NEW YORK, NY — (MARKET WIRE) — 09/09/08 — Prospect Capital Corporation (NASDAQ: PSEC)(“Company” or “Prospect”) today announced financial results for its fourthfiscal quarter and fiscal year ended June 30, 2008.
For the year ended June 30, 2008, our net investment income was $45.1million, or $1.91 per weighted average number of shares for the year, anincrease of 95% and 30% from the prior year on a dollars and per sharebasis, respectively.
Our net asset value per share on June 30, 2008 increased by 40 cents pershare from March 31, 2008, to $14.55 per share.
For the quarter ended June 30, 2008, our net investment income was $13.7million, or 50 cents per weighted average number of shares for the quarter,an increase of 64% and 19% from the prior year-over-year quarter on adollars and per share basis, respectively.
We estimate that our net investment income for the current first fiscalquarter ended September 30, 2008 will be $0.45 to $0.53 per share. Weexpect to announce our first fiscal quarter dividend this month.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Stockholders' equity as of June 30, 2008: $429.62 million Net asset value per share as of June 30, 2008: $14.55Fiscal Year Operating Results: Net investment income: $45.11 million Net investment income per share: $1.91 Net increase in net assets resulting from operations: $27.59 million Dividends to shareholders per share: $1.58875Fourth Fiscal Quarter Operating Results: Net investment income: $13.67 million Net investment income per share: $0.50 Net increase in net assets resulting from operations: $23.99 million Dividends to shareholders per share: $0.40125Fourth Fiscal Quarter Portfolio Activity: Number of new portfolio companies invested: 2 Number of portfolio companies at end of period: 29
PORTFOLIO AND INVESTMENT ACTIVITY
On June 30, 2008, the fair value of our portfolio of 29 long-terminvestments was approximately $497.5 million.
During the fiscal year ended June 30, 2008, our portfolio generated acurrent yield of approximately 15.5% across all our long-term debt andequity investments. This current yield includes interest from all ourlong-term investments as well as dividends from certain portfoliocompanies.
During the quarter ended June 30, 2008, we completed two new investmentstotaling approximately $59.8 million, as well as follow-on investments inexisting portfolio companies.
On April 3, 2008, we provided $39.8 million in first and second lien debtand equity for our control acquisition of Ajax, a custom forger of seamlessrolled steel rings based in York, South Carolina. Ajax manufactures ringsfor wind turbines, mining equipment, construction equipment, and other enduser markets.
On April 30, 2008, we provided $20.0 million in secured debt financing tosupport the acquisition by Peerless, based in Dallas, Texas, of Nitram.Peerless is a leading manufacturer of separation, filtration, heattransfer, and sound dampening systems for diversified energy and industrialmarkets.
On April 30, 2008, we fully exited our investment in Cougar through thesale of our equity interest for $3.4 million. With this monetization, wehave received a 34% internal rate of return on this investment.
On June 9, 2008, Deep Down fully repaid our $12.0 million loan. Weexercised our warrant on a cashless basis and sold the acquired shares onAugust 1, 2008 for approximately $1.65 million, generating a 54% internalrate of return.
On June 30, 2008, we consolidated our coal investments into Yatesville Coalunder one management team, allowing for a more efficient utilization andoversight of our assets. We are pleased with the improvement of Yatesville,which we attribute to more efficient operations as a result of theconsolidation of the multiple operating companies, as well as significantincreases in coal prices in Central Appalachia.
As of June 30, 2008, we had 29 portfolio companies which together withother assets aggregated to approximately $541.8 million of total assets.Thus far in the current quarter ending September 30, 2008, we have madeinvestments in three new portfolio companies, received repayment on ourdebt outstanding to R-V Industries, and sold our stock in Deep Down.
On August 1, 2008, we provided $7.4 million in secured debt financing toCastro Cheese, based in Houston. Castro is a leading manufacturer andmarketer of Hispanic cheeses and creams.
On August 4, 2008, we provided $15.0 million in debt financing to supportthe take-private acquisition of TriZetto Group, a leading healthcareinformation technology company, by Apax Partners and equity co-investors.
On August 26, 2008, we provided $26.0 million in first lien secured debtfinancing and co-invested $2.3 million in equity for the growthrecapitalization of Biotronic NeuroNetwork, based in Ann Arbor, Michigan.Biotronic is the largest independent national provider of intra-operativeneurophysiological monitoring services.
On August 27, 2008, R-V Industries repaid our $7.5 million of secured debt.
In early May 2008, Gas Solutions purchased a series of propane puts atprices of $1.530 per gallon and $1.394 per gallon covering the periods May1, 2008, through April 30, 2009, and May 1, 2009 through April 30, 2010,respectively. These hedges have been executed at close to the highestmarket propane prices ever achieved on an historical basis. Such hedgespreserve the upside of Gas Solutions to benefit from potential futureincreases in commodity prices. Gas Solutions is generating approximately$27.3 million of unadjusted plant operating income based on annualizing theperformance of the six months ending June 30, 2008, which is an increase of55% from the previous year. For calendar year 2008, Gas Solutions estimatesbased on current commodity prices and annualized run rates that it wouldachieve more than $30 million of unadjusted plant operating income.
As previously disclosed, we are in the process of monetizing Gas Solutions.This monetization process is ongoing, and extensive discussions areoccurring now with an interested party related to a definitive purchaseagreement. While we are optimistic, we will make no definitive assurancesas to the likelihood or timing of such agreement.
Besides Gas Solutions, we are in active discussions concerning monetizingother controlled investments to maximize shareholder value.
LIQUIDITY AND FINANCIAL RESULTS
On June 2, 2008, we closed a public offering of 3.25 million shares of ourcommon stock, raising $48.4 million in gross proceeds.
At June 30, 2008, borrowings under our credit facility stood atapproximately $91.2 million. Currently, the Company has approximately $130million drawn under its $200 million credit facility. In addition to itscorporate cash, the Company has non-recourse access to an additionalapproximately $30 million of cash at Gas Solutions.
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, and we expect to initiate syndication of this facility during thiscalendar year. The closing of the facility is subject to lender syndicationand other conditions customary for a transaction of this type.
CONFERENCE CALL
The Company will host a conference call on Tuesday, September 9, 2008, at11:00 a.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 passcode422994.
Prospect Capital Corporation and Subsidiary Consolidated Statements of Assets and Liabilities (in thousands, except share and per share data) June 30, 2008 June 30, 2007 ------------- -------------Assets (Audited) (Audited)Investments at fair value (cost of $496,805 and $326,197, respectively) Control investments (cost of $203,661 and $130,493, respectively) $ 205,827 $ 145,121 Affiliate investments (cost of $5,609 and $14,821, respectively) 6,043 14,625 Non-control/Non-affiliate investments (cost of $287,535 and $180,883, respectively) 285,660 168,476 ------------- ------------- Total investments at fair value 497,530 328,222 ------------- -------------Investments in money market funds 33,000 41,760Cash 555 -Receivables for: Interest 4,094 2,139 Dividends 4,248 263 Loan principal 71 - Structuring Fees - 1,625 Other 567 271Prepaid expenses 273 471Deferred financing costs 1,440 1,751 ------------- ------------- Total Assets 541,778 376,502 ------------- -------------LiabilitiesCredit facility payable 91,167 -Payable for securities purchased - 70,000Dividends payable 11,845 -Due to Prospect Administration 695 330Due to Prospect Capital Management 5,946 4,508Accrued expenses 1,104 1,312Other liabilities 1,398 304 ------------- ------------- Total Liabilities 112,155 76,454 ------------- -------------Net Assets $ 429,623 $ 300,048 ============= =============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 19,949,065 issued and outstanding, respectively) $ 30 $ 20Paid-in capital in excess of par 441,332 299,845Undistributed (distributions in excess of) net investment income 1,508 (4,092)Accumulated realized gains (losses) on investments (13,972) 2,250Unrealized appreciation on investments 725 2,025 ------------- -------------Net Assets $ 429,623 $ 300,048 ============= =============Net Asset Value Per Share $ 14.55 $ 15.04 ============= ============= Prospect Capital Corporation and Subsidiary Consolidated Statements of Operations (in thousands, except share and per share data) Three Months Ended Year Ended ------------------------- ------------------------ June 30, June 30, June 30, June 30, 2008 2007 2008 2007 ------------ ----------- ----------- ----------- (Unaudited) (Unaudited) (Audited) (Audited)Investment IncomeInterest income: Control investments $ 7,020 $ 4,045 $ 21,709 $ 13,500 Affiliate investments 246 652 1,858 3,489 Non-control/Non- affiliate investments 9,229 4,439 35,466 13,095 ------------ ----------- ----------- ----------- Total interest income 16,495 9,136 59,033 30,084 ------------ ----------- ----------- -----------Dividend income: Control investments 4,377 850 11,327 3,400 Money market funds 149 914 706 2,753 ------------ ----------- ----------- ----------- Total dividend income 4,526 1,764 12,033 6,153 ------------ ----------- ----------- -----------Other Income: Control/Affiliate investments 913 219 1,123 230 Non-control/Non- affiliate investments 1,514 2,890 7,213 4,214 ------------ ----------- ----------- ----------- Total Other income 2,427 3,109 8,336 4,444 ------------ ----------- ----------- ----------- Total Investment Income 23,448 14,009 79,402 40,681 ------------ ----------- ----------- -----------Operating ExpensesInvestment advisory fees: Base management fee 2,555 1,730 8,921 5,445 Income incentive fee 3,417 2,086 11,278 5,781 ------------ ----------- ----------- ----------- Total investment advisory fees 5,972 3,816 20,199 11,226 ------------ ----------- ----------- -----------Interest and credit facility expenses 1,599 518 6,318 1,903Chief Financial, Chief Compliance Officer and Sub-administration fees 239 147 859 567Legal fees 279 395 2,503 1,365Valuation services 146 110 577 395Sarbanes-Oxley compliance expenses 56 55 66 101Audit and tax related fees 66 - 404 498Allocation of overhead from Prospect Administration 1,031 170 2,139 532Insurance expense 64 72 256 291Directors' fees 88 55 253 230Other general and administrative expenses 239 322 715 442 ------------ ----------- ----------- ----------- Total Operating Expenses 9,779 5,660 34,289 17,550 ------------ ----------- ----------- ----------- Net Investment Income 13,669 8,349 45,113 23,131 ------------ ----------- ----------- -----------Net realized gain (loss) on investments 2,191 - (16,222) 1,949Net change in unrealized appreciation/ depreciation on investments 8,126 (3,501) (1,300) (8,352) ------------ ----------- ----------- ----------- Net Increase in Net Assets Resulting from Operations $ 23,986 $ 4,848 $ 27,591 $ 16,728 ------------ ----------- ----------- ----------- Three Months Ended Year Ended ------------------------ ------------------------ June 30, June 30, June 30, June 30, 2008 2007 2008 2007 ----------- ----------- ----------- -----------Per Share Data: (Unaudited) (Unaudited) (Audited) (Audited)Net asset value at beginning of period $ 14.15 $ 15.18 $ 15.04 $ 15.31Costs related to the secondary public offering (0.01) - (0.05) (0.06)Share issuances related to the secondary public offering (0.06) - - 0.26Net investment income 0.50 0.42 1.91 1.47Realized gain 0.08 - (0.69) 0.13Net unrealized appreciation 0.30 (0.17) (0.05) (0.53)Dividends declared and paid (0.41) (0.39) (1.59) (1.54) ----------- ----------- ----------- -----------Net asset value at end of period $ 14.55 $ 15.04 $ 14.55 $ 15.04 =========== =========== =========== ===========
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