Saratoga Investment Corp. Announces Fiscal Second Quarter 2027 Financial Results

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Our second-quarter results demonstrate the resilience of our platform despite the continued pressure affecting private credit markets. We grew assets under management by 2.1% to $1.150 billion, generating $37.1 million of net originations, while adjusted NII remained relatively stable at $0.46 per share including the cost of our recently refinanced capital structure. Although company-specific valuation adjustments, most previously highlighted in Q1, reduced NAV during the quarter, our core BDC portfolio ended the period only 1.6% below cost, and non-accrual investments represented 0.0% of total portfolio fair value and 1.3% of cost, with both the F-Note and Pepper Palace being sold after quarter-end. We believe these results reflect the underlying quality of the overall portfolio and our ability to continue deploying capital selectively in a volatile market.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Continuing our track record of strong dividend distributions, we recently announced a base monthly dividend of $0.25 per share, or $0.75 per share in aggregate for the third quarter of fiscal 2027. Our annualized third quarter dividend of $0.75 per share represents an 18.1% yield based on the stock price of $16.61 as of October 5, 2026, offering strong current income. Originations and AUM growth during the quarter contributed to adjusted NII of $0.46 per share, compared to $0.47 per share last quarter. The modest sequential decline reflected higher interest income from portfolio growth, including new originations and BB and BBB CLO debt investments, offset by the full-period impact of our recent refinancing activity.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Investment activity remained healthy during the quarter, supported by the continued expansion of our business development capabilities and sponsor relationships. Market dynamics continued to be very competitive. Despite this, we originated $76.1 million of investments, including investments in two new portfolio companies and nine follow-on investments, compared with $39.0 million of repayments, resulting in $37.1 million of net originations. Approximately $9.2 million of the quarter’s originations consisted of BB and BBB CLO debt investments. While competition remains significant and sentiment across private credit continues to be cautious, we remain highly selective and disciplined in evaluating opportunities given the uncertain operating environment. Our strong reputation, differentiated market positioning, and the ongoing development of sponsor relationships continue to create attractive investment opportunities from high-quality sponsors. We remain prudent and discerning in our underwriting approach, particularly in light of the current volatile and uncertain environment.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Saratoga’s overall performance is reflected in our key performance indicators this past quarter and year, including: (i) an increase in AUM of $23.9 million, or 2.1%, to $1.150 billion from the previous quarter, and $154.9 million, or 15.6%, from the previous year, (ii) NAV decrease of $25.9 million, or 6.8%, to $352.6 million from the previous quarter, with 49% of the decline due to portfolio adjustments and 51% due to excess dividend distributions and share repurchases, (iii) LTM ROE of (1.1)% as compared to the industry average of 2.2%, (iv) adjusted NII of $0.46 versus $0.47 per share last quarter, (v) EPS of $(0.41) per share versus $(0.42) in the previous quarter, and (vi) total dividends of $0.75 per share, unchanged from last quarter and last year.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“NAV per share is down by 4.6% from $23.23 per share last quarter to $22.15 per share in Q2. Of the $1.08 per share reduction this quarter, $0.90 per share was attributable to unrealized depreciation on investments discussed below, and $0.30 per share distribution of dividends in excess of earnings, partially offset by $0.09 per share of accretion from net share repurchases.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Our total $1.150 billion portfolio was marked down $14.4 million during the quarter from realized gains and unrealized depreciation. The non-CLO portfolio had $15.4 million of net depreciation, driven primarily by $13.1 million of markdowns in Madison Logic, Exigo and Chronus, reflecting company performance adjustments, and the sales of Gen4 and Modis that resulted in a $1.5 million reversal of previously recognized unrealized appreciation, while other marks reflected a combination of lower equity market multiples and changes in market spreads. These declines were partially offset by $4.5 million of unrealized appreciation in Zollege. The CLO1’s F Note remained at zero fair value, the JV was written down $1.1 million, representing primarily the effect of $0.8 million of dividend income that reduced fair value, and the BB and BBB portfolio was relatively flat. We also recognized $2.1 million of realized gains, primarily from the Gen4 and Modis Dental equity conversions as part of a merger transaction. At quarter-end, our core BDC portfolio was 1.6% below cost and the total portfolio was 4.9% below cost.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“During the quarter, our core non-CLO net interest margin increased by $0.2 million to $13.6 million. The average core assets increase of 1.2% and 5 basis points increase in the average SOFR rate used in the portfolio, was offset by (i) spreads on originations this quarter being 220 basis points lower than the repayments they replaced, and (ii) increased interest expense due to changes in our capital structure. Shares issued under the DRIP were fully offset by share repurchases, resulting in no net dilution.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“Our overall credit quality remained solid this quarter, with 96.0% of credits rated in our highest internal category, a result we are proud of given the current headwinds in the industry, as further seen in this quarter’s markdowns. Pepper Palace and our CLO’s F Note remained on non-accrual and at zero fair value, together representing 0.0% of portfolio fair value and 1.3% of portfolio cost. With 81.5% of our investments at quarter-end in first lien debt, generally supported by strong enterprise values and resilient balance sheets in industries that have historically performed well in stressed situations, we believe our portfolio composition and leverage profile are well structured to handle a wide range of economic conditions and uncertainty.”

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment

“As we reach the halfway point of fiscal year 2027, the operating environment remains uneven as geopolitical uncertainty, persistent inflation, interest-rate volatility and concerns regarding AI-related disruption within the software sector continue to affect borrowers and valuations. These conditions have contributed to higher default activity, declining NAVs across the industry and dividend reductions by several BDCs. At Saratoga, however, the NAV decline this quarter was concentrated in a limited number of company-specific situations and does not appear to reflect broad-based deterioration across the portfolio. At the same time, strong BDC debt issuance, firmer values for higher-quality loans and improving M&A activity point to a market that appears to be stabilizing and increasingly differentiating among managers. We remain confident that our disciplined, senior secured, first-lien focused underwriting and well-structured balance sheet position Saratoga to navigate this environment and continue delivering durable, risk-adjusted returns to our shareholders over the long term.”