NEW YORK, NY — (MARKET WIRE) — 09/14/09 — Prospect Capital Corporation (NASDAQ: PSEC)(“Company” or “Prospect”) today announced financial results for its fourthfiscal quarter and fiscal year ended June 30, 2009.
For the year ended June 30, 2009, our net investment income was $59.2million, or $1.87 per weighted average number of shares for the year, anincrease of 31% from the prior year on a dollars basis, and comparable tothe prior year per weighted average share amount of $1.91. Our net assetvalue per share on June 30, 2009 stood at $12.40 per share.
For the quarter ended June 30, 2009, our net investment income was $12.0million, or 32 cents per weighted average number of shares for the quarter.We estimate that our net investment income for the current first fiscalquarter ended September 30, 2009 will be 25 to 30 cents per share. Thesetemporary per share changes from prior quarters are primarily due to theraising of additional capital to fund the acquisition of Patriot CapitalFunding, Inc. (NASDAQ: PCAP) (“Patriot”), the benefits of which will bereflected in our future financial results after the Patriot closingprojected in the fourth quarter. We expect the Patriot acquisition to besignificantly accretive to net investment income per quarter in an amountapproximating at least 9 to 10 cents per share, which could be greater withearly repayments before scheduled maturity dates, as has occurred withmultiple prior Patriot transactions. In addition, we are currentlyevaluating a pipeline of potential additional portfolio and individualinvestment opportunities, aggregating more than $1 billion, for which wehave significant cash and credit facility availability on hand.
We expect to announce our first fiscal quarter dividend later this month.
OPERATING RESULTSHIGHLIGHTSEquity Values: Net assets as of June 30, 2009: $532.60 million Net asset value per share as of June 30, 2009: $12.40Fiscal Year Operating Results: Net investment income: $59.16 million Net investment income per share: $1.87 Dividends declared to shareholders per share: $1.6175Fourth Fiscal Quarter Operating Results: Net investment income: $11.98 million Net investment income per share: $0.32 Dividends declared to shareholders per share: $0.40625Fourth Fiscal Quarter Portfolio Activity: Total Portfolio investments at cost: $531.42 million Number of portfolio companies at end of period: 30
PORTFOLIO AND INVESTMENT ACTIVITY
During the year ended June 30, 2009, we completed three new investments inCastro Cheese, TriZetto, and Biotronic, as well as several follow-oninvestments in existing portfolio companies, totaling approximately $96.3million.
For the year ended June 30, 2009, we fully exited our investments in DeepDown and Charlevoix, and partially exited our investments in R-V andDiamondback, including full repayment of the Diamondback loan.
As of June 30, 2009, we held 30 portfolio company investments aggregatingapproximately $547.2 million. Since June 30, 2009, two additionalinvestments, Peerless and C&J, have been repaid, generating a 19%cash-on-cash internal rate of return in each case, not including a 40%equity stake which we continue to hold in C&J.
On August 3, 2009, we announced our entering into a definitive agreement toacquire Patriot, including assets with an amortized cost of approximately$311 million, for a purchase price of approximately $197 million, or 63% ofamortized cost. We are purchasing Patriot with our common stock plus cashto repay all Patriot debt, anticipated to be approximately $110.5 millionwhen the acquisition closes. Our common shares will be exchanged at a ratioof approximately 0.3992 for each Patriot share, or 8,616,467 shares of ourcommon stock for 21,584,251 Patriot shares, with such exchange ratiodecreased for any tax distributions Patriot may declare before closing. Weexpect significant accretion of this discount on a quarterly basis andanticipate a majority of this accretion to be income not subject toProspect shareholder taxation. We are basing our net investment incomeaccretion assumptions assuming no early repayments. Early repayments wouldaccelerate the recognition of such accretion income.
The Patriot acquisition reflects our previously articulated strategy ofidentifying and closing on opportunities created by the marketplace creditdislocation, including opportunities to acquire financial companies andportfolios with attractive assets but with liquidity issues created bylenders seeking immediate payment. We are currently evaluating a number ofother portfolios, both public and private, where our ability to provideliquidity has the potential for significant reward.
In addition, the Patriot acquisition will approximately double our numberof portfolio companies to approximately 60 companies, thereby expanding ourdiversification by company, by industry, by geography, and by businessowner. Approximately 70% of the acquired asset value is in companies wherePatriot has a senior secured position. Our gross assets will also expand bymore than 30%, providing anticipated scaling benefits as a consolidator inthe industry.
LIQUIDITY AND FINANCIAL RESULTS
On June 25, 2009, we completed a first closing on an expanded $250 millionsyndicated revolving credit facility (the “Facility”). The new Facility,for which lenders have closed on $175 million to date, includes anaccordion feature which allows the Facility to accept up to an aggregatetotal of $250 million of commitments for which we continue to solicitadditional commitments from other lenders for the additional $75 million.The revolving period of the Facility extends through June 2010, with anadditional one year amortization period after the completion of therevolving period. The maturity date of the facility is June 2020. Intereston borrowings under the credit facility is one-month LIBOR plus 400 basispoints, subject to a minimum Libor floor of 200 basis points. The facilityhas an investment grade Moody’s rating of A2.
We expect to close on an additional lender commitment, for which lendercredit committee approval has already occurred but for which signeddocumentation has not yet been received, in the next 30 days, bringing ourfacility size to $195 million and our number of lenders to five, providingcounterparty diversification benefits.
As of June 30, 2009, we had $124.8 million outstanding under our creditfacility. We currently have zero outstanding borrowings in our facility, aswell as cash-equivalent instruments of approximately $60 million. Ourunleveraged balance sheet is a source of significant strength in comparisonwith many overleveraged competitors. Our equitized balance sheet also givesus the potential for future earnings upside as we prudently grow ourrevolving credit facility and evaluate term debt solutions driven by ourFacility’s investment grade facility rating.
We also continue to generate liquidity through stock offerings and therealization of portfolio investments. On March 19, April 27, May 26, July7, and August 20, 2009, we completed stock offerings aggregating 21,567,186shares of our common stock, raising approximately $180.7 million in grossproceeds.
In the second quarter of the fiscal year ended June 30, 2009, we announcedthe authorization by our board of directors to repurchase up to $20 millionof our outstanding stock. To date, we have not made any such repurchases,but we continue to maintain the flexibility to do so should we deem suchpurchases to be in the best interest of our shareholders.
On April 30, 2009, we gave a 60-day notice to Vastardis Fund Services LLC(“Vastardis”) regarding termination, effective June 30, 2009, of theagreement with Vastardis to provide sub-administration services. The priorcost of this agreement had been approximately $700 thousand per annum basedon approximately $600 million of assets. With our chief financial officerhaving expanded his finance and administration team in recent months, we nolonger require any services from Vastardis.
CONFERENCE CALL
The Company will host a conference call on Tuesday, September 15, 2009, 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 passcode433827.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES June 30, 2009 and 2008 (in thousands, except share and per share data) June 30, 2009 June 30, 2008 (Audited) (Audited) -------------- --------------AssetsInvestments at fair value (cost of $531,424 and $496,805, respectively) Control investments (cost of $187,105 and $203,661, respectively) $ 206,332 $ 205,827 Affiliate investments (cost of $33,544 and $5,609, respectively) 32,254 6,043 Non-control/Non-affiliate investments (cost of $310,775 and $287,535, respectively) 308,582 285,660 -------------- -------------- Total investments at fair value 547,168 497,530 -------------- --------------Investments in money market funds 98,735 33,000Cash 9,942 555Receivables for: Interest, net 3,562 4,094 Dividends 28 4,248 Loan principal -- 71 Other 571 567Prepaid expenses 68 273Deferred financing costs 6,951 1,440 -------------- -------------- Total Assets 667,025 541,778 -------------- --------------LiabilitiesCredit facility payable 124,800 91,167Dividends payable -- 11,845Due to Prospect Administration 842 695Due to Prospect Capital Management 5,871 5,946Accrued expenses 2,381 1,104Other liabilities 535 1,398 -------------- -------------- Total Liabilities 134,429 112,155 -------------- --------------Net Assets $ 532,596 $ 429,623 ============== ==============Components of Net AssetsCommon stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 42,943,084 and 29,520,379 issued and outstanding, respectively) $ 43 $ 30Paid-in capital in excess of par 545,707 441,332Undistributed net investment income 24,152 1,508Accumulated realized losses on investments (53,050) (13,972)Unrealized (depreciation) appreciation on investments 15,744 725 -------------- --------------Net Assets $ 532,596 $ 429,623 ============== ==============Net Asset Value Per Share $ 12.40 $ 14.55 ============== ============== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and the Year Ended June 30, 2009 and 2008 (in thousands, except share and per share data) (Unaudited) For The Three Months Ended For The Year Ended June 30, June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- --------- -------- --------Investment IncomeInterest Income Control investments $ 1,981 $ 7,020 $ 19,281 $ 21,709 Affiliate investments 674 246 3,039 1,858 Non-control/Non-affiliate investments 9,409 9,229 40,606 35,466 -------- --------- -------- -------- Total interest income 12,064 16,495 62,926 59,033 -------- --------- -------- --------Dividend income Control investments 8,900 4,377 22,468 11,327 Money market funds 60 149 325 706 -------- --------- -------- -------- Total dividend income 8,960 4,526 22,793 12,033 -------- --------- -------- --------Other income: Control/affiliate investments 418 913 1,249 1,123 Non-control/Non-affiliate investments 358 1,514 13,513 7,213 -------- --------- -------- -------- Total other income 776 2,427 14,762 8,336 -------- --------- -------- -------- Total Investment Income 21,800 23,448 100,481 79,402 -------- --------- -------- --------Operating ExpensesInvestment advisory fees: Base management fee 3,175 2,555 11,915 8,921 Income incentive fee 2,995 3,417 14,790 11,278 -------- --------- -------- -------- Total investment advisory fees 6,170 5,972 26,705 20,199Interest and credit facility expenses 1,333 1,599 6,161 6,318Sub-administration fees (including former Chief Financial Officer and Chief Compliance Officer) 202 239 846 859Legal fees 357 279 947 2,503Valuation services 144 146 705 577Audit, compliance and tax related fees 167 122 1,015 470Allocation of overhead from Prospect Administration 1,092 1,031 2,856 2,139Insurance expense 61 64 246 256Directors’ fees 65 88 269 253Other general and administrative expenses 228 239 1,035 715Excise taxes -- -- 533 -- -------- --------- -------- -------- Total Operating Expenses 9,819 9,779 41,318 34,289 -------- --------- -------- --------Net Investment Income 11,981 13,669 59,163 45,113 -------- --------- -------- --------Net realized (loss) gain on investments (40,739) 2,191 (39,078) (16,222)Net change in unrealized appreciation/depreciation on investments 28,009 8,126 15,019 (1,300) -------- --------- -------- --------Net (Decrease) Increase in Net Assets Resulting from Operations $ (749) $ 23,986 $ 35,104 $ 27,591 ======== ========= ======== ========Net (decrease) increase in net assets resulting from operations per share $ (0.02) $ 0.88 $ 1.11 $ 1.17 ======== ========= ======== ========Dividends declared per share: $ 0.41 $ 0.40 $ 1.62 $ 1.59 ======== ========= ======== ======== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For the Three Months and the Year Ended June 30, 2009 and 2008 (in actual dollars) (Unaudited) For the Three Months Ended For the Year Ended -------------------- -------------------- June 30, June 30, June 30, June 30, 2009 2008 2009 2008 --------- --------- --------- ---------Per Share Data:Net asset value at beginning of period $ 14.19 $ 14.15 $ 14.55 $ 15.04Costs related to the secondary public offering -- (0.07) -- (0.07)Net investment income 0.32 0.50 1.87 1.91Net realized (loss) gain (1.10) 0.08 (1.24) (0.69)Net unrealized appreciation (depreciation) 0.75 0.30 0.48 (0.05)Net (decrease) increase in net assets as a result of public offerings (1.76) -- (2.11) --Dividends recognized -- (0.41) (1.15) (1.59) --------- --------- --------- ---------Net asset value at end of period $ 12.40 $ 14.55 $ 12.40 $ 14.55 ========= ========= ========= =========
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.