Saratoga Investment Corp. (NYSE: SAR) has extended a significant debt maturity to 2031, though the refinancing increases annual coupon costs and does not resolve ongoing dividend coverage gaps.

The business development company closed an $85 million offering of 8.00% unsecured notes on Aug. 26, generating net proceeds of approximately $82.0 million. Saratoga plans to combine these funds with available cash to redeem all $105.5 million of its 6.00% notes due 2027 on Sept. 18.

Refinancing Costs Rise Despite Lower Principal

The new notes mature on Aug. 31, 2031, and bear interest at 8.00% annually. On the $85 million principal, this equals $6.80 million in annual coupon interest. The redeemed 6.00% notes carried $6.33 million in annual interest on their $105.5 million principal.

While the new issue reduces principal by $20.5 million, it adds approximately $470,000 to annual stated coupon interest. This follows a prior refinancing in the quarter ended May 31, where Saratoga replaced a $175 million 4.375% bond with higher-cost securities, increasing annual stated coupon interest by roughly $3.47 million.

Dividend Coverage Remains Under Pressure

For the quarter ended May 31, Saratoga reported net investment income and Adjusted NII of $0.47 per share, while dividends totaled $0.75 per share. This results in a dividend payout ratio of 159.6% of NII. The company maintained its base quarterly dividend at $0.75, declaring three monthly payments of $0.25 per share.

What the Numbers Show

The divergence between income and payouts is visible in the NAV movement. Saratoga’s NAV fell from $24.42 to $23.23 per share, a decline of $1.19. This drop included $0.93 per share in unrealized depreciation and $0.28 per share attributed to under-earning the dividend. The $0.28 figure precisely matches the gap between the $0.75 dividend and the $0.47 NII, highlighting that current portfolio earnings do not fully support the declared payout rate.

Saratoga cited declining short-term interest rates and tighter spreads on its floating-rate asset base as pressures on earnings. Spreads on new originations were almost 50 basis points lower than those on repayments during the quarter. While the maturity extension removes a near-term refinancing hurdle, the structural question remains whether future portfolio income can close the gap with dividends given higher funding costs.

Saratoga Investment Corp (NYSE: SAR) has priced an underwritten public offering of $85 million in aggregate principal amount of 8.00% unsecured notes due 2031. The specialty finance firm intends to use the net proceeds from this transaction, along with available cash, to redeem in full its outstanding 6.00% Notes due 2027. The offering is expected to close on August 26, 2026, subject to customary closing conditions.

The new notes carry an investment-grade rating of BBB from Egan-Jones Ratings Company, a Nationally Recognized Statistical Rating Organization (NRSRO). Egan-Jones is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider and is certified by the European Securities and Markets Authority (ESMA). The notes are expected to list on the New York Stock Exchange under the trading symbol SAX within 30 days of the original issue date.

Offering Structure and Management

The offering is being managed by a consortium of financial institutions led by joint book-runners Lucid Capital Markets, LLC and Oppenheimer & Co. Inc. Additional management roles include:

• Lead managers: B. Riley Securities, Inc., Clear Street LLC, Compass Point Research & Trading, LLC, Ladenburg Thalmann & Co. Inc., and Maxim Group, LLC.
• Co-managers: InspereX LLC and William Blair & Company, L.L.C.

A registration statement (File No. 333-292765) relating to the notes was filed with and declared effective by the Securities and Exchange Commission. Investors may obtain the preliminary prospectus supplement dated August 18, 2026, the pricing term sheet dated August 18, 2026, and the accompanying prospectus dated March 11, 2026, from the designated investment banks.

Note Terms and Redemption

The notes will mature on August 31, 2031, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after August 26, 2028. Interest is payable quarterly on February 28, May 31, August 31, and November 30 of each year, beginning November 30, 2026.

The Company has granted the underwriters an option to purchase up to an additional $12.75 million in aggregate principal amount of notes.

Portfolio and Funding Profile

Saratoga provides customized financing solutions to U.S. middle-market businesses, investing primarily in senior and unitranche leveraged loans and mezzanine debt. The company, regulated as a business development company under the Investment Company Act of 1940, is externally managed by Saratoga Investment Advisors, LLC.

The firm’s funding structure includes two active SBIC-licensed subsidiaries. It also manages a $360 million collateralized loan obligation (CLO) fund currently in wind-down and co-manages a joint venture owning a $400 million CLO fund. Saratoga owns 52% of the Class F notes and 100% of the subordinated notes of the CLO, alongside significant interests in the joint venture structure.