Business Development Company Saratoga Investment Corp. Sells a New Baby Bond

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Saratoga Investment (NYSE:SAR), a smaller sized BDC, with assets under management of just $272 million, has sold a new baby bond issue in a refinancing transaction.  The new bond has a coupon of 6.75% and a maturity date of 12/30/2023 making it a relatively short duration security.

The new issue from Saratoga is $65 million in size and the company has stated the intention to call their SAQ issue with the proceeds.  The SAQ issue has a coupon of 7.50% and became initially callable on 5/31/2016.  The issue being called was a $42 million issue so the new issue will readily cover the cost of bringing in the old issue, leaving the balance for general corporate purposes.

The new issue ticker symbol is SAB and there will be no OTC Grey Market trading since it is a debt issue and debt issues do not trade on the OTC prior to permanent market trading.


We note that we hold the 7.50% Saratoga baby bonds in all of the model portfolios and in addition we hold shares in our personal accounts.  The issue has provided a nice, non volatile, 7.50% income stream for quite a few years and we are sorry to see it go.  Now we will need to find a spot to redeploy the proceeds from call. It is very likely that we will go ahead and buy the new issue for our Short/Medium Duration Income Portfolio as well as the Moderate Duration Income with Zip Portfolio.  Even though the new issue has a coupon of just 6.75% with a maturity date of 2023 it fits the requirements of these 2 portfolios and swapping a new 6.75% for the old 7.50% is not significant damage to the income flow.

Details of this new issue can be found here.  We expect this issue to begin trading in the next couple of days.

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Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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