SAR Saratoga Investment

Henri Steenkamp Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary
Chris Oberbeck Chairman of the Board, Chief Executive Officer and President
Mike Grisius Chief Investment Officer
Bryce Rowe Hovde Group
Casey Alexander Compass Point
Robert Dodd Raymond James
Mickey Schleien Ladenburg Thalmann
Sarkis Sherbetchyan B. Riley Securities
Call transcript
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corporation's Fiscal Second Quarter 2022 Financial Results Conference Call. Please note that today's call is being recorded.

During today's presentation, all parties will be in a listen-only mode.

we the remarks, for prepared management's will line open questions. Following Mr. to time, Chief call Officer, I this turn Financial would Compliance Corporation's At Investment like the Saratoga over and to Henri Steenkamp. Sir, ahead. please go

Henri Steenkamp

from required like these to cause quarter the our forward-looking do Today, most actual results refer second conference so a statements Thank you. materially projections. earnings our referencing for I welcome projections. to update to important ask Corp.'s factors presentation XXXX call by Saratoga conference Today's with to We recent be statements SEC that everyone We call. forward-looking differ not our could and call. and forward-looking to law. filings to fiscal undertake will during statements Investment includes we unless to would you do

Officer, press XXXX IR our our will You Events to link and X introductory turn be refer Presentation XXth. will section the can find Please website. this conference like is our second for page also to A in distributed & earnings call fiscal A presentation over the would press Relations through earnings be release call last Investor making night. release to October a from p.m. details. Executive to who today Chief I available Christian of remarks. replay our our of Oberbeck, in shareholder quarter now Chairman the few

Chris Oberbeck

Thank everyone. you, And Henri. welcome

where the up market recovery to the be thus our and of and we quarter, impact substantial Despite to be have financial COVID-XX, unprecedented companies. second pleased portfolio to resilience of fortunate the we and we the ongoing feel the on very challenges continuance its continue activity. reflect upside we far position in leverage position strength can ramp with in As and of global a overcome

us activities healthy Our existing business our new level of investments. to and allow companies perform continue a and find to development well current portfolio evaluate

$XXX record by originated redeemed, recognition QX gain platforms investment. follow-on million. Passageways with this offset to million repayments, or of our slightly of quarter contracted million AUMs investments, $X.X a in almost number $XXX our equity the We on the was million realized Our record This including $XXX matched new quarter.

in how lumpy temporarily accompanied discussed substantial this our repayments, which often be long-term an quarter example. growth have assets of could We by was

We historical all continue quarter to originations with increase the existing new the XXth grew NAV The Again, $XX.XX. while quarter portfolio, added performance set maintaining our a for portfolio investments. to fiscal X% bring the of and also have platform record made four credit high into this our us, XX were quarters. this increase our investments share extremely quarter bar this past we for quality in per by the being with

the X. To recap Our return was as of past on latest XX months XX.X%. this quarter briefly on slide quarter equity

continue to rating XX.X% financial on with First, our in investment strengthen of credit of quarter-end, return we QX highest maintaining loan on credit quality, equity foundation over retaining our by our total our total investments of basis on and gross our XX.X% total above of the a a trailing unlevered XX.X% portfolio, and of fair unrealized IRR realizations the unlevered X% value million. XX portfolio month gross registering a a level of a generating at of $XXX with IRR high XX% current cost

current investments this of as remains as increase year-end. year our of and a a well repayments, Our pipeline last decrease X% originations same four last of increase million $XXX record from from time slightly follow-on as million but and $XXX quarter this as assets management $XXX decreased the Despite included reduction, new investments, quarter, the robust. XX% due new under XX% million to to portfolio net a $XXX our company six from as million

us. strength, liquidity sheet paramount for despite economic balance Third, conditions, NAV remain improving and preservation

quarter-end at and million covenant million $XXX structure SBIC of mark-to-market of million of debentures. non-SBIC free, capital long-term was debt free supports current equity long-term strong. $XXX covenant $XXX Our

of our exceeds leverage regulatory quarter-end XXX% XXX% Our substantially requirement.

SBIC $XXX million basis of new of yield cost of our The total less current we X% additional have issued our in unsecured to and capital effective position. undrawn non-SBIC capital more quarter-end bonds importantly $XX of outstanding II our by In existing with opportunities We and million committed are existing reduces lending bonds, this the the of million Lender new $XXX million, points. week, fund. companies our both with total liquidity new debt SBIC existing which commitments Finance, with II dedicated July, basis support available liquidity currently Encina facility paid just In strengthens points. SAR all-in we've of our is this five-year And cost at million, XXX we facilities to baby X.XXX% XXX to cost portfolio than August, capital million. an $XX by closed companies a our that X.XX% portfolio an than $XX $XXX reducing

reflecting and the recent our Finally, XXXX liquidity our performance, per dividend on September paid $X.XX ended of increased portfolio by XXXX. financial $X.XX to for overall XX, August on share and XX, issuance and quarter quarterly improved the Directors note Board the

better We our and fundamental a we performance. the to of visibility on reassess on will the quarterly continue basis business dividends amount gain as economy

XX, indicators ended saw August XXXX. compared quarter XXXX with May our to performance XX, performance key as the and strong quarters This

million $X year this is last quarter, up $X.X NII versus and adjusted up XX.X% versus Our last million XX.X% quarter. million $X.X

up $XX.XX last inception we year quarter. from and share detail our last $X.XX cents will This $X.XX per last in last share last quarter. quarter. highest from on from per quarter, the NII return this share $X.XX since later. XXXX. per more but management $XX.XX NAV adjusted Our Latest XX.X% XX.X% year is And X% up is year, up up from And months XX from last and provide Saratoga $XX.XX, our X% down for Investment is NAV from up is equity XX.X%, of

over than XX the our on no management and consistently since ago, X, see slide the can we and more assets steadily quality remain of have As with high BDC under non-accruals years our credits you took currently. risen

available trend pipeline, time call to financial portfolio. this while With credit appropriately we now turn composition working evolving capital environment. like positive over the of results, to currently well that, performance being same our growing this deploy are diligently as as would our to the I our cautious the at as back in our continue to review into Henri We and

Chris Oberbeck

QX. quarter. Across ended baby redeemed unchanged QX and during $X.X reflects from NII period QX highlights impact of year. from investments bonds in The and Slide up each last $X.XX results million Adjusted $X.XX quarter. last period, as higher quarter. other AUM primarily fee interest XX.X% was is release for quarter during interest million X.X% $X.X up related interest from share the second as to Mac removed a August related quarters, last calculation last well remained this Chris. interest originations from X.X%. adjusted our due metrics basis from per income common to NII at the incentive for primarily The the reserve of Thank per share recognition XXX XXXX. made of last X.X% in net you, core from that incentive year quarter. XX, from to shares yield $X.XX for investment XX.X% from to shares compared per fee points XX% higher of the year yield adjusted $X.XX XX quarter NII with Taco the points up gains has and $X.XX up the $X.X the performance was cents, last million the as adjusting increase income NII full been last our When was capital was increase key non-accrual Adjusted X average up SAF million and basis on the level accrual share weighted from and the million up in last and XX.X year year's largely three This from to $X.X outstanding up

recognized primarily realized million previously My in Passageways For and Alarm $X.X and our net unrealized the total a on subsidiaries. $X.XX and to million gain bonds in of a million portfolio offset investment. sale in on net $X.X reversal million realization by SAF in on of $X.X The of I million average $X.X Center realized investments gains previously by of of realized company realized The of share. Center $X.X respectively, recognized the from the reversal our of appreciation or expense expense $X.X on the appreciation in recognition company's deferred $X.X $X.XX increase realized one, primarily gain gain performance. per $X.X per related or a and, resulting of of operations and/or investments million SBIC $X.X baby million $X.X share, loss net on million million million in remaining comprised write-off My tax a final the of net the realized $X.X $X.X market the Passageways total income revised a assets and million was The million value on and on depreciation gain on or net weighted and X.X% investments, million company's the comprises [indiscernible] $X.X multiples unrealized net $X.X on the $X.XX in two, unrealized offset we investment, average appreciation quarter, the the net the write-down reflects, of gains extinguishment portfolio, per Alarm appreciation tax weighted spreads, second share improvements million a debentures EBITDA experienced loss increase

includes the than fair reversed the above now non-CLO an realized All been on in has of net performance of X.X% quarter the unrealized which and in for cost. overall portfolio gains. value year indicator and last equity us, important remains the more value reduction is the of Return first both portfolio

on excluding fees as XX, incentive debt increased management management this XXXX months. base taxes, these was unchanged the from million to for quarter. and $X.X represents of and Total total the equity quarter return over August XX.X% financing ended expenses, average last interest same million This income of XX expenses, assets, fees X.X% $X.X Our periods. and

over XX increased increase again rate balance we statement Of for since management trends starting took months XX end note quadrupled the quarters slide have We past XX QX. the past XX, added and how run particular to at the of the upward slides, slide of through that our maintained. BDC, nine have net has appendix our continued Saratoga and also and presentation, income the the by the the is KPI has matrix almost in interest shows from in X% margin has highlighting sheet

million on primarily by driven Moving of realized from X. quarter-end, last NAV $X.X million the million was quarter last unrealized $XX.X increase and and this slide year, from increase as a $XXX.X quarter to a same gains.

$XX.XX ago. of were per a shares of $XX.XX. from of last past share while at QX, net $XX.XX of and was During of million X,XXX at XX for at price cost up an shares share, per price million of share proceeds months as $XX.XX were has $X.X as an XX.XX X,XXX $X.X repurchased average quarter-end, increased the XX of NAV NAV of average sold XX quarters. per from as quarter

increased has asset value net this in Our the by accretive share. demonstrated increase steadily since been growth XXXX. NAV as per And has

a and of NII in interest sequential We NII decrease increase $X.XX per income, expenses fees. a gains. on last other from higher increased both major the realized per due this share $X.XX to at cent continue income; consistent Starting offset a a per quarter a quarterly in adjusted the benefit non-CLO $X.XX will net share and top, and increase and to CLO per by to were changes see management base interest $X.XX you slide operating lower reconciliation a benefit On share simple from X, partially from basis. income $X.XX $X.XX our of history quarter, NAV in share unrealized

adventures NAV for income half the extinguishment on as GAAP $X.XX deferred gains increase the unrealized related and of reconciles to $X.XX quarter. and totaled of QX $X.XX secured outlines to taxes was offset loss us credit the between expense of by $XXX.X $X.XX $X.XX gains, facility. appreciation on $X.XX this Moving to undrawn quarter-end, The cash, the slide, net and available partially paid X on realized net of NII SBA on debt. the our investments and spread available lower a the Slide share per were of which dry million. powder This undrawn in and dividend realized

XXXX, X%, XXXX X.XX% X%, and than notes of an the of and X.XXX%, of July quarter-end and further $XXX need redeem quarter-end, significantly. our at allows capital an an a reducing us assets we an to it $XXX with baby we basis our notes of by accretive. at thus At financing, This with it in debentures, million, above million $XX NAV grow due our when being XX, to of without expense more additional cutting of trading our On cost SAF to premium NYSE, interest some less than our liquidity fully bonds, cash or effective has used that of reopened our with external per points amount. also all-in available million and strengthening X.XXX% additional our accretive issued yield effectively SBA million of resulting on on been again of share. deployed delisted XX% SAF stock those level capital by XXX structure proceeds very cost for NII $XX existing

dollar this week, Finance. capital X%, facility basis million leverage balance especially reduced position, revolving rate maturing a sheet a by We of rate. closed has We overall facility debt taking This while and no of also ATM the our equity into with And credit structure Encina Lender existing new remain debt in flexibility. conservative active Madison with $XX four in non-SBIC fixed within term and points, replaces facility. floating plus years of floor, strong program credit that and XX the just XXX liquidity the nature pleased have our point our our fact finally, retaining with mostly LIBOR next long our is with all and account three-year, nature we a basis And an cost facility with place.

of that one to on like move highlights review invested X $XXX and million to investment and slides fund. Slide and or X at through value at of CLO million have XX yield quickly fair the XX portfolio composition now cost, our we'd portfolio. Now, we companies in $XXX AUM

percentage in that our well yield in spreads as out total this of lien slide our higher last due core is in X.X% first BDC you to positions. mix of is dropped our repaid excluding assets, yield but how of shift is to first market, of CLO, investments, On can some has see total X, of our as Our yielding quarter. XX% as our lien, partly which our tightening assets assets year. were this due continued also a the This

in In QX. to year equity fiscal this addition, our almost has X.X% position doubled from XX.X%

in recurring is form as P&L that this equity of the that income is equity income. in of its points line our increase the dividend own is Some rather than in preferred income a basis in interest lowest earns dividend now reflected floor. And reminder, XXX

to interest expect currently not further CLO decreases The do current. steady, LIBOR performing CLO and we in almost unchanged quarter-on-quarter. at XX.X% So, The see income. impact remained is yield

to slide XX. Turning

see investments resulting you $XXX can and and made fiscal six four quarter. portfolio record second slide in companies our million that XX, represents. new the in portfolio plus had a we During six the quarter, of On decrease investments follow-on investments and industry the a million net diversity million $XXX in for of amortizations, repayments breadth $XX in

distinct spread large industries over and healthcare, education services XX with on software, services. a investments focus healthcare IT Our and are

Of our finance In CLO, which in investment investment a equity strategy. addition our XX.X% investment total remain to which our included our the very consists structured important has overall of of part portfolio, interests, securities.

investments. equity of carried including early the For combined when two-thirds that gains unused of realized the were carryforwards the due net Over over capital the of accretive had past NAV over fiscal a redemption from QX, these interest Saratoga $XX sale of BDC. million gains or sale loss to years, fully from management we were to nine of took or other

our Officer, again and in market. This grow the last this quarter, That Alarm helped in is now performance I write-down position, year has Michael credit tax financial cumulative quality, concludes portfolio long-term to call portfolio reflected carryforward our realization Center of Chief our a gains. overview NAV the Grisius, offset review. final loss investment realized Elyria and and our ROE. Investment over will which are healthy, future an and capital current will turn My we Following for highlights our consistent my

Mike Grisius

perspective strategy. minutes performance last and Since a we where very tighten, were Liquidity they see update, exceptionally continuing and on take describe much of state COVID-XX the remain market. borrowers comment I'll Henri. couple current returning the to conditions our our you, market current market to Thank portfolio then of pre investment our on to and a robust. conditions

metrics capital We and among are an overall. and seeing aggressive leverage transaction leverage Pricing that deployment multiples we've and ever volumes, increasing seen. yields tightening most credit the competitive levels greater are posture

to is timing investors there looser for accelerated covenant result, to ways, pressure and as a close As such compete other in increasing restrictions.

in in said, in robust, path terms of year capitalized half is reasonable of quite thinly pandemic driven deals, of appears from XXXX. unusually conditions, most post economy the a are aggregate unabated Calendar resulting minimum particularly low to still for the rates. regard that capital staying wary outlook and activity a calendar interest by Fed are part on gains covenants. to in and and the for lenders legislation Now be a of and first for base be year volume equity our Deal tax XXXX trading M&A QX potential the positive this requiring remainder the of market active, support levels there disciplined of through frenzied future was robust

to pandemic, the the quarter. strong are investments back Portfolio calendar past companies evidenced platform new we and underwriting fiscal the remain and past this platform management engaged three back follow-ons remains in investments have as this bar notably, an four invested including sheets to balance high usual. by capital portfolio finding and new fiscal quarters with to of actively onset two quarter previous. important borrowers six Our with continue with opportunities nine seeking Follow-on models our to as with important existing demonstrated continues in business companies. origination added XX Most be Yet deploy critically we record since avenue as actively and QX. we in deployment, in of capital and be

general uptick themselves that have generally positioned found the the recovers. have in economic they economy benefit We from as to activity

our All back been payment according of terms. on has our accrual. their Taco are placed loans portfolio paying to Mac in

now so, any prior having And whole across the we through portfolio. non-accruals not COVID, in to and to have zero non-accruals addition

by means the appreciation unrealized fair assets million COVID We an also net portfolio in has realized basis believe of reflects the and We with more X.X%. performed associated appreciation its unrealized additional million recovered portfolio industries overall recognize that of portfolio last which performance strong year and certain enterprise our supported overall than is gains $X.X lien our its debt stress in values quarter, durability. strong have historically this cost overall $X.X bolster in first of in well Saratoga's situations. by value generally attributes that now that and our the exceeds XX%

We energy or have no exposure. direct commodities

In of of portfolio strong addition, our produce revenue retention. comprised historically and businesses a is the recurring demonstrated majority of that degree revenue high have

been XX, of portfolio slide can the you with has realized space cost. stay approach this And respect see a always gains at on net approach our the to the in as of on top Our underwriting. as at to performance our of portfolio focused quality percentage has resulted being BDC

in management top strong and we paramount and to approach of list underwriting the A returns the of of always understand sought its deeply and the into Saratoga, businesses over years. characteristics. for directly as the business ownership each invested with appear producing long-term the of past risk-adjusted, positive at three at the assess culture endeavor strengths We and possible to accurately over best BDCs term. remains the accretive We company shareholders underlying thoroughly only investment long with as eight its a our that to capital objective working have had durable and the are order business model. strength a number We

that the that selectively highest has our rating we're reflects Part rating opportunity our COVID portfolio of we equity our not been investments. at and attractive to upside continue when but equity overall potential. that underwriting strategy. that given possess quarter-end. and as in believe of shows We requirements Our equity make This attributes intend our protection co-investment the businesses coinvest of XX% returns. equity yield credit augmented experience of strategy to quality debt portfolio credit overlap strategy there's our between only has those portfolio, It those them for internal companies this our the served when impact portfolio our significant is meet in strict as also our investment of and meaningfully that

slide exceptionally with modest a company maintain our consider investment. Rather, leverage value businesses the debt from leverage last overall at for models isolation. Total strength looking attractive portfolio see will leverage to originations in confident reflecting QX. investing capitalization relatively slightly profile. QX profiles are from where to of times, industry leverage. sustainably on That volatility, business able you the leverage was dollar decreasing credits focusing Through on said, in new calendar return X.XX enterprise that multiples never in can strong and Now of risk increased exceed XX, been portfolio we slightly we last the past and have quarter, with we lower

long addition, this generate consistent illustrates new despite market In investments the ability term, dynamics. over our changing ever to slide

companies three follow-on During nine made calendar the added investments. new we first and portfolio XX quarters,

our XX, led new slide on business relationships relationships experience for mature skill to have to set, continue and development deals. that focus to on our strategic new Moving become sources team's significant has and

focus Our a attracting deal opportunities. percentage reflecting dropped initially to number quality efforts sources recently more on of of COVID, our to but higher due

year pace. Our There XX sheets measured expand as grow give deal of especially is this formed year's progress showing of term to issued continue the our up to last competence we our calendar goal. one-third over term that last nine as over of XXXX, are months that is a of we months efforts. XX first are is shots that past on new us relationships, XX generating in more is from year markedly the What and our notably, to over newly Most can development reflecting the Similarly, sheets four environment, XXXX up well calendar term. investments our AUM steadily that pipeline is robust. during us portfolio months we the are factors compared pleasing as from number long the business XX notable company the issued

as First, investments have evidenced made to our relationships. reach several we by continue we is newly recently marketplace, the with grow into formed

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see can investments Saratoga quality QX on you the is solid. repayment our management gross credit IRR XX%. portfolio The As of on in remains IRR realizations. million by single of overall on an had Passageways slide XX, The unlevered made XX.X% $XXX realized Investment team

chart our to fundamental IRR in-person dependent can are interaction. those total million due on and total remaining investments The CX fair Education investments, the our of is are unrealized remaining the two combined performance. is now unlevered unrealized to XX.X% management. weighted more gross our in changes of We Even SBIC both $XXX the X% above cost. their value the and see overall appreciation view largest COVID which on markdowns, with human current believe its long-term On BDC Saratoga portfolio right, not unrealized Group do Nolan our appreciations took of you over since

yielded realized Our investment approach returns. has exceptional

invested million slide Moving license see can first our $XXX as you quarter-end. on with of XX, funded, is to SBIC fully

equity, license are are debentures SBA million cash already in deployed. million which debentures funded Our with and of million the focus, due been equity of back team the $XX.X remain of preserving competent $XXX of our SBIC and million fully There of we have $X.X with intensely underwriting over future procedures. has still review remains portfolio currently is of such the Saratoga. against activity $XXX for COVID-XX second quality itself remain really platform be and times concludes I'd and that primary and our the and against seeing of turn now. the last focused available of When comparing Chris? year, value like durable this way to our high flux, proven world and impact both resilient especially asset team, And while levels the This our underscores continuous in of has to at my equity. to Credit in the And we call quarter portfolio CEO. been market. diligence our strength the to on much overall as

Chris Oberbeck

Thank you, Mike.

the factors. of and this for Board XXXX. Directors This general considering a share slide $X.XX on Board will outlined last $X.XX to or at quarterly declared per quarter reflected a The XX% company basis, the of both August dividend reassess ended XX, Directors least from As on XX, an quarter. increase continue economic

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Our longer-term performance outlined slide. next is on our

all both time horizons. Our three BDCs top and five-year of respectively returns place us in the XX and XX top for

performance the index, return return outperformance XX% of can key over and slide Over specific metrics. years, see exceeded broader the our to context return. certain years, XX% XX% the past exceeded greatly our the further industry XXX% while On return five the the the three our in of XX, you past index's placed

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and include and make accretive support historic of at share both; low private to SBIC investments; the which and of characteristics return a grade our cost historic attractive one BBB+ the us receipt ownership industry our industry in accompanied of public by with investment and providing XX%; risk profile. and for NAV to earnings quality differentiating maintaining second levels long-term yield AUM access growing management issuances; NII the portfolio highest X% putting of of solid bond expansion liquidity long-term per cost active share Our rating sub per liquidity; license industry-leading the and an at and top and NAV and on equity strong high a

portfolio balance our serve remain Saratoga including oil that sheet, that and like the battling to current their addition, for In investment underwriting closing, strong contains for would credit environment, gas to term. experienced shareholders questions. us near the quality ongoing minimal in like conventionally and will standards of and in historically again industries, high the and in benefit historically liquidity call and I well tested our to open thank We management strategy exposure team, all cyclical challenges industry. In through confident capital now structure the long shareholders will support future our our and and would the


[Operator Instructions].

of from Rowe line Hovde. comes question the with Bryce First

Bryce Rowe

wanted maybe with Mike I start to Chris. or either

activity here move then, effect? describe repayment are potential in tax adjective that kind quarter the we robust record as with And You've we here you you've calendar changes against the two obviously any an the already and origination August you the highlighted described as activity do here record of in and as on as describing perspective kind the all law used the last and that near we the robust fourth of it over to quarter quarters How pipeline? from XXXX, juxtapose taking as pipeline and into repayment lumpy. activity the had thoughts

Chris Oberbeck

and start on it with then to I'll pass Mike. that I'll

than sort broad they weddings be like over. a and casual were because not but postponed last taking as it's the held to about are overview, weddings. this Just There place year all of more year it,

of activity demand in COVID. from lot in think of pause, a transaction that activity the up long if last I will, you year there's pent because So,

have so, opened And kind all the in the in valuations way, up a many in. markets of major accelerated of we've that invested businesses have

I There was And in increase valuation. pent up exit so, an there of sort was a demand, think.

are their seeing owners saw to So, of a still opportunities them. sponsors businesses lot and equity and of sell

deals, I small year the board. big everywhere. think across this deals, record M&A activity The

lot of a just So, activity.

other card the that's decreases management. paid side, business, business, So, the a report under in impact back, an the our assets the hand, our you on it credit that repayment made good get you that's investment. on when obviously, But because

originations the our strong. think other side is I very are

as of buy side, tremendous also activity amount the So, the activity a sell there's on lot side. there's on just of

we're these quarter calls and in to because quarter. buy relatively means our these the to out company pretty pay it going we're in we pay We We fortunately, agreed get recent say, to sometimes ahead were sell we've on so, week in side it lumpy or a decided off to a predict. can't a we we're month, in the over again, say people say the going far And and off they you most And things – balanced we going oh, are and process. sell before.

months might So, our predict – month can't of it predict be absolute we visibility three to out in necessarily. sort one We it out. able

So, we got some visibility there.

working of some with our us. companies are And

we've able had the predict So, to they way overall then sort we're a up companies. think both put to But that, that. really to I sides. have is And for to redemption acquire decide active to not on a are decided we long decided companies market comment and themselves in not and that very winded of say sale side, the on

new of both new our the in And presentation, seeing importantly, portfolio of new relationships. secret share very new new we're our really is the relationships so, important been as creating platforms but one investments, up highlighted to to because elements often wind growing – was our performance platforms Mike? platforms. new and And and that's

Mike Grisius

on me Let that. expound

were side, the origination the market, is in origination as probably pandemic, quarters. for the there's the of of and On you've a the there's getting One are and a robust last we're referenced, Chris factors now people the period, sidelines so there's that past seen lot on lot driving much that demand, that volume pent up that couple transaction of more two period.

think And – But partnership volume And starting we're long we expanding and we're our of right set. in and job of to very think benefiting we're that relationships. the in flow important from good done so, in to development, oriented. think we recognizes the of business, creating of we the that really business is historically is is way We've is that. transaction focusing we're a making of more thoughtful growth marketplace because see pleased the this our by We're on specifically really and the run thing, and fundamental that what it. thing, the we we're benefits do the investments the relationship very business the second

As we done And to relationships that new the try support a out in seek we very relationships things, we've they to those invest the repeat get result effort capital successfully. But made a marketplace. have. can that of that as from a lot of we we've concerted business

instance, I last So, was new in of XX% think our from quarter, production relationships. this for

certainly, in and but as so repeat continue we've historically, will just So, as are of try some lower groups. those to and relationships middle We're we have steady. And done control we given play. much though, is confident less talked activity It's never do opportunity. prepared if factors and some highlight, of on you in business the more saw can payoffs, when at up over And equity out at just you that to really But other much and then, games bears develop we a never our upside and we and Passageways more lot that that invest. we Chris us co-invest more we're reflective And really feel activity. equity down we us, end in I unpredictable. fruit if be and that, the would that when of well. there, to where kind market very as deals on grow seek payoff don't always finding But opportunities with we strong stable, that'll to you investors, many kind of as and our we're the predictable going something the the realized add referenced, more do origination on lots smart pretty which just objective, the And high to it think going invest side, the both remarks, that for we of originations, market of a to from that is where markets activity follow of reflective will, in see about deals there. meet do. it's this that's capital that's quarterly most keep means in to what certainly for go quality volume well that as much done there's companies this is year,

going and in origination just run, there's trading. less expect payoff little there's be But that in So, many would But as this feel are the a add do I'd on average I because with a transactions curse is many a in as long to outpace payoffs. the that. predictable. market higher, general, with robust But, just volume our we can like blessing so those a activity. a companies so bit and we that

Bryce Rowe

into segue question. my follow-up Nice

quarter, last remarks. one-off preferred in statements, you highlighted And financial income think a your prepared carved dividend I the of standalone here the is. all investments and out equity then in couple you've what

there two in then, this off coming looks equity those preferred one the a income made of is the that August quarter. was of income the source in debt you was like to the off the here see equity dividend I of of understand quarter, we'll chance investments quarter. addition interest to coming investments? those It And So, that here income some investments dividend in complementary exited hoping the August the

Henri Steenkamp

that three nature that off that receiving We was quarter had me preferred actually investments was Let and income. equity question. dividend in on start last

and was interest As quarter, We with although like nature. It's and income in repaid nature. we're obviously recognize in that, it's you income, left [ph] recurring dividend noted, two Greenfire this return during investments income this that. not has so one,

so that reason, thinking interest the the that dividend dividends as a mentioned, income, recurring on line can as and obviously start own an its we included investments stream, as revenue basis. a rate. see nature on you more guys P&L it quarterly you So, it's recurring the not as highlighted on these investors on like of in schedule of all and of And it are that in declared for

a reasonably the on early this investment If to that it's of you repaid, those primarily related in bit think investments. two third related quarter. little was There's was to that quarter, but the

being haircut, So, with basis small quarterly recurring in thinking you on start of that a nature a income can forward. line dividend going as

Chris Oberbeck

And add let Bryce. that, to me

the opportunistically. good structure really looking thinking instruments. the capital or returns case. discussed broader various instrument I bit is of thinking what where these occasionally, other more preferred perspective, We're debt a in But, or we opportunities Just to from way attractive at get a we Most we at like always And think preferred in looking businesses in still position. quarter the spots. We're last a an back senior find were these in adjusted investments in feel deploy opportunity capital of to can a bit more we risk it's opportunistic. a invest

with more it them I that not balance lots we'll those And it general. but kind measured that approaching way future, should see is be to a think to the the going of think our for way we're in our expectation fill in sheet you look may about of going you of it's continue of to opportunities. It's them.


Compass Casey from comes from of questions Next Alexander the Point. line

Casey Alexander

questions. I have particularly couple Nothing a frankly. compelling,

the not on of Saratoga in credit historically reliance quarters. seven this on last Henri, for Madison all, of had of a probably facility. as fact, the First had balance And credit is matter it's has much the eight facility, a new Capital zero

So, as credit I'm to you fee. curious the facility, credit minimum some draws the why on new non-use agreed on to form of opposed facility

Henri Steenkamp

needs it intra Firstly, cash either used times timing during the sort the years, periods as you although we, that we've or couple at there used quarter we've quarter of have this for had. differences have flow past note, where over minimally of been

necessarily BDCs an sort has drawn. wonderful aside, like this But relationship ability and I the fee the is in draw that guess, SEC away because a credit it of, not facility appear use to the had with of of had all to just increase of of sort undrawn we this rules. over it whatever it with facility, thought still fee week makes of opportunity in at see we a opportunity – There us. an have the a we on There the on balance draw, of the to, the to where of the We potentially of sheet. been come years, little most as drawn time, have that invest you'll it's is more us putting the associated later minimum looking down I for obviously, is with substantially but a that So, will as a than capital Obviously, Madison here to actually at go cost a would on as but the for quite think new portion bring the time us point opportunity credit facility, cost minimal. increase still undrawn drawn still it, most will an use lower and it's the a it, required return out sense the sort usage of allows X-K capital view it. the facility with

Chris Oberbeck

of we draws importantly, mentioned are weigh that structure, covenants safest, on rate also show know, quarterly could fixed maybe type of there just type I I the been But no we those up statements. term, well, Henri mostly have if financings, in think at a on don't looking as Casey, our lot have things. financial this long think bond capital as which our very you that and

bit. However, a changes then the those are those fairly chunky and market for

a commitments still robust swing that commitments lot of forward don't we be making we moment, place. a can hand making have we line cash at necessarily like have we comfortable know if and because this in have on and pipeline So, we're we

run our And payments we and that so, the impact have to allows would always liquidity. of large us balances negatively. it a cash lot drawn without earnings interest But

been well. do a sort to facility of a enhancer very enabled our that's very, us So, been liquidity a standby of and it's important it's sort very business

insurance are the maybe undrawn, less an example. and was do, ratio drawn most sensitive the banks in for Madison who they of have been New don't I facilities York with think of type reporting that fortunate subsidiary undrawn as institution, we've terms that same they In capital to because a of Life,

bank. very are It's They just kind to not some a the market they have comfortable what is. not a non-bank nonetheless, with drawn. of So, facilities. are that's largely most is in like draw. undrawn banks And of facilities, them interested large they Encina level facility. But

think were kind more I benefits a were I so side facility non-market importantly, that think we carries plus we forward able with of life. that this of the from Madison the very facility had Again, draw was many facility. we've have to of that fortunate our minimum

very comfortable So, this this and facility new with new we're very, all relationship.

Casey Alexander

by My feel the Mike, private the were were some If transaction? you give driven Passageways sale? some put guys were next question about. going for driver you is from that how Mike. or around you us that you sponsor brackets can Was just just along that equity guys and came can

Mike Grisius

minority We sell were equity of benefited sponsor offer we group and a business it. very investor with. private a in they a from all we support to compelling And that a got have the relationship good very

a was in exit. But where debt more providing most with well. were It grow to the driving conjunction with then, we're we as the capital not do, their consistent in help business. them what good we find business co-invested often is equity which So, that, we

Casey Alexander

more for Mike. One you, question

a in this years was You're twice working the balance for increasing help some to us you three balance ago. have scale? way with sheet challenges the of a your sponsors sort the investments what And it investing size Can of keep does give size feel of it that's entry funded of to a you as from new into increase size? these fully in sheet

Mike Grisius

question. middle in in billion and market are really can town, sweet of are a middle lower adjusted the throw, people sometimes especially really be stay think market end returns we But that much our spot. there. companies play We where size. get is dollars risk better we we end the middle our anxious of market, We can the lower what would to It's good call

can actually You get real covenants.

we of kind We've so, check million sizes initially really off many greater had we sticking to we're our know benefit it investments investment And and the started ones it grown, of the the have as performing capital. our of to our small, is support we've them more $XX to are of capacity that expand well, sheets the balance box. knitting. then, you confidence less even best especially well, after of well, than company And having fairly out with done some see if the

intend to that. we to continue do So,

take to are have recently, relates courting them. these new a get time know it relationship. of quite that and As can another same relationships new way for just week last them. the for closed a tell these And been instance, folks bit you, really that would they in the We've fact, with of the well, in way three the much that the with court better similar deal And to reputationally group years. kind be won about that understood gotten I to just we us. terms. relationships, feel they we like group in because to better deal business and same them Know very basically And and deal, was pricing other lending we know exactly felt were than partners we

continue the that to marketplace going in we're in So, to play manner.

we've gotten take can larger bigger, on certainly, check sizes. As we

as our that's So, helpful base equity well. we've as expanded

terms as believe up bring how people we much to underwrite. know of quality And We culture ranks, and anybody, balance and underwriting as in not we terms larger very if of bodies apprenticeship it share in we've sheet, best business. view in add we've in the so and we credit as the marketplace. the junior continued people, can a that good invested our an where what In an managing we've substantial got resources

capacity so, but this manage it have the so. we And significantly balance continue to to to here. not in we've only we do beyond got think And resources at grow of that size, we sheet plenty invest

Chris Oberbeck

to others, for including and solve need lead syndicating able of more early to commit allows out underwriting point other balance deals one to much being our to marketplace. and Just in where can be we better larger the also our commitment that. larger more that they can In things and sheet a to be where, actually look that a of and tranches there's much sponsors maybe sizable this we can problems to we lot pieces is equity words, us pieces, like

– as some our of maybe some situations. stretching of much used some clients of their scratchier makes to, and to as our not relationships it we're we serve So, in us

Casey Alexander

the at Michael, thank to in new breaking that new with you made sponsor a know one least investment for a news. now quarter. company new portfolio you've We

us news there. breaking for thanks So for


line Robert Next of Dodd question comes from James. from the Raymond

Robert Dodd

the Congrats appreciation questions. of on to my And two theme quarter. following I'd there. on like Kind express Casey

liability origination the side, well. the then on on side as First the asset

market in seasonally Given having – September origination seasonally quarter, robust. the activity you've color seems necessarily quarter though with fourth – not and given relatively slow a quarter last extremely this fiscal, the quarter second to the platform highest even be ever, an of in activity, year-end, What calendar, represent here probability for exact is the this QX, I'm you would going would history? looking example, highest this for you probability is Saratoga say not What calendar the number. level origination – the to

Chris Oberbeck

a for Our the to in origination tough thought own I answer. fourth thing quarter, that's us

over to outpace sort our payoffs ability in The what term. our said long from benefiting say the can where market, relationships don't changing. I feel think that we impossible I very earlier it new things I in of of to is But that confident see terms robust quarter we don't for comes exactly is out either. the a say. see invested benefiting in, from we And that changing that we've that

things trying we're on one would say we I about we the returns. that would quarter. of the many outcome, focused then as is think in thing after right we as can, the our after think never is to opportunities find laser just a volumes and go shareholders remain in favorable. marketplace adjusted The outcome offer the terms is going I to think And to to that try quality the ones that going want us but risk

but well to respect, in that things those are it's So, lined impossible really. say, up

Henri Steenkamp

well And add on just have years. growing We've very that, and the said, had quarter in could Mike But the roll a right. can organization, I And consistent the our in if be as of over I we given Chris, we're been there is past. we're to be up in many variations just there it. records a setbacks trendline to very I I any we're because as think can than growth think growing and that as setting a lot organization. many, larger think quarters growing

trajectory think of but about is we're our based We different But we've number want one, setting statements, records on make our sort any focusing in number forward-looking metrics, don't our history. course, confident trajectory in our two. So areas. quality, our and growth equity on I earlier, again, to return very what on of key many close talked credit

losing focused profitable And on robust levels growth. declining we're at even too. are deals in participate we're So, very we because certain to these markets,

So, there's a to want play. of on to judgments we going little that too, as where we want bit us and play making to how

Robert Dodd

kind your happen. the warning On much – shrink notice in a Obviously, second environment? the can things repayments obviously of part, Does more partners, you and growth, about there's active repayment? the you would of environment, to activity, say highly period, in this quicker how kind the it this get net

not there kind that a your – market of there? great, environment? in kind that it's Or your is is there does and on does it ever kind wide, of visibility even So, on any how any worse this dynamic that's that's repayments, get color criticism, not that of

Chris Oberbeck

to a offer in hard generalize. real they a processes, go want and you lot it's other negotiated a until then, a it's into periods situation process, they Everyone lot of that sometimes then think about There's is ones really a and and of don't they interest and over – they've more talk to visibility. live, and And time companies of done. lot and it had specific. get I get basically

of kind spectrum. So, a there's

period we've a we're Friday, got in that. like, into process the next and bank year, an going times, off of out thinking and of it's a we've find and half short feedback got updates to we're lot time other paying of on we on going sell and first in we're a investment we're Sometimes

between. situations of So, there's may then, of a – the pieces be sort in lot lot sides the – a of it's extreme. different those of And two

Henri Steenkamp

that said Chris say that I'd all true. is absolutely

if probably On your in run by to they're accurate. like point going even process. you'll in people fact driven that somebody a a process, see mostly margin, feels preempt it's And the is robust the markets,

payoff. be So, it's you might six a that think something for out months

a aggressive. But than the And know really get you at will otherwise. selling they're that's it, people Some the lot before business sooner margin.

Chris very deal out, it's much as think pointed I specific.

have don't you sometimes, And it's of a out. of times, a that And lot quite knows ways kind forewarning. other you

Robert Dodd

question. like the things, some would the you cases, of of part the remain into In Because it next I'm incumbent even I sure if appreciate ties lender to equity one that. transaction. there's to an these

credit, lender these have, like of is a market where imagine you've relationships to of an repayment, incumbent credit. would lower higher, got lender oftentimes good If one you It's to the probability you transactions expand I the In just would remaining active just matter? number of the an or you lot there's doesn't [indiscernible]. of remain as that a in

Henri Steenkamp

bigger. Once capital to harder stay for the certainly it company and see they're a we It's significantly, control there a lot higher upon just before. our transaction of could because a grown credit us is the now is for that change looking had than more was sheet time, in balance

for we afford So, round, say, balance business, sheet, investors. we that opportunity a now in us an partnership larger you we'd that to presents us have correctly with XXX% like your or as raise know hands opportunity get pointed next ourselves somebody. to really it this support to the out, does and like go that it to additional either And

So, well. that benefit it as has

do. so, it's in circumstances, that is try something yes, to we much right the there And that opportunity, very

Robert Dodd

the fees, cetera, Madison. XX basis the of Obviously, terms of et one floor an north with improvement is in the secured in points cetera, X%. Encina terms can, credit of If effectively last all the X%, facility all non-use like the probably actually, on more L I sounds et liability facility plus in, side. But kind buying with on cost, the

seeing you probably lend borrow the is, willing is? grade secured think cheaper – question. to trading. what can you market are the given Encina incrementally One, components to today, are X% heavy? in the that just tied You guy with the little that sub consideration And given at that gap cash those was question, to information I other unsecured the is are other? than institutional institutional or missing your a What's think what running there groups relative investment do to where bonds unsecured not Two a you'd each two guess a and respect the then, to running revolver all just

Chris Oberbeck

Well, I a think couple things.

heavy on We that. now right top are cash of

there's I works. What just a way lot facility we business it is importantly, little talked about of other flexibility. a questions. one our variability But on a of So, credit we because earlier from get the of think revolving the

whatever had make necessarily a time flexible bond variable. want it's some we part fixed time, in this you've bonds, bonds want the more is market We got is swing approach period a issue fixed raise terms. some more that right, a costs being credit of say, don't moment we to And million in us to have us along. bridge or to to if draw in. time over flexible our we've a it's we So, flexibility. and a at given we're something bonds, raise if it The amount – very marketplace to we've This It's interested it able of got all we've help having business. lot that $XX to with time, with it. us fixed – mindset goes a of draw and want not to something do million optimally have we of know. of line a we got we've and whole point commitments you And cash gives $XX of can decide gives reason to that It approach of to let's position, and of got

undrawn the able XXXX. bond flexibility number revolver a business fund and deals. of to XXXX, a bond, on lot deals. last I in to we were when problems there our We in big had the draw of to hadn't was that enter back could year, did of to had of those and the to issue that revolver been of think going us marketplace, in spring if conversations issue result a with June lot an have we that done a able we we allowed But

there's us So, cash allows we to that component flexibility think heavy. than and our better a running do business

Henri Steenkamp

extremely much structure are is our Whether a Robert, been originating building obviously, The I capital also whether this of facilities and just normal to is the lender. a we cost. bank is for this the bank always And with the structure than lender's at lenders sort prioritize cetera, very of a better cost. above assets what would structure important a non-bank add base we And Saratoga. et flexible, BDC, have to that, us Obviously, this is. structure, or is we're at comes borrowing structure more lender. non-bank than recourse that different us, beneficial, But higher facility structures.


next comes Schleien question Mickey from from Ladenburg. the Your of line

Mickey Schleien

the lot opportunity A do to which good of loan just have to wanted first market and or follow up see investments on a difficult pieces portfolio tightened? perhaps asked. in And have is lien help spreads more how an opportunity second out been sell deals? tranche support view could considering the I unit questions yield, tranche how high investment first liens you you of How for unit question. already level do

Mike Grisius

unit the opportunity think Mickey, tranche quite I is robust.

lien be And a tranche somebody first many is change it would marketplace used if will, structure of vis-à-vis done might in the and of the was where bifurcated mezz as kind of many unit of that with or more market deals that bank for first really lien the dominant we unsecured do. many capital a security time, tranche, I middle in then came deals were done. were And supporting lien probably with to first control over fact, categorize companies that this, aware either there lien. you do, transactions. a deals In lender Unit second you're

capital of really see there's you to good And think opportunities to we to we what do deploy in what so, and intend portfolio our it's there. and continue most that's some

wide we're certainly the and We a second right us lien we to for available open those also than have to circumstance. one is market lien dollar do second for higher in bar opportunities the risk. Now,

kind don't be expect big of investments change or there. first been what in And past. with it's a see so, second we We tranche the lien the unit of lien would mix would that versus consistent

a to that of opportunity our something with of able folks is deal, our something it interest lien us, it security might a that if we're well. underwrite, position but first but an maybe of optimizing kind to to, being hasn't piece an as positions, to in do that in open position core as cases, and over terms for our even a have that where been it's relates Now, we're a some and returns, we down have part intent of is develop we selling to in how partnerships certainly full in is time

Mickey Schleien

follow work up to comment, last messy. sell in on to deals those your to up is given still Mike, usually this of with sort out end it's at the just up and a pieces, folks you this that first borrowing time out kind Or are are progress? you set do the like Otherwise, already something of secured funded?

Mike Grisius

good question. It's a

we're where deals simultaneously, doing doing a actively closing been structure. last have out, it, first our, call we're let's We where

So, if years. it's of that a that for unit will. you done a And waterfall, number tranche those has we've

Mickey Schleien

attracted the Palace of in food be quirky can risks performance. sort retailers of They underwrite. typically curious to terms of what to general offset you that hard their Pepper to sector? are But Mike,

Mike Grisius

you the private get before we're of I question. that companies good and And control the course, are a even It's detail, here. remind into owner not of I will, these some

went what We, share. that with on, these we're eyes amount business a just really certain into that result, have a can So, and as But limited our there's businesses this aware open you well commented wide we say some this, what model. interesting of – our I'd can of in convinced became terms of a underwriting of volatility. is

on many their and advantageous the kind can some has add of they if volatility that underperform, And structures can This they're some tied into business they really to of in obligations. say One of our underwriting businesses, experience structure. they're that, structures respect. saddled I things that with can that of good lease those a locations trouble in is where deal those where take of capital into the is get

these one amount the how that flexibility in a they the money less of And on leases. terms and of so, structure of is their Their have it they terms that capital fantastic open of that. just lot there's return of in to takes

structural reasons, volatility doesn't to So, we other those well market as in bright became terms element that and that ownership we the group, is comfortable feel can those have a knowledgeable just models, has we in think it's like variety this that features. one the quite relates think, its and to as we it its performance business business a business of quite of position future. that for a investing add And and

Mickey Schleien

estimated of of More last Henri. housekeeping bit CLO, that the more a of noticed strong I the a on is the you question. comments given perhaps on Interesting One are for in little how and terms counterintuitive, question lowered things yield leases. fundamentals which defaults nature.

So, on any insight what's that us can into there? going you give

Henri Steenkamp

your other balance say the driver you specific quarter, probably stayed I And and quarter-over-quarter. from probably interest valuation, interest portion change biggest then it the the unchanged distribution, the output increased the that of and you the And interest the quarter's from function relatively than our was projected. how the larger valuation of you got prior – rates that nothing Mickey, will. or I principal then, receiving obviously, would would cost And the just is a during a as know, increases cost income rate is saw the remaining from say in large works if equity than accounting distribution you've basis rate. equity principal,

lower. the the slightly And up, went that so sort rate an as of output drove because principal

the performance, that. anything. really was our anything It's driven probably by else. or that largest So, more driver of really wasn't if It performance


from comes Securities. B. Sherbetchyan line from Sarkis of question the Next Riley

Sarkis Sherbetchyan

cash the keep that [Technical cash Difficulty] level curious just on on repayments. appropriate you as to view the earning into I'm what assets. versus pulling of books

Henri Steenkamp

how moment obviously missed the repayments, don't remaining cash is are of on things or because just at the bond level just, problem first the the a sort you think with from cash. of We did. what have offering we but that part, I We've asking that we bit of little issue have

quite And cash. of bit a so, we have

it quarter-end, was deploy. at million around $XX think, I to

especially million timing because, I we the relatively terms to facility, $XX.X can comfortable which credit the lot access if of and $XX of cash million that obviously, need, we again, to think if pretty course, it institutional be that not good market, all additional about the we utilize liquidity there's a concerned the more facility of the we the with of facility only need, about we cash if additional bond is the at allows availability a cash have really hand a moment. needs. feel us with bond for baby there's of then, market cash bond credit used. From I'm perspective, And available have the credit on hand. in or cash the having have, feel capacity And drawn, a

Sarkis Sherbetchyan

on so, level my guess cash to and is I think Henri, was my here? I cash? might line sheet a in appreciate balance chopping wondering, that deploying be essentially cash what I the books think on you really that you're appropriate right what's question keep spot good to up. But super more of just the the do liquidity the compared to I'm keep

Mike Grisius

constantly here, a It's I about. think something very maybe thinking jump are I in could if Well, we question. that's good

capital markets quarter relative been we many pretty a the we've is period have to capital to within in although the when markets, deals that for time fortunate of of pipeline going as think close look, this have close, And think times access kind have a and our how what forward there are we second capital given of I we our like to do XXXX, good that. to example. are

And be want to to our business. so, continue we do able to

we of the line credit. why that's So, have

to it's I in think terms, we facility, upsize $XX million ability million. the a of notice to have the as but you that some $XX

have we the to So, of ability have our revolving line increase. credit

cash that on so, less at little a time. to hand allows And us maybe with the run

we comes cash your from, have where repayments. depending think redemptions, I also right, have we

coming repayments have in. we So,

have back. we coming about some visibility cash So,

We cash going have some visibility on out.

given that exactly. very paying at even that's million dynamic X.XX% anything and up not that's us came And $XX matched a informing offering of your on but on and decision you're efficient, well-priced of have the the so, or is million books, a very that things a cash earning being something where making. from you depending you're if cash it's $XX is X.XX%, cash against bond But obviously one right, we're

And a to there's arbitrage negative so, cash.

minimize And to our negative is arbitrage. Henri, points? then, unused want line basis the you XX so, And fee,

Henri Steenkamp

to then basis basis Yeah, points. drawn and we're XX% it's points XX until it drops XX

Mike Grisius

but expensive than XX and we're So, level Again, is about relative things a safety will. for points in that we have which are general of of paying is managing you those to cash XX standpoint, certainly the all some between but if considerations, bonds facility, the sold fund, of cash less basis talked then process. other negative from undrawn running is good to we've cash ongoing an arbitrage to


further no questions are I'll back Chris There at Oberbeck hand over this closing remarks. it time. to for

Chris Oberbeck

we you and thank you. forward everyone next with look appreciate quarter. appreciate us we for joining interest to Well, We your today and speaking you Thank questions and all.


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