Saratoga Investment Corp., a business development company (“BDC”), entered into a new $85 million senior secured revolving credit facility with Valley National Bank as Sole Lead Arranger and Administrativve Agent, together with three additional participating banks. The Valley Facility replaces the Company’s existing $65 million senior secured revolving credit facility with Encina Lender Finance (the “Encina Facility”), previously scheduled to mature in January 2026.

The  Valley Facility increases Saratoga Investment’s borrowing capacity by $20 million and extends maturity by two years to 2028, while significantly reducing the applicable margin. The Valley Facility also expands eligible assets for the borrowing base calculation to include certain additional debt investments, providing enhanced flexibility in financing Saratoga’s diversified investment portfolio.

Approximately $32.5 million of the total $85.0 million Valley Facility will be drawn at the time of closing, consistent with the outstanding balance under the Encina Facility, with the remaining $52.5 million available to provide incremental funding.

Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment, commented, “We are pleased to announce this new facility, which meaningfully enhances our financing flexibility while lowering our cost of capital. The expanded size and improved terms reflect both the continued strong performance of our portfolio and the strength of our long-term lending relationships. This facility positions us well to continue prudently growing our platform.” 

Henri Steenkamp, Chief Financial Officer and Chief Compliance Officer of Saratoga Investment, added, “This financing reflects a significant step forward in our ongoing capital optimization efforts. In addition to lowering our spread and cost of capital, we expanded the types of assets eligible for borrowing to include new types of debt securities currently in our portfolio. We appreciate the confidence of Valley National Bank and the participating lenders in Saratoga’s credit quality, portfolio approach and discipline, and long-term strategy.”

Key Terms:

• Reduces Applicable Margin: The applicable margin under the Valley Facility is 2.85% per annum with no SOFR adjustment, which is a reduction of approximately 150 bps compared to the all-in rate of 4.35% including the 0.10% SOFR adjustment under the Encina Facility.     

• Increases Borrowing Capacity: The total size under the Valley Facility is $85 million, an increase of $20 million as compared to the $65 million under the Encina Facility.     

• Extends Maturity: The Valley Facility matures in November 2028, an extension of almost three years compared to the January 2026 maturity under the Encina Facility.     

• Lowers Unused Fee and Reduces Minimum Usage Requirement: The unused fee under the Valley Facility is 0.75% when the unused amount is greater than 62%, or otherwise 0.50%. The Valley Facility requires a minimum draw of only 38% as compared to 50% for the Encina Facility.     

• Expands Eligible Assets: The definition of eligible assets under the Valley Facility includes new types of debt obligations as eligible for leverage calculations, which were not previously eligible under the Encina Facility.     

• Minimum Funding Amount: The minimum funding requirement under the Valley Facility is equal to the greater of $25 million or 38% ($32.3 million at the time of closing) of the Valley Facility amount. This compares to a minimum funding requirement of $32.5 million for the Encina Facility, despite it being $20 million smaller.     

• Enhances Flexibility on Cash Withdrawals and Advances: Cash withdrawals and advances may be requested or made on any date with three business days advance notice under the Valley Facility, compared to the Encina Facility, which restricted withdrawals and advances to Thursdays only.