NEW YORK, NY — (MARKET WIRE) — 05/10/10 — Prospect Capital Corporation (NASDAQ: PSEC)(“Company,” “Prospect” or “we”) today announced financial results for itsthird fiscal quarter ended March 31, 2010.
For the three and nine months ended March 31, 2010, our net investmentincome was $19.0 million and $48.2 million, respectively, or 30 cents and85 cents, respectively, per weighted average share outstanding for theperiods then ended. Our net investment income increased 12%, and our netinvestment income per share increased 3%, from the quarter ended December31, 2009 to the quarter ended March 31, 2010.
We closed our acquisition of Patriot Capital Funding, Inc. (NASDAQ: PCAP)(“Patriot”) on December 2, 2009. During the quarter ended March 31, 2010,we recognized $15.6 million of interest income in connection with theassets acquired from Patriot, including $6.7 million of interest incomefrom the acceleration of purchase discounts upon repricing of three loans.
We have additional liquidity available that can be deployed into otheraccretive investments beyond the Patriot acquisition and are currentlymoving forward a pipeline of potential additional portfolio and individualinvestment opportunities.
We estimate that our net investment income for the current fourth fiscalquarter ended June 30, 2010 will be 24 to 32 cents per share. We expect toannounce our third fiscal quarter distribution in June.
OPERATING RESULTSHIGHLIGHTSEquity Values: Net assets as of March 31, 2010: $649.48 million Net asset value per share as of March 31, 2010: $10.09Third Fiscal Quarter Operating Results: Net investment income: $18.97 million Net investment income per share: $0.30 Dividends declared to shareholders per share: $0.41Year-to-date Operating Results: Net investment income: $48.22 million Net investment income per share: $0.85 Dividends declared to shareholders per share: $1.22625
PORTFOLIO AND INVESTMENT ACTIVITY
At March 31, 2010, our portfolio consisted of 55 long-term investments witha fair value of approximately $697.0 million, compared to the same numberof long-term investments with a fair value of $648.1 million at December31, 2009. This increase in invested capital resulted primarily from afollow-on investment in Shearer’s Food’s, Inc. (“Shearer’s”) on March 31,2010, as well as additional fundings to existing portfolio companies.
During the quarter ended March 31, 2010, we completed a $36.3 millioninvestment in Shearer’s, a snack food company, for which we received $35.0million of junior secured debt and $1.3 million of equity interests.Concurrent with this funding, Shearer’s repaid its existing $18.0 millionloan to us. During the nine months ended March 31, 2010, we also madefollow-on investments in portfolio companies and received principalpayments of $15.7 million on loans.
During the three months ended March 31, 2010, we repriced our loans toAircraft Fasteners International, LLC (“AFI”), Prince Mineral Company, Inc.(“Prince”) and R-O-M Corporation (“ROM”). The revised terms were morefavorable than the original terms and increased the present value of thefuture cash flows. In accordance with ASC 320-20-35, the cost bases of thenew loans were recorded at par value, resulting in $6.7 million ofaccelerated original purchase discount recognized as interest income.
Subsequent to March 31, 2010, we invested $12.3 million in secured debt inSeaton Corp., a leading vendor-on-premise staffing company.
Primary investment activity in the marketplace has increased recently, andwe are currently evaluating a growing pipeline of potential investments,some of which have the potential to close this quarter. These investmentsare primarily secured investments with double digit coupons, sometimescoupled with equity upside through co-investments or warrants, anddiversified across multiple sectors.
Gas Solutions continues to generate meaningful free cash flows, with nothird party debt. In February 2010, we hired Robert Bourne as President andCEO of Gas Solutions. Mr. Bourne has over 30 years of experience in themidstream sector. He is focusing on new business development and seekingnew opportunities to help Gas Solutions grow beyond its existing footprint.In April 2010, Gas Solutions purchased a series of propane puts with strikeprices of $1.00 per gallon and $0.95 per gallon covering the periods May 1,2010, through April 30, 2011, and May 1, 2011, through April 30, 2012,respectively. Gas Solutions hedged approximately 85% of its currentexposure to natural gas liquids based on current plant volumes. Thesehedges are expected to reduce the earnings volatility associated with lowerprices of natural gas liquids without limiting the upside from higherprices, helping Gas Solutions continue to generate significant cash flowsfor interest and dividend payments.
LIQUIDITY AND FINANCIAL RESULTS
On June 25, 2009, we completed a first closing on an expanded syndicatedrevolving credit facility (the “Facility”). The Facility includes anaccordion feature which allows the Facility to accept up to an aggregatetotal of $250 million of commitments. Since that initial closing with twolenders, we have added four additional lenders to the Facility andcurrently have commitments totaling $210 million. The Facility has aninvestment grade Moody’s rating of A2. We are working with our lenders toreduce the cost, grow the size, increase the advance rate, expand thecollateral pool and extend the duration of the Facility, with suchamendment targeted for completion within the next 45 days.
As of March 31, 2010, we had $54.2 million of borrowings under ourFacility. With the pledging of additional assets from the Patriotacquisition, we have significant additional credit availability of $62.5million, not including further leveragability of additional collateral thatwe could add to our Facility with additional transaction activity, and notincluding further availability increases targeted by our Facilityamendment.
Our virtually unleveraged balance sheet is a source of significant strengthin comparison with many overleveraged competitors. Our equitized balancesheet also gives us the potential for future earnings upside as weprudently grow our existing revolving credit facility, add additionalsecured facilities, and evaluate term debt solutions driven by ourinvestment grade facility ratings at both the corporate and Facilitylevels. We are pleased with the increase in desire of counterparties toprovide us additional credit at significantly more attractive pricing ascompared to what the capital markets offered a year ago.
CONFERENCE CALL
The Company will host a conference call on Tuesday, May 11, 2010, at 11:00a.m. Eastern Time. The conference call dial-in number will be 866-524-3160.A recording of the conference call will be available for approximately 30days. To hear a replay, call 877-344-7529 and use passcode 440436.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES March 31, 2010 and June 30, 2009 (in thousands, except share and per share data) March 31, June 30, 2010 2009 (Unaudited) (Audited) ---------- ----------AssetsInvestments at fair value (cost of $675,534 and $531,424, respectively, Note 4) Control investments (cost of $181,894 and $187,105, respectively) $ 194,647 $ 206,332 Affiliate investments (cost of $63,197 and $33,544, respectively) 73,516 32,254 Non-control/Non-affiliate investments (cost of $430,443 and $310,775, respectively) 428,838 308,582 ---------- ---------- Total investments at fair value 697,001 547,168 ---------- ----------Investments in money market funds 23,011 98,735Cash 21,249 9,942Receivables for: Interest, net 3,233 3,562 Dividends 1 28 Other 404 571Prepaid expenses 146 68Deferred financing costs, net 4,948 6,951Other assets 534 -- ---------- ---------- Total Assets $ 750,527 $ 667,025 ---------- ----------LiabilitiesCredit facility payable 54,200 124,800Dividend payable 26,403 --Due to Prospect Administration 243 842Due to Prospect Capital Management 9,246 5,871Due to broker 1,743 --Accrued expenses 7,640 2,381Other liabilities 1,566 535 ---------- ---------- Total Liabilities 101,041 134,429 ---------- ----------Net Assets $ 649,486 $ 532,596 ========== ==========Components of Net AssetsCommon stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 64,398,231 and 42,943,084 issued and outstanding, respectively) $ 64 $ 43Paid-in capital in excess of par 753,992 545,707Under/(over) distributed net investment income (21,756) 24,152Accumulated realized losses on investments (104,281) (53,050)Unrealized appreciation on investments 21,467 15,744 ---------- ----------Net Assets $ 649,486 $ 532,596 ========== ==========Net Asset Value Per Share $ 10.09 $ 12.40 ========== ========== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For The Three and Nine Months Ended March 31, 2010 and 2009 (in thousands, except share and per share data) (Unaudited) For The Three Months For The Nine Months Ended Ended March 31, March 31, --------------------- -------------------- 2010 2009 2010 2009 --------- ---------- --------- ---------Investment IncomeInterest Income Control investments (Net of foreign withholding tax of $0, $28, ($19), and $137, respectively) $ 4,494 $ 5,503 $ 14,137 $ 17,300 Affiliate investments 2,731 730 5,119 2,365 Non-control/non-affiliate investments 20,722 9,832 42,065 31,197 --------- ---------- --------- --------- Total interest income 27,947 16,065 61,321 50,862 --------- ---------- --------- ---------Dividend income Control investments 2,300 4,400 12,660 13,568 Money market funds 1 45 29 265 --------- ---------- --------- --------- Total dividend income 2,301 4,445 12,689 13,833 --------- ---------- --------- ---------Other income: Control/affiliate investments 241 -- 316 831 Gain on Patriot acquisition -- -- 5,714 -- Non-control/non-affiliate investments 1,516 159 2,365 13,155 --------- ---------- --------- --------- Total other income 1,757 159 8,395 13,986 --------- ---------- --------- --------- --------- ---------- --------- --------- Total Investment Income 32,005 20,669 82,405 78,681 --------- ---------- --------- ---------Operating ExpensesInvestment advisory fees: Base management fee 3,576 2,977 9,962 8,740 Income incentive fee 4,744 2,930 12,054 11,795 --------- ---------- --------- --------- Total investment advisory fees 8,320 5,907 22,016 20,535Interest and credit facility expenses 2,111 1,345 5,480 4,828Sub-administration fees -- 177 -- 644Legal fees 146 107 469 590Valuation services 231 139 504 561Audit, compliance and tax related fees 181 219 681 848Allocation of overhead from Prospect Administration 840 588 2,520 1,764Insurance expense 64 61 190 185Directors' fees 64 61 192 204Potential merger expenses 925 -- 1,148 --Other general and administrative expenses 149 345 988 807Tax expense -- -- -- 533 --------- ---------- --------- --------- Total Operating Expenses 13,031 8,949 34,188 31,499 --------- ---------- --------- ---------Net Investment Income 18,974 11,720 48,217 47,182 --------- ---------- --------- ---------Net realized (loss) gain on investments (2) -- (51,231) 1,661Net change in unrealized appreciation/depreciation on investments 6,968 3,611 5,723 (12,990) --------- ---------- --------- ---------Net Increase in Net Assets Resulting from Operations $ 25,940 $ 15,331 $ 2,709 $ 35,853 ========= ========== ========= =========Net increase in net assets resulting from operations per share: $ 0.41 $ 0.51 $ 0.05 $ 1.21 ========= ========== ========= =========Dividends/distributions declared per share: $ 0.41 $ 0.41 $ 1.23 $ 1.21 ========= ========== ========= ========= PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For the Three and Nine Months Ended March 31, 2010 and 2009 (in actual dollars) (Unaudited) For The Three Months For The Nine Months Ended Ended -------------------- -------------------- March 31, March 31, March 31, March 31, 2010 2009 2010 2009 --------- --------- --------- ---------Per Share Data:Net asset value at beginning of period $ 10.06 $ 14.43 $ 12.40 $ 14.55Net investment income 0.30 0.39 0.85 1.59Net realized (loss) gain -- -- (0.90) 0.06Net unrealized appreciation (depreciation) 0.11 0.12 0.10 (0.44)Net increase (decrease) in net assets as a result of public offerings and DRIP issuance 0.03 (0.34) (0.85) (0.36)Net increase in net assets as a result of shares issued for Patriot acquisition -- -- 0.14 --Dividends declared (0.41) (0.41) (1.65) (1.21) --------- --------- --------- ---------Net asset value at end of period $ 10.09 $ 14.19 $ 10.09 $ 14.19 ========= ========= ========= =========
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. Our investment objective is to generate both current income andlong-term capital appreciation through debt and equity investments.
We have elected to be treated as a business development company under theInvestment Company Act of 1940 (“1940 Act”). We are required to comply witha series of regulatory requirements under the 1940 Act as well asapplicable NASDAQ, federal and state rules and regulations. We have electedto be treated as a regulated investment company under the Internal RevenueCode of 1986. Failure to comply with any of the laws and regulations thatapply to us could have an adverse effect on us and our shareholders.
This press release contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995, whose safe harborfor forward-looking statements does not apply to business developmentcompanies. Any such statements, other than statements of historical fact,are highly likely to be affected by other unknowable future events andconditions, including elements of the future that are or are not under ourcontrol, and that we 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 we undertake noobligation to update any such statement now or in the future.