Saratoga Investment Prices Baby Bonds

BDC Saratoga Investment (SAR) has priced their new issue of baby bonds.

The bonds will carry a fixed rate coupon of 7.25%.

The bonds will have an optional redemption period starting 6/24/2022 and will have a final maturity date of 6/30/2025

There will be no OTC grey market trading in this issue.

SAR has one other 6.25% baby bond outstanding which can be see here.

The pricing term sheet can be read here.

8 thoughts on “Saratoga Investment Prices Baby Bonds”

  1. They must be really needing the money as they are spending quite a bit to raise it for just 3 years. That aspect scares me, unless it is a normal way of raising funds for a BDC?

    1. That’s a really good point. Between the UW discount and cost to carry it’s “at least” a cost of 7.88% per year, or 7.10% margin to UST10 during an all-time low yield environment. Appears Uncle Billy left the envelope full of money in the newspaper.

      1. oops…this comment was meant for the First Midwest Bank post. Their minimum cost of capital is actually 7.63% if the UW discount is amortized over the full 5 years and the spread to UST10 is 6.90%. It appears reasonable to assume they’re having or are projecting material liquidity issues.

    2. Jay R—BDC exchange traded debt is almost always around 5 years–this is pretty normal.

      1. Gary, yes it is short, we can see it as an advantage for the investor but if i see it with skepticism then I am wondering why they are incurring so much cost for 2 years.

        Had bought GLAD (common stock) long back and got burnt so I have become vary of the BDCs. I know I have to look at it more dispassionately and not just connect it with one experience. One of these days I will try and learn more about them …

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