NEW YORK, NY — (MARKET WIRE) — 02/10/09 — Prospect Capital Corporation (NASDAQ: PSEC)(“Company” or “Prospect”) today announced financial results for its secondfiscal quarter and the six months ended December 31, 2008.
For the six months ended December 31, 2008, our net investment income was$35.5 million, or $1.20 per share, an increase of $16.9 million, or $0.34per share, from the results for the six months ended December 31, 2007.For the quarter ended December 31, 2008, our net investment income was$12.0 million, or $0.40 per share, an increase of $1.3 million from thesame quarter in the prior year. Our second quarter results included theaccrual of an excise tax of $533 thousand due to underdistributing ourdividends relative to net investment income for calendar year 2008.Excluding this non-recurring item, our net investment income would havebeen $0.42 per share.
Our net asset value per share on December 31, 2008 equaled $14.43 pershare, a decrease of $0.12 per share compared to $14.55 at June 30, 2008.
We estimate that our net investment income for the current third fiscalquarter ended March 31, 2009 will be $0.40 to $0.45 per share. We expect toannounce our third fiscal quarter dividend next month. Our businessobjective continues to be to generate long-term dividend growth, as we havedelivered to date with 17 consecutive quarterly dividend increases.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Net assets as of December 31, 2008: $427.80 million Net asset value per share as of December 31, 2008: $14.43Second Fiscal Quarter Operating Results: Net investment income: $11.96 million Net investment income per share: $0.40 Net investment income per share excluding non-recurring items*: $0.42 Net increase in net assets resulting from operations: $6.52 million Dividends to shareholders per share: $0.40375Second Fiscal Quarter Portfolio Summary:Total portfolio investments at cost: $571.5 million Number of portfolio companies at end of period: 31*See Supplemental Financial Information
PORTFOLIO AND INVESTMENT ACTIVITY
On December 31, 2008, the fair value of our portfolio of 31 long-terminvestments was approximately $555.7 million.
As of December 31, 2008, our portfolio generated a current yield ofapproximately 16.0% 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 quarterended December 31, 2008, due to the market dislocation and the slowdown ofmarket transaction activity, we did not complete any new investments, butcontinued to evaluate a number of new investments in the primary andsecondary market.
On January 20, Diamondback Operating, LP (“Diamondback”) repaid Prospect’s$9.2 million loan in full from the sale of 65% of Diamondbank’s RockSprings oil and gas property interests. Prospect has realized anapproximate 17% cash on cash internal rate of return (“IRR”) on theDiamondback investment. Prospect continues to hold the right to receive 15%of any future Diamondback equity distributions.
During the past year, we have been in discussions with multiple purchasersfor Gas Solutions but have not entered into a binding agreement. While wewish to liquify the value we see in Gas Solutions, we do not wish to enterinto any agreement at any time that does not recognize the long term valuewe see in Gas Solutions. As a hedged midstream asset generating significantcash flows to us, Gas Solutions is a valuable asset that we wish to sell ata value-maximizing price, or not at all. We continue discussions withinterested parties, but have a patient approach toward the process. Themulti-year puts purchased by Gas Solutions earlier in 2008 aresubstantially in the money, providing downside protection against commodityprice declines. Gas Solutions has generated approximately $21.2 million ofEBITDA during the ten month period ended October 31, 2008. On anannualized basis this represents an increase of 73.7% over the 2007results.
LIQUIDITY AND FINANCIAL RESULTS
At December 31, 2008, borrowings under our credit facility stood atapproximately $138.7 million.
We are currently seeking to increase our revolving credit facility from itspresent size of $200 million. Over the past few months we have worked withrating agencies to structure an expanded facility. We have not yet embarkedupon a formal syndication process for this facility due to the currentcredit environment, but we expect to initiate such activities in thefuture. The closing of the facility is subject to lender syndication andother conditions customary for a transaction of this type.
In the second quarter we announced the authorization by our board ofdirectors to repurchase up to $20 million of our outstanding stock. Todate, we have not made any such repurchases, but we have now made therequired notification to shareholders of our flexibility to make suchrepurchases.
CONFERENCE CALL
The Company will host a conference call on Tuesday, February 10, 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 passcode427191.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES December 31, 2008 and June 30, 2008 (in thousands, except share and per share data) December 31, June 30, 2008 2008 (Unaudited) (Audited) ------------ ------------AssetsInvestments at fair value (cost of $571,537 and $496,805, respectively) Control investments (cost of $216,242 and $203,661, respectively) $ 216,448 $ 205,827 Affiliate investments (cost of $33,496 and $5,609, respectively) 31,721 6,043 Non-control/Non-affiliate investments (cost of $321,799 and $287,535, respectively) 307,492 285,660 ------------ ------------ Total investments at fair value 555,661 497,530 ------------ ------------Investments in money market funds 22,606 33,000Cash 2,438 555Receivables for: Interest 4,430 4,094 Dividends 19 4,248 Loan principal -- 71 Managerial assistance 405 380 Prepaid prospective deal expenses 86 -- Other 204 187Prepaid expenses 778 273Deferred financing costs 1,350 1,440 ------------ ------------ Total Assets 587,977 541,778 ------------ ------------LiabilitiesCredit facility payable 138,667 91,167Dividends payable 11,966 11,845Due to Prospect Administration 683 695Due to Prospect Capital Management 5,629 5,946Accrued expenses 2,101 1,104Other liabilities 1,128 1,398 ------------ ------------ Total Liabilities 160,174 112,155 ------------ ------------Net Assets $ 427,803 $ 429,623 ============ ============Components of Net AssetsCommon stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 29,637,928 and 29,520,379 issued and outstanding, respectively) $ 30 $ 30Paid-in capital in excess of par 442,838 441,332Undistributed net investment income 13,122 1,508Accumulated realized losses on investments (12,311) (13,972)Unrealized (depreciation) appreciation on investments (15,876) 725 ------------ ------------Net Assets $ 427,803 $ 429,623 ============ ============Net Asset Value Per Share $ 14.43 $ 14.55 ============ ============ PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For The Three and Six Months Ended December 31, 2008 and 2007 (in thousands, except share and per share data) (Unaudited) For The Three Months For The Six Months Ended Ended December 31, December 31, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- ---------Investment IncomeInterest Income Control investments (Net of foreign withholding tax of $62, $69, $109, and $158, respectively) $ 5,075 $ 5,285 $ 11,797 $ 10,348 Affiliate investments (Net of foreign withholding tax of $0, $35, $0, and $70, respectively) 1,075 655 1,635 1,322 Non-control/Non-affiliate investments 11,091 8,876 21,365 15,978 --------- --------- --------- --------- Total interest income 17,241 14,816 34,797 27,648 --------- --------- --------- ---------Dividend income Control investments 4,584 2,200 9,168 3,650 Money market funds 81 266 220 434 --------- --------- --------- --------- Total dividend income 4,665 2,466 9,388 4,084 --------- --------- --------- ---------Other income: Control/Affiliate investments 87 -- 831 10 Non-control/Non-affiliate investments 220 1,281 12,996 2,212 --------- --------- --------- --------- Total other income 307 1,281 13,827 2,222 --------- --------- --------- --------- Total Investment Income 22,213 18,563 58,012 33,954 --------- --------- --------- ---------Operating ExpensesInvestment advisory fees: Base management fee 2,940 2,112 5,763 3,978 Income incentive fee 2,990 2,665 8,865 4,631 --------- --------- --------- --------- Total investment advisory fees 5,930 4,777 14,628 8,609Interest and credit facility expenses 1,965 1,618 3,483 2,856Sub-administration fees (including former Chief Financial Officer and Chief Compliance Officer) 217 206 467 392Legal fees 184 569 483 1,775Valuation services 110 120 422 233Audit, compliance and tax related fees 306 43 629 293Allocation of overhead from Prospect Administration 588 260 1,176 520Insurance expense 63 64 124 128Directors’ fees 62 55 143 110Other general and administrative expenses 295 191 462 503Tax expense 533 -- 533 10 --------- --------- --------- --------- Total Operating Expenses 10,253 7,903 22,550 15,429 --------- --------- --------- ---------Net Investment Income 11,960 10,660 35,462 18,525 --------- --------- --------- ---------Net realized gain (loss) on investments 16 (18,610) 1,661 (18,621)Net change in unrealized appreciation/depreciation on investments (5,452) 4,264 (16,601) 4,960 --------- --------- --------- ---------Net Increase (Decrease) in Net Assets Resulting from Operations $ 6,524 $ (3,686) $ 20,522 $ 4,864 ========= ========= ========= =========Net increase (decrease) in net assets resulting from operations per share: $ 0.22 $ (0.16) $ 0.69 $ 0.23 ========= ========= ========= =========Dividends declared per share: $ 0.40 $ 0.39 $ 0.80 $ 0.78 ========= ========= ========= ========= PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For The Three and Six Months Ended December 31, 2008 and 2007 (in actual dollars) (Unaudited) For The Three For The Six Months Ended Months Ended --------------------- --------------------- December December December December 31, 2008 31, 2007 31, 2008 31, 2007 ---------- ---------- ---------- ----------Net asset value at beginning of period $ 14.63 $ 15.08 $ 14.55 $ 15.04Costs related to the secondary public offering -- (0.02) -- (0.02)Net investment income 0.40 0.46 1.20 0.86Net realized gain (loss) -- (0.80) 0.06 (0.86)Net unrealized appreciation (depreciation) (0.18) 0.18 (0.56) 0.23Share issued for dividend reinvestments (0.01) -- (0.01) --Net increase in net assets as a result of public offering -- 0.07 -- 0.11Dividends declared (0.40) (0.39) (0.80) (0.78)Difference due to rounding (0.01) -- (0.01) -- ---------- ---------- ---------- ----------Net asset value at end of period $ 14.43 $ 14.58 $ 14.43 $ 14.58 ========== ========== ========== ==========
SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS)
Please note that the following supplemental financial informationrepresents a reconciliation of a GAAP measure (Net investment income) to anon-GAAP measure (Adjusted net investment income).
Three months ended December 31, 2008 ------------Total investment income $ 22,213Total operating expenses 10,253Net investment income 11,960Add back non-recurring items 426Adjusted net investment income $ 12,386Net investment income per common share $ 0.40Adjusted net investment income per common share $ 0.42
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. 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 our control, and that wemay or may not have considered; accordingly, such statements cannot beguarantees or assurances of any aspect of future performance. Actualdevelopments and results are highly likely to vary materially from theseestimates and projections of the future. Such statements speak only as ofthe time when made, and we undertake no obligation to update any suchstatement now or in the future.
For additional information, contact:Grier EliasekPresident and Chief Operating OfficerEmail ContactTelephone (212) 448-0702