NEW YORK, NY -- (Marketwired) -- 11/04/13 -- Prospect Capital Corporation (NASDAQ: PSEC) ("Company" or "Prospect") today announced financial results for our first fiscal quarter ended September 30, 2013.
For the September 2013 quarter, our net investment income ("NII") was $82.3 million or $0.32 per weighted average number of shares for the quarter. For the September 2012 quarter, our NII was $74.0 million or $0.46 per weighted average number of shares for the quarter. NII increased year-over-year by 11.2% on a dollars basis and decreased by 30.4% on a per share basis due to non-recurring income in the September 2012 period.
For the September 2013 quarter, our net increase in net assets resulting from operations ("NI") was $79.9 million or $0.31 per weighted average number of shares for the quarter. For the September 2012 quarter, our NI was $47.2 million or $0.29 per weighted average number of shares for the quarter. NI increased year-over-year by 69.1% and 6.9% on a dollars and per share basis, respectively.
We have previously announced our upcoming and increasing cash distributions to shareholders through June 2014, ranging from $0.110250 per share for November 2013 to $0.110450 for June 2014. Prospect's closing stock price of $11.34 as of November 1, 2013 delivers to shareholders a current dividend yield of 11.7%.
We have generated cumulative NII in excess of cumulative distributions to shareholders in the June 2013 fiscal year and since Prospect's initial public offering nine years ago. For the June 2013 fiscal year, our NII in excess of distributions to shareholders was $53.4 million and $0.26 per share. For the September 2013 quarter, distributions were in excess of NII by $4.3 million and $0.01 per share, distributing some of the excess which was built up in the previous fiscal year.
Since our IPO nine years ago through our June 2014 distribution, assuming our current share count for upcoming distributions, we will have distributed $12.60 per share to initial shareholders and $1.1 billion in cumulative distributions to all shareholders.
Our net asset value per share on September 30, 2013 stood at $10.72 per share, flat to the value at June 30, 2013. Our debt to equity ratio stood at a modest 53.7% after subtraction of cash and equivalents as of September 30, 2013, down from 55.7% as of June 30, 2013. We estimate that our NII for the current December 2013 quarter will be $0.28 to $0.33 per share. Our objective is to grow net investment income per share in the coming quarters by focusing on matched-book funding to finance disciplined and accretive originations across our diversified lines of business.
Net assets as of September 30, 2013: $2.910 billion
Net asset value per share as of September 30, 2013: $10.72
First Fiscal Quarter Operating Results:
Net investment income: $82.34 million
Net investment income per share: $0.32
Dividends to shareholders per share: $0.330600
First Fiscal Quarter Portfolio and Investment Activity:
Portfolio investments in quarter: $556.84 million
Total portfolio investments at cost at September 30, 2013: $4.642 billion
Number of portfolio companies at September 30, 2013: 129
PORTFOLIO AND INVESTMENT ACTIVITY
Our origination efforts during the September 2013 quarter prioritized secured lending, with an emphasis on senior loans, although we also seek to close selected subordinated debt and income-producing equity investments. Our diversified approach includes seven origination strategies, including (1) lending in private equity sponsored transactions, (2) lending directly to companies not owned by private equity firms, (3) control investments in corporate operating companies, (4) control investments in financial companies, (5) investments in structured credit, (6) real estate investments, and (7) investments in syndicated debt. With our scale team of more than 90 professionals, one of the largest dedicated middle-market credit groups in the industry, we believe we are well positioned to select in a disciplined manner a small number of investments out of thousands of investment opportunities sourced annually.
Our portfolio's annualized current yield stood at 12.5% across all performing interest bearing investments as of September 30, 2013. Distributions from equity positions that we hold are not included in this yield calculation. In many of our portfolio companies, we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns. While the market has experienced yield compression in recent months (which may have moderated in the current December quarter due to an uptick in deal activity), we have continued to prioritize first lien senior and secured debt with our originations to protect against downside risk while still achieving above market yields through credit selection discipline and a differentiated origination approach.
At September 30, 2013, our portfolio consisted of 129 long-term investments with a fair value of $4.553 billion, a record total, compared to 124 long-term investments with a fair value of $4.173 billion at June 30, 2013.
During the September 2013 quarter, we completed 18 new and follow-on investments aggregating $556.8 million, sold two investments, and received repayment on seven other investments. Our repayments in the September 2013 quarter were $164.2 million, resulting in investments net of repayments of $392.7 million.
Broadly diversified across our lines of business, our originations in the September 2013 quarter were weighted toward the last two months of the quarter, resulting in only a partial quarter positive income benefit from such originations. We expect such originations to generate full-quarter positive benefit in the current December 2013 quarter.
In the March 2013 quarter we launched a call center initiative with multiple full-time resources to drive a higher level of investment opportunity sourcing from direct companies and intermediaries. The majority of our portfolio consists of agented middle-market loans that we have originated, structured, selected, and closed. In general, we perceive the risk-adjusted reward in the current environment to be superior for agented and self-originated opportunities compared to the syndicated market, causing us to prioritize our proactive sourcing efforts. The call center initiative already has led to closed deal activity, and we anticipate such effort to continue to have a positive impact on our business in the upcoming quarters.
Since September 30, 2013 in the current December 2013 quarter, we have completed eleven new and follow-on investments aggregating $105.7 million, received repayment of three investments, and sold five investments.
None of our loans originated in over six years has gone on non-accrual status. The fair market value of our loan assets on non-accrual as a percentage of total assets stood at approximately 0.3% on September 30, 2013 and June 30, 2013, down from 1.9% on June 30, 2012. We are pleased with the overall credit quality of our portfolio, with many of our companies generating year-over-year and sequential growth in top-line revenues and bottom-line profits.
During calendar year 2012, we received significant dividends and interest income from our ESHI investment. Our income from ESHI in calendar year 2013 is significantly less than such income in calendar year 2012. We are targeting to offset this decrease by utilizing existing liquidity and prudent leverage to finance our growth through new originations, including attractive yielding investments in the financial services and other sectors.
Because of the good performance of several controlled positions in our portfolio, we have selectively monetized certain such companies and may monetize other positions if we identify attractive opportunities for exit. As such exits materialize, we expect to reinvest such proceeds into new income-producing opportunities. We are pleased with the performance of our controlled portfolio companies, and are actively exploring other new investment opportunities at attractive multiples of cash flow.
Our advanced investment pipeline aggregates more than $1.0 billion of potential opportunities diversified across multiple sectors. These opportunities are primarily secured investments with double-digit coupons, sometimes coupled with equity upside through additional investments. With our growing advanced investment pipeline, we expect a significant pickup in deal closings over the next several weeks.
LIQUIDITY AND FINANCIAL RESULTS
Our modestly leveraged balance sheet, with its vast majority of unencumbered assets, access to multiple funding sources, matched-book funding, and weighting toward unsecured fixed-rate debt, is a source of significant strength. Our debt to equity ratio stood at a modest 53.7% after subtraction of cash and equivalents at September 30, 2013. Our equitized balance sheet also gives us the potential for future earnings upside as we prudently utilize and grow our existing revolving credit facility as well as potentially add additional secured or unsecured term facilities made more attractive by our investment-grade ratings at corporate, revolving facility, and term debt levels.
On March 27, 2012, we renegotiated our credit facility and closed on an expanded five-year revolving credit facility (the "Facility") for Prospect Capital Funding LLC. As of September 30, 2013, our Facility size stood at $567.5 million with commitments from 18 total lenders. After September 30, 2013, we added two additional banks and the commitments now stand at $587.5 million. The Facility includes an accordion feature which allows aggregate commitments to be increased to $650 million without the need for re-approval from existing lenders or the rating agency.
As we make additional investments, we generate additional availability to the extent such investments are eligible to be placed into the borrowing base. The revolving period of the Facility extends through March 2015, with an additional two-year amortization period, with distributions allowed after the completion of the revolving period. Interest on borrowings under the Facility is one-month Libor plus 275 basis points, with no minimum Libor floor. The Facility continues to carry a high-investment-grade Moody's rating of Aa3.
We also have significantly diversified our counterparty risk. The current count of 20 institutional lenders in our Facility compares to five lenders at June 30, 2010 and represents the most diversified bank group in our industry.
In addition, our repeat issuance in the 5-year to 30-year unsecured term debt market has extended our liability duration, thereby better matching our assets and liabilities for balance sheet risk management.
On December 21, 2010, we issued $150.0 million in principal amount of 6.25% senior unsecured convertible notes, convertible at $11.35 per common share and due December 2015 ("2015 Converts").
On February 18, 2011, we issued $172.5 million in principal amount of 5.50% senior unsecured convertible notes, convertible at $12.73 per common share and due August 2016 ("2016 Converts"). In the March 2012 quarter, we repurchased $5.0 million of our 2016 Notes.
On April 16, 2012, we issued $130.0 million in principal amount of 5.375% senior unsecured convertible notes, convertible at $11.61 per common share and due October 2017 ("2017 Converts").
On August 14, 2012, we issued $200.0 million in principal amount of 5.75% senior unsecured convertible notes, convertible at $12.07 per common share and due March 2018 ("2018 Converts").
On December 21, 2012, we issued $200.0 million in principal amount of 5.875% senior unsecured convertible notes, convertible at $12.54 per common share and due January 2019 ("2019 Converts", and together with the 2015 Converts, 2016 Converts, 2017 Converts, and 2018 Converts, the "Convertible Notes").
On May 1, 2012, we issued $100.0 million in principal amount of 6.95% senior unsecured notes due November 2022 (the "2022 Baby Bond Notes). The 2022 Baby Bond Notes trade on the New York Stock Exchange with ticker PRY and further demonstrate our diversified access to longer-dated funding.
On March 15, 2013, we issued $250.0 million in aggregate principal amount of 5.875% senior unsecured notes due March 2023 (the "2023 Notes").
On February 16, 2012, we entered into a Selling Agent Agreement for our issuance and sale from time to time of senior unsecured program notes (the "Program Notes", and together with our 2022 Baby Bond Notes, Convertible Notes, and our 2023 Notes, the "Unsecured Notes"). Since initiating the program, we have issued $518.8 million of Program Notes. These notes were issued with interest rates ranging from 3.28% to 7.00% with a weighted average rate of 5.56%. These notes mature between October 15, 2016 and October 15, 2043.
The Unsecured Notes are general unsecured obligations of Prospect, with no financial covenants, no technical cross default provisions, and no payment cross default provisions with respect to our revolving credit facility. The Unsecured Notes have no restrictions related to the type and security of assets in which Prospect might invest. These Unsecured Notes have an investment-grade S&P rating of BBB and Kroll rating of BBB+. As of September 30, 2013, Prospect held more than $3.9 billion of unencumbered assets on its balance sheet to benefit holders of Unsecured Notes and Prospect shareholders.
On May 8, 2013 and August 22, 2013, we entered into equity distribution agreements relating to at-the-market offerings from time to time of our common stock. During the period from July 1, 2013 to September 30, 2013, we sold approximately 21.3 million shares of our common stock at an average price of $11.18 per share, and raised $238.0 million of gross proceeds, with all issuance at prices above net asset value per share. During the period from October 1, 2013 to November 4, 2013, we sold approximately 12.7 million shares of our common stock at an average price of $11.21 per share, and raised $141.8 million of gross proceeds, with all issuance at prices above net asset value per share.
We currently have no borrowings under our Facility. Assuming sufficient assets are pledged to the Facility and that we are in compliance with all Facility terms, and taking into account our cash balances on hand, we have over $869 million of new investment capacity. Any principal repayments, other monetizations of our assets, debt and other capital issuances, or increases in our Facility size would also further increase our investment capacity.
EARNINGS CONFERENCE CALL
Prospect will host an earnings conference call on Tuesday, November 5, 2013, at 11:00 a.m. Eastern Time. The conference call dial-in number will be 888-317-6016. A recording of the conference call will be available for approximately 30 days. To hear a replay, call 877-344-7529 and use passcode 10036288. The updated Prospect corporate presentation is available on the Investor Relations tab at www.prospectstreet.com.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES September 30, 2013 and June 30, 2013 (in thousands, except share and per share data) September 30, June 30, 2013 2013 ------------- ----------- (Unaudited) (Audited) Assets Investments at fair value: Control investments (amortized cost of $970,400 and $830,151, respectively) $ 947,572 $ 811,634 Affiliate investments (amortized cost of $49,324 and $49,189, respectively) 37,425 42,443 Non-control/Non-affiliate investments (amortized cost of $3,622,564 and $3,376,438, respectively) 3,568,139 3,318,775 ------------- ----------- Total investments at fair value (amortized cost of $4,642,288 and $4,255,778, respectively) 4,553,136 4,172,852 ------------- ----------- Investments in money market funds 151,995 143,262 Cash 10,399 59,974 Receivables for: Interest, net 21,470 22,863 Other 1,995 4,397 Prepaid expenses 382 540 Deferred financing costs 44,194 44,329 ------------- ----------- Total Assets 4,783,571 4,448,217 ------------- ----------- Liabilities Credit facility payable 69,000 124,000 Senior convertible notes 847,500 847,500 Senior unsecured notes 347,762 347,725 Prospect Capital InterNotes® 461,977 363,777 Due to broker 87,662 43,588 Dividends payable 29,916 27,299 Due to Prospect Administration 55 1,366 Due to Prospect Capital Management 1,734 5,324 Accrued expenses 3,000 2,345 Interest payable 18,687 24,384 Other liabilities 6,523 4,415 ------------- ----------- Total Liabilities 1,873,816 1,791,723 ------------- ----------- Net Assets $ 2,909,755 $ 2,656,494 ============= =========== Components of Net Assets Common stock, par value $0.001 per share (500,000,000 common shares authorized; 271,404,289 and 247,836,965 issued and outstanding, respectively) $ 271 $ 248 Paid-in capital in excess of par 2,999,878 2,739,864 Undistributed net investment income 72,745 77,084 Accumulated realized losses on investments (73,987) (77,776) Unrealized depreciation on investments (89,152) (82,926) ------------- ----------- Net Assets $ 2,909,755 $ 2,656,494 ============= =========== Net Asset Value Per Share $ 10.72 $ 10.72 ============= =========== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For The Three Months Ended September 30, 2013 and 2012 (in thousands, except share and per share data) (Unaudited) For The Three Months Ended September 30, ------------------------- 2013 2012 ------------ ------------ Investment Income Interest income: Control investments $ 32,633 $ 17,919 Affiliate investments 1,496 1,651 Non-control/Non-affiliate investments 78,112 45,027 CLO Fund securities 26,180 13,713 ----------- ----------- Total interest income 138,421 78,310 ----------- ----------- Dividend income: Control investments 7,075 33,250 Non-control/Non-affiliate investments 3 2,955 Money market funds 11 3 ----------- ----------- Total dividend income 7,089 36,208 ----------- ----------- Other income: Control investments 9,221 2 Affiliate investments 2 8 Non-control/Non-affiliate investments 6,301 9,108 ----------- ----------- Total other income 15,524 9,118 ----------- ----------- Total Investment Income 161,034 123,636 ----------- ----------- Operating Expenses Investment advisory fees: Base management fee 23,045 13,228 Income incentive fee 20,584 18,507 ----------- ----------- Total investment advisory fees 43,629 31,735 ----------- ----------- Interest and credit facility expenses 27,407 13,511 Legal fees 219 622 Valuation services 439 376 Audit, compliance and tax related fees 623 432 Allocation of overhead from Prospect Administration 3,986 2,184 Insurance expense 93 93 Directors' fees 75 75 Excise tax 1,000 -- Other general and administrative expenses 1,226 581 ----------- ----------- Total Operating Expenses 78,697 49,609 ----------- ----------- Net Investment Income 82,337 74,027 ----------- ----------- Net realized gain on investments 3,789 1,775 Net change in unrealized depreciation on investments (6,226) (28,553) ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 79,900 $ 47,249 =========== =========== Net increase in net assets resulting from operations per share $ 0.31 $ 0.29 =========== =========== Dividends declared per share $ 0.33 $ 0.30 =========== =========== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For the Three Months September 30, 2013 and 2012 (in actual dollars) (Unaudited) For The Three Months Ended September 30, 2013 2012 ------- ------- Per Share Data: Net asset value at beginning of period $ 10.72 $ 10.83 Net investment income 0.32 0.46 Net realized gain 0.01 0.01 Net unrealized depreciation (0.02) (0.18) Net increase in net assets as a result of public offerings 0.02 0.07 Dividends declared and paid (0.33) (0.31) ------- ------- Net asset value at end of period $ 10.72 $ 10.88 ======= =======
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation (www.prospectstreet.com) is a business development company that focuses on lending to and investing in private businesses. Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.
We have elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). We are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to us could have an adverse effect on us and our shareholders.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, whose safe harbor for forward-looking statements does not apply to business development companies. Any such statements, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under our control, and that we may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from any forward-looking statements. Such statements speak only as of the time when made, and we undertake no obligation to update any such statement now or in the future.
Source: Prospect Capital Corporation
S&P and the Client grant to you a limited, personal license to access the Site and to access and download the Contents, but only for your own personal, family and household use. You may not use, reproduce, distribute or display any portion of the Site for any other purpose, including without limit any commercial purpose. You may use the Site and the Contents for lawful purposes only. S&P and Client reserve all rights not expressly granted, including the right to terminate your use of the Site without notice.
The Site contains copyrighted material, trademarks and service marks, and other proprietary information, including but not limited to text, software, and graphics, which materials are owned by S&P and/or its Client. S&P and Client reserve all rights in the Contents. You agree not to reproduce, distribute, sell, broadcast, publish, retransmit, disseminate, circulate or commercially exploit the Site or the Contents without the express written consent of S&P and the Client.
You agree to access the Contents and the Site manually, by request, and not automatically, through the use of a program, or other means. You agree not to take any action, alone or with others, that would interfere with the operation of the Site, to alter the Site in any way, or to impede others' access to and freedom to enjoy and use the Site as made available by S&P and S&P’s Client.
THE SITE AND THE CONTENTS ARE PROVIDED ON AN "AS IS" BASIS. S&P, ITS CLIENT, AND ANY OTHER PROVIDERS OF THE INFORMATION EXPRESSLY DISCLAIM ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF ACCURACY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.
NEITHER, S&P, THE CLIENT NOR EITHER OF THEIR AFFILIATES, SHAREHOLDERS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, EXEMPLARY , PUNITIVE SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE SITE, THE USE OF OR INABILITY TO USE THE SITE, OR THE CONTENTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN PARTICULAR, S&P WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY YOUR RELIANCE ON INFORMATION OBTAINED THROUGH THE SITE.
It is your responsibility to evaluate the accuracy, completeness or usefulness of any of the Contents available on the Site. Please seek the advice of professionals regarding the evaluation of any of the information on the Site.
The Site does not represent an offer or solicitation with respect to the purchase or sale of any security.