SAR - Earnings call transcript Q4 2021 | Saratoga Investment Corp

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corporation’s Fiscal Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. Please note that today’s call is being recorded.

During today’s presentation, all parties will be in a listen-only mode.

we the remarks, for prepared management’s will line open questions. Following Mr. to time, Chief call Officer, I this turn Financial would Compliance Corporation’s At Investment like the Saratoga over and to Henri Steenkamp. Sir, ahead. please go

Henri Steenkamp

like to quarter recent to results conference refer ask fourth year call Thank you. forward-looking fiscal with I welcome to the and Corp.’s and call. Saratoga conference earnings most you statements to filings everyone SEC XXXX to includes our fiscal Investment Today’s We would undertake important projections. materially that forward-looking factors will cause actual a during projections. so not for forward-looking be these do statements do presentation and we our to differ statements law. to could from our Today, call. by referencing unless We required update

quarter Relations replay night. website. available Chief who in link X page find a year call Events the for refer release release introductory fiscal through our fiscal today earnings the in IR last conference can XXXX A Investor Presentation A presentation our section our press of will now is to Christian and this fourth from and Officer, call to Chairman our p.m. May making remarks. of press Please I our and to to shareholder XXth. turn earnings over You would like will the be Executive Oberbeck, detail. be few also distributed

Christian Oberbeck

and Henri, everyone. you, welcome Thank

which times, through we fiscal company full and Our unprecedented managed companies months our during portfolio successfully these our a industry XXXX results resilient our reflect and of challenges. proved as XX

forward solid challenges. and experience and recent continued liquidity in the of We potential strong our our liquidity, our year to call. effectively capitalize opportunities levels on capital full improvement to and through most navigate have on positions capitalization results we and Looking reviewing to future confidence presenting inevitable and today's investing, that quarterly look approach us ahead, organization and management future structure conservative

equity XX this and on $X.XX, one NII BDCs the over year full-year this share for $X.XX XXXX of per full of and metrics NAV fiscal performance of annual impact a last X%, of month include grow metric X.X%, return to only of period. handful of Our adjusted share or growth COVID including per

NAV the $XX.XX To of quarter yet. and the per highest on Our represents our share briefly year-end of highlights level year slide X. recap past

X% BDC a we First, XX-month of return maintaining investment our basis, year the industry current a mean strengthen of this trailing portfolio quality, of significantly and our of gross at X.X%. our rating XX% total of on generating value our loan by unrealized X% our high have but $XXX year total credit continue XX.X% a IRR foundation of today realizations gross unlevered end, investments our continuing on quarter end, a to on of IRR financial ahead of our to fair of XX% a above highest equity on total And cost million. of as registering portfolio, unlevered level with

CLO Second, by period relative extending impact this at the refinancing of further the and million, the quarter $XXX QX, under CLO a to increased our to quarter three the XXX management which including $XXX million the upsizing to increase of a assets years. reinvestment in of million included end, slightly from X%

up this Mike throughout investments later. investments and in to originate during demonstrated platform keep XX% despite million of differentiator follow-on repayments both more the with market year, origination fiscal our our has to ability last which $XXX We've detail end. year, a the $XXX year new With again will million of With of is ongoing For new pace redemptions. XXXX. AUM from great challenges, the us. year, this $XXX the many of continued million as we been discuss originated for

paramount for remain balance conditions, economic improving despite Third, us. strength, NAV preservation sheet and liquidity

of Our strong, covenant long-term translates substantial mark-to-market free regulatory $XXX with debt. requirement. non-SBIC of leverage over capital at This with remains end, into $XXX year structure of million XXX% equity million cushion supporting XXX%

liquidity our available our dedicated basis companies X.XXX% year to $XXX million. outstanding points. a five of the our commitments committed with that all debt million, year year cost to strengthens companies are Subsequent liquidity to are facilities portfolio new X%. and opportunities unsecured our support Our current approximately position, also $XX $XXX million in of of of this end non-SBIC portfolio we by almost importantly, fund. issued both existing million lending XXX and $XX currently capital at end, in and is bond cost reduces just undrawn new capital SBICX SBICX The total credit Total

of Finally, April XX, XXXX. reflecting our Board Directors on increase paid $X.XX decided by per $X.XX for liquidity ended XXXX the the quarterly resiliency, overall to February quarter on again and dividend share portfolio XX, our to improved

visibility portfolio to fundamental and continue intermediate will we on We better on least economy evaluate a payments performance. as term our gain at quarterly the basis, dividend

This key ended quarter saw performance quarter as XX, compared the performance to continued our indicators, solid XXXX. within November

versus quarter, quarter. is adjusted up million Our $X.X $X.X last NII million X% this

Our last quarter. from $X.XX XX -- quarter. last X% NII return XX% per share Latest XX% quarter, $X.XX months from adjusted is is this up down this on quarter, equity

Henri X% detail is quarter. more share $XX.XX, $XX.XX Our provide later. NAV up will from per last

years our management X, took at high. over you since than BDC AUM remain the can continue and on credits is XX slide more steadily to quality we ago, As see the risen, of

turn continue to time back available to same diligently capital that, we well as would performance of at financial review in as the Henri the credit over while trend to our working results portfolio. our this deploy the this as call With appropriately and are cautious composition evolving environment. to being like are now We I

Henri Steenkamp

to of base. the remained $X.X our gains, current weighted fee Slide accrual million year coupon from and XX% adjusting Chris. up million February above. highlights was Both ended and as quarter and year originations an easy from AUM quarter. fee since fee last grown last growing yield down the quarters to prepayment from $X.X increase X% X the the share the advisory incentive on year’s for noted $X.XX, base shares $X.X NII X.X% a When largely due weighted income quarter premiums Adjusted compared decreasing unchanged per sequential $X.X Across this was non-recurring non-CLO million were from in last $X.XX quarter by DDC last a quarterly and The XXXX. impact to related Thank offset decrease of due these the per quarter per last when of is period is from that net full performance due quarters quarter, NII year average to share year. metrics average $X.XX share NII you, and partially X.X% primarily Adjusted year key primarily The last up million NII last for each outstanding three is the of fourth has including to share X.X% This X.X% QX. capital adjusted adjusted adjusted last realization reasons ICE quarter, X.X% to for over $X.XX or year. investment was accrual. down from last year. the but last up from common by for XX, incentive yield per down XX.X%, $X.XX investments

million million extinguishment the appreciation And the weighted performance. assets the in quarter, point or $X.XX of realized weighted the been May $X.X the loss statement revised increase investment was first net on Therefore, to the equity the depreciation million $XX.X and increase of of to in loss in total the in primarily $X.XX the relates extinguishment the by portfolio The average of reversal portfolio, the previously first one, fpac since or operations. company last this in $X.X reflected line a net share. The quarter investment of gain operations market $XX.X $XX XXXX. dates of million, $X.X all on now of million per CLO comprised value Saratoga X% in $X.X appreciation in multiples reduction reversed item has loss. on company's debt resulting but primarily million $X.X in net to XX% non investment, unrealized remaining The For improvements net remaining net average sale to million $X.X of we EBITDA that $X.XX the is licence. million $X related a of realized $X.X million million primarily net in a of experienced gain and/or XXXX. in value two, investments in net repayment Elyria. own BDC in spreads, the share recognized the on unrealized realized point shares, reflect; of XX management investments, a its took $X.X of of Adventures primarily fourth loss This hbas net of following per total The per million or portfolio realization over back before million offset of or from Elyria relates

partially As metrics year we five. X% is When last year, share outstanding was adjusting adjusted for on non down gains The of accrual weighted ended adjusted au highlight by $X.XX offset $XX.X capital the a also NII fee Yield from our recurring year was impact last $XX.X net the NII of X.X% for $X.XX adjusted NII m the incentive last accrual from the adjusted this XX% in million from performance year. slide down the key Adjusted per for largely noted XX% quarter down end, also February NII share increase XX, million result year year when EVAs per share fee is a $X.XX was over above, year. per year X.X% decrease in shares on up average incentive and year.

of in per experienced $X.X and which both in increase investments on and offset per gains important $X.X a investments million remains share. net of net million For unrealized on operations net provision on on the the million year, realized million was investments assets income weighted or comprised in resulting was $X.X our unrealized in Return loss realized an $X.XX average The million appreciation This QX. we net $X us. net from gains in and total or share, on unrealized loss realized on indicator $X.X performance by of paid unrealized a of same $X.XX loss full for $XX.X equity, million resulting includes investments.

this we fee as expense million increased in And average expenses an of income the income industry our statement touching XX, debt excise X.X%. our XX since Our particular the have last return the balance quarters. period the tax financing increased the point and for unchanged year, have Quickly at in million also has XX through end also KPIs upward tax maintained. to A sheet how and of Saratoga note assets. based well appendix remained BDC X.X% equity excluding added past expenses matrix management on the of interest and the past on over X.X% net interest of the slide for incentive took average shows historical total year, $X.X And year, quadrupled in expenses, highlighting above was and XX, total trends year. last XX% management from we for presentation BDC as just by run-rate but the $X.X and is the slides XX, margin that months, same the

Moving from was as last $XXX.X year unchanged six, year. on to slide end, the NAV of million basically

NAV of the QX of Looking quarters, XXXX, per in XX point fiscal year and common repurchases XX as X% In $XX.XX one at to by few distributions of in as NAV share X.X% of was stock. NAV also two reinvestment per dividend grown $X.X ago. the $XX.XX made or in from and $XX.XX up million plan, at past end, million million, of quarter, through but have stock X.X%. the was to all remain includes months our $X.X last NAV the share is dividend last company's increase just of from BDC per up $X.X year. we NAV share offset

$X.XX also by The end, a offset net lower XXXX, increase Slide as from and quarterly a On $X.XX year depreciation. for During $X.XX the $X.X and which $X.XX gains income in totalled a XX% were from with consists ATM QX our and slide at This X%, to realized to seven, XX% an on base $XX.XX NII fully an share. by available and ATM undrawn and for the $X.XX very external when at in offset AUM see and of slide the accretive decrease liquidity you increased net for the reconciliation available million shares in will dry financing, to of X changes primarily income, generated of million repurchased and by partially per an of available allows without XX,XXX due cost realized to major NAV NII programs our simple million price average This of outlines realized a debentures income year our and to sequential year last $X.XX in in the share NII debt. accretive $XXX the cash $X.XX basis. creative. were in the FY unrealized BDC of cost per us decreased tax The need $X.XX losses The for programs and noted, with and shares increased increase of changes dividend for at loss per other $XX of grow per facility. the $X.XX due a end declared SBA to NAV of the share NII top, year dilution debentures fiscal and DRIP in under $X.XX significant were of level due impact increase management reduction an previously year. the The from $X.XX DRIP interest per drawn SBA all fees a share by this $X.XX assets extinguishment deployed, the provision us Starting a cash of powder share Madison on million. share year. being per $XXX.X to it that's half $X.XX from non-CLO, reconciles additional $X.XX

years, $XX.X liquidity pleased notes million. $XX And with we overall in is our remain In no due slide. public sheet. end accretive available addition, maturing into debt investment in all that four liquidity the account approximately within taking proceeds our is year fact this conservative rate. fixed and XXXX, Saratoga We million, debt leverage position, especially the liquidity mostly net nature on long-term of on XX, the the next offering March This resulting XXXX closed the X.XXX% to balance our non-SBIC nature of and a with

above move that XX XX% XX, portfolio. our to our slide CLO on of investment investments assets, and positions. XX, is in we'd are million slide review CLO Now assets invested remains lien, quickly XX which first out first composition the like and companies are see on of of On our you X% the fund. in portfolio and in with one our And XX yield excluding our how last can through to yield of BDC lien just $XXX slides X%. Starting core of

But points As slightly mainly below yield end. continued the decline X.X% quarter. short-term X.X% this last LIBOR from year, core as cost. to value was yields is and last floors, overall to of year This increasing Overall of LIBOR fair by because above increase already decreased quarter. our to this XX X.X% with back our portfolio to X.X% asset basis demonstrated from in

XXX reminder, floor. a generally is lowest As basis our points

impact interest So we do in further not LIBOR expect greatly decreases income. to see

Our performing. is similar CLO and CLO quarter, yield our of XX.X% and to is current last

remain investments in well geography. as terms of diversified our by XX, slide to highly as Turning type

in $XX exits of quarter. increase million XX and diversity resulting new the in investments represents. portfolio breadth On had $XX plus follow-ons a our you in and industry see that past and the in of XX, quarter, million five can we two amortizations, net million $X.X During the for made portfolio investments slide companies

education and on distinct industries, healthcare and software, services, IT investments Our XX over with focus a education spread large are services.

in investment finance part our In securities our Of reflected CLO on which an portfolio, total X.X% consists structured of total interest, addition, remained equity strategy. is investment slide. the investment this of overall our as important

redemption sale these when over NAV to of team, XX, the fiscal from $XX.X fully of from For by a Over demonstrated and interest sale equity million investments that had accretive years, gains or loss Saratoga were we BDC. investments. originated of capital net were carry-forwards unused two-thirds realized early nine combined to the of gains other Saratoga over of on as the slide management due the took the past on carried

the our Investment now illyria our offset grow capital to review. the helped highlights ROE. is call and by. consistent this in and forwards future that capital gains quality the Michael investment turn carry Following President will my has reflected creates and Officer market. an NAV our for over That position realization financial portfolio credit of portfolio new our be will This overall loss legacy Chief of overview I concludes healthy Grisius, performance long-term

Michael Grisius

strategy. on extent Liquidity lesser in you, Thank the robust. exceptionally a I'll remain investment we in our performance earlier pockets the and describe current continued Market it, market by take the Henri. and conditions COVID-XX, couple but then minutes crisis. portfolio mainly of to comment state a to to and far than conditions be certain affected of as see current

then. seeing in leverage accept to liquidity. multiples pursuing rebounding portfolio This and are Earlier yields accelerated and transaction levels back tightening pre-COVID deals change and even volumes, limited growth credit risk. last competition were and existing to to was We crisis, in increasing widen levels. year tighten outlook to the mostly requiring healthy part either calendar XXXX. and and QX deals of back QX a for started it's capitalization. appears have or pricing greater robust initiatives year willingness the greater to seeking for companies Calendar is Lenders our Significant and deals quite for are there covenants, to the be pre-COVID most since a market quality disciplined with staying leverage helping in to equity even positive

avenue important of environment. and demonstrated models have that be continue Follow-on throughout usual, actively by the returns yet We underwriting remains borrowers and investments existing are with capital balance believe seeking business as achieved compelling supportive and be strong Our capital. can with an that opportunities risk durability deploy COVID finding strength to adjusted and bar we high businesses sheets to deployment. capital deploying

in XX have platform portfolio our be engaged quarter. with pandemic, calendar new actively of onset investments continues critically companies. As the including and this to we two notably, since Most Portfolio past invested follow-ons past the this in with we XX management quarter. demonstrated remain important,

We have COVID-XX found steps to of your the help near long-term right businesses. that on they mitigate both have and generally effect the taken

to also As we've mentioned Protection are themselves before, relief. loan able avail PPP the many them of of or Paycheck Program

that Alarm to our in non-accruals remain accrual including no terms, of prior their this that investments through been our and according payment COVID. have portfolio Mac quarter. two paying to My There Rosco the to are All non-accrual. and are Taco loans new returns

And that We overall also value quarter, XX% recognize has recovered the fair reflects certain and that overall its we debt, recovered have QX. over an in well, historically that performed which assets bolster by means that performance And generally this has portfolio portfolio depreciation over the portfolio of X% additional and durability. believe our this enterprise our appreciation million in of unrealized $X.X in XX% values of unrealized of supported in to is its attributes lien distressed basis. industries cost strong our first situations. Saratoga’s strong

We have or exposure. direct commodities energy no

limited specific majority realized our impacts unrealized is being produce the lead in spreads revenue, demonstrated potentially future. a and but to credit depreciation in effects underlying and to the have historically multiples the COVID-XX negative and company conditions including operating on market not of in addition, increases and performance, in declines strong portfolio recognized economy, of There related In our the market could of comprised adverse revenue that market high future potential remains recurring degree portfolio on retention. the of overall businesses and

constructed structure this will us challenges liquidity capital we by environment. broader to believe lack beyond our COVID-XX that and the the macro continue Now, help navigate of despite well presented clarity, and to

realized into focus you see underwriting characteristics. portfolio percentage management, always of term. and accretive our with and investment approach this at best company positive our that has remains deeply invested has has XX, seven the the shareholders of understand objective producing and And capital thoroughly to underwriting. the We as Our to only with always years. We in in as the a a ownership Paramount of a resulted business assess business quality the to long returns to list and culture each as accurately slide directly Endeavour approach top durable with to strategy our businesses BDC term strong of portfolio BDCs over at possible performance model. the thought working on approach being can strengths order been on stick have of gain the over past its three and cost risk as net long A its adjusted for appear We underlying the the strength our Saratoga.

shows Our highest XX% end. internal the at quality reflects credit rating year rating impact portfolio our COVID and of of of as our

overall and leverage times, the in slide down Looking Total X.XX was using for deals. quarter, of the underwritten the at from capitalization, investments portfolio XX. previous new for portfolio leverage reflecting lower certain X.XX strengthen EBITDA company times

in we times our the exceed able consider which and Rather below attractive also is the market where sustainably risk focusing will we across a investment. been business date Through models dollar never isolation. throughout, maintain leverage last we profiles modest on have past leverage strong value credits to investing about multiples risk to of Our average volatility, our relatively year business profile with industry. the leverage in are five of enterprise the are exceptionally return confident although,

generate of dynamics. this In to market slide in ability even our the addition, long the midst investments over the difficult new term, illustrates strengthening

XX added supported portfolio follow-on COVID-XX. portfolio including investments, company's a the XX new XXXX, we liquidity year and made companies to During that during calendar follow-on

challenges five two investments emphasis the follow COVID able added That in on quarter our the we calendar ongoing this We of underscores also the were on capabilities. face of in XXXX. broadening platforms first origination accomplish and to

fiscal Now today subsequent including days. either the close of couple end, closing next or are in be that will year to investments

one had million originated investments XX million approximately of new existing million. new executed have six for companies originations and companies net and of approximately of portfolio three $XX repayment $XX approximately new in We also portfolio

new continue significant mature. strategic skill-set, Moving led business new to and focus our team's development to And sources has experience of on deals. become on to slide relationships that XX, relationships our have

this year, pipeline during last active The pace. are year's a beginning the during more XX reflecting of much although Our especially dropped of we last also to year. last to sheets number that in XX issued pleasing is us our of difficult up is term deal the is deal one-fifth markedly almost months sourcing term see sheets XX from efforts. environment sources company from we environment, as XX our that the of reflecting this newly measured give investments relationships, our steadily our and the as as over that long new are expand well we months, past development There a issued continue number progress business are of four portfolio formed to can over confidence notable factors in grow AUM us term. What

our as formed First, to by we continue have we grow with reach evidenced made investments the several into marketplace, recently relationships. newly

deep, developed look us their Second, active as have of we financing. preferred numerous established with long-term source that relationships and firms to

plenty to within opportunities we of intentionally that experiencing are have Third, growth see which long and expertise. we developed trends, investment segments term in secular industry continue

XX, As is strong, of on our track you originations. overall on can almost slide see very record billion $X.X

fair Saratoga $XXX dependent On and million Nolan SBIC changes our Group management. you markdowns, of over investments unrealized our person the total The view remaining unlevered portfolio due IRR value overall interaction. cost. their performance. is We both current now the its unrealized investments, largest Even X% and those in not depreciations in above with gross the Education fundamental XX% CX are weighted which more our can long on unrealized since term combined believe did our of to remaining COVID human depreciation on are see of chart right, BDC total the took is on two

returns. exceptional approach investment realized yielded has Our

in to is on developments XX.X% centre on had approximately investments company $XXX Our the a debt flow on remaining My new also acquiring which and realization. some retaining the of liquidity. fair cash resulted IRR end, realized significant we on senior had investment, our and Alarm million burden year value unlevered the $XXX,XXX. gross pressure of Subsequent cost of The customers of plus

there the this a a at sponsor accelerated at took very filing, business with the into XX new not its senior through a capital. the for capital equity recent position is As is in majority recovery choosing prospect lender debt infuse chapter the pre-packaged additional time, to credit junior and little a result,

have our our is Repayments I end, Moving occur of fully repaid million with we as on annual and in license SBIC some you first see to XX, invested proceeds, Slide million with can QX. XXX basis. funded paying down repayment of debentures on XX year of using debentures SBIC semi a started

XXX $XX There equity and second and already of million have against with deployed. down license million. currently unfunded dropped the by SBIC of are Our available equity. our increase which million has million of that debentures equity, availability which of have XX.X SBA still cash debenture been X.X equity, million, We of would been debentures still SBIC of when funded million $XX XXX into

to Looking my procedures. back quality the constructed, always whole came is and primary our fore, COVID-XX, has over underwriting demonstrating our the has turn the Saratoga Credit we portfolio. over portfolio, I'd year, to our value, while confident for due our on the back proven strength like future the the diligence focus. market year, and concludes And well Chris. remain Investment. to and our our in significantly the be focused and to portfolio and itself of and really remain against impact the way And team review the resilient of changed overall and this of asset intensely world CEO, the call team, platform preserving This

Christian Oberbeck

Thank Mike. you,

on As XX. outlined Slide

per Following February our This portfolio, – and raises declared the dividend $X.XX XXXX. reflected X% Board share of the for current performance quarter a the recent Directors XX, capital of ended on least a Directors $X.XX continue considering to factors. increase quarter, dividend basis and this of at quarterly will quarterly reassess company-specific sequential both the Board third last The increase. economic from

Moving on to Slide XX.

XXX%. both dividends has appreciation of generated Our BDC index total capital months, which for and last XXX%.,outpacing total XX returns the return includes the of

XX, longer Our outlined term slide. next performance is Slide our on

us both easily Our the the top the BDCs returns of in and five averages. five, places three all one year return year industry BDC beating with

specific XX% index the our can placed years, greatly certain to XX%. and over the context On outperformance further our return and return past the see in XXX% indexes three past XX, XX% five of years, the broader the you Over our the performance metrics. of Slide outperformed industry key return exceeded the

We Latest have including our per net the outperform our interest on NAV the receiving. growing continue marks share performance Notably, XX shareholders yield latest on equity value value diverse high across XX and per growth. been consistently asset share to categories, industry months XX months portfolio. our return latest reflects the and equity achieve on return and months

seven are we And and only past NAV in our the of second, done per quarters, of XX by also average of the not months. seven XX.X%, BDCs very one of the return have the NAV, last one First, share few is on BDCs industry. growing we highest the accreatively grown it one XX only growing have equity now year XX in

on to XX. Moving Slide

All achievements initiatives, the Saratoga today in markets drive are capital adding slide, and community. that a believe quality more is of including size our attracted make institutions. this investment outlined of decisions competitive highly characteristics to and differentiated this We call, the designed will and investor our base, BDC on discussed our to help

the risk yield and and rating private liquidity, NAV cost upgraded, recently Our at our one to share, earnings an baby and in bond low XX%, second equity industry historic support providing us AUM management long-term sub for issuances, industry accretive growing cost differentiating quality maintaining of in which a top NII active putting to on X% SBIC by per at characteristics attractive of liquidity, and investments. and highest make strong include profile. accompanied both. and historic per our industry BBB+ that license, with was of investment share the return High the and solid public grade of and ownership expansion NAV portfolio the of leading access levels and long-term Receipt

of And balance like the would liquidity ongoing again and In I that capital Saratoga I shareholders our their invest for like closing, long-term. benefit support. environment. now near including and structure all conventionally tested for historically to And current strong to and the open confident team, We cyclical remain industries, high experienced portfolio strategy that underwriting oil challenges standards our substantial contains well will serve addition, battling management the gas historically exposure in shareholders industry. call would questions. to as In the this minimal our through in quality our sheet, will thank credit investment and in

Operator

[Operator Hovde Bryce first you. Instructions] Rowe Thank with Group. comes Our question from

Bryce Rowe

afternoon. Good Thanks.

Christian Oberbeck

Bryce. Hi,

Michael Grisius

Good afternoon.

Bryce Rowe

year Good I to on maybe the pricing. on wanted stability Hi. to debt see portfolio. start from

of to expectations possibly a I what a February. And you as perspective. once the about the get you build reset, here time. subsequent it yield from kind of seen $XX your the Mike, then know kind quarter. so move you've what wanted through could then, get lower activity are in those And CLO into the for of and start talked feel to current million portfolio, we with

Michael Grisius

Yes.

say will there, capital out literally But CLO. a are opportunities I'll available the we that the operate in relates of of feel shareholders. take bit. as as good companies invest to in come private definitely would me debt to very but businesses But market, the certainly address fact has that, having the were good where you that a X,XXXs point at our reflections continue Certainly, as the lower as parts. of find middle consequence, to where in yields Let down that in of where we're very rates it’s said to have at seeing that, credit. the Henri pre-COVID. it to two our market lot in those end them And seeing come that general, come let has invest in, we I'll I companies that pricing And to we below a yields are there helpful for end, well are even that remind capital accretive

Henri Steenkamp

right. you're Yeah. Great. absolutely And then on the CLO,

of to reflects weighted CLO and effective portfolio, performance average the interest of cash end of grows. future effective sort the flows, weighted clarity now gets rate the reinvestment rate, shortening the is the the the interest as which its you more see that So average on closer period,

couple So have think, XX%. I in effective of our the you last quarters, seen, XX%, would interest weighted average, rate is to closer being the

what did the weighted new half than and we're once just what did the to instead ramped behave just now AUM, effective expectation you but million is, $XXX it million, it on similarly the rate that that on being or it seen the That's haven't up. same, management the to was, on that each As income was, generates. rate has done evaluation side. component of it about and remains going And it fully last we've the the to one that, for our CLO the time. and BDC $XXX points and of an interest the will output But the basis we be fee went repricing. it fee, before valuation. obviously -- time, yet also slightly that, of XX probably of because this that that's what then the CLO earns, addition it better But, And reset obviously, management it'll interest obviously QX, interest average last forward, in on maybe is time, the

And the so additional will to that on largest BDC be size. the income

Bryce Rowe

gears Henri, and Okay. wanted to I of question That's bit shift you. more maybe one little ask a helpful.

You with undistributed taxable calendar guys ended year the income.

kind in quarter you there manage an that. Can And of, account was this in the I past, so, talk of possibly to you you've carry kind not to and tax how plan know for about excise to that? UTI. preferred

about of thinking kind that now? just curious how you're So

Henri Steenkamp

on the at probably the the Well, we XX-K. here, you I where right, moment you’re think the saw are on as in Bryce, actual,

million. So we with us last spillover, just start March taxable of year which year is under income to X for related effectively $X this now,

dividend As you and around know, -- between the couple million. $X basis been -- quarterly million last our a have $X.X on

our we've we declared, So think, -- that, obviously, in that of have in this actually as capital, paid this and of, But we've obviously we hadn't reflection take conservative earnings one should by that means so the more we way the be the sort have will as historically, dividend is managed fact, spillover, in also This addition the just spillover care it had next that the That but had, care I well been to year, some then spillover. we now the of past. last of, dividends taken power we the year. dividend. a next

Christian Oberbeck

look in just to Yes. just -- question, it. how further, at And then, we terms of a

year spill -- been time lot over have height the of spill how, the much spent we liquidity, gave us think, the in pointing a of last flexibility in out in over needed. should it absence of how terms I of potential the crisis the COVID

be I been out good Henri certainly mentioned. turned has looked year, to it thankfully, the the in million, to realm quite it as did have We a what move year as opposed mentioned, this tune spillover I think, could the into past. to past like as of $X

terms is. the there's on take ordinary outstanding -- not The excise will of we’re spillover. it just course there's you believe, spill having will, cost nothing is the specifically It's you of needs that to on care out. In something if that amount of, be whatever in that I no managed, asked the the over, managing X% taxes,

sheet the on So our in balance it, of of absolute the viewed the liability not structure high. totality context our of cost cost is

anticipate, So looking flexibility had have before. prove spillover it, we're it, wouldn't it, aware the of at from depending in little future. dividends it would that that's anticipate needed we our as obviously have those than spillover shrinking. we a top elements, between interplay should on But on we of flexibility much possibly substantial and And we less still -- as and here we then growing two and we the over earnings still

Bryce Rowe

jump I'll answers. queue. in the the Appreciate Chris. back Thanks, Okay.

others Thanks. Let’s ask.

Operator

comes question from Ladenburg. Our with Mickey Schleien next

Mickey Schleien

Good morning.

for Just Mike. one question

that to sponsors, year. ask to mentioned diligence do conduct relationships that you work could to And these the funds, on before us private you You you created describe you that which given I wanted decide that new due them? are with last new

Michael Grisius

we deep And undergone groups investors that, have are pretty new as deals marketplace and continue of firm of The looking starting haven't who we of a that when the that our having that of backgrounds. are point diligence a well. the to. equity thankfully, But sponsored kind players done looking within the is know from to the capital network. past. sophisticated pretty at team, private attract their said a get most -- most But are, we're the and lot in at develop to the firms to meet Happy

of the or at their And one who we know As as we in we've that people some do typically were prior marketplace, even long you. maybe firms. removed, we at people them, least know know may have step been what them, know

able the is -- team. starting people always the the very lot with on teams. a point experience invariably, have we're to strong And those strong had investing get that and the with very so And of references

way pretty deals deals? go is kind good our place a way sheet, more to with opportunity? their Do feel them what are position we our good somebody, get to a drives second is, issue And work decision it doing? so that is when The we directly. than of making in their is very reputation a anything capital business is dealing factor lenders? good the and And to that there. just capitalizing we to with is portfolio. the process. the And is means durable you how has the always get the How get of that in about? combination talk that they done. sponsor term What's best plus by the we that all What businesses somebody work really deal get we with no robust the characteristics a do we comfortable their they at The looking best know then It's don't you that know we are

Mickey Schleien

top interest your information with worked provide to right gauging and you mentioned lenders trouble a terms past? you with working anecdotally, look Do just Mike, the sponsor. at in in three, that they and behavior just how were you that of out put on deals try or they in in do

Michael Grisius

anecdotally, the thing to tends candidly. if It develops a if, be And that kind pretty sponsor where it's bad also spreads word more reputation of a quickly.

that big were into the so to come I it's are We find thing and they've the trouble, our when a and not of just check, underwriting relationships important, such wish good very would a anecdotally, rescue little important. work equity we a though business it's the remind way. The that bit that sponsors got you do , So say with could sponsor. And you the with minute background forth. knowledge. without certainly deal I the that don't is I

even and a So plenty turn like sponsor of if a best the we the they very down. of those end sponsor lower private middle deal equity lot, a at is market, the

a feel hoping diminish the important to of of going the it, and their they the we model? durability the the perform you cash structure? them. that questions. pay what not bit, but not the our make of the even can But they're where assumption to even of importance that save ways it's pressures? elements sponsor. this not under down pay All sponsor if little we're always to part the the to, We're tend investment loan continue they - sponsor underwriting. a good about produce Do day come we underperforms, capital know we certainly underwriting business So that our very wrong. It's if we're our looking cyclical into there. relationship going the in Q lot go in like do Okay. so it taking at are of a for things that, Where play, when business my in saying, are those you they position overtime? face is and it is free to one How Is a out? of of Thank we're And flow, sponsor,

Operator

comes Our Securities. Sarkis from next Sherbetchyan with Riley B. question

Sarkis Sherbetchyan

the to up this here. meaningfully It a Roscoe taking fee that wanted side. was if to investment Thanks touch bit just was And question income wondering the little jump quarter. my attributable to just returning medical on I Hi. for accrual?

Henri Steenkamp

released gone we Sarkis, actually because the that reserve income, pick. Yeah. our back back was this is into on really Hi was last released quarter We QX. as Henri. a absolutely, that Yeah, that Roscoe it's

that really released reserve. so we And That's the jump.

take if So just a out, that of around, of pick QX, at that it sort Roscoe, under as you it. perspective look total interest X%, income use and from it's right you

Sarkis Sherbetchyan

that that of to of Got much clear, nature? how one-time was just And kind you. how much continues? And of in be

Henri Steenkamp

XX,XXX, Roscoe I one-time think And release think of See have on the I was to around I a XXX,XXX. would check, -- I quarterly the Reserve so a double quarter. basis, believe the it's the but

Sarkis Sherbetchyan

there. that. verify to wanted for just thank I you the $X.X Yeah, million

Henri Steenkamp

Okay.

Sarkis Sherbetchyan

for guess position, that. And Any the of of sale future. that comes Elvira then, helps you mentioned level with loss? that was if And what's, the you what's talked capital the on I kind a the capital the obviously, new about that you loss there

So just trying to understand what that level is?

Christian Oberbeck

Yeah.

ended capital we Easy we gain and the paid loss when had year, federal year the on this that's saw tax which February having out now QX. that in you Ice so carry-forward cleaned gain XXXX realized up in last had that So we a then us our income

full So to Elyria down that of we then written-off, And loss that's back loss QX, position, position on out sort zero. now years. many realizes been cleaned our the with Elyria, being gain sold many, in over written

is loss realized position against put that And total from that million, gains. Elyria future capital loss $X.X were the be can so new the which obviously in carry-forward is a

Sarkis Sherbetchyan

Great.

Henri Steenkamp

the And just investment predates of management point legacy and ownership one positions. our BDC. further our Elyria, was on of if That -- one that

Sarkis Sherbetchyan

Yep. Understood. Thank you.

Operator

in further Oberbeck questions at I'm closing remarks. I'd call showing Chris no queue time. for back this to like to turn the

Christian Oberbeck

to us you thank forward everyone quarter. today, next joining We'd like with to look and we for speaking

Operator

Thank conference participating. concludes This for you today's call.

disconnect. now may You

Saratoga Investment (SAR) 7 May 212021 Q4 Earnings call transcript