

Community Investors, Inc.

  Software   Revolver   $ 166,667        —          —          0.0

Community Investors, Inc. (g)

  Software   Preferred Stock     63,463        149,138        121,214        0.1

Community Investors, Inc. (g)

  Software   Preferred Stock - A Shares     135,584        135,584        258,965        0.2

Identity Automation
Systems (g)

  Software   Common Stock Class A Units     232,616        232,616        232,616        0.2

Identity Automation Systems

  Software   First Lien Term Loan 10.25% Cash, 8/25/2019   $ 5,000,000        4,950,321        5,000,000        4.2

Pen-Link, Ltd. (d)

  Software   Second Lien Term Loan 12.50% Cash, 5/26/2019   $ 11,500,000        11,294,269        11,500,000        9.6
       

 

 

   

 

 

   

 

 

 
   

Total Software

      23,548,174        24,011,286        20.1
       

 

 

   

 

 

   

 

 

 

 

6


Table of Contents

Censis Technologies, Inc.

  Technology   First Lien Term Loan B 11.00% Cash, 7/24/2019   $  12,000,000        11,761,173        11,760,000        9.8

Censis Technologies,
Inc. (g), (h)

  Technology   Limited Partner Interests     999        999,000        999,000        0.8
       

 

 

   

 

 

   

 

 

 
   

Total Technology

      12,760,173        12,759,000        10.6
       

 

 

   

 

 

   

 

 

 

Advanced Air & Heat of Florida, LLC

  Utilities   First Lien Term Loan 10.00% Cash, 1/31/2019   $ 6,105,441        6,022,273        6,105,441        5.1
       

 

 

   

 

 

   

 

 

 
   

Total Utilities

      6,022,273        6,105,441        5.1
       

 

 

   

 

 

   

 

 

 

Sub Total Non-control/Non-affiliated investments

      215,422,798        216,229,627        180.5
       

 

 

   

 

 

   

 

 

 

Control investments – 16.8% (b)

           

Saratoga Investment Corp. CLO 2013-1,
Ltd. (a), (d), (e), (f)

  Structured Finance Securities   Other/Structured Finance Securities 16.01%, 10/17/2023   $ 30,000,000        16,555,808        20,090,075        16.8
       

 

 

   

 

 

   

 

 

 

Sub Total Control investments

          16,555,808        20,090,075        16.8
       

 

 

   

 

 

   

 

 

 

TOTAL INVESTMENTS – 197.3% (b)

        $ 231,978,606      $ 236,319,702        197.3
       

 

 

   

 

 

   

 

 

 

 

(a) Represents a non-qualifyng investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 8.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $119,817,820 as of August 31, 2014.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 16.01% interest rate in the table above represents the interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

   Purchases      Redemptions      Sales (cost)      Interest
Income
     Management
fee income
     Net Realized
gains/(losses)
     Net Unrealized
gains/(losses)
 

Saratoga Investment Corp. CLO 2013-1, Ltd.

   $ —         $ —         $ —         $ 1,301,369       $ 767,493       $ —         $ 3,534,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(g) Non-income producing at August 31, 2014.
(h) Includes securities issued by an affiliate of the company.

 

7


Table of Contents

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2014

 

Company

 

Industry

 

Investment Interest
Rate / Maturity

  Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 

Non-control/Non-affiliated investments - 162.1% (b)

           

PATS Aircraft, LLC (d), (g)

  Aerospace   Common Stock     51,813      $ 89,636      $ 89,636        0.1

PATS Aircraft, LLC (d)

  Aerospace   First Lien Term Loan 8.50% Cash, 10/6/2016   $ 254,598        254,598        254,598        0.2
       

 

 

   

 

 

   

 

 

 
   

Total Aerospace

      344,234        344,234        0.3
       

 

 

   

 

 

   

 

 

 

National Truck Protection Co., Inc. (d), (g)

  Automotive   Common Stock     1,116        1,000,000        1,152,531        1.0

National Truck Protection Co., Inc. (d)

  Automotive   First Lien Term Loan 15.50% Cash, 9/13/2018   $ 8,250,000        8,250,000        8,250,000        7.2

Take 5 Oil Change, L.L.C. (d), (g)

  Automotive   Common Stock     7,128        712,800        1,217,747        1.1
       

 

 

   

 

 

   

 

 

 
    Total Automotive       9,962,800        10,620,278        9.3
       

 

 

   

 

 

   

 

 

 

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting A-1     2,535        220,900        552,351        0.5

Legacy Cabinets Holdings (d), (g)

  Building Products   Common Stock Voting B-1     1,600        139,424        348,624        0.3
       

 

 

   

 

 

   

 

 

 
    Total Building Products       360,324        900,975        0.8
       

 

 

   

 

 

   

 

 

 

ARSloane Acquistion, LLC (d)

  Business Services   First Lien Term Loan 7.50% Cash, 10/1/2019   $ 997,500        988,200        1,004,981        0.9

BMC Software, Inc. (d)

  Business Services   First Lien Term Loan 5.00% Cash, 9/10/2020   $ 6,000,000        5,943,801        6,013,800        5.2

Dispensing Dynamics International (d)

  Business Services   Senior Secured Note 12.50% Cash, 1/1/2018   $ 7,000,000        6,882,278        7,525,000        6.5

Easy Ice, LLC (d)

  Business Services   First Lien Term Loan 14.00% (11.00% Cash/3.00% PIK), 3/29/2018   $ 7,507,024        7,387,970        7,507,024        6.5

Emily Street Enterprises, L.L.C.

  Business Services   Senior Secured Note 12.00% (11.00% Cash/1.00% PIK), 12/28/2017   $ 5,767,983        5,680,703        5,767,983        5.0

Emily Street Enterprises, L.L.C. (g)

  Business Services   Warrant Membership Interests     49,318        400,000        601,679        0.5

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   First Lien Term Loan 5.50% Cash, 6/28/2019   $ 3,990,000        3,954,385        3,960,075        3.5

Help/Systems Holdings, Inc.(Help/Systems, LLC) (d)

  Business Services   Second Lien Term Loan 9.50% Cash, 6/28/2020   $ 2,000,000        1,972,758        2,000,000        1.7

Knowland Technology Holdings, L.L.C.

  Business Services   First Lien Term Loan 11.00% Cash, 11/29/2017   $ 6,200,000        6,107,034        6,200,000        5.4

Trinet HR Corporation (SOI Holdings, Inc.) (d)

  Business Services   First Lien Term Loan 5.00% Cash, 8/20/2020   $ 4,987,500        4,941,335        5,018,921        4.4

Trinet HR Corporation (SOI Holdings, Inc.) (d)

  Business Services   Second Lien Term Loan 8.75% Cash, 2/20/2021   $ 2,500,000        2,453,145        2,518,750        2.2

Vector Controls Holding Co., LLC (d)

  Business Services   First Lien Term Loan, 14.00% (12.00% Cash/2.00% PIK), 3/6/2018   $ 9,261,074        9,115,415        9,075,853        7.9

Vector Controls Holding Co., LLC (d), (g)

  Business Services   Warrants to Purchase Limited Liability Company Interests     101        —          136,217        0.1
       

 

 

   

 

 

   

 

 

 
    Total Business Services       55,827,024        57,330,283        49.8
       

 

 

   

 

 

   

 

 

 

Targus Group International, Inc. (d)

  Consumer Products   First Lien Term Loan 11.00% Cash, 5/24/2016   $ 3,738,369        3,704,766        3,663,602        3.2

 

8


Table of Contents

Company

 

Industry

 

Investment Interest
Rate / Maturity

  Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 

Targus Holdings, Inc. (d), (g)

  Consumer Products   Common Stock     62,413        566,765        730,232        0.6

Targus Holdings, Inc. (d)

  Consumer Products   Unsecured Note 10.00% PIK, 6/14/2019   $ 2,054,158        2,054,158        1,387,848        1.2

Targus Holdings, Inc. (d)

  Consumer Products   Unsecured Note 16.00% Cash, 10/26/2018   $ 384,577        379,471        336,505        0.3
       

 

 

   

 

 

   

 

 

 
    Total Consumer Products       6,705,160        6,118,187        5.3
       

 

 

   

 

 

   

 

 

 

Avionte Holdings, LLC (g)

  Consumer Services   Common Stock   $ 100,000        100,000        100,000        0.1

Avionte Holdings, LLC

  Consumer Services   First Lien Term Loan 9.75% Cash, 1/8/2019   $ 3,000,000        2,940,000        3,000,000        2.6

CFF Acquisition L.L.C. (d)

  Consumer Services   First Lien Term Loan 7.50% Cash, 7/31/2015   $ 1,319,891        1,273,596        1,319,891        1.1

Expedited Travel L.L.C.

  Consumer Services   First Lien Term Loan 9.00% Cash, 12/28/2017   $ 4,580,000        4,501,104        4,580,000        4.0

PrePaid Legal Services, Inc. (d)

  Consumer Services   First Lien Term Loan 6.25% Cash, 7/1/2019   $ 4,274,194        4,236,035        4,247,694        3.7

PrePaid Legal Services, Inc. (d)

  Consumer Services   Second Lien Term Loan 9.75% Cash, 7/1/2020   $ 5,000,000        4,931,888        5,044,000        4.4
       

 

 

   

 

 

   

 

 

 
    Total Consumer Services       17,982,623        18,291,585        15.9
       

 

 

   

 

 

   

 

 

 

M/C Acquisition Corp.,
L.L.C. (d), (g)

  Education   Class A Common Stock     544,761        30,241        —          0.0

M/C Acquisition Corp., L.L.C. (d)

  Education   First Lien Term Loan 1.00% Cash, 3/13/14   $ 2,512,184        1,358,250        90,128        0.1
       

 

 

   

 

 

   

 

 

 
    Total Education       1,388,491        90,128        0.1
       

 

 

   

 

 

   

 

 

 

Group Dekko, Inc. (d)

  Electronics   Second Lien Term Loan 11.00% (10.00% Cash/1.00% PIK), 5/1/2016   $ 6,901,547        6,901,547        6,741,431        5.9
       

 

 

   

 

 

   

 

 

 
    Total Electronics       6,901,547        6,741,431        5.9
       

 

 

   

 

 

   

 

 

 

USS Parent Holding Corp. (d), (g)

  Environmental   Non Voting Common Stock     765        133,002        220,992        0.2

USS Parent Holding Corp. (d), (g)

  Environmental   Voting Common Stock     17,396        3,025,798        5,027,574        4.4
       

 

 

   

 

 

   

 

 

 
    Total Environmental       3,158,800        5,248,566        4.6
       

 

 

   

 

 

   

 

 

 

DS Waters of America, Inc. (d)

  Food and Beverage   First Lien Term Loan 5.25% Cash, 8/30/2020   $ 2,493,750        2,470,506        2,531,156        2.2

HOA Restaurant Group, L.L.C. (d)

  Food and Beverage   Senior Secured Note 11.25% Cash, 4/1/2017   $ 4,000,000        3,918,437        4,240,000        3.7

TB Corp. (d)

  Food and Beverage   First Lien Term Loan 5.75% Cash, 6/19/2018   $ 5,101,971        5,082,013        5,127,481        4.5

TB Corp. (d)

  Food and Beverage   Unsecured Note 13.50% (12.00% Cash/1.50% PIK), 12/20/2018   $ 2,543,154        2,513,130        2,555,870        2.2

TM Restaurant Group L.L.C.

  Food and Beverage   First Lien Term Loan 7.75% Cash, 7/16/2017   $ 2,845,690        2,831,271        2,831,462        2.5
       

 

 

   

 

 

   

 

 

 
    Total Food and Beverage       16,815,357        17,285,969        15.1
       

 

 

   

 

 

   

 

 

 

Bristol Hospice, LLC

  Healthcare Services   Senior Secured Note 11.00%(10.00% Cash/1.00% PIK), 11/29/2018   $ 5,509,782        5,405,325        5,509,782        4.8

Oceans Acquisition, Inc.

  Healthcare Services   First Lien Term A Loan 10.75% Cash, 12/27/2017   $ 6,373,113        6,273,020        6,373,113        5.6

Oceans Acquisition, Inc.

  Healthcare Services   First Lien Term B Loan 10.75% Cash, 12/27/2017   $ 500,000        490,224        500,000        0.4

Smile Brands Group Inc. (d)

  Healthcare Services   First Lien Term Loan 7.50% Cash, 8/16/2019   $ 4,488,750        4,406,559        4,488,750        3.9

Surgical Specialties Corporation (US), Inc. (d)

  Healthcare Services   First Lien Term Loan 7.25% Cash, 8/22/2018   $ 2,437,500        2,415,591        2,449,688        2.1

Zest Holdings, LLC (d)

  Healthcare Services   First Lien Term Loan 6.50% Cash, 8/16/2020   $ 4,488,750        4,405,073        4,488,750        3.9
       

 

 

   

 

 

   

 

 

 
    Total Healthcare Services       23,395,792        23,810,083        20.7
       

 

 

   

 

 

   

 

 

 

 

9


Table of Contents

Company

 

Industry

 

Investment Interest
Rate / Maturity

  Principal/
Number of Shares
    Cost     Fair Value (c)     % of
Net Assets
 

McMillin Companies L.L.C. (d), (g)

  Homebuilding   Senior Secured Note 0% Cash, 12/31/2013   $ 550,000        558,434        344,355        0.3
       

 

 

   

 

 

   

 

 

 
   

Total Homebuilding

      558,434        344,355        0.3
       

 

 

   

 

 

   

 

 

 

Distribution International, Inc. (d)

  Manufacturing   First Lien Term Loan 7.50% Cash, 7/16/2019   $ 5,970,000        5,916,094        5,970,000        5.2
       

 

 

   

 

 

   

 

 

 
   

Total Manufacturing

      5,916,094        5,970,000        5.2
       

 

 

   

 

 

   

 

 

 

Elyria Foundry Company, L.L.C. (d)

  Metals   Senior Secured Note 17.00% (13.00% Cash/4.00% PIK), 9/14/2014   $ 8,859,614        8,859,614        6,644,711        5.8

Elyria Foundry Company, L.L.C. (d), (g)

  Metals   Warrants to Purchase Limited Liability Company Interests (2008)     7,000        20        —          0.0

Elyria Foundry Company, L.L.C. (d), (g)

  Metals   Warrants to Purchase Limited Liability Company Interests (2013)     18,227        —          —          0.0
       

 

 

   

 

 

   

 

 

 
   

Total Metals

      8,859,634        6,644,711        5.8
       

 

 

   

 

 

   

 

 

 

Network Communications, Inc. (d), (g)

  Publishing   Common Stock     380,572        —          —          0.0

Network Communications, Inc. (d)

  Publishing   Unsecured Notes 8.60% PIK, 1/14/2020   $ 2,601,736        2,202,168        1,190,888        1.0
       

 

 

   

 

 

   

 

 

 
   

Total Publishing

      2,202,168        1,190,888        1.0
       

 

 

   

 

 

   

 

 

 

Community Investors, Inc. (g)

  Software   Common Stock     1,282        1,282        1,449        0.0

Community Investors, Inc.

  Software   First Lien Term Loan 9.75% Cash, 5/9/2018   $ 6,983,333        6,863,915        6,983,333        6.1

Community Investors, Inc.

  Software   Revolver   $ 166,667        —          —          0.0

Community Investors, Inc. (g)

  Software   Preferred Stock     135,584        135,584        153,210        0.1

Pen-Link, Ltd.

  Software   Second Lien Term Loan 12.50% Cash, 5/26/2019   $ 11,500,000        11,280,887        11,500,000        10.0
       

 

 

   

 

 

   

 

 

 
   

Total Software

      18,281,668        18,637,992        16.2
       

 

 

   

 

 

   

 

 

 

Advanced Air & Heat of Florida, LLC

  Utilities   First Lien Term Loan 10.00% Cash, 1/31/2019   $ 6,705,441        6,606,457        6,705,441        5.8
       

 

 

   

 

 

   

 

 

 
   

Total Utilities

      6,606,457        6,705,441        5.8
       

 

 

   

 

 

   

 

 

 

Sub Total Non-control/
Non-affiliated investments

          185,266,607        186,275,106        162.1
       

 

 

   

 

 

   

 

 

 

Control investments -
17.0% (b)

         

Saratoga Investment Corp. CLO 2013-1,
Ltd. (a), (d), (e), (f)

  Structured Finance Securities   Other/Structured Finance Securities 15.16%, 10/17/2023   $ 30,000,000        16,555,808        19,569,596        17.0
       

 

 

   

 

 

   

 

 

 

Sub Total Control investments

          16,555,808        19,569,596        17.0
       

 

 

   

 

 

   

 

 

 

TOTAL INVESTMENTS - 179.1% (b)

        $ 201,822,415      $ 205,844,702        179.1
       

 

 

   

 

 

   

 

 

 

 

(a) Represents a non-qualifying investment as defined under Section 55 (a) of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 9.5% of the Company’s portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b) Percentages are based on net assets of $114,924,018 as of February 28, 2014.
(c) Because there is no readily available market value for these investments, the fair value of these investments is approved in good faith by our board of directors (see Note 3 to the consolidated financial statements).
(d) These securities are pledged as collateral under a senior secured revolving credit facility (see Note 6 to the consolidated financial statements).
(e) This investment does not have a stated interest rate that is payable thereon. As a result, the 15.16% interest rate in the table above represents the interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment.
(f) As defined in the Investment Company Act, we “Control” this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the period in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

 

Company

   Purchases      Redemptions      Sales (cost)      Interest
Income
     Management
fee income
     Net Realized
gains/(losses)
     Net Unrealized
gains/(losses)
 

Saratoga Investment Corp. CLO 2013-1, Ltd.

   $ —         $ —         $ —         $ 3,410,868       $ 1,775,141       $ —         $ 3,013,788   

 

(g) Non-income producing at February 28, 2014.

 

10


Table of Contents

Saratoga Investment Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)

 

     For the six months ended
August 31, 2014
    For the six months ended
August 31, 2013
 

INCREASE FROM OPERATIONS:

    

Net investment income

   $ 4,133,152      $ 4,741,555   

Net realized gain from investments

     441,841        1,074,942   

Net unrealized appreciation (depreciation) on investments

     318,809        (2,057,943
  

 

 

   

 

 

 

Net increase in net assets from operations

     4,893,802        3,758,554   
  

 

 

   

 

 

 

Total increase in net assets

     4,893,802        3,758,554   

Net assets at beginning of period

     114,924,018        108,686,761   
  

 

 

   

 

 

 

Net assets at end of period

   $ 119,817,820      $ 112,445,315   
  

 

 

   

 

 

 

Net asset value per common share

   $ 22.27      $ 23.77   

Common shares outstanding at end of period

     5,379,616        4,730,116   

Distribution in excess of net investment income

   $ (25,494,426   $ (19,781,396

See accompanying notes to consolidated financial statements.

 

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Saratoga Investment Corp.

Consolidated Statements of Cash Flows

(unaudited)

 

     For the six months ended
August 31, 2014
    For the six months ended
August 31, 2013
 

Operating activities

    

NET INCREASE IN NET ASSETS FROM OPERATIONS

   $ 4,893,802      $ 3,758,554   

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES:

    

Paid-in-kind interest income

     (371,527     (472,923

Net accretion of discount on investments

     (382,571     (224,598

Amortization of deferred debt financing costs

     512,481        419,294   

Net realized gain from investments

     (441,841     (1,074,942

Net unrealized (appreciation) depreciation on investments

     (318,809     2,057,943   

Proceeds from sale and redemption of investments

     24,387,382        54,849,577   

Purchase of investments

     (53,347,634     (87,854,349

(Increase) decrease in operating assets:

    

Cash and cash equivalents, reserve accounts

     77,442        (4,506,556

Interest receivable

     (742,554     828,945   

Due from manager

     —          (4,929

Management fee receivable

     (16,925     17,331   

Other assets

     (48,308     (7,938

Receivable from unsettled trades

     —          316,489   

Increase (decrease) in operating liabilities:

    

Payable for unsettled trades

     —          16,270,000   

Management and incentive fees payable

     364,629        977,424   

Accounts payable and accrued expenses

     (288,213     66,602   

Interest and debt fees payable

     162,938        487,255   

Due to manager

     20,000        85,888   
  

 

 

   

 

 

 

NET CASH USED BY OPERATING ACTIVITIES

     (25,539,708     (14,010,933
  

 

 

   

 

 

 

Financing activities

    

Borrowings on debt

     27,600,000        4,000,000   

Paydowns on debt

     (4,700,000     (24,300,000

Issuance of notes

     —          48,300,000   

Debt financing cost

     (382,812     (2,579,309
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     22,517,188        25,420,691   
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     (3,022,520     11,409,758   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     3,293,898        149,025   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 271,378      $ 11,558,783   
  

 

 

   

 

 

 

Supplemental Information:

    

Interest paid during the period

   $ 2,921,683      $ 1,824,887   

Supplemental non-cash information:

    

Paid-in-kind interest income

   $ 371,527      $ 472,923   

Net accretion of discount on investments

   $ 382,571      $ 224,598   

Amortization of deferred debt financing costs

   $ 512,481      $ 419,294   

See accompanying notes to consolidated financial statements.

 

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SARATOGA INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2014

(unaudited)

Note 1. Organization and Basis of Presentation

Saratoga Investment Corp. (the “Company”, “we”, “our” and “us”) is a non-diversified closed end management investment company incorporated in Maryland that has elected to be treated and is regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We commenced operations on March 23, 2007 as GSC Investment Corp. and completed our initial public offering (“IPO”) on March 28, 2007. We have elected to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code (the “Code”). We expect to continue to qualify and to elect to be treated for tax purposes as a RIC. Our investment objective is to generate current income and, to a lesser extent, capital appreciation from our investments.

GSC Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited liability company. As of February 28, 2007, the LLC had not yet commenced its operations and investment activities.

On March 21, 2007, the Company was incorporated and concurrently therewith the LLC was merged with and into the Company, with the Company as the surviving entity, in accordance with the procedure for such merger in the LLC’s limited liability company agreement and Maryland law. In connection with such merger, each outstanding limited liability company interest of the LLC was converted into a share of common stock of the Company.

On July 30, 2010, the Company changed its name from “GSC Investment Corp.” to “Saratoga Investment Corp.” in conjunction with the transaction described in “Note 13. Recapitalization Transaction” below.

We are externally managed and advised by our investment adviser, Saratoga Investment Advisors, LLC (the “Manager”), pursuant an investment advisory and management agreement dated July 30, 2010 (the “Management Agreement”). Prior to July 30, 2010, we were managed and advised by GSCP (NJ), L.P.

On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC, LP (“SBIC LP”), received a Small Business Investment Company (“SBIC”) license from the Small Business Administration (“SBA”).

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company its special purpose financing subsidiary, Saratoga Investment Funding, LLC (previously known as GSC Investment Funding LLC) and SBIC LP. All intercompany accounts and transactions have been eliminated in consolidation. All references made to the “Company,” “we,” and “us” herein include Saratoga Investment Corp. and its consolidated subsidiaries, except as stated otherwise.

Note 2. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and income, gains (losses) and expenses during the period reported. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company such as, a money market fund if such investment would cause the Company to exceed any of the following limitations:

 

    we were to own more than 3.0% of the total outstanding voting stock of the money market fund;

 

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    we were to hold securities in the money market fund having an aggregate value in excess of 5.0% of the value of our total assets; or

 

    we were to hold securities in money market funds and other registered investment companies and BDCs having an aggregate value in excess of 10.0% of the value of our total assets.

Cash and Cash Equivalents, Reserve Accounts

Cash and cash equivalents, reserve accounts include amounts held in designated bank accounts in the form of cash and short-term liquid investments in money market funds representing payments received on secured investments or other reserved amounts associated with our $45.0 million senior secured revolving credit facility with Madison Capital Funding LLC. The Company is required to use these amounts to pay interest expense, reduce borrowings, or pay other amounts in accordance with the terms of the senior secured revolving credit facility.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which we own more than 25.0% of the voting securities or maintain greater than 50.0% of the board representation. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which we own between 5.0% and 25.0% of the voting securities. Under the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

Investment Valuation

The Company accounts for its investments at fair value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the Company to assume that its investments are to be sold at the statement of assets and liabilities date in the principal market to independent market participants, or in the absence of a principal market, in the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

Investments for which market quotations are readily available are fair valued at such market quotations obtained from independent third party pricing services and market makers subject to any decision by our board of directors to approve a fair value determination to reflect significant events affecting the value of these investments. We value investments for which market quotations are not readily available at fair value as approved, in good faith, by our board of directors based on input from our Manager, the audit committee of our board of directors and a third party independent valuation firm. Determinations of fair value may involve subjective judgments and estimates. The types of factors that may be considered in determining the fair value of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments, market yield trend analysis, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors.

We undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:

 

    Each investment is initially valued by the responsible investment professionals of our Manager and preliminary valuation conclusions are documented and discussed with the senior management of our Manager; and

 

    An independent valuation firm engaged by our board of directors reviews approximately one quarter of these preliminary valuations each quarter so that the valuation of each investment for which market quotes are not readily available is reviewed by the independent valuation firm at least annually.

In addition, all our investments are subject to the following valuation process:

 

    The audit committee of our board of directors reviews each preliminary valuation and our Manager and independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee; and

 

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    Our board of directors discusses the valuations and approves the fair value of each investment, in good faith, based on the input of our Manager, independent valuation firm (to the extent applicable) and the audit committee of our board of directors.

Our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”) is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flows analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO.

Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such investments.

Investment Transactions and Income Recognition

Purchases and sales of investments and the related realized gains or losses are recorded on a trade-date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on its investments when it is determined that interest is no longer collectible. Discounts and premiums on investments purchased are accreted/amortized over the life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as a reduction in principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

Interest income on our investment in Saratoga CLO is recorded using the effective interest method in accordance with the provisions of ASC Topic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, (“ASC 325-40”), based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield over the remaining life of the investment from the date the estimated yield was changed.

Paid-in-Kind Interest

The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We stop accruing PIK interest if we do not expect the issuer to be able to pay all principal and interest when due.

Deferred Debt Financing Costs

Financing costs incurred in connection with our credit facility are deferred and amortized using the straight line method over the life of their respective facilities. Financing costs incurred in connection with our SBA debentures are deferred and amortized using the effective yield method over the life of the debentures.

 

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Contingencies

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.

In the ordinary course of business, the Company may directly or indirectly be a defendant or plaintiff in legal actions with respect to bankruptcy, insolvency or other types of proceedings. Such lawsuits may involve claims that could adversely affect the value of certain financial instruments owned by the Company.

Income Taxes

The Company has filed an election to be treated for tax purposes as a RIC under Subchapter M of the Code and, among other things, intends to make the requisite distributions to its stockholders which will relieve the Company from federal income taxes. Therefore, no provision has been recorded for federal income taxes.

In order to qualify as a RIC, among other requirements, the Company is required to timely distribute to its stockholders at least 90.0% of its investment company taxable income, as defined by the Code, for each fiscal tax year. The Company will be subject to a nondeductible U.S. federal excise tax of 4.0% on undistributed income if it does not distribute at least 98.0% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31.

Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year dividend distributions into the next tax year and pay a 4.0% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

In accordance with certain applicable Treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC subject to a limitation on the aggregate amount of cash to be distributed to all stockholders, which limitation must be at least 20.0% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20.0% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock.

ASC 740, Income Taxes, (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the consolidated statements of operations. During the fiscal year ended February 28, 2014, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal. The 2011, 2012 and 2013 federal tax years for the Company remain subject to examination by the IRS. As of August 31, 2014 and February 28, 2014, there were no uncertain tax positions.

Dividends

Dividends to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by the board of directors. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for reinvestment.

We have adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividend distributions on behalf of our stockholders unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. We have the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator.

 

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Capital Gains Incentive Fee

The Company records an expense accrual on the consolidated statements of operations, relating to the capital gains incentive fee payable on the consolidated statements of assets and liabilities, by the Company to its investment adviser when the unrealized gains on its investments exceed all realized capital losses on its investments given the fact that a capital gains incentive fee would be owed to the investment adviser if the Company were to liquidate its investment portfolio at such time. The actual incentive fee payable to the Company’s investment adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year and will include only realized capital gains for the period.

New Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, (“ASU 2014-11”). ASU 2014-11 makes limited changes to the accounting for repurchase agreements, clarifies when repurchase agreements and securities lending transactions should be accounted for as secured borrowings, and requires additional disclosures regarding these types of transactions. The guidance is effective for fiscal years beginning on or after December 15, 2014, and for interim periods within those fiscal years. Management is currently evaluating the impact these changes will have on the Company’s consolidated financial statement disclosures.

Risk Management

In the ordinary course of its business, the Company manages a variety of risks, including market risk and credit risk. Market risk is the risk of potential adverse changes to the value of investments because of changes in market conditions such as interest rate movements and volatility in investment prices.

Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount.

The Company is also exposed to credit risk related to maintaining all of its cash and cash equivalents, including those in reserve accounts, at a major financial institution and credit risk related to any of its derivative counterparties.

The Company has investments in lower rated and comparable quality unrated high yield bonds and bank loans. Investments in high yield investments are accompanied by a greater degree of credit risk. The risk of loss due to default by the issuer is significantly greater for holders of high yield securities, because such investments are generally unsecured and are often subordinated to other creditors of the issuer.

Note 3. Investments

As noted above, the Company values all investments in accordance with ASC 820. ASC 820 requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Based on the observability of the inputs used in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:

 

    Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

 

    Level 2—Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.

 

   

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs used in the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the

 

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broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 asset, assuming no additional corroborating evidence.

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors that is consistent with ASC 820 and the 1940 Act (see Note 2). Consistent with our Company’s valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

The following table presents fair value measurements of investments, by major class, as of August 31, 2014 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

Middle market loans

   $ —         $ —         $ 26,814       $ 26,814   

First lien term loans

     —           —           115,589         115,589   

Second lien term loans

     —           —           29,262         29,262   

Senior secured notes

     —           —           25,035         25,035   

Unsecured notes

     —           —           5,909         5,909   

Structured finance securities

     —           —           20,090         20,090   

Equity interest

     —           —           13,621         13,621   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —         $ —         $ 236,320       $ 236,320   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents fair value measurements of investments, by major class, as of February 28, 2014 (dollars in thousands), according to the fair value hierarchy:

 

     Fair Value Measurements  
     Level 1      Level 2      Level 3      Total  

Middle market loans

   $ —         $ —         $ 32,390       $ 32,390   

First lien term loans

     —           —           80,246         80,246   

Second lien term loans

     —           —           27,804         27,804   

Senior secured notes

     —           —           30,032         30,032   

Unsecured notes

     —           —           5,471         5,471   

Structured finance securities

     —           —           19,570         19,570   

Equity interest

     —           —           10,332         10,332   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —         $ —         $ 205,845       $ 205,845   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended August 31, 2014 (dollars in thousands):

 

    Middle
market
loans
    First lien
term loans
    Second lien
term loans
    Senior
secured
notes
    Unsecured
notes
    Structured
finance
securities
    Common
stock/
equities
    Total  

Balance as of February 28, 2014

  $ 32,390      $ 80,246      $ 27,804      $ 30,032      $ 5,471      $ 19,570      $ 10,332      $ 205,845   

Net unrealized gains (losses)

    (256     (395     (263     (1,108     322        520        1,499        319   

Purchases and other adjustments to cost

    28        40,446        11,175        76        116        —          2,260        54,101   

Sales and redemptions

    (5,383     (5,155     (9,500     (4,253     —          —          (96     (24,387

Net realized gains/(losses) from investments

    35        447        46        288        —          —          (374     442   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of August 31, 2014

  $ 26,814      $ 115,589      $ 29,262      $ 25,035      $ 5,909      $ 20,090      $ 13,621      $ 236,320   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended August 31, 2013 (dollars in thousands):

 

     Middle
market
loans
     First
lien term
loans
    Second lien
term loans
    Senior
secured
notes
    Unsecured
notes
     Structured
finance
securities
    Common
stock/equities
    Total  

Balance as of February 28, 2013

   $ —         $ 83,792      $ 9,571      $ 23,305      $ 4,874       $ 25,517      $ 8,021      $ 155,080   

Net unrealized gains (losses)

     222         38        (29     (122     432         (3,635     1,037        (2,057

Purchases and other adjustments to cost

     37,013         32,924        9,400        8,938        127         —          150        88,552   

Sales and redemptions

     —           (41,650     (3,030     (7,728     —           (2,140     (301     (54,849

Net realized gains from investments

     —           403        370        —          —           —          301        1,074   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of August 31, 2013

   $ 37,235       $ 75,507      $ 16,282      $ 24,393      $ 5,433       $ 19,742      $ 9,208      $ 187,800   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

Sales and redemptions represent net proceeds received from investments sold, and principal paydowns received, during the period.

The net change in unrealized gain/(loss) for the six months ended August 31, 2014 and 2013, on investments held as of August 31, 2014 and 2013, was $734,740 and $(2,349,502), respectively, and is included in net unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of August 31, 2014 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique    Unobservable Input   Range   Weighted
Average Yield
 
Middle market loans    $ 26,814       Market Comparables    Third-Party Bid   97.5 - 100.3     99.4%   
First lien term loans      115,589       Market Comparables    Market Yield (%)   5.5% - 15.7%     11.2%   
         EBITDA

Multiples (x)

  3.0x     3.0x   
         Third-Party Bid   83.7 - 101.0     96.1%   
Second lien term loans      29,262       Market Comparables    Market Yield (%)   8.8% - 14.8%     12.2%   
         Third-Party Bid   100.0 — 101.9     101.3%   
Senior secured notes      25,035       Market Comparables    Market Yield (%)   11.0% - 42.5%     12.6%   
         EBITDA
Multiples (x)
  5.0x     5.0x   
         Third-Party Bid   108.0     108.0%   
Unsecured notes      5,909       Market Comparables    Market Yield (%)   13.2% - 22.2%     17.0%   
Structured finance securities      20,090       Discounted Cash Flow    Discount Rate (%)   7.5%     7.5%   
Equity interests      13,621       Market Comparables    EBITDA
Multiples (x)
  6.3x — 14.0x     8.1x   

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets as of February 28, 2014 were as follows (dollars in thousands):

 

     Fair Value      Valuation Technique    Unobservable Input   Range    Weighted
Average Yield
 

Middle market loans

   $   32,390       Market Comparables    Third-Party Bid   99.5 - 100.6      100.1%   

First lien term loans

     80,246       Market Comparables    Market Yield (%)   5.1% - 15.5%      10.4%   
         EBITDA

Multiples (x)

  3.0x      3.0x   
         Third-Party Bid   83.3 - 101.5      97.0%   

Second lien term loans

     27,804       Market Comparables    Market Yield (%)   9.6% - 12.5%      11.7%   
         Third-Party Bid   100.0 — 101.8      101.1%   

Senior secured notes

     30,032       Market Comparables    Market Yield (%)   11.0% - 42.5%      12.4%   
         EBITDA
Multiples (x)
  5.0x      5.0x   
         Third-Party Bid   106.0 - 107.5      107.0%   

Unsecured notes

     5,471       Market Comparables    Market Yield (%)   12.8% - 20.3%      16.5%   

Structured finance securities

     19,570       Discounted Cash Flow    Discount Rate (%)   9.0%      9.0%   

Equity interests

     10,332       Market Comparables    EBITDA
Multiples (x)
  6.3x — 12.0x      7.8x   

 

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For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the EBITDA valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement.

The composition of the Company’s investments as of August 31, 2014, at amortized cost and fair value were as follows (dollars in thousands):

 

     Investments at
Amortized Cost
     Amortized Cost
Percentage of
Total Portfolio
    Investments at
Fair Value
     Fair Value
Percentage of
Total Portfolio
 

Middle market loans

   $ 26,662         11.5   $ 26,814         11.3

First lien term loans

     116,473         50.2        115,589         48.9   

Second lien term loans

     29,261         12.6        29,262         12.4   

Senior secured notes

     27,416         11.8        25,035         10.6   

Unsecured notes

     7,265         3.2        5,909         2.5   

Structured finance securities

     16,556         7.1        20,090         8.5   

Equity interest

     8,346         3.6        13,621         5.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 231,979         100.0   $ 236,320         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

The composition of the Company’s investments as of February 28, 2014, at amortized cost and fair value were as follows (dollars in thousands):

 

     Investments at
Amortized Cost
     Amortized Cost
Percentage of
Total Portfolio
    Investments at
Fair Value
     Fair Value
Percentage of
Total Portfolio
 

Middle market loans

   $ 31,983         15.8   $ 32,390         15.7

First lien term loans

     80,734         40.0        80,246         39.0   

Second lien term loans

     27,540         13.6        27,804         13.5   

Senior secured notes

     31,304         15.6        30,032         14.6   

Unsecured notes

     7,149         3.5        5,471         2.7   

Structured finance securities

     16,556         8.2        19,570         9.5   

Equity interest

     6,556         3.3        10,332         5.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 201,822         100.0   $ 205,845         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

For loans and debt securities for which market quotations are not available, we determine their fair value based on third party indicative broker quotes, where available, or the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield valuation methodology. In applying the market yield valuation methodology, we determine the fair value based on such factors as market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. If, in our judgment, the market yield methodology is not sufficient or appropriate, we may use additional methodologies such as an asset liquidation or expected recovery model.

For equity securities of portfolio companies and partnership interests, we determine the fair value based on the market approach with value then attributed to equity or equity like securities using the enterprise value waterfall valuation methodology. Under the enterprise value waterfall valuation methodology, we determine the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering

 

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the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities. We also take into account historical and anticipated financial results.

Our investment in Saratoga CLO is carried at fair value, which is based on a discounted cash flow model that utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for equity interests in collateralized loan obligation funds similar to Saratoga CLO, when available, as determined by our Manager and recommended to our board of directors. Specifically, we use Intex cash flow models, or an appropriate substitute, to form the basis for the valuation of our investment in Saratoga CLO. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated valuations. The assumptions are based on available market data and projections provided by third parties as well as management estimates. We use the output from the Intex models (i.e., the estimated cash flows) to perform a discounted cash flows analysis on expected future cash flows to determine a valuation for our investment in Saratoga CLO at August 31, 2014. The significant inputs for the valuation model include:

 

    Default rates: 2.0%

 

    Recovery rates: 35-75%

 

    Prepayment rate: 25.0%

 

    Reinvestment rate / price: L+375bps / $99.75

The Company and SBIC are both considered to be investment companies for financial reporting purposes and have applied the guidance in Topic 946, “Financial Services — Investment Companies”. There have been no changes to the Company or SBIC’s status as investment companies during the quarterly period ended August 31, 2014.

Note 4. Investment in Saratoga Investment Corp. CLO 2013-1, Ltd. (“Saratoga CLO”)

On January 22, 2008, we invested $30.0 million in all of the outstanding subordinated notes of GSC Investment Corp. CLO 2007, Ltd., a collateralized loan obligation fund managed by us that invests primarily in senior secured loans. Additionally, we entered into a collateral management agreement with GSC Investment Corp. CLO 2007, Ltd. pursuant to which we act as collateral manager to it. The Saratoga CLO was refinanced in October 2013 and its reinvestment period ends in October 2016. The Saratoga CLO remains 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.25% and a subordinated management fee of 0.25% of the Fee Basis Amount at the beginning of the Collection Period, paid quarterly to the extent of available proceeds. We are also entitled to an incentive management fee equal to 20.0% of the remaining interest proceeds and principal proceeds, if any, after the subordinated notes have realized the incentive management fee target return of 12.0%, in accordance with the Priority of Payments after making the prior distributions on the relevant payment date. For the three months ended August 31, 2014 and August 31, 2013, we accrued $0.4 million and $0.5 million in management fee income, respectively, and $0.7 million and $1.1 million in interest income, respectively, from Saratoga CLO. For the six months ended August 31, 2014 and August 31, 2013, we accrued $0.8 million and $1.0 million in management fee income, respectively, and $1.3 million and $2.2 million in interest income, respectively, from Saratoga CLO. We did not accrue any amounts related to the incentive management fee as the 12.0% hurdle rate has not yet been achieved.

At August 31, 2014, the Company determined that the fair value of its investment in the subordinated notes of Saratoga CLO was $20.1 million. The Company determines the fair value of its investment in the subordinated notes of Saratoga CLO based on the present value of the projected future cash flows of the subordinated notes over the life of Saratoga CLO. At August 31, 2014, Saratoga CLO had investments with a principal balance of $304.4 million and a weighted average spread over LIBOR of 4.1%, and had debt with a principal balance of $282.4 million with a weighted average spread over LIBOR of 1.8%. As a result, Saratoga CLO earns a “spread” between the interest income it receives on its investments and the interest expense it pays on its debt and other operating expenses, which is distributed quarterly to the Company as the holder of its subordinated notes. At August 31, 2014, the total “spread”, or projected future cash flows of the subordinated notes, over the life of Saratoga CLO was $24.3 million, which had a present value of approximately $20.9 million, using a 7.5% discount rate.

Below is certain financial information from the separate unaudited financial statements of Saratoga CLO as of August 31, 2014 and February 28, 2014, pursuant to Rule 3-09 of SEC rules Regulation S-X, and for the three and six months ended August 31, 2014 and August 31, 2013.

 

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Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Assets and Liabilities

 

     As of  
     August 31, 2014     February 28, 2014  
     (unaudited)        

ASSETS

    

Investments

    

Fair Value Loans (amortized cost of $302,554,790 and $299,137,566, respectively)

   $         301,019,691      $         300,491,077   
  

 

 

   

 

 

 

Total investments at fair value (amortized cost of $302,554,790 and $299,137,566, respectively)

     301,019,691        300,491,077   

Cash and cash equivalents

     2,809,601        8,018,933   

Receivable from open trades

     2,223,951        1,801,266   

Interest receivable

     1,293,973        1,450,952   

Deferred debt financing costs, net

     2,054,114        2,166,633   

Other assets

     91,331        91,336   
  

 

 

   

 

 

 

Total assets

   $ 309,492,661      $ 314,020,197   
  

 

 

   

 

 

 

LIABILITIES

    

Interest payable

   $ 668,293      $ 622,476   

Payable from open trades

     7,427,661        9,445,000   

Accrued base management fee

     83,515        75,053   

Accrued subordinated management fee

     83,515        75,053   

Class X Notes—SIC CLO 2013-1, Ltd.

     —          1,666,666   

Class A-1 Notes—SIC CLO 2013-1, Ltd.

     170,000,000        170,000,000   

Discount on Class A-1 Notes—SIC CLO 2013-1, Ltd.

     (1,583,109     (1,671,864

Class A-2 Notes—SIC CLO 2013-1, Ltd.

     20,000,000        20,000,000   

Discount on Class A-2 Notes—SIC CLO 2013-1, Ltd.

     (164,100     (173,300

Class B Notes—SIC CLO 2013-1, Ltd.

     44,800,000        44,800,000   

Discount on Class B Notes—SIC CLO 2013-1, Ltd.

     (1,065,994     (1,125,757

Class C Notes—SIC CLO 2013-1, Ltd.

     16,000,000        16,000,000   

Discount on Class C Notes—SIC CLO 2013-1, Ltd.

     (663,693     (700,902

Class D Notes—SIC CLO 2013-1, Ltd.

     14,000,000        14,000,000   

Discount on Class D Notes—SIC CLO 2013-1, Ltd.

     (861,525     (909,825

Class E Notes—SIC CLO 2013-1, Ltd.

     13,100,000        13,100,000   

Discount on Class E Notes—SIC CLO 2013-1, Ltd.

     (1,624,225     (1,715,285

Class F Notes—SIC CLO 2013-1, Ltd.

     4,500,000        4,500,000   

Discount on Class F Notes—SIC CLO 2013-1, Ltd.

     (590,760     (623,880

Subordinated Notes

     30,000,000        30,000,000   
  

 

 

   

 

 

 

Total liabilities

   $ 314,109,578      $ 317,363,435   
  

 

 

   

 

 

 

Commitments and contingencies

    

NET ASSETS

    

Ordinary equity, par value $1.00, 250 ordinary shares authorized, 250 and 250 issued and outstanding, respectively

   $ 250      $ 250   

Accumulated gain (loss)

     (3,343,489     838,567   

Net loss

     (1,273,678     (4,182,055
  

 

 

   

 

 

 

Total net assets

     (4,616,917     (3,343,238
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 309,492,661      $ 314,020,197   
  

 

 

   

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Statements of Operations

(unaudited)

 

     For the three months ended
August 31
    For the six months ended
August 31
 
     2014     2013     2014     2013  

INVESTMENT INCOME

        

Interest from investments

   $ 3,323,320      $ 4,201,548      $ 6,480,838      $ 8,607,828   

Interest from cash and cash equivalents

     562        1,295        838        4,451   

Other income

     42,007        325,629        140,930        677,266   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     3,365,889        4,528,472        6,622,606        9,289,545   
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

        

Interest expense

     1,997,155        1,472,007        4,124,139        3,037,996   

Professional fees

     24,142        208,576        94,360        324,928   

Miscellaneous fee expense

     3,263        8,681        26,396        160,791   

Base management fee

     187,730        96,150        383,747        195,768   

Subordinated management fee

     187,730        384,601        383,747        783,073   

Trustee expenses

     27,313        23,839        53,928        48,371   

Amortization expense

     239,963        254,427        479,926        508,854   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,667,296        2,448,281        5,546,243        5,059,781   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INVESTMENT INCOME

     698,593        2,080,191        1,076,363        4,229,764   
  

 

 

   

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

        

Net realized gain on investments

     147,951        213,058        528,570        451,600   

Net unrealized depreciation on investments

     (1,425,262     (4,139,484     (2,878,611     (3,499,811
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss on investments

     (1,277,311     (3,926,426     (2,350,041     (3,048,211
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

   $ (578,718   $ (1,846,235   $ (1,273,678   $ 1,181,553   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Saratoga Investment Corp. CLO 2013-1 Ltd.

Schedule of Investments

August 31, 2014

(unaudited)

 

Issuer Name

   Industry   Asset Name   Asset Type    Current Rate     Maturity Date      Principal      Cost      Fair Value  

24 Hour Holdings III LLC

   Leisure Goods/
Activities/Movies
  Term Loan   Loan      3.75     5/28/2021       $ 500,000       $ 495,123       $ 498,750   

Academy, LTD.

   Retailers (Except
Food and Drugs)
  Initial Term
Loan (2012)
  Loan      4.50     8/3/2018         1,950,262         1,939,947         1,944,412   

Acosta Holdco.

   Media   Term Loan
B
  Loan      5.00     8/13/2021         2,000,000         1,985,000         2,007,500   

Acosta, Inc.

   Food Products   Term B
Loan (2013)
  Loan      4.25     3/1/2018         4,141,844         4,092,120         4,133,436   

Aderant North America, Inc.

   Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.25     12/20/2018         3,260,898         3,260,898         3,264,974   

Advantage Sales

   Business Equipment
and Services
  Term Loan   Loan      4.25     7/25/2021         1,935,484         1,934,245         1,916,129   

Aegis Toxicology Science Corporation

   Healthcare   Term B
Loan
  Loan      5.50     2/24/2021         1,000,000         1,000,000         1,003,750   

Aeroflex Incorporated

   Aerospace and
Defense
  Tranche B-1
Term Loan
  Loan      4.50     1/18/2019         3,208,854         3,195,483         3,204,843   

Akorn, Inc.

   Healthcare   Term Loan
B
  Loan      4.50     4/16/2021         500,000         497,769         498,750   

Albertson’s

   Retailers (Except
Food and Drugs)
  Term Loan
B-4
  Loan      5.50     8/25/2021         1,000,000         985,000         1,002,080   

Alere Inc. (fka IM US Holdings, LLC)

   Healthcare   Incremental
B-1 Term
Loan
  Loan      4.25     6/30/2017         1,949,993         1,949,993         1,939,034   

American Tire Distributors

   Automotive   Term Loan   Loan      5.75     6/1/2018         498,988         498,988         499,612   

Anchor Glass

   Containers/Glass
Products
  Term Loan   Loan      3.25     5/16/2021         2,000,000         1,995,000         1,998,760   

Applied Systems, Inc.

   Business Equipment
and Services
  Initial Term
Loan (First
Lien)
  Loan      4.25     1/25/2021         497,500         496,392         494,545   

Aramark Corporation

   Food Products   LC-2
Facility
  Loan      3.69     7/26/2016         79,187         79,187         78,692   

Aramark Corporation

   Food Products   LC-3
Facility
  Loan      3.69     7/26/2016         43,961         43,961         43,686   

Aramark Corporation

   Food Products   U.S. Term F
Loan
  Loan      3.25     2/24/2021         3,198,521         3,198,521         3,148,944   

ARG IH Corp

   Food Services   Term Loan   Loan      4.75     11/15/2020         497,500         496,469         497,500   

Asurion, LLC (fka Asurion Corporation)

   Insurance   Incremental
Tranche B-1
Term Loan
  Loan      5.00     5/24/2019         5,480,487         5,434,635         5,481,638   

Auction.Com, LLC

   Business Equipment
and Services
  Term Loan
A-4
  Loan      4.40     2/28/2017         914,567         913,866         905,422   

Avantor Performance Materials Holdings, Inc.

   Chemicals/Plastics   Term Loan   Loan      5.25     6/26/2017         4,454,250         4,442,046         4,454,250   

Avast Software

   Electronics/Electric   Term Loan   Loan      4.00     3/20/2020         1,975,000         1,972,619         1,975,000   

AZ Chem US Inc.

   Chemicals/Plastics   Term Loan   Loan      5.25     12/22/2017         492,466         490,056         493,608   

Bass Pro Group, LLC

   Retailers (Except
Food and Drugs)
  New Term
Loan
  Loan      3.75     11/20/2019         496,174         495,632         492,041   

Bayonne Energy Center

   Oil & Gas   Term Loan
B
  Loan      4.50     8/19/2021         1,000,000         995,008         1,000,000   

Belmond Hotels

   Lodging & Casinos   Term Loan   Loan      4.00     3/19/2021         498,750         496,353         497,503   

Berry Plastics Corporation

   Chemicals/Plastics   Term E
Loan
  Loan      3.75     1/6/2021         1,496,250         1,493,014         1,479,836   

Big Heart Pet Brands (fka Del Monte Corporation)

   Food/Drug Retailers   Initial Term
Loan
  Loan      3.50     3/9/2020         2,992,500         3,013,405         2,937,648   

Biomet, Inc.

   Healthcare   Dollar Term
B-2 Loan
  Loan      3.65     7/25/2017         1,840,718         1,840,718         1,836,116   

BJ’s Wholesale Club, Inc.

   Food/Drug Retailers   New 2013
(November)
Replacement
Loan (First
Lien)
  Loan      4.50     9/26/2019         1,497,500         1,496,307         1,483,558   

Bombardier Recreational Products Inc.

   Leisure Goods/
Activities/Movies
  Term B
Loan
  Loan      4.00     1/30/2019         754,286         749,824         745,332   

Brickman Group Ltd. LLC, The

   Brokers/Dealers/
Investment Houses
  Initial Term
Loan (First
Lien)
  Loan      4.00     12/18/2020         1,498,750         1,485,345         1,470,963   

Brock Holdings III, Inc.

   Industrial
Equipment
  Term Loan
(First Lien)
  Loan      6.00     3/16/2017         1,949,171         1,966,066         1,950,399   

Burlington Coat Factory Warehouse Corporation

   Retailers (Except
Food and Drugs)
  Term B-2
Loan
  Loan      4.25     2/23/2017         2,000,000         1,990,010         1,990,000   

BWAY

   Leisure Goods/
Activities/Movies
  Term Loan
B
  Loan      5.50     8/14/2020         1,000,000         990,072         1,004,170   

Camp International Holding Company

   Aerospace and
Defense
  2013
Replacement
Term Loan
(First Lien)
  Loan      4.75     5/31/2019         1,970,023         1,976,344         1,970,023   

Capital Automotive L.P.

   Conglomerate   Tranche B-1
Term Loan
Facility
  Loan      4.00     4/10/2019         2,090,570         2,095,324         2,083,775   

Capsugel Holdings US, Inc.

   Drugs   Initial Term
Loan
  Loan      3.50     8/1/2018         3,110,785         3,104,540         3,082,259   

Catalent Pharma Solutions

   Drugs   Initial Term
B Loan
  Loan      3.50     9/15/2021         500,000         497,561         499,645   

Ceasars Entertainment Corp.

   Lodging & Casinos   Term B-7
Loan
  Loan      6.25     3/1/2017         1,000,000         993,142         973,910   

Celanese US Holdings LLC

   Chemicals/Plastics   Dollar Term
C-2
Commitment
  Loan      2.25     10/31/2016         2,165,387         2,188,463         2,165,387   

Cengage Learning

   Publishing   Term Loan   Loan      7.00     3/31/2020         2,244,375         2,275,315         2,251,669   

Charter Communications Operating, LLC

   Cable and Satellite
Television
  Term F
Loan
  Loan      3.00     12/31/2020         2,669,226         2,659,702         2,581,996   

CHS/Community Health Systems, Inc.

   Healthcare   2017 Term
E Loan
  Loan      3.48     1/25/2017         1,103,364         1,074,608         1,100,727   

CHS/Community Health Systems, Inc.

   Healthcare   2021 Term
D Loan
  Loan      4.25     1/27/2021         2,940,830         2,853,404         2,939,418   

Cinedigm Digital Funding I, LLC

   Business Equipment
and Services
  Term Loan   Loan      3.75     2/28/2018         702,747         697,657         702,747   

CITGO Petroleum

   Oil & Gas   Term Loan
B
  Loan      4.50     7/29/2021         500,000         495,047         500,625   

Covanta Energy Corporation

   Ecological Services
and Equipment
  Term Loan   Loan      3.25     3/28/2019         331,667         330,203         329,491   

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

   Electronics/Electric   Term B
Loan
  Loan      4.25     4/7/2021         3,613,444         3,613,444         3,593,859   

Crosby US Acquisition Corp.

   Industrial
Equipment
  Initial Term
Loan (First
Lien)
  Loan      4.00     11/23/2020         746,250         745,404         739,720   

Crown Castle Operating Company

   Telecommunications/Cellular   Extended
Incremental
Tranche B-2
Term Loan
  Loan      3.00     1/31/2021         2,447,895         2,445,617         2,422,657   

Culligan International Company

   Conglomerate   Dollar Loan
(First Lien)
  Loan      6.25     12/19/2017         783,162         740,581         773,204   

Culligan International Company

   Conglomerate   Dollar Loan
(Second
Lien)
  Loan      9.50     6/19/2018         783,650         741,308         730,299   

Cumulus Media Holdings Inc.

   Broadcast Radio and
Television
  Term Loan   Loan      4.25     12/23/2020         492,315         487,783         489,484   

Custom Sensors

   Industrial
Equipment
  Term Loan   Loan      4.50     6/18/2021         500,000         498,800         497,500   

DaVita HealthCare Partners Inc. (fka DaVita Inc.)

   Healthcare   Tranche B
Term Loan
  Loan      4.50     10/20/2016         500,000         497,534         496,815   

DCS Business Services, Inc.

   Financial
Intermediaries
  Term B
Loan
  Loan      7.25     3/19/2018         3,477,807         3,450,350         3,390,862   

Dealertrack Technologies, Inc.

   Leisure Goods/
Activities/Movies
  Term B
Loan
  Loan      3.50     2/26/2021         477,011         475,941         474,425   

Dell International LLC

   Retailers (Except
Food and Drugs)
  Term B
Loan
  Loan      4.50     4/29/2020         1,985,000         1,974,309         1,971,363   

Delos Finance SARL

   Financial
Intermediaries
  Term Loan   Loan      3.50     3/6/2021         500,000         497,626         495,625   

Delta 2 (Lux) S.a.r.l.

   Lodging & Casinos   Term Loan
B-3
  Loan      4.75     7/30/2021         1,000,000         995,017         994,290   

Deluxe Entertainment Service Group, Inc.

   Leisure Goods/
Activities/Movies
  Term Loan
(First Lien)
  Loan      6.50     2/28/2020         1,993,750         1,995,044         1,983,781   

Devix

   Chemicals/Plastics   Term Loan   Loan      4.25     4/30/2021         250,000         247,593         250,000   

Devix

   Chemicals/Plastics   Term Loan
(Second
Lien)
  Loan      8.00     5/2/2022         500,000         497,630         498,000   

Diamond Resorts International

   Lodging & Casinos   Term Loan   Loan      5.50     5/9/2021         1,000,000         995,141         1,002,500   

Drew Marine Group Inc.

   Chemicals/Plastics   Term Loan
(First Lien)
  Loan      4.50     11/19/2020         1,497,500         1,503,089         1,503,116   

Dunkin’ Brands, Inc.

   Food Services   Term B-4
Loan
  Loan      3.25     2/7/2021         3,942,384         3,933,660         3,857,150   

Education Management LLC

   Leisure Goods/
Activities/Movies
  Tranche C-2
Term Loan
  Loan      4.25     6/1/2016         3,860,726         3,759,583         2,440,172   

EIG Investors Corp.

   Business Equipment
and Services
  Term Loan   Loan      5.00     11/8/2019         992,500         988,161         991,259   

Emerald Performance Materials, LLC

   Chemicals/Plastics   Term Loan
(First Lien)
  Loan      4.50     8/1/2021         500,000         497,515         497,500   

Emerald Performance Materials, LLC

   Chemicals/Plastics   Term Loan
(Second
Lien)
  Loan      7.75     8/1/2022         500,000         497,500         496,250   

EnergySolutions, LLC

   Oil & Gas   Term Loan
B
  Loan      6.75     5/29/2020         1,000,000         980,709         1,004,380   

Enviromental Resources Management

   Business Equipment
and Services
  Term Loan   Loan      5.00     5/16/2021         1,000,000         990,621         1,000,000   

Evergreen Acqco 1 LP

   Retailers (Except
Food and Drugs)
  New Term
Loan
  Loan      5.00     7/9/2019         980,044         976,268         979,799   

EWT Holdings III Corp. (fka WTG Holdings III Corp.)

   Industrial
Equipment
  Term Loan
(First Lien)
  Loan      4.75     1/15/2021         995,000         990,648         991,687   

Federal-Mogul Corporation

   Automotive   Tranche C
Term Loan
  Loan      4.75     4/15/2021         3,000,000         2,985,847         2,986,260   

First Data Corporation

   Financial
Intermediaries
  2017 Second
New Dollar
Term Loan
  Loan      4.15     3/24/2017         2,111,028         2,015,273         2,094,541   

First Data Corporation

   Financial
Intermediaries
  2018 Dollar
Term Loan
  Loan      4.15     3/23/2018         2,290,451         2,228,007         2,254,674   

Fitness International, LLC

   Leisure Goods/
Activities/Movies
  Term Loan
B
  Loan      5.50     7/1/2020         1,500,000         1,488,994         1,483,125   

FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.)

   Nonferrous Metals/
Minerals
  Loan   Loan      3.75     6/28/2019         1,992,500         1,992,008         1,972,954   

Four Seasons Holdings Inc.

   Lodging & Casinos   Term Loan
(First Lien)
  Loan      3.50     6/29/2020         496,250         496,250         492,776   

Garda World Security Corporation

   Business Equipment
and Services
  Term B
Delayed
Draw Loan
  Loan      4.00     11/6/2020         202,176         201,269         200,787   

Garda World Security Corporation

   Business Equipment
and Services
  Term B
Loan
  Loan      4.00     11/6/2020         790,324         786,877         784,895   

Gardner Denver, Inc.

   Oil & Gas   Initial Dollar
Term Loan
  Loan      4.25     7/30/2020         2,488,750         2,478,058         2,470,358   

Gates Global LLC

   Leisure Goods/
Activities/Movies
  Term Loan
(First Lien)
  Loan      4.25     7/2/2021         500,000         495,109         494,030   

Generac Power Systems, Inc.

   Industrial
Equipment
  Term Loan
B
  Loan      3.25     5/29/2020         857,504         842,443         842,498   

General Nutrition Centers, Inc.

   Retailers (Except
Food and Drugs)
  Amended
Tranche B
Term Loan
  Loan      3.25     3/4/2019         4,732,124         4,715,732         4,669,424   

Global Tel*Link Corporation

   Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.00     5/26/2020         2,770,614         2,761,855         2,749,834   

Goodyear Tire & Rubber Company, The

   Chemicals/Plastics   Loan
(Second
Lien)
  Loan      4.75     4/30/2019         4,000,000         3,951,481         4,006,000   

Grosvenor Capital Management Holdings, LP

   Brokers/Dealers/
Investment Houses
  Initial Term
Loan
  Loan      3.75     1/4/2021         3,482,500         3,466,019         3,449,138   

Harland Clarke Holdings Corp. (fka Clarke American Corp.)

   Publishing   Tranche B-4
Term Loan
  Loan      6.00     8/2/2019         493,750         491,629         499,922   

HCA Inc.

   Healthcare   Tranche B-4
Term Loan
  Loan      2.94     5/1/2018         5,691,680         5,400,424         5,664,132   

Hertz Corporation, The

   Automotive   Tranche B-1
Term Loan
  Loan      3.75     3/12/2018         2,955,000         2,989,719         2,938,393   

Hologic, Inc.

   Healthcare   Refinancing
Tranche A
Term Loan
  Loan      2.15     8/1/2017         2,250,000         2,245,260         2,240,865   

Hoofmaster Group, Inc.

   Containers/Glass
Products
  Term Loan   Loan      5.25     5/8/2020         2,000,000         1,980,684         1,995,000   

Huntsman International LLC

   Chemicals/Plastics   Extended
Term B
Loan
  Loan      2.69     4/19/2017         3,880,270         3,852,485         3,863,313   

Husky Injection

   Business Equipment
and Services
  Term Loan
B
  Loan      4.25     6/30/2021         500,000         497,075         497,500   

Ikaria, Inc.

   Healthcare   Initial Term
Loan (First
Lien)
  Loan      5.00     2/12/2021         471,910         469,803         471,419   

Infor (US), Inc. (fka Lawson Software Inc.)

   Business Equipment
and Services
  Tranche B-5
Term Loan
  Loan      3.75     6/30/2020         2,222,406         2,203,207         2,188,514   

 

24


Table of Contents
J. Crew Group, Inc.    Retailers (Except
Food and Drugs)
  Term B-1
Loan Retired
03/05/2014
  Loan      4.00     3/5/2021         970,069         970,068         939,269   
Jazz Acquisition    Aerospace and
Defense
  First Lien
6/14
  Loan      4.50     6/19/2021         500,000         498,754         497,500   
JFB Firth Rixson Inc.    Industrial
Equipment
  2013
Replacement
Dollar Term
Facility
Loan
  Loan      4.25     6/30/2017         2,551,360         2,541,993         2,548,170   
Kinetic Concepts, Inc.    Healthcare   Dollar Term
D-1 Loan
  Loan      4.00     5/4/2018         487,607         472,811         485,778   
Koosharem, LLC    Business Equipment
and Services
  Term Loan   Loan      7.50     4/29/2020         1,000,000         992,822         1,004,380   
La Quinta Holdings, Inc.    Lodging & Casinos   Term Loan
(First Lien)
  Loan      4.00     4/14/2021         480,952         478,688         477,648   
Mauser Holdings, Inc.    Containers/Glass
Products
  Term Loan   Loan      4.50     8/2/2021         500,000         497,526         496,250   
Michaels Stores, Inc.    Retailers (Except
Food and Drugs)
  Term B
Loan
  Loan      3.75     1/28/2020         493,750         493,750         488,284   
Michaels Stores, Inc.    Retailers (Except
Food and Drugs)
  Term Loan
B-2
  Loan      3.75     1/28/2020         500,000         497,573         495,940   
Microsemi Corporation    Electronics/Electric   Incremental
Term Loan
  Loan      3.50     2/19/2020         2,393,981         2,389,500         2,376,027   
Microsemi Corporation    Electronics/Electric   Term Loan   Loan      3.75     2/19/2020         172,170         172,170         171,524   
Millenium Laboratories    Drugs   Term Loan   Loan      5.25     4/16/2021         1,500,000         1,485,513         1,492,500   
Mitel US Holdings, Inc.    Telecommunications   Term Loan   Loan      5.25     1/31/2020         214,164         213,177         214,431   
MPH Acquisition Holdings LLC    Health Insurance   Term Loan   Loan      4.00     3/31/2021         486,364         485,222         482,628   
MSC Software Corp.    Business Equipment
and Services
  Term Loan   Loan      4.00     5/29/2020         1,000,000         990,321         1,001,250   
National CineMedia, LLC    Leisure Goods/
Activities/Movies
  Term Loan
(2013)
  Loan      2.95     11/26/2019         1,086,207         1,056,330         1,064,483   
National Veterinary Associates    Healthcare   Term Loan
B
  Loan      4.75     8/14/2021         1,000,000         995,094         1,002,500   
National Vision, Inc.    Retailers (Except
Food and Drugs)
  Term Loan
(Second
Lien)
  Loan      6.75     3/11/2022         250,000         249,690         244,063   
Newsday, LLC    Publishing   Term Loan   Loan      3.69     10/12/2016         2,215,385         2,213,965         2,215,385   
Nortek, Inc.    Electronics/Electric   Term B
Loan
  Loan      3.75     10/30/2020         1,000,000         997,657         994,170   
Novelis, Inc.    Conglomerate   Initial Term
Loan
  Loan      3.75     3/10/2017         4,832,525         4,844,857         4,820,444   
NPC International, Inc.    Food Services   Term Loan
(2013)
  Loan      4.00     12/28/2018         488,750         488,750         486,712   
NRG Energy, Inc.    Utilities   Term Loan
(2013)
  Loan      2.75     7/2/2018         3,880,875         3,858,512         3,820,062   
NuSil Technology LLC.    Chemicals/Plastics   Term Loan   Loan      5.25     4/7/2017         802,457         802,457         786,408   
OEP Pearl Dutch Acquisition B.V.    Chemicals/Plastics   Initial BV
Term Loan
  Loan      6.50     3/30/2018         136,371         135,141         136,882   
Ollie’s Bargain Outlet    Retailers (Except
Food and Drugs)
  Term Loan   Loan      6.00     9/30/2019         982,101         977,482         982,101   
On Assignment, Inc.    Business Equipment
and Services
  Initial Term
B Loan
  Loan      3.50     5/15/2020         1,311,364         1,302,764         1,305,633   
Onex Carestream Finance LP    Healthcare   Term Loan
(First Lien
2013)
  Loan      5.00     6/7/2019         4,282,361         4,263,330         4,279,021   
OpenLink International LLC    Business Equipment
and Services
  Term B
Loan
  Loan      6.25     10/27/2017         975,000         975,000         975,000   
Orbitz Worldwide, Inc.    Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      4.50     4/15/2021         500,000         498,785         498,905   
P.F. Chang’s China Bistro, Inc. (Wok Acquisition Corp.)    Food/Drug Retailers   Term
Borrowing
  Loan      4.25     6/24/2019         1,455,477         1,443,484         1,419,090   
P2 Upstream Acquisition Co. (P2 Upstream Canada BC ULC)    Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.00     10/30/2020         995,000         990,753         998,313   
Paragon Offshore Finance    Oil & Gas   Term Loan
B
  Loan      3.75     7/18/2021         750,000         746,314         738,750   
Patheon Inc.    Healthcare &
Pharmaceuticals
  Term Loan   Loan      4.25     3/11/2021         3,000,000         2,992,669         2,960,640   
PetCo Animal Supplies, Inc.    Retailers (Except
Food and Drugs)
  New Loans   Loan      4.00     11/24/2017         1,477,041         1,476,121         1,471,502   
Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)    Conglomerate   2013 Term
Loan
  Loan      4.00     12/5/2018         1,950,300         1,925,362         1,941,251   
Phillips-Medisize Corporation    Healthcare   Term Loan   Loan      4.75     6/16/2021         500,000         497,575         498,125   
Pinnacle Foods Finance LLC    Food Products   New Term
Loan G
  Loan      3.25     4/29/2020         2,581,332         2,575,965         2,551,337   
Planet Fitness Holdings LLC    Leisure Goods/
Activities/Movies
  Term Loan   Loan      4.75     3/31/2021         1,496,250         1,489,018         1,492,973   
Polymer Group, Inc.    Chemicals/Plastics   Initial Loan   Loan      5.25     12/19/2019         497,500         495,282         497,500   
Prestige Brands, Inc.    Drugs   Term B-1
Loan
  Loan      3.75     1/31/2019         435,606         430,604         434,081   
Prestige Brands, Inc.    Leisure Goods/
Activities/Movies
  Term Loan   Loan      4.50     9/3/2021         1,000,000         1,000,000         1,005,000   
Pro Mach, Inc.    Industrial
Equipment
  Term Loan   Loan      4.50     7/6/2017         1,891,863         1,883,473         1,895,420   
Progressive Waste Solutions Ltd.    Ecological Services
and Equipment
  Term B
Loan
  Loan      3.00     10/24/2019         496,222         496,222         496,013   
QoL Meds    Healthcare   Term Loan
B
  Loan      5.50     7/15/2020         2,000,000         1,990,049         2,005,000   
Quintiles Transnational Corp.    Conglomerate   Term B-3
Loan
  Loan      3.75     6/8/2018         3,681,541         3,649,943         3,652,383   
Redtop Acquisitions Limited    Electronics/Electric   Initial Dollar
Term Loan
(First Lien)
  Loan      4.50     12/3/2020         497,500         494,218         497,913   
Rexnord LLC/RBS Global, Inc.    Industrial
Equipment
  Term B
Loan
  Loan      4.00     8/21/2020         1,655,137         1,655,137         1,646,630   
Reynolds Group Holdings Inc.    Industrial
Equipment
  Incremental
U.S. Term
Loan
  Loan      4.00     12/1/2018         1,970,100         1,970,100         1,962,929   
Rocket Software, Inc.    Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.75     2/8/2018         1,916,674         1,896,090         1,916,080   
Rovi Solutions Corporation / Rovi Guides, Inc.    Electronics/Electric   Tranche B-3
Term Loan
  Loan      3.50     3/29/2019         1,500,000         1,492,617         1,486,245   
RPI Finance Trust    Drugs   Term B-2
Term Loan
  Loan      3.25     5/9/2018         5,233,797         5,212,118         5,219,091   
SBP Holdings LP    Industrial
Equipment
  Term Loan
(First Lien)
  Loan      5.00     3/27/2021         1,000,000         995,167         1,001,670   
Scitor Corporation    Business Equipment
and Services
  Term Loan   Loan      5.00     2/15/2017         463,977         462,503         459,337   
Sensata Technologies B.V./Sensata Technology Finance Company, LLC    Industrial
Equipment
  Term Loan   Loan      3.25     5/13/2019         1,517,088         1,517,088         1,515,540   
Sensus USA Inc. (fka Sensus Metering Systems)    Utilities   Term Loan
(First Lien)
  Loan      4.75     5/9/2017         1,935,040         1,929,701         1,934,228   
ServiceMaster Company, The    Conglomerate   Tranche B
Term Loan
  Loan      4.40     1/31/2017         2,000,000         1,980,369         1,970,000   
Shearers Foods    Food Services   Term Loan
(First Lien)
  Loan      4.50     6/30/2021         1,000,000         997,522         995,000   
Sonneborn, LLC    Chemicals/Plastics   Initial US
Term Loan
  Loan      6.50     3/30/2018         772,768         759,467         775,666   
Sophia, L.P.    Electronics/Electric   Term B
Loan
  Loan      4.00     7/19/2018         923,543         912,021         917,771   
Southwire Company, LLC (f.k.a Southwire Company)    Building and
Development
  Initial Term
Loan
  Loan      3.25     2/10/2021         498,750         497,580         493,972   
SRAM, LLC    Industrial
Equipment
  Term Loan
(First Lien)
  Loan      5.25     4/10/2020         3,138,397         3,123,509         3,067,783   
SS&C Technologies Holdings Europe S.A.R.L.    Business Equipment
and Services
  2013
Replacement
Term B-2
Loan
  Loan      3.25     6/7/2019         523,600         518,916         522,291   
SS&C Technologies, Inc., /Sunshine Acquisition II, Inc.    Business Equipment
and Services
  2013
Replacement
Term B-1
Loan
  Loan      3.25     6/7/2019         54,165         53,675         54,030   
Steak ‘n Shake Operations, Inc.    Food Services   Term Loan   Loan      4.75     3/19/2021         997,500         987,960         996,672   
STHI Holding    Healthcare   Term Loan   Loan      4.50     8/6/2021         1,000,000         995,003         995,630   
SunGard Data Systems Inc (Solar Capital Corp.)    Conglomerate   Tranche C
Term Loan
  Loan      3.90     2/28/2017         285,352         282,591         285,232   
SunGard Data Systems Inc (Solar Capital Corp.)    Conglomerate   Tranche E
Term Loan
  Loan      4.00     3/9/2020         3,707,953         3,610,543         3,689,413   
SuperMedia Inc. (fka Idearc Inc.)    Publishing   Loan   Loan      11.60     12/30/2016         252,782         244,705         218,183   
Syniverse Holdings, Inc.    Telecommunications   Initial Term
Loan
  Loan      4.00     4/23/2019         479,913         475,748         474,816   
Taminco Global Chemical Corporation    Chemicals/Plastics   Initial
Tranche B-3
Dollar Term
Loan
  Loan      3.25     2/15/2019         1,466,493         1,457,915         1,455,495   
Team Health, Inc.    Healthcare   Tranche B
Term Loan
  Loan      3.75     6/29/2018         4,365,000         4,349,553         4,343,175   
TGI Friday’s    Food Services   Term Loan
B
  Loan      5.25     7/15/2020         1,000,000         995,076         995,630   
TransDigm Inc.    Aerospace and
Defense
  Tranche C
Term Loan
  Loan      3.75     2/28/2020         4,871,784         4,881,456         4,818,341   
TransUnion    Financial
Intermediaries
  Term Loan   Loan      4.00     4/9/2021         498,750         497,586         495,508   
Tricorbraun Inc. (fka Kranson Industries, Inc.)    Containers/Glass
Products
  Term Loan   Loan      4.00     5/3/2018         1,902,083         1,893,866         1,897,328   
Truven Health Analytics Inc. (fka Thomson Reuters (Healthcare) Inc.)    Healthcare   New
Tranche B
Term Loan
  Loan      4.50     6/6/2019         490,047         481,472         485,759   
Twin River Management    Lodging & Casinos   Term Loan
B
  Loan      5.25     7/10/2020         1,000,000         1,002,256         999,170   
U.S. Security Associates Holdings, Inc.    Business Equipment
and Services
  Delayed
Draw Loan
  Loan      6.00     7/28/2017         159,332         158,264         158,536   
U.S. Security Associates Holdings, Inc.    Business Equipment
and Services
  Term B
Loan
  Loan      6.00     7/28/2017         935,857         930,087         931,177   
United Surgical Partners International, Inc.    Healthcare   New
Tranche B
Term Loan
  Loan      4.75     4/3/2019         2,444,124         2,418,323         2,431,904   
Univar Inc.    Chemicals/Plastics   Term B
Loan
  Loan      5.00     6/30/2017         3,864,954         3,864,526         3,854,325   
Univision Communications Inc.    Telecommunications   Replacement
First-Lien
Term Loan
  Loan      4.00     3/1/2020         2,962,612         2,945,669         2,938,290   
Valeant Pharmaceuticals International, Inc.    Drugs   Series D2
Term Loan
B
  Loan      3.75     2/13/2019         2,545,588         2,536,761         2,532,861   
Verint Systems Inc.    Business Equipment
and Services
  Term Loan   Loan      3.50     9/6/2019         1,264,058         1,259,071         1,258,370   
Vertafore, Inc.    Business Equipment
and Services
  Term Loan
(2013)
  Loan      4.25     10/3/2019         2,881,003         2,881,003         2,873,800   
Visant Corporation (fka Jostens)    Leisure Goods/
Activities/Movies
  Tranche B
Term Loan
(2011)
  Loan      5.25     12/22/2016         3,604,551         3,604,551         3,584,726   
Vouvray    Industrial
Equipment
  Term Loan   Loan      5.00     6/28/2021         500,000         497,539         500,000   
Washington Inventory Service    Business Equipment
and Services
  U.S. Term
Loan (First
Lien)
  Loan      6.75     12/20/2018         1,896,034         1,918,563         1,888,924   
Wendy’s International, Inc    Food Services   Term B
Loan
  Loan      3.25     5/15/2019         677,050         670,886         673,184   
West Corporation    Telecommunications   Term B-10
Loan
  Loan      3.25     6/30/2018         2,571,560         2,610,717         2,535,738   
                 

 

 

    

 

 

 
                  $ 302,544,790       $ 301,019,691   
                 

 

 

    

 

 

 

 

25


Table of Contents

Saratoga Investment Corp. CLO 2013-1, Ltd.

Schedule of Investments

February 28, 2014

 

Issuer Name

   Industry   Asset Name   Asset Type    Current Rate     Maturity Date      Principal      Cost      Fair Value  

Academy, LTD.

   Retailers (Except
Food and Drugs)
  Initial Term
Loan (2012)
  Loan      4.50     8/3/2018       $ 1,960,187       $ 1,948,853       $ 1,969,969   

Acosta, Inc.

   Food Products   Term B
Loan (2013)
  Loan      4.25     3/2/2018         4,162,740         4,101,035         4,177,310   

Aderant North America, Inc.

   Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      6.25     12/20/2018         3,473,750         3,470,186         3,482,434   

Aegis Toxicology Sciences Corporation

   Healthcare   Initial Term
Loan (First
Lien)
  Loan      5.50     2/24/2021         1,000,000         990,000         990,000   

Aegis Toxicology Sciences Corporation

   Healthcare   Initial Term
Loan
(Second
Lien)
  Loan      9.50     8/24/2021         500,000         492,500         492,500   

Aeroflex Incorporated

   Aerospace and
Defense
  Tranche B-1
Term Loan
  Loan      4.50     11/9/2019         3,208,854         3,194,690         3,223,550   

Akorn, Inc.

   Healthcare   Term
Loan B
  Loan      4.50     11/13/2020         500,000         497,500         503,125   

Alere Inc. (fka IM US Holdings, LLC)

   Healthcare   Incremental
B-1 Term
Loan
  Loan      4.25     6/30/2017         1,960,000         1,930,566         1,968,173   

Applied Systems, Inc.

   Business Equipment
and Services
  Term Loan   Loan      4.25     12/8/2016         500,000         498,750         498,750   

Aramark Corporation

   Food Products   LC-2
Facility
  Loan      3.69     7/26/2016         79,187         79,187         79,206   

Aramark Corporation

   Food Products   LC-3
Facility
  Loan      3.69     7/26/2016         43,961         43,961         43,971   

Aramark Corporation

   Food Products   U.S. Term F
Loan
  Loan      3.25     2/24/2021         3,206,537         3,206,537         3,207,307   

Ardagh Holdings USA Inc. (Ardagh Packaging Finance S.A.)

   Containers/Glass
Products
  Dollar Term
Loan
  Loan      4.25     12/17/2019         1,000,000         995,109         1,002,500   

ARG IH Corporation

   Food Services   Term Loan   Loan      5.00     11/15/2020         500,000         498,797         502,500   

Asurion, LLC (fka Asurion Corporation)

   Insurance   Incremental
Tranche B-1
Term Loan
  Loan      4.50     5/24/2019         5,508,783         5,462,695         5,516,660   

Auction.Com, LLC

   Business Equipment
and Services
  Term Loan
A-4
  Loan      4.66     2/28/2017         980,651         979,812         970,845   

Autotrader.com, Inc.

   Automotive   Tranche B-1
Term Loan
  Loan      4.00     12/15/2016         3,791,778         3,791,778         3,805,997   

Avantor Performance Materials Holdings, Inc.

   Chemicals/Plastics   Term Loan   Loan      5.25     6/24/2017         4,875,000         4,861,403         4,875,000   

AZ Chem US Inc.

   Chemicals/Plastics   Term Loan   Loan      5.25     12/22/2017         1,355,941         1,329,859         1,362,720   

Bass Pro Group, LLC

   Retailers (Except
Food and Drugs)
  New Term
Loan
  Loan      3.75     11/20/2019         498,725         498,126         500,715   

Berry Plastics Corporation

   Chemicals/Plastics   Term E
Loan
  Loan      3.75     1/6/2021         1,500,000         1,496,250         1,495,500   

Big Heart Pet Brands (fka Del Monte Corporation)

   Food/Drug Retailers   Initial Term
Loan
  Loan      3.50     3/9/2020         3,000,000         3,022,866         2,999,250   

Biomet, Inc.

   Healthcare   Dollar Term
B-2 Loan
  Loan      3.65     7/25/2017         1,970,137         1,970,137         1,972,797   

BJ’s Wholesale Club, Inc.

   Food/Drug Retailers   New 2013
(November)
Replacement
Loan (First
Lien)
  Loan      4.50     9/26/2019         500,000         497,592         502,750   

Bombardier Recreational Products Inc.

   Leisure Goods/
Activities/Movies
  Term B
Loan
  Loan      4.00     1/30/2019         754,286         748,080         756,647   

Brickman Group Ltd. LLC, The

   Brokers/Dealers/
Investment Houses
  Initial Term
Loan (First
Lien)
  Loan      4.00     12/18/2020         250,000         248,750         250,937   

Brock Holdings III, Inc.

   Industrial
Equipment
  Term Loan
(First Lien)
  Loan      6.75     3/16/2017         1,959,839         1,976,826         1,967,188   

Burlington Coat Factory Warehouse Corporation

   Retailers (Except
Food and Drugs)
  Term B-2
Loan
  Loan      4.25     2/23/2017         2,660,377         2,653,889         2,675,675   

C.H.I. Overhead Doors, Inc.

   Building and
Development
  Term Loan
(First Lien)
  Loan      5.50     3/18/2019         2,739,013         2,692,934         2,745,861   

Camp International Holding Company

   Aerospace and
Defense
  2013
Replacement
Term Loan
(First Lien)
  Loan      4.75     5/31/2019         990,000         990,000         999,900   

Capital Automotive L.P.

   Conglomerate   Tranche B-1
Term Loan
Facility
  Loan      4.00     4/10/2019         2,137,369         2,141,920         2,142,712   

Capstone Logistics, LLC

   Business Equipment
and Services
  Term
Note A
  Loan      6.50     9/16/2016         2,658,626         2,637,550         2,618,899   

Capsugel Holdings US, Inc.

   Drugs   Initial Term
Loan
  Loan      3.50     8/1/2018         3,145,521         3,138,959         3,141,589   

Celanese US Holdings LLC

   Chemicals/Plastics   Dollar Term
C-2
Commitment
  Loan      2.25     10/31/2016         2,176,323         2,201,894         2,192,254   

Charter Communications Operating, LLC

   Cable and Satellite
Television
  Term F
Loan
  Loan      3.00     12/31/2020         2,682,707         2,672,727         2,666,369   

CHS/Community Health Systems, Inc.

   Healthcare   2017 Term
E Loan
  Loan      3.48     1/25/2017         1,108,908         1,082,718         1,113,987   

CHS/Community Health Systems, Inc.

   Healthcare   2021 Term
D Loan
  Loan      4.25     1/27/2021         2,955,608         2,862,024         2,980,228   

Cinedigm Digital Funding I, LLC

   Business Equipment
and Services
  Term Loan   Loan      3.75     2/28/2018         825,121         820,892         825,121   

Covanta Energy Corporation

   Ecological Services
and Equipment
  Term Loan   Loan      3.50     3/28/2019         491,250         489,468         492,788   

CPI International Acquisition, Inc. (f/k/a Catalyst Holdings, Inc.)

   Electronics/Electric   Term B
Loan
  Loan      5.00     2/13/2017         4,622,500         4,611,092         4,622,500   

Crosby US Acquisition Corp.

   Industrial
Equipment
  Initial Term
Loan (First
Lien)
  Loan      4.00     11/23/2020         750,000         749,094         748,312   

Crown Castle Operating Company

   Telecommunications/Cellular   Extended
Incremental
Tranche B-2
Term Loan
  Loan      3.25     1/31/2019         2,460,196         2,441,025         2,460,316   

Culligan International Company

   Conglomerate   Dollar Loan
(First Lien)
  Loan      6.25     12/19/2017         787,658         738,102         734,491   

 

26


Table of Contents

Issuer Name

   Industry   Asset Name   Asset Type    Current Rate     Maturity Date      Principal      Cost      Fair Value  

Culligan International Company

   Conglomerate   Dollar Loan
(Second
Lien)
  Loan      9.50     6/19/2018         783,162         732,061         657,856   

Cumulus Media Holdings Inc.

   Broadcast
Radio and
Television
  Term Loan   Loan      4.25     12/23/2020         500,000         495,000         502,815   

DaVita HealthCare Partners Inc. (fka DaVita Inc.)

   Healthcare   Tranche B
Term Loan
  Loan      4.50     10/20/2016         3,909,320         3,909,320         3,927,655   

DCS Business Services, Inc.

   Financial
Intermediaries
  Term B
Loan
  Loan      7.25     3/19/2018         3,831,595         3,792,824         3,735,805   

DealerTrack Technologies, Inc.

   Computers &
Electronics
  Term Loan   Loan      3.50     2/28/2021         500,000         498,750         498,750   

Dell International LLC

   Retailers
(Except Food
and Drugs)
  Term B
Loan
  Loan      4.50     4/29/2020         1,995,000         1,982,818         1,988,935   

Delos Finance S.à r.l.

   Leasing   Loan   Loan      3.50     2/26/2021         500,000         497,500         497,500   

Deluxe Entertainment Services Group Inc.

   Media   Initial Term
Loan
  Loan      6.50     2/28/2020         1,000,000         1,000,000         1,000,000   

Digitalglobe, Inc.

   Ecological
Services and
Equipment
  Term Loan   Loan      3.75     1/31/2020         248,125         248,125         247,815   

Drew Marine Group Inc.

   Chemicals/
Plastics
  Term Loan
(First Lien)
  Loan      4.50     11/19/2020         500,000         499,397         502,500   

Dunkin’ Brands, Inc.

   Food Services   Term B-4
Loan
  Loan      3.25     2/7/2021         3,956,731         3,946,925         3,936,948   

DynCorp International Inc.

   Aerospace
and Defense
  Term Loan   Loan      6.25     7/7/2016         486,442         482,619         488,573   

Education Management LLC

   Leisure
Goods/
Activities/
Movies
  Tranche C-2
Term Loan
  Loan      4.31     6/1/2016         3,882,152         3,746,734         3,544,405   

EIG Investors Corp.

   Business
Equipment
and Services
  Term Loan   Loan      5.00     11/9/2019         997,500         992,713         1,003,734   

Energy Transfer Equity, L.P.

   Oil & Gas   Loan   Loan      3.25     12/2/2019         1,000,000         997,599         998,750   

Evergreen Acqco 1 LP

   Retailers
(Except Food
and Drugs)
  New Term
Loan
  Loan      5.00     7/9/2019         492,516         488,615         493,900   

EWT Holdings III Corp. (fka WTG Holdings III Corp.)

   Industrial
Equipment
  Term Loan
(First Lien)
  Loan      4.75     1/15/2021         1,000,000         995,084         1,002,500   

Federal-Mogul Corporation

   Automotive   Tranche B
Term Loan
  Loan      2.14     12/29/2014         2,220,981         2,187,068         2,202,747   

Federal-Mogul Corporation

   Automotive   Tranche C
Term Loan
  Loan      2.14     12/28/2015         1,307,032         1,270,847         1,296,301   

First Data Corporation

   Financial
Intermediaries
  2017 Second
New Dollar
Term Loan
  Loan      4.20     3/24/2017         2,111,028         2,010,799         2,109,276   

First Data Corporation

   Financial
Intermediaries
  2018 Dollar
Term Loan
  Loan      4.20     3/23/2018         2,290,451         2,231,370         2,292,741   

FMG Resources (August 2006) Pty LTD (FMG America Finance, Inc.)

   Nonferrous
Metals/
Minerals
  Loan   Loan      4.25     6/28/2019         997,500         995,122         1,006,438   

Four Seasons Holdings Inc.

   Lodging &
Casinos
  Term Loan
(First Lien)
  Loan      3.50     6/27/2020         498,750         498,750         498,750   

Garda World Security Corporation

   Business
Equipment
and Services
  Term B
Delayed
Draw Loan
  Loan      4.00     11/6/2020         203,194         202,218         203,363   

Garda World Security Corporation

   Business
Equipment
and Services
  Term B
Loan
  Loan      4.00     11/6/2020         794,306         790,489         794,965   

Gardner Denver, Inc.

   Oil & Gas   Initial Dollar
Term Loan
  Loan      4.25     7/30/2020         1,496,250         1,485,394         1,489,337   

Generac Power Systems, Inc.

   Industrial
Equipment
  Term
Loan B
  Loan      3.50     5/31/2020         868,414         852,908         868,258   

General Nutrition Centers, Inc.

   Retailers
(Except Food
and Drugs)
  Amended
Tranche B
Term Loan
  Loan      3.25     3/4/2019         4,740,112         4,722,664         4,725,892   

Global Tel*Link Corporation

   Business
Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.00     5/23/2020         1,920,175         1,915,905         1,900,014   

Goodyear Tire & Rubber Company, The

   Chemicals/
Plastics
  Loan
(Second
Lien)
  Loan      4.75     4/30/2019         4,000,000         3,941,039         4,037,000   

Grosvenor Capital Management
Holdings, LP

   Brokers/
Dealers/
Investment
Houses
  Initial Term
Loan
  Loan      3.75     1/4/2021         3,500,000         3,482,803         3,489,080   

Harland Clarke Holdings Corp. (fka Clarke American Corp.)

   Publishing   Tranche B-4
Term Loan
  Loan      6.00     8/4/2019         500,000         497,500         500,780   

HCA Inc.

   Healthcare   Tranche B-4
Term Loan
  Loan      2.94     5/1/2018         5,720,353         5,390,148         5,713,947   

Hertz Corporation, The

   Automotive   Tranche B-1
Term Loan
  Loan      3.75     3/11/2018         2,970,000         3,005,791         2,973,683   

Hologic, Inc.

   Healthcare   Refinancing
Tranche A
Term Loan
  Loan      2.19     8/1/2017         2,312,500         2,307,973         2,313,425   

Hunter Defense Technologies, Inc.

   Aerospace
and Defense
  Term Loan   Loan      3.45     8/22/2014         3,470,285         3,460,723         3,262,068   

Huntsman International LLC

   Chemicals/
Plastics
  Extended
Term B
Loan
  Loan      2.73     4/19/2017         3,920,000         3,892,467         3,919,020   

Ikaria, Inc.

   Healthcare   Initial Term
Loan (First
Lien)
  Loan      5.00     2/12/2021         500,000         497,515         502,815   

Infor (US), Inc. (fka Lawson Software Inc.)

   Business
Equipment
and Services
  Tranche B-5
Term Loan
  Loan      3.75     6/3/2020         1,776,183         1,758,861         1,772,488   

Inventiv Health, Inc. (fka Ventive Health, Inc)

   Conglomerate   Consolidated
Term Loan
  Loan      7.50     8/4/2016         492,090         492,090         491,105   

J. Crew Group, Inc.

   Retailers
(Except Food
and Drugs)
  Term B-1
Loan Retired
03/05/2014
  Loan      4.00     3/7/2018         972,500         972,500         972,656   

JFB Firth Rixson Inc.

   Industrial
Equipment
  2013
Replacement
Dollar Term
Facility
Loan
  Loan      4.25     6/30/2017         2,564,311         2,554,534         2,568,054   

Kinetic Concepts, Inc.

   Healthcare   Dollar Term
D-1 Loan
  Loan      4.00     5/4/2018         490,057         475,404         492,508   

La Quinta Intermediate Holdings L.L.C.

   Gaming And
Hotels
  Initial Term
Loan
  Loan      4.00     2/19/2021         500,000         500,000         500,000   

Michaels Stores, Inc.

   Retailers
(Except Food
and Drugs)
  Term B
Loan
  Loan      3.75     1/28/2020         496,250         496,250         497,302   

Microsemi Corporation

   Electronics/
Electric
  Incremental
Term Loan
  Loan      3.75     2/19/2020         498,750         498,750         499,373   

Microsemi Corporation

   Electronics/
Electric
  Term Loan   Loan      3.50     2/19/2020         2,393,981         2,389,463         2,398,482   

 

27


Table of Contents

Issuer Name

   Industry   Asset Name   Asset Type    Current Rate     Maturity Date      Principal      Cost      Fair Value  

Mitel US Holdings, Inc.

   Telecommunications   Term Loan   Loan      5.25     1/31/2020         250,000         248,753         252,083   

National CineMedia, LLC

   Leisure Goods/
Activities/Movies
  Term Loan
(2013)
  Loan      2.95     11/26/2019         1,086,207         1,054,177         1,082,134   

Newsday, LLC

   Publishing   Term Loan   Loan      3.69     10/12/2016         2,215,385         2,213,416         2,215,385   

Novelis, Inc.

   Conglomerate   Initial Term
Loan
  Loan      3.75     3/10/2017         4,857,520         4,868,347         4,873,452   

NPC International, Inc.

   Food Services   Term Loan
(2013)
  Loan      4.00     12/28/2018         490,833         490,833         493,597   

NRG Energy, Inc.

   Utilities   Term Loan
(2013)
  Loan      2.75     7/1/2018         3,900,525         3,875,534         3,872,168   

NuSil Technology LLC

   Chemicals/Plastics   Term Loan   Loan      5.25     4/7/2017         809,163         809,163         799,558   

OEP Pearl Dutch Acquisition B.V.

   Chemicals/Plastics   Initial BV
Term Loan
  Loan      6.50     3/30/2018         142,422         140,466         143,846   

On Assignment, Inc.

   Business Equipment
and Services
  Initial Term
B Loan
  Loan      3.50     5/15/2020         1,311,364         1,303,125         1,312,190   

Onex Carestream Finance LP

   Healthcare   Term Loan
(First Lien
2013)
  Loan      5.00     2/25/2017         4,531,159         4,511,264         4,582,135   

OpenLink International, Inc.

   Computers &
Electronics
  Replacement
Term Loan
  Loan      6.25     10/30/2017         980,000         980,000         980,000   

P.F. Chang’s China Bistro, Inc. (Wok Acquisition Corp.)

   Food/Drug Retailers   Term
Borrowing
  Loan      5.50     6/22/2019         1,496,212         1,488,641         1,509,675   

P2 Upstream Acquisition Co.
(P2 Upstream Canada BC ULC)

   Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.00     10/30/2020         1,000,000         995,186         1,008,750   

Patheon Inc.

   Healthcare   Term Loan   Loan      4.25     3/11/2021         3,000,000         2,992,500         2,990,640   

PetCo Animal Supplies, Inc.

   Retailers (Except
Food and Drugs)
  New Loans   Loan      4.00     11/24/2017         1,484,694         1,483,250         1,489,103   

Pharmaceutical Product Development, Inc. (Jaguar Holdings, LLC)

   Conglomerate   2013 Term
Loan
  Loan      4.00     12/5/2018         1,960,200         1,936,226         1,967,845   

Pinnacle Foods Finance LLC

   Food Products   New Term
Loan G
  Loan      3.25     4/29/2020         4,962,500         4,951,514         4,942,352   

Polymer Group, Inc.

   Chemicals/Plastics   Initial Loan   Loan      5.25     12/19/2019         500,000         497,500         501,875   

Prestige Brands, Inc.

   Drugs   Term B-1
Loan
  Loan      3.75     1/31/2019         435,606         430,195         437,022   

Pro Mach, Inc.

   Industrial
Equipment
  Term Loan   Loan      4.50     7/6/2017         1,945,655         1,934,699         1,955,383   

Progressive Waste Solutions Ltd.

   Ecological Services
and Equipment
  Term B
Loan
  Loan      3.00     10/24/2019         498,741         498,741         500,486   

Quintiles Transnational Corp.

   Conglomerate   Term B-3
Loan
  Loan      3.75     6/8/2018         3,681,541         3,646,328         3,685,186   

Redtop Acquisitions Limited

   Electronics/Electric   Initial Dollar
Term Loan
(First Lien)
  Loan      4.50     12/3/2020         500,000         496,369         502,915   

Rexnord LLC/RBS Global, Inc.

   Industrial
Equipment
  Term B
Loan
  Loan      4.00     8/21/2020         1,663,476         1,663,476         1,667,035   

Reynolds Group Holdings Inc.

   Industrial
Equipment
  Incremental
U.S. Term
Loan
  Loan      4.00     12/1/2018         1,980,000         1,980,000         1,993,365   

Rocket Software, Inc.

   Business Equipment
and Services
  Term Loan
(First Lien)
  Loan      5.75     2/8/2018         1,960,025         1,934,083         1,960,515   

Rovi Solutions Corporation / Rovi Guides, Inc.

   Electronics/Electric   Tranche A-2
Loan
  Loan      2.45 &