Item 1.01. Entry into a Material Definitive Agreement.
On January 13, 2022, Saratoga Investment Corp. (the "Company") entered into an
underwriting agreement (the "Underwriting Agreement") by and among the Company,
Saratoga Investment Advisors, LLC and Raymond James & Associates, Inc., as
representative of the several underwriters named in Exhibit A thereto, in
connection with the issuance and sale of $75 million aggregate principal amount
of the Company's 4.35% Notes due 2027 (the "Notes") and the issuance and sale of
the Notes, the "Offering").
On January 19, 2022, the Company and U.S. Bank National Association, as trustee
(the "Trustee"), entered into a Ninth Supplemental Indenture (the "Ninth
Supplemental Indenture") to the Base Indenture, dated May 10, 2013, between the
Company and the Trustee (the "Base Indenture"; and together with the Ninth
Supplemental Indenture, the "Indenture"). The Ninth Supplemental Indenture
relates of the Notes.
The Notes bear interest at a rate of 4.35% per year payable semi-annually in
arrears on February 28 and August 28 of each year, beginning on August 28, 2022.
The Notes will mature on February 28, 2027 and may be redeemed in whole or in
part at the Company's option at any time prior to November 28, 2026, at par plus
a "make-whole" premium, and thereafter at par.
The Company intends to use the net proceeds from the Offering to make
investments in middle-market companies (including investments made through
Saratoga Investment Corp. SBIC LP and Saratoga Investment Corp. SBIC II LP, each
a wholly owned subsidiary of the Company that is licensed as a small business
investment company) in accordance with the Company's investment objective and
strategies and for general corporate purposes.
The Notes are the direct unsecured obligations of the Company and rank pari
passu with all existing and future unsubordinated unsecured indebtedness issued
by the Company, senior to any of the Company's future indebtedness that
expressly provides it is subordinated to the Notes, effectively subordinated to
all of the existing and future secured indebtedness issued by the
Company (including indebtedness that is initially unsecured in respect of which
the Company subsequently grants security), to the extent of the value of the
assets securing such indebtedness, including, without limitation, borrowings
under the Company's senior secured revolving credit facility, as amended, and
structurally subordinated to all existing and future indebtedness and other
obligations of any of the Company's subsidiaries.
The Indenture contains certain covenants, including certain covenants requiring
the Company to comply with Section 18(a)(1)(A) as modified by
Section 61(a)(2) of the Investment Company Act of 1940, as amended (the "1940
Act"), or any successor provisions, whether or not the Company continues to be
subject to such provisions of the 1940 Act, but giving effect, in either case,
to any exemptive relief granted to the Company by the U.S. Securities and
Exchange Commission (the "SEC"); to agree that for the period of time during
which the Notes are outstanding, the Company will not declare any dividend
(except a dividend payable in our stock), or declare any other distribution,
upon a class of our capital stock, or purchase any such capital stock, unless,
in every such case, at the time of the declaration of any such dividend or
distribution, or at the time of any such purchase, the Company has an asset
coverage (as defined in the 1940 Act) of at least the threshold specified in
Section 18(a)(1)(B) as modified by such provisions of Section 61(a)(2) of the
1940 Act as may be applicable to the Company from time to time or any successor
provisions thereto of the 1940 Act, as such obligation may be amended or
superseded, after deducting the amount of such dividend, distribution or
purchase price, as the case may be, and in each case giving effect to (i) any
exemptive relief granted to the Company by the SEC, and (ii) any
SEC no-action relief granted by the SEC to another business development company
("BDC") (or to the Company if it determines to seek such similar no-action or
other relief) permitting the BDC to declare any cash dividend or distribution
notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by
such provisions of Section 61(a)(2) of the 1940 Act as may be applicable to the
Company from time to time; and to provide financial information to the holders
of the Notes and the Trustee if the Company should no longer be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended.
These covenants are subject to important limitations and exceptions that are
described in the Indenture.
In addition, holders of the Notes can require the Company to repurchase some or
all of the Notes at a purchase price equal to 100% of their principal amount,
plus accrued and unpaid interest to, but not including, the repurchase date upon
the occurrence of a "Change of Control Repurchase Event," as defined in the
Ninth Supplemental Indenture.
The Notes were offered and sold in an offering registered under the Securities
Act of 1933, as amended, pursuant to the Registration Statement on Form N-2
(File No. 333-256366), the prospectus supplement dated January 13, 2022 and the
pricing term sheet filed with the SEC on January 13, 2022. The transaction
closed on January 19, 2022. The net proceeds to the Company were approximately
$72.7 million, based on a public offering price of 99.317% of par, after
deducting the underwriting discount of $1.5 million and the estimated offering
expenses of approximately $250,000 payable by the Company.
The foregoing descriptions of the Underwriting Agreement, the Ninth Supplemental
Indenture, and the Notes do not purport to be complete and are qualified in
their entirety by reference to the full text of the the Underwriting Agreement,
the Ninth Supplemental Indenture, and the form of global note representing the
Notes, respectively, each filed as exhibits hereto and incorporated by reference
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The information required by Item 2.03 contained in Item 1.01 of this Current
Report on Form 8-K is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
1.1 Underwriting Agreement, dated as of January 13, 2022, by and among
Saratoga Investment Corp., Saratoga Investment Advisors, LLC and Raymond
James & Associates, Inc.
4.1 Form of Indenture by and between the Company and U.S. Bank National
Association, as trustee (Incorporated by reference to Exhibit (d)(4) to
Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2
(File No. 333-186323) filed on April 30, 2013).
4.2 Ninth Supplemental Indenture, dated as of January 19, 2022, between
Saratoga Investment Corp. and U.S. Bank National Association, as
4.3 Form of Global Note with respect to the 4.35% Notes due 2027
(incorporated by reference to Exhibit 4.2 hereto).
5.1 Opinion of Eversheds Sutherland (US) LLP.
23.1 Consent of Eversheds Sutherland (US) LLP (included in Exhibit 5.1
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