- Saratoga Investment Corp (SAR) reported a solid QQ2 2026 (fiscal quarter ended August 31, 2025) with notable NAV strength and a disciplined deployment stance in a challenging lower-middle-market environment. Total assets under management reached $995.3 million, and NAV stood at $410.5 million ($25.61 per share), up 3.6% QoQ and 10.3% YoY, underscoring robust portfolio performance and NAV accretion despite macroadjustments in rates and spreads. The company highlighted continued NAV growth from the previous quarter and NAV per share growth, supported by a strong ROE and resilient credit quality.
- Core profitability and liquidity remained favorable. Adjusted net investment income (NII) was $9.1 million for the quarter, or $0.58 per share, reflecting the impact of lower rates and repayments on a portfolio largely comprised of floating-rate assets. Management underscored that the quarter included $52.2 million of originations (including three follow-ons) and accretive CLO/debt investments, alongside continued deleveraging and a cash buildup (roughly $201 million) available for deployment. The base quarterly dividend remains at $0.25 per share, i.e., $0.75 per share annualized for 2026, implying a high current income yield given the stock price context (yield guidance cited at approximately 12.3% based on the Oct 2025 price).
- Balance sheet and liquidity are a notable strength. SAR reported $407 million of investment capacity at quarter-end, with $201 million in cash and $156 million undrawn SBA debentures, supporting potential 41% asset growth without external financing. Net leverage, net of cash, was highlighted as materially supported by liquidity, with no BDC covenants pose for stress conditions. The portfolio maintained a materially low nonaccrual rate (0.2% of fair value) after the return of Xolage to accrual status, leaving Pepper Palace as the sole nonaccrual at roughly 0.2% of fair value and cost.
- Outlook and strategic themes. Management emphasized a disciplined underwriting approach in a high-competition environment, expanding business development to broaden deal flow, and leveraging a sizable cash/credit capacity to capitalize on high-quality sponsor opportunities. They flagged CLO BB/BBB securities as a growing segment within the portfolio and reiterated a preference for lower-middle-market opportunities with robust covenants and meaningful equity components. The company also signaled ongoing liquidity flexibility via SBIC licenses and non-dilutive capacity to deploy capital into attractive platforms, while maintaining dividend coverage discipline through quarterly review.