- Current report filing (8-K)
August 03 2010 - 6:09AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 30, 2010
SARATOGA INVESTMENT CORP.
(Exact Name of Registrant as Specified in Charter)
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Maryland
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1-33376
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20-8700615
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(State or Other Jurisdiction
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(Commission
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(IRS Employer
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of Incorporation)
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File Number)
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Identification No.)
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535 Madison Avenue
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New York, New York
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10022
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrants telephone number, including area code
(212) 750-3343
GSC Investment Corp.
500 Campus Drive, Suite 220
Florham Park, New Jersey 07932
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (
see
General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 1.01 Entry into a Material Definitive Agreement
On July 30, 2010, GSC Investment Corp. (the Company) completed the private sale (the
Private Placement) of $15 million in aggregate purchase price of the Companys common stock at an
offering price of $1.52 per share to CLO Partners LLC (CLO Partners), Saratoga Investment
Advisors, LLC (Saratoga) and certain individuals affiliated with such entities, pursuant to a
stock purchase agreement, dated April 14, 2010 (the Stock Purchase Agreement), by and among the
Company, Saratoga and CLO Partners.
Concurrently with the completion of the Private Placement, the Company entered into the
following agreements:
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Investment Advisory and Management Agreement
. On July 30, 2010,
the Company entered into an investment advisory and management agreement with Saratoga
pursuant to which Saratoga acts as the Companys external investment adviser. The
initial term of the investment advisory and management agreement is for two years, with
automatic, one-year renewals, subject to approval by the Companys board of directors, a
majority of whom are not interested directors as defined in the Investment Company Act
of 1940, and/or the Companys stockholders. Pursuant to the investment advisory and
management agreement, Saratoga implements the Companys business strategy on a
day-to-day basis and performs certain services for the Company, under the direction of
the Companys board of directors. Saratoga, as the Companys investment adviser, is
responsible for, among other duties, performing all of the Companys day-to-day
functions, determining investment criteria, sourcing, analyzing and executing
investments, asset sales, financings and performing asset management duties. Under the
investment advisory and management agreement, the Company pays Saratoga a fee consisting
of two components a base management fee and an incentive fee. The base management
fee is paid quarterly in arrears, and is equal to 1.75% per annum of the Companys gross
assets (other than cash or cash equivalents but including assets purchased with borrowed
funds) and is calculated at the end of each fiscal quarter based on the average value of
the Companys gross assets (other than cash or cash equivalents but including assets
purchased with borrowed funds) as of the end of such fiscal quarter and the end of the
immediate prior fiscal quarter.
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The incentive fee consists of two parts. The first part is calculated and payable
quarterly in arrears and equals 20% of the Companys pre-incentive fee net investment
income for the immediately preceding quarter, subject to a preferred return, or
hurdle, and a catch up feature. For this purpose, pre-incentive fee net investment
income means interest income, dividend income and any other income (including any other
fees, such as commitment, origination, structuring, diligence, managerial and consulting
fees or other fees that the Company receives from portfolio companies) accrued by the
Company during the fiscal quarter, minus the Companys operating expenses for the quarter
(including the base management fee, expenses payable under the administration agreement
described below, and any interest expense and dividends paid on any issued and
outstanding preferred stock, but excluding the incentive fee).
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The second part of the incentive fee is determined and payable in arrears as of the end
of each fiscal year (or upon termination of the investment advisory and management
agreement) and equals 20% of the Companys incentive fee capital gains, which equals
the Companys realized capital gains on a cumulative basis from May 31, 2010 through the
end of the year, if any, computed net of all realized capital losses and unrealized
capital depreciation on a cumulative basis, less the aggregate amount of any previously
paid capital gain incentive fee. Under the investment advisory and management agreement,
the capital gains portion of the incentive fee will be reset based on realized gains and
realized and unrealized losses from May 31, 2010 because the Companys realized gains and
realized and unrealized losses will be calculated from such date. Therefore, realized
and unrealized losses incurred prior to such time will not be taken into account when
calculating the capital gains portion of the incentive fee, and Saratoga will be entitled
to 20% of net capital gains that arise after May 31, 2010. In addition, the cost basis
for realized gains and losses on investments held by the Company as of May 31, 2010 will
equal the fair value of such investments as of such date.
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Administration Agreement
. On July 30, 2010, the
Company entered into an administration agreement with Saratoga
pursuant to which Saratoga furnishes the Company with office
facilities, equipment and clerical, bookkeeping and record keeping
services. The administration agreement has an initial term of two
years. Under the administration agreement, Saratoga also performs,
or oversees the performance of, the Companys required
administrative services, which include, among other things, being
responsible for the financial records which the Company is required
to maintain, preparing reports for the Companys stockholders and
reports required to be filed with the SEC. Payments under the
administration agreement will be equal to an amount based upon the
Companys allocable portion of Saratogas overhead in performing
its obligations under the administration agreement, including rent
and the allocable portion of the cost of the Companys officers
and their respective staffs relating to the performance of services
under this agreement. Notwithstanding the foregoing, the fees to
be paid to Saratoga for the first year of the term of the
administration agreement will be capped at $1 million and the
existence of a cap, and the determination of a proper cap amount,
in the second year of the term will be determined by the mutual
agreement of the Companys independent directors and Saratoga.
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Trademark License Agreement
. On July 30, 2010, the Company entered
into a trademark license agreement with Saratoga pursuant to which Saratoga granted the
Company a non-exclusive, royalty-free license to use the Saratoga name, for so long as
Saratoga or one of its affiliates remains the Companys investment adviser.
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Registration Rights Agreement
. On July 30, 2010, the Company
entered into a registration rights agreement with Saratoga, CLO Partners, the
individuals affiliated with such entities that purchased shares of the Companys common
stock in the Private Placement and GSC CDO III, L.L.C., pursuant to which the Company
agreed to file a registration statement with the SEC to register for resale the shares
of the Companys common stock sold in the Private Placement or, in the case of GSC CDO
III, L.L.C., held by it within 30 days after the closing of the Private Placement and to
use commercially reasonable efforts to cause such registration statement to be declared
effective within 90 days after the date on which the registration statement was
initially filed with the SEC.
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Credit, Security and Management Agreement
. On July 30, 2010, the
Company entered a credit, security and management agreement (the Replacement Facility)
with GSC Investment Funding LLC, the Companys wholly owned subsidiary (GSC
Subsidiary), Saratoga, Madison Capital Funding LLC (Madison) and U.S. Bank National
Association, pursuant to which GSC Subsidiary has the right to request advances from
Madison up to the aggregate principal amount of $40 million. Under the Replacement
Facility, GSC Subsidiary may draw up to the lesser of (i) $40 million and (ii) the
product of the applicable advance rate (which varies from 50% to 75% depending on the
type of loan asset) and the value, determined in accordance with the Replacement
Facility, of certain eligible loan assets pledged as security for the loan, in each
case less (a) the amount of any undrawn funding commitments GSC Subsidiary has under any
loan asset and which are not covered by unfunded exposure amounts and (b) outstanding
borrowings.
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Under the Replacement Facility, borrowed funds bear interest at the greater of the
prevailing LIBOR rate and 2.00%, plus an applicable margin of 5.50%. At GSC Subsidiarys
option, funds may be borrowed based on an alternative base rate, which in no event will
be less than 3.00%, and the applicable margin over such alternative base rate is 4.50%.
In addition, GSC Subsidiary will pay the lenders a commitment fee of 0.75% per year on
the unused amount of the Replacement Facility for the duration of a revolving period of
three years (the Revolving Period) following the closing of the Replacement Facility.
Accrued interest and commitment fees are payable monthly. All borrowings and other
amounts payable under the Replacement Facility are due and payable in full five years
after the end of the Revolving Period.
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The Replacement Facility is secured by substantially all of the assets of GSC Subsidiary,
including subordinated notes issued by GSC Investment Corp. CLO 2007 Ltd. (GSIC CLO)
and the management fees due to the Company under its collateral management agreement with
GSIC CLO (which management fees, when, as and if received by the Company, have been
contributed to GSC Subsidiary).
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On August 1, 2010, the Company issued a press release announcing the completion of the Private
Placement and the other matters described herein. A copy of the press release is attached hereto
as Exhibit 99.1 and is incorporated herein by reference.
The foregoing description of the investment advisory and management agreement, the
administration agreement, the trademark license agreement, the registration rights agreement and
the Replacement Facility does not purport to be complete and is qualified in its entirety by
reference to the full text of the investment advisory and management agreement, the administration
agreement, the trademark license agreement, the registration rights agreement and the Replacement
Facility attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively.
Item 1.02 Termination of a Material Definitive Agreement
On July 30, 2010, the Company contributed all of the proceeds from the Private Placement to
GSC Subsidiary and GSC Subisidiary used substantially all net proceeds plus approximately $18.4
million of borrowings under the Replacement Facility to pay off all amounts outstanding under the
Credit Agreement, dated as of April 11, 2007 (the Deutsche Bank Facility), among the Company, GSC
Subsidiary, GSC (NJ), L.P. and Deutsche Bank AG, New York Branch and then terminated the Deutsche
Bank Facility.
In addition, on July 30, 2010, the Companys investment advisory and management agreement, and
administration agreement with GSC (NJ), L.P., which previously served as the Companys external
investment advisor and administrator, were terminated.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
The information required by Item 2.03 is contained in Items 1.01 and 1.02 and is incorporated
herein by reference.
Item 5.01 Changes in Control of Registrant
Certain information required by Item 5.01 is contained in Item 1.01 and is incorporated herein
by reference. In addition, Saratoga, CLO Partners and certain affiliates thereof (collectively,
the Investors) acquired 9,868,422 shares of the Companys common stock, which is equal to 36.8%
of the Companys outstanding shares of common stock on the date hereof, in connection with the
transactions contemplated by the Stock Purchase Agreement. The Investors used their personal funds
or, in the case of Saratoga and CLO Partners, their available working capital to purchase such
shares. Through the investment of approximately $15 million in the shares of the Companys common
stock in the Private Placement and their ability to find replacement debt financing from Madison
for the Company in order to permit it to cure the event of default under the Deutsche Bank
Facility, the Investors were able to cause the Company to agree to take the following actions:
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engage Saratoga to act as its external investment adviser and administrator;
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appoint Christian L. Oberbeck, who is also the Managing Member of Saratoga, and
Richard A. Petrocelli, who is also the Managing Director of Saratoga, as its President
and Chief Executive Officer, and Chief Financial Officer, Secretary and Chief Compliance
Officer, respectively;
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appoint Messrs. Oberbeck and Petrocelli as members of the Companys board of
directors to replace two resigning directors who were affiliated with its former
external investment adviser and administrator, GSCP (NJ) L.P.; and
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change its name and ticker symbol from GSC Investment Corp. and GNV to Saratoga
Investment Corp. and SAR, respectively.
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Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers; Compensatory Agreements of Certain Officers
On July 30, 2010, Seth M. Katzenstein, Eric A. Snyder and Eric P. Rubenfeld resigned as the
Companys Chief Executive Officer and President, Chief Financial Officer, and Vice President,
Secretary and Chief Compliance Officer, respectively. In addition, on July 30, 2010, Robert F.
Cummings, Jr. and Richard M. Hayden, both of whom are affiliates of the Companys former external
investment adviser and administrator, resigned as members of the Companys board of directors. The
above-described resignations were solely made in connection with the Stock Purchase Agreement and
were not due to any disagreement between the Company and the above-referenced executives and
directors.
On July 30, 2010, the Companys board of directors appointed Christian L. Oberbeck as the
Companys Chief Executive Officer and President and Richard A. Petrocelli as the Companys Chief
Financial Officer, Secretary and Chief Compliance Officer. In addition, on July 30, 2010, the
board of directors of the Company appointed Messrs. Oberbeck and Petrocelli as member of the board
of directors. These actions were taken in accordance with the terms of the Stock Purchase
Agreement. Information regarding Messrs. Oberbeck and Petrocelli is as follows:
Christian L. Oberbeck
Mr. Oberbeck has over 23 years of experience in leveraged finance, from distressed debt to
private equity, and has been involved in originating, structuring, negotiating, consummating,
managing and monitoring investments in these businesses. Mr. Oberbeck is the Managing Partner of
Saratoga Partners and has served on its investment committee since 1995. Mr. Oberbeck is also the
Managing Member of Saratoga and the Chief Executive Officer and President of the Company. He also
serves as a member of the Companys board of directors.
Prior to assuming management responsibility for Saratoga Partners in 2008, Mr. Oberbeck has
co-managed Saratoga Partners since 1995, when he joined Dillon Read and Saratoga Partners from
Castle Harlan, Inc., a corporate buyout firm. Mr. Oberbeck had joined Castle Harlan at its
founding in 1987 and was a Managing Director, leading successful investments in manufacturing and
financial services companies. Prior to joining Castle Harlan, he worked in the Corporate
Development Group of Arthur Young and in corporate finance at Blyth Eastman Paine Webber. Mr.
Oberbeck has been a director of numerous middle market companies while at Saratoga Partners and
Castle Harlan.
Mr. Oberbeck graduated from Brown University in 1982 with a BS in Physics and a BA in
Mathematics. In 1985, he earned an MBA from Columbia University.
Richard A. Petrocelli
Mr. Petrocelli has over 20 years of experience including investment management, private equity
and corporate reorganizations. Mr. Petrocelli is a Managing Director and Chief Financial Officer
at Saratoga Partners and has been involved in originating, structuring, negotiating, consummating,
managing and monitoring middle market investments. Mr. Petrocelli is the Managing Director of
Saratoga and the Chief Financial Officer, Secretary and Chief Compliance Officer of the Company.
He also serves as a member of the Companys board of directors.
Mr. Petrocelli began his career as an accountant before transitioning to alternative assets at
Gabelli Asset Management Company in 1993. Mr. Petrocellis background brings financial expertise
to the diligence and oversight processes, which is critically important when dealing in complex
transactions. In addition to his involvement in originating, structuring, negotiating,
consummating, managing and monitoring investments at Saratoga Partners, Mr. Petrocelli is currently
the Chief Financial Officer of Saratoga Partners and is responsible for reporting and compliance.
Mr. Petrocelli joined Saratoga Partners in 1998 from Gabelli Asset Management. At Gabelli Asset
Management, Mr. Petrocelli was a Vice President in the corporate finance department with a primary
focus on the Companys alternative investment business. Prior to that, he was a senior accountant
at BDO Siedman. Mr. Petrocelli has served as a director of a number of Saratoga Partners
portfolio companies.
Mr. Petrocelli graduated with a BSBA from Georgetown University in 1990 and earned an MBA from
New York Universitys Stern School of Business in 1999. He is a Certified Public Accountant.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
On July 30, 2010, the Company amended its articles of incorporation to change its name to
Saratoga Investment Corp.
A copy of the articles of amendment the relating to the change of the Companys name to
Saratoga Investment Corp. is attached hereto as Exhibit 3.1.
Item 5.07 Submission of Matters to a Vote of Security Holders
On July 30, 2010, the Company held a special meeting of stockholders to: (i) approve the
issuance of shares of common stock at a price per share below the current net asset value per share
of such stock pursuant to the Stock Purchase Agreement and (ii) approve the investment advisory and
management agreement with Saratoga.
The number of shares of common stock entitled to vote at the special meeting was 16,940,109.
The number of shares of common stock present or represented by proxy at the special meeting was
10,778,656.
The number of votes cast for and against and the number of abstentions and broker non-votes
with respect to each matter voted upon are set forth below:
Proposal No. 1 Issuance of Common Stock Below Net Asset Value Per Share
Stockholders approved the issuance of 9,868,422 shares of the Companys common stock for an
aggregate purchase price of approximately $15 million at a price per share below the current net
asset value per share of such stock, on the terms and subject to the conditions set forth in the
Stock Purchase Agreement, as set forth below:
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Votes For
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Votes Against
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Abstain
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9,700,780
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957,206
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120,670
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Proposal No. 2 Adoption of Investment Advisory and Management Agreement
Stockholders approved the investment advisory and management agreement pursuant to which
Saratoga was appointed as the new investment adviser of the Company, as set forth below:
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Votes For
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Votes Against
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Abstain
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9,828,620
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832,157
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117,879
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Item 9.01 Financial Statements and Exhibits
(a)
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Not Applicable.
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(b)
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Not Applicable.
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(c)
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Not Applicable.
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(d)
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Exhibits
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Exhibit
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Number
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Description
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3.1
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Articles of Amendment dated July 30, 2010
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10.1
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Investment Advisory and Management
Agreement, dated as of July 30, 2010, by and
between GSC Investment Corp. and Saratoga
Investment Advisors, LLC.
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10.2
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Administration Agreement, dated as of July 30,
2010, by and between GSC Investment Corp. and
Saratoga Investment Advisors, LLC.
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10.3
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Trademark License Agreement, dated as of July
30, 2010, by and between GSC Investment Corp.
and Saratoga Investment Advisors, LLC.
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10.4
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Registration Rights Agreement, dated July 30,
2010, by and among GSC Investment Corp.,
Saratoga Investment Advisors, LLC, CLO Partners
LLC, GSC CDO III, L.L.C. and the other
signatory parties thereto.
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10.5
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Credit, Security and Management Agreement,
dated July 30, 2010, by and among GSC
Investment Funding LLC, Saratoga Investment
Corp., Saratoga Investment Advisors, LLC.,
Madison Capital Funding LLC and U.S. Bank
National Association.
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99.1
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Press release dated August 1, 2010
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SARATOGA
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INVESTMENT CORP.
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Date: August 2, 2010
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By:
Name:
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/s/ Richard A. Petrocelli
Richard A. Petrocelli
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Title:
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Chief Financial Officer
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