Saratoga BDC's NAV Falls 4.6% to $22.15 Amid Private Credit Strain
Saratoga Investment's net asset value fell 4.6% to $22.15 a share in the quarter ended Aug. 31 on markdowns, even as its loan book grew 2.1%.
Why it matters
- Saratoga Investment's net asset value per share fell 4.6% to $22.15 in the quarter ended Aug. 31, 2026, from $23.23 three months earlier, the business development company said Oct. 6.
- Spreads on its new loans were 220 basis points lower than on the loans that repaid, while refinancing raised its interest expense.
- CEO Christian Oberbeck said industry conditions have led to higher default activity, declining NAVs and dividend cuts at several BDCs.
Saratoga Investment Corp. (NYSE: SAR), a business development company that lends to middle-market companies, said Oct. 6 that its net asset value fell 4.6% to $22.15 a share in its fiscal second quarter ended Aug. 31, 2026, from $23.23 at the end of May. The drop came from markdowns on a few loans and dividends that exceeded earnings, the company said in a press release filed with the SEC.
Total net asset value fell $25.9 million, or 6.8%, to $352.6 million. A year earlier, NAV stood at $25.61 a share.
Why did Saratoga's NAV fall?
Most of the decline came from loan valuations. Of the $1.08-a-share drop, $0.90 came from unrealized depreciation on investments and $0.30 from dividends paid in excess of earnings, partly offset by $0.09 of gains from share buybacks, the company said.
Saratoga said $13.1 million of markdowns were concentrated in three portfolio companies: Madison Logic, Exigo and Chronus. At quarter-end its core BDC portfolio was valued 1.6% below cost, and the total portfolio 4.9% below cost.
Key figures for the quarter
| Measure | Aug. 31, 2026 | May 31, 2026 | Aug. 31, 2025 |
|---|---|---|---|
| NAV per share | $22.15 | $23.23 | $25.61 |
| Assets under management | $1.150 billion | $1.126 billion | $995.3 million |
| Adjusted net investment income per share | $0.46 | $0.47 | $0.58 |
| Weighted average rate, core portfolio | 10.6% | 10.5% | 11.3% |
| Dividends per share | $0.75 | $0.75 | $0.75 |
Source: Saratoga Investment Corp.
Lending kept growing, at thinner spreads
Saratoga originated $76.1 million of investments in the quarter, including two new portfolio companies and nine follow-on deals, against $39.0 million of repayments, for $37.1 million of net originations. Assets under management rose 2.1% from May and 15.6% from a year earlier.
But pricing tightened. Spreads on new originations were 220 basis points lower than on the repayments they replaced, the company said. Refinancing its own debt also added interest expense "while spreads on assets not yet widening." Saratoga issued an $85.0 million baby bond, later increased to $120.8 million, to refinance a $105.5 million note.
Credit metrics held up. Non-accrual loans were 0.0% of portfolio fair value and 1.3% of cost, 81.5% of investments were first-lien debt, and 96.0% of credits carried the company's highest internal rating. Saratoga said both remaining non-accrual investments were sold after quarter-end.
What does this say about private credit?
The company's own outlook was cautious. "These conditions have contributed to higher default activity, declining NAVs across the industry and dividend reductions by several BDCs," Chief Executive Christian Oberbeck said, citing geopolitical uncertainty, persistent inflation, rate volatility and AI-related disruption in software. He added that strong BDC debt issuance, firmer values for higher-quality loans and improving M&A activity "point to a market that appears to be stabilizing."
Saratoga put its last-12-month return on equity at negative 1.1%, against what it called an industry average of 2.2%.
For private lenders, Saratoga's quarter shows two pressures at once: tighter pricing on new loans and higher costs on its own borrowings, which the company said squeezed net investment income even as its portfolio grew. Our rates and data page tracks the benchmarks behind those funding costs, and more coverage, including our report on debt funds leading non-agency CRE lending, is in the Private Credit section.
Sources
- Saratoga Investment Corp., Saratoga Investment Corp. Announces Fiscal Second Quarter 2027 Financial Results, press release filed with the SEC as Exhibit 99.1 to Form 8-K (Oct. 6, 2026)
