Saratoga Investment Corp Secures Expanded, Lower‑Cost Credit Facility to Bolster Capital Base

Saratoga Investment Corp. (NYSE: SAR) announced on November 6, 2025 that it has entered into a new $85 million senior secured revolving credit facility with Valley National Bank, the sole lead arranger and administrative agent, complemented by three additional participating banks. The deal replaces the company’s existing $65 million senior secured revolving credit facility with Encina Lender Finance, LLC, which had been scheduled to mature in January 2026.

Key Terms and Strategic Impact

  • Borrowing Capacity Increase – The Valley facility lifts Saratoga’s borrowing base by $20 million, providing a more robust capital cushion for future financing activities and portfolio expansions.
  • Extended Maturity – The new arrangement extends the credit term to 2028, granting the BDC a two‑year extension relative to the Encina facility. This extension aligns with the company’s medium‑term growth strategy and reduces refinancing risk.
  • Margin Reduction – By securing lower spreads, the facility improves the cost of capital, enhancing the BDC’s net interest margins and enabling more favorable lending terms for its middle‑market portfolio.
  • Expanded Eligible Assets – The borrowing base now includes certain additional debt instruments, broadening the range of assets that can be pledged to support drawdowns and improving liquidity flexibility.

Market Context

Saratoga’s share price closed at $22.51 on November 2, 2025, positioning the company near the lower end of its 52‑week range ($21.10–$26.00). With a market capitalization of approximately $356.9 million and a P/E ratio of 9.31, the firm trades at a valuation that reflects its role as a business development company focused on customized financing solutions for middle‑market enterprises nationwide.

The refinancing comes at a time when the BDC sector is navigating a tightening credit environment and heightened regulatory scrutiny. By securing a larger, lower‑cost facility, Saratoga is well‑positioned to continue delivering value to its investors while supporting the capital needs of its portfolio companies.

Forward‑Looking Outlook

The extended credit line and reduced margin set the stage for Saratoga to:

  1. Accelerate Portfolio Growth – With enhanced liquidity, the company can pursue larger or higher‑yielding investments in middle‑market businesses without compromising its debt‑to‑equity balance.
  2. Improve Cash Flow Management – The longer maturity horizon allows for better alignment of debt servicing with the life cycles of underlying loan commitments.
  3. Strengthen Competitive Positioning – Lower borrowing costs translate into more attractive loan terms for borrowers, potentially increasing market share in a crowded BDC landscape.

Investors should monitor Saratoga’s utilization of the Valley facility and its subsequent impact on the company’s leverage ratios and earnings profile. The move signals a proactive stance on capital structure management and underscores Saratoga’s commitment to maintaining a resilient financing platform for its middle‑market clientele.