Saratoga Investment Corp. Announces New $85 Million Credit Facility with Valley National Bank

Rhea-AI Summary

Saratoga Investment Corp (NYSE: SAR) entered an $85.0 million senior secured revolving credit facility with Valley National Bank as sole lead arranger and administrative agent, replacing a $65.0 million facility with Encina.

Key terms: facility size increased by $20.0 million, maturity extended to November 2028 (vs January 2026), initial draw of approximately $32.5 million with $52.5 million available, and an applicable margin of 2.85% per annum (no SOFR adjustment), ~150 bps lower than the prior all-in rate. The borrowing base now includes additional debt investments and cash withdrawals/advances may be requested with three business days' notice.

Positive

• Borrowing capacity increased by $20.0 million to $85.0 million
• Applicable margin reduced to 2.85%, ~150 bps lower than prior all-in rate
• Maturity extended to November 2028 (almost three-year extension)
• $52.5 million of incremental availability beyond the initial draw

Negative

• Unused facility fee of up to 0.75% when unused amount is >62%
• Minimum funding requirement equals greater of $25.0 million or 38% (≈$32.3 million at closing)

Insights

Credit Markets Analyst

Saratoga secured a larger, cheaper revolving credit line that extends maturity and broadens eligible collateral, improving near-term liquidity and funding optionality.

The new Valley Facility increases borrowing capacity to $85 million, up $20 million, and reduces the applicable margin to 2.85% per annum (no SOFR adjustment). It replaces the prior $65 million facility and draws approximately $32.5 million at close, matching the prior outstanding balance while leaving $52.5 million undrawn and available for incremental funding.

This structure improves the company’s liquidity profile in three clear ways: lower explicit financing cost versus the prior all-in rate of 4.35%, a longer maturity through November 2028 (versus the prior January 2026 date), and expanded eligible assets for the borrowing base which increases usable collateral. The facility also lowers the minimum usage requirement to 38% and introduces more flexible withdrawal mechanics (three business days’ notice rather than weekly-only draws), which increases operational flexibility.

Dependencies and risks include the covenant and collateral definitions embedded in the credit agreement and the company’s ongoing portfolio credit performance; those terms govern how much of the expanded asset classes will actually support borrowing capacity. Watch the facility’s utilization, any covenant triggers, and the lender reporting cadence over the next 12–24 months, and monitor the company’s periodic disclosures for exact covenant language and any amendments by Q4 2025 filings or subsequent press releases.

To Replace Existing $65 Million Encina Credit Facility at Lower Spreads

NEW YORK, NY, Nov. 06, 2025 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE: SAR) (“Saratoga Investment” or the “Company”), a business development company (“BDC”), today announced that it has entered into a new $85 million senior secured revolving credit facility (the “Valley Facility”) with Valley National Bank as SOLE LEAD ARRANGER AND ADMINISTRATIVE 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, LLC (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.

About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, and is externally managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Saratoga Investment Corp. owns two active SBIC-licensed subsidiaries, having surrendered its first license after repaying all debentures for that fund following the end of its investment period and subsequent wind-down. Furthermore, it manages a $650 million collateralized loan obligation (“CLO”) fund that is in wind-down and co-manages a joint venture (“JV”) fund that owns a $400 million collateralized loan obligation (“JV CLO”) fund.  It also owns 52% of the Class F and 100% of the subordinated notes of the CLO, 87.5% of both the unsecured loans and membership interests of the JV and 87.5% of the Class E notes of the JV CLO. The Company’s diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward Looking Statements

This press release contains historical information and forward-looking statements with respect to the business and investments of the Company, including, but not limited to, the statements about future events or our future performance or financial condition. Forward-looking statements can be identified by the use of forward looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or negative versions of those words, other comparable words or other statements that do not relate to historical or factual matters. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including, but not limited to: changes in the markets in which we invest; changes in the financial, capital, and lending markets; an economic downturn or a recession and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us; the impact of interest rate volatility on our business and our portfolio companies; the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policy and its impact on our portfolio companies and the global economy; the impact of supply chain constraints and labor shortages on our portfolio companies; and the elevated levels of inflation and its impact on our portfolio companies and the industries in which we invests, as well as those described from time to time in our filings with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which it is made. The Company undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call, whether as a result of new information, future developments or otherwise, except as required by law. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2025 and subsequent filings, including the “Risk Factors” sections therein, with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements. 

Contacts:

Saratoga Investment Corporation
535 Madison Avenue, 4th Floor
New York, NY 10022

Henri Steenkamp
Chief Financial Officer
Saratoga Investment Corp.
212-906-7800
                                                            
Lena Cati
The Equity Group Inc.
212-836-9611

Val Ferraro
The Equity Group Inc.
212-836-9633

FAQ

What are the main terms of Saratoga Investment Corp's new $85M credit facility (NYSE: SAR)?

The Valley Facility totals $85.0M, initial draw ≈$32.5M, available $52.5M, margin 2.85%, and maturity in November 2028.

How much did Saratoga Investment increase its borrowing capacity with the new facility (SAR)?

Borrowing capacity was increased by $20.0M, from $65.0M to $85.0M.

How does the new applicable margin for SAR compare to the prior facility?

The new applicable margin is 2.85% (no SOFR adjustment), approximately 150 basis points lower than the prior all-in rate of 4.35% including SOFR adjustment.

What liquidity is immediately available to Saratoga under the Valley Facility (SAR)?

Approximately $32.5M was drawn at closing and an additional $52.5M remains available for borrowing.

When does the Saratoga Valley credit facility mature and how does that compare to the prior maturity?

The Valley Facility matures in November 2028, extending maturity by almost three years versus the prior January 2026 maturity.

What changes to eligible assets and withdrawal rules did Saratoga secure in the new SAR facility?

The borrowing base now includes additional types of debt investments previously ineligible, and cash withdrawals/advances can be requested with three business days notice (vs Thursdays only previously).