NEW YORK, NY — (MARKET WIRE) — 11/10/08 — Prospect Capital Corporation (NASDAQ: PSEC)(“Company” or “Prospect”) today announced financial results for its firstfiscal quarter ended September 30, 2008.
For the quarter ended September 30, 2008, our net investment income was$23.5 million, or $0.80 per share, an increase of 199% and 105% from theprior year on a dollars and per share basis, respectively. Our resultsinclude approximately 34 cents per share of positive net investment incomeresulting from the settlement of net profits interests with IEC Systems LPand Advanced Rig Services LLC.
Our net asset value per share on September 30, 2008 increased $0.08 pershare from the June 30, 2008 amount to $14.63 per share.
We estimate that our net investment income for the current second fiscalquarter ended December 31, 2008 will be $0.42 to $0.50 per share. We expectto announce our second fiscal quarter dividend next month.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Net assets as of September 30, 2008: $431.74 million Net asset value per share as of September 30, 2008: $14.63First Fiscal Quarter Operating Results: Net investment income: $23.50 million Net investment income per share: $0.80 Net increase in net assets resulting from operations: $14.00 million Dividends to shareholders per share: $0.4025First Fiscal Quarter Portfolio Activity: Number of new portfolio company investments: 3 Number of portfolio companies at end of period: 31
PORTFOLIO AND INVESTMENT ACTIVITY
On September 30, 2008, the fair value of our portfolio of 31 long-terminvestments was approximately $549.3 million.
As of September 30, 2008, our portfolio generated a current yield ofapproximately 15.5% across all our long-term debt and equity investments.This current yield includes interest from all our long-term investments aswell as dividends from certain portfolio companies.
During the quarter ended September 30, 2008, we completed three newinvestments totaling approximately $50.7 million, as well as follow-oninvestments in existing portfolio companies.
On August 1, 2008, we provided $7.4 million in secured debt financing toCastro Cheese Company (“Castro”), based in Houston, Texas. Castro is aleading manufacturer, marketer, and distributor of Hispanic cheeses andcreams.
On August 4, 2008, we provided $15.0 million in debt financing to supportthe take-private acquisition of the TriZetto Group (“TriZetto”). TriZettois a leading healthcare information technology company.
On August 21, 2008, we provided $26.0 million in senior secured debtfinancing and co-invested $2.3 million in equity in the acquisition of BNNHoldings Corp. d/b/a Biotronic NeuroNetwork (“Biotronic”), based in AnnArbor, Michigan. Biotronic is the largest independent national provider ofintra-operative neurophysiological monitoring services.
In addition, during the quarter ended September 30, 2008, we exited twopositions. We exercised our options and sold our shares in Deep Down onAugust 1, 2008 for approximately $1.65 million, generating a 53% all-ininternal rate of return on our investment. On August 27, 2008, R-VIndustries repaid the $7.5 million of debt owed to us.
On September 30, 2008, we settled our net profits interests (“NPIs”) in IECSystems LP (“IEC”) and Advanced Rig Services LLC (“ARS”) with the companiesfor a combined $12.6 million. In conjunction with the NPI settlement, wesimultaneously reinvested the $12.6 million as incremental senior secureddebt in IEC and ARS. The incremental debt will be amortized over the periodfrom September 30, 2008 to November 20, 2010.
Prospect has been in discussions with multiple purchasers for Gas Solutionsbut has not yet entered into a binding agreement. Significant negotiationscontinue. While Prospect wishes to unlock the value Prospect sees in GasSolutions, Prospect does not wish to enter into any agreement at any timethat does not recognize the long term value Prospect sees in Gas Solutions.As an almost fully hedged midstream asset generating predictable andconsistent cash flow to Prospect, Gas Solutions is an asset that Prospectwishes to sell at a value-maximizing price, or not at all. Prospect has apatient approach toward the process. Prospect’s multi-year puts purchasedearlier this year are substantially in the money, providing downsideprotection to commodity price declines. GSHI has generated approximately$19.5 million of unadjusted plant operating income during the eight monthperiod ended August 31, 2008. On an annualized basis this represents anincrease over the results from the year ended December 31, 2007 of 126.7%.
LIQUIDITY AND FINANCIAL RESULTS
At September 30, 2008, borrowings under our credit facility stood atapproximately $131.7 million.
We are currently seeking to increase our revolving credit facility from itscurrent size of $200 million. Over the past few months we have worked withrating agencies to structure an expanded facility of up to $400 million insize. We have not yet embarked upon initiating a syndication process forthis facility due to the current credit environment, but we expect toinitiate such activities in early 2009. The closing of the facility issubject to lender syndication and other conditions customary for atransaction of this type.
In the current quarter we announced the authorization by our board ofdirectors to repurchase up to $20 million of our outstanding stock. We willbe disclosing any such repurchases in each quarterly report beginning withour December quarter report that we anticipate filing in February.
CONFERENCE CALL
The Company will host a conference call on Monday, November 10, 2008, at1:00 p.m. Eastern Time. The conference call dial-in number will be800-860-2442. A recording of the conference call will be available forapproximately 30 days. To hear a replay, call 877-344-7529 and use passcode425233.
Prospect Capital Corporation and Subsidiary Consolidated Statements of Assets and Liabilities (in thousands, except share and per share data) September 30, June 30, 2008 2008 ----------- -----------Assets (Unaudited) (Audited)Investments at fair value (cost of $559,727 and $496,805, respectively) Control investments (cost of $204,064 and $203,661, respectively) $ 202,324 $ 205,827 Affiliate investments (cost of $33,354 and $5,609, respectively) 33,392 6,043 Non-control/Non-affiliate investments (cost of $322,309 and $287,535, respectively) 313,587 285,660 ----------- ----------- Total investments at fair value 549,303 497,530 ----------- -----------Investments in money market funds 28,658 33,000Cash 1,269 555Receivables for: Interest 5,516 4,094 Dividends 230 4,248 Loan principal 63 71 Mangerial assistance 382 380 Structuring fees 303 - Other 232 187Prepaid expenses 346 273Deferred financing costs 1,416 1,440 ----------- ----------- Total Assets 587,718 541,778 ----------- -----------LiabilitiesCredit facility payable 131,667 91,167Dividends payable 11,882 11,845Due to Prospect Administration 1,038 695Due to Prospect Capital Management 8,631 5,946Accrued expenses 994 1,104Other liabilities 1,767 1,398 ----------- ----------- Total Liabilities 155,979 112,155 ----------- -----------Net Assets $ 431,739 $ 429,623 =========== ===========Components of Net AssetsCommon stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 29,520,379 and 29,520,379 issued and outstanding, respectively) $ 30 $ 30Paid-in capital in excess of par 441,332 441,332Undistributed net investment income 13,128 1,508Accumulated realized losses on investments (12,327) (13,972)Unrealized (depreciation) appreciation on investments (10,424) 725 ----------- -----------Net Assets $ 431,739 $ 429,623 =========== ===========Net Asset Value Per Share $ 14.63 $ 14.55 =========== =========== Prospect Capital Corporation and Subsidiary Consolidated Statements of Operations (in thousands) Three Months Ended ------------------------ Sep 30, Sep 30, 2008 2007 ----------- ----------- (Unaudited) (Unaudited)Investment IncomeInterest income: Control investments $ 6,722 $ 5,063 Affiliate investments 560 667 Non-control/non-affiliate investments 10,274 7,102 ----------- ----------- Total interest income 17,556 12,832 ----------- -----------Dividend income: Control investments 4,585 1,450 Money market funds 138 168 ----------- ----------- Total dividend income 4,723 1,618 ----------- -----------Other income: Control/affiliate investments 744 10 Non-control/non-affiliate investments 12,776 931 ----------- ----------- Total other income 13,520 941 ----------- ----------- Total Investment Income 35,799 15,391 ----------- -----------Operating ExpensesInvestment advisory fees: Base management fee 2,823 1,866 Income incentive fee 5,875 1,966 ----------- ----------- Total investment advisory fees 8,698 3,832 ----------- -----------Interest and credit facility expenses 1,518 1,238Chief Financial, Chief Compliance Officer and Sub-administration fees 250 186Legal fees 597 1,206Valuation services 160 113Sarbanes-Oxley compliance expenses 2 10Audit and tax related fees 175 250Allocation of overhead from Prospect Administration 588 260Insurance expense 61 64Directors' fees 81 55Other general and administrative expenses 167 312 ----------- ----------- Total Operating Expenses 12,297 7,526 ----------- ----------- Net Investment Income 23,502 7,865 ----------- -----------Net realized gain (loss) on investments 1,645 (11)Net change in unrealized appreciation/depreciation on investments (11,149) 696 ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 13,998 $ 8,550 =========== =========== Prospect Capital Corporation and Subsidiary Per Share Data (in actual dollars) Three Months Ended ------------------------ Sep 30, Sep 30, 2008 2007 ----------- -----------Per Share Data: (Unaudited) (Unaudited)Net asset value at beginning of period $ 14.55 $ 15.04Net investment income 0.80 0.39Realized gain (loss) 0.05 -Net unrealized (depreciation) appreciation (0.38) 0.04Difference due to rounding 0.01 -Dividends declared (0.40) (0.39) ----------- -----------Net asset value at end of period $ 14.63 $ 15.08 =========== ===========
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation (www.prospectstreet.com/) is a closed-endinvestment company that lends to and invests in private and microcap publicbusinesses. Prospect Capital’s investment objective is to generate bothcurrent income and long-term capital appreciation through debt and equityinvestments.
Prospect Capital has elected to be treated as a business developmentcompany under the Investment Company Act of 1940 (“1940 Act”). We arerequired to comply with a series of regulatory requirements under the 1940Act as well as applicable NASDAQ, federal and state rules and regulations.We have elected to be treated as a regulated investment company under theInternal Revenue Code of 1986. Failure to comply with any of the laws andregulations that apply to Prospect Capital could have an adverse effect onProspect Capital and its shareholders.
This press release contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995. Any suchstatements, other than statements of historical fact, are highly likely tobe affected by other unknowable future events and conditions, includingelements of the future that are or are not under the Company’s control, andthat the Company may or may not have considered; accordingly, suchstatements cannot be guarantees or assurances of any aspect of futureperformance. Actual developments and results are highly likely to varymaterially from these estimates and projections of the future. Suchstatements speak only as of the time when made, and the Company undertakesno obligation to update any such statement now or in the future.
Please send investment proposals to:Grier EliasekPresident and Chief Operating OfficerEmail ContactTelephone (212) 448-0702