October 11, 2022
We learned from Saratoga Investment's (SAR) 2023 fiscal IIQ results (June-August) that portfolio company Zollege PBC has been underperforming both operationally and financially. Here is what SAR's management revealed on its earnings conference call:
"They [Zollege ] very recently encountered some performance difficulties related to an enrollment interruption that was due to a partnership arrangement that they had that they have since moved away from. And since moving away from that partnership arrangement, enrollment is back on track to historical levels. And as a result, we’re optimist at and expect that their financial performance will come back and follow suit as well. But that valuation write-down is largely reflective of that enrollment interruption, which we expect to be temporary."
In response to the above, SAR wrote down the value of its $16.5mn at cost in Term Loan, Delayed Draw Loan and equity stake in Zollege to $15.2mn. We have added the company to the BDC Credit Reporter's underperformers list for the first time with a CCR 3 rating on the 5 point scale.
The company - which used to be called Vandelay Education - is privately held, so we're not expecting to gather much information from the public record, but will have SAR's quarterly valuations to rely on. From what we do know, the likelihood of a full recovery is greater than any loss at the moment, but we will continue to track how Zollege performs.