Pepper Palace: Added To Underperformers List

On July 6, 2022, we heard from Saratoga Investment (SAR) regarding its calendar IIQ 2022 results ended May 31. One of the key credit developments was the unrealized write-down of the BDC’s investment in Pepper Palace, Inc. – a specialty food manufacturer of spicy sauces and seasonings. Exposure consists of $34.5mn at cost in first lien debt and equity. The equity was sharply discounted from a cost of $1.0mn, down to a value of $0.2mn. The debt has been reduced from $33.5mn to $28.8mn. The amount of annual investment income at risk is $2.7mn.

SAR said the following about the newly underperforming company, which we rated CCR 2 previously:

This markdown reflects the current performance of the company, but they continue to pay interest. We are working closely with the company and the sponsor as they work to improve performance.

Saratoga Investment – Conference Call – July 7, 2022

There is nothing in the public record which explains what’s wrong at the Tennessee-based company, which has “200-500 employees”, according to LinkedIn. We do know that the investment is a relatively new one for SAR – which has been on a portfolio growth spurt of late – booked in the middle of 2021.

All we can do is add the company to our underperformers list with a rating of CCR 3 on our 5 point scale. We will track the public record daily for any development worth bringing to readers attention.