Saratoga Investment announced the U.S. Small Business Administration (SBA) issued a green light or go forth letter inviting Saratoga Investment to continue its application process to obtain a license to form and operate its second Small Business Investment Company (SBIC) subsidiary.
The success of our current SBIC investment program has contributed to the improvement in our financial strength by expanding the size and quality of our assets under management, said Christian L. Oberbeck, chairman and Chief Executive Officer of Saratoga Investment. A second license would enable us to use the 2-to-1 leverage, lower cost of capital and favorable terms inherent in the SBIC program to grow our asset base by the permitted amount under the second license of $112.5 million. The investment strategy of focusing on the smaller, less competitive end of the market would be consistent with our first fund.
If approved, a second SBIC license would provide Saratoga Investment an incremental source of long-term capital by permitting it to issue $75 million of additional SBA-guaranteed debentures in addition to the $150 million already approved under the first license. These have maturities of ten years and have fixed interest rates generally lower than those of comparable bank and other debt. Under the regulations applicable to SBICs, an SBIC may have outstanding debentures guaranteed by the SBA generally in an amount of up to twice its regulatory capital.
Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an SBIC license, or of the time frame in which it would receive a license, should one be granted.
“A new SBIC license would add to the financial strength and liquidity of Saratoga Investment,” said Mike Grisius, president and chief investment officer. “Our portfolio of investments is well diversified, with no direct energy exposures or write-downs to date. Our net interest income per share and return on equity are reflective of strong risk-adjusted portfolio returns, and our dividend yield is continuing to increase. The second SBIC license would be accretive in all aspects and augment an already healthy financial picture. We closed 14 investments in 2014 that supported new and existing portfolio companies, and this year we will continue to support private equity sponsors and companies with a variety of value added financing solutions.”
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses.