NEW YORK, NY — (MARKET WIRE) — 02/01/10 — Prospect Capital Corporation (NASDAQ: PSEC)(“Prospect”) on Friday, January 29, 2010 filed with the Securities and ExchangeCommission a preliminary proxy statement in opposition to the proposed mergerbetween Allied Capital Corporation (“Allied”) and Ares Capital Corporation(“Ares”) in furtherance of Prospect’s increased proposal to acquire Allied madeon January 26, 2010.
“We believe that our increased merger proposal should not only provide superiorvalue to Allied shareholders, when compared to the Ares proposal, but also shouldprovide significant value to Prospect shareholders,” said John F. Barry III,Chairman and CEO of Prospect. “In our view, the credit markets have improvedsignificantly since October when Allied agreed to merge with Ares. We believethe significant improvement in the credit markets likely increases the valueof the Allied portfolio since October and makes Allied asset sales and debtrepayments more feasible. The strong GDP numbers released on January 29 furthersupport our belief that there may be smoother sailing ahead for Allied’sportfolio companies.”
“We also learned from the Ares/Allied amended preliminary proxystatement/prospectus filed on January 26, 2010 that, from September 30, 2009to January 15, 2010, Allied has paid down $389 million of secured debt,significantly reducing the principal payments of Allied debt now required in2010, compared to our previous estimates,” continued Mr. Barry. “We also nowunderstand from these materials that, as of January 15, 2010, Allied had on handapproximately $185 million of cash, money market and similar securities. Thesesignificant debt paydowns, and cash and equivalents on hand, disclosed just sixdays ago, significantly reduce the pro forma leverage of a Prospect-Alliedcombination. In addition, the sale of collateral management agreementsassociated with Allied’s portfolio company Callidus, announced after January15, 2010, may result in an even greater current cash buildup at Allied. In ourview, these factors make Allied a more attractive purchase for Prospect thanbefore.”
“We believe our pending increased merger proposal, if consummated, will deliversignificant benefits to both Prospect and Allied shareholders, includingpotential upside through Allied’s equity positions in a strengthening economy,increased diversification across more than 130 portfolio companies, andamortization of certain fixed costs across a greater asset base,” continued Mr.Barry.
“We are disappointed that, to date, the Allied Board of Directors has notresponded to our increased merger proposal. However, we hope for a constructiveresponse and the opportunity to roll up our sleeves and commence seriousdiscussions with Allied with respect to Prospect’s increased merger proposal,which we believe will create significant value for both Allied and Prospectshareholders,” concluded Mr. Barry.
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 with aseries of regulatory requirements under the 1940 Act as well as applicable NASDAQ,federal and state rules and regulations. We have elected to be treated as aregulated investment company under the Internal Revenue Code of 1986. Failureto comply with any of the laws and regulations that apply to us could have anadverse effect on us and our shareholders.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995, whose safe harbor forforward-looking statements does not apply to business development companies.Such forward-looking statements may relate to us and/or our industry and addressmatters that involve risks and uncertainties. Forward-looking statementsreflect our current views and assumptions with respect to future events,operations, business plans, business and investment strategies and portfoliomanagement, the performance of our investments and our investment managementbusiness and the economy. These forward-looking statements are not historicalfacts, but rather are based on current expectations, estimates and projectionsabout our industry, our beliefs, and our assumptions. Words such as “intends,””intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,””expected,” “project,” “projected,” “projections,” “plans,” “seeks,””anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,””foreseeable future,” “believe,” “believes,” “currently anticipates,””currently believes” and “scheduled” and variations of these words and similarexpressions are intended to identify forward-looking statements. Our actualresults or outcomes may differ materially from those anticipated. Readers arecautioned not to place undue reliance on these forward-looking statements, whichspeak only as of the date the statement was made. We undertake no obligationto publicly update or revise any forward-looking statements, whether as a resultof new information, future events or otherwise. These statements are notguarantees of future performance and are subject to risks, uncertainties, andother factors, some of which are beyond our control and difficult to predictand could cause actual results to differ materially from those expressed orforecasted in the forward-looking statements, including without limitation:
-- our future operating results;-- our business prospects and the prospects of our portfolio companies;-- the impact of investments that we expect to make;-- our contractual arrangements and relationships with third parties;-- the dependence of our future success on the general economy and its impact on the industries in which we invest;-- the ability of our portfolio companies to achieve their objectives;-- difficulty in obtaining financing or raising capital, especially in the current credit and equity environment;-- the level and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets;-- adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise;-- a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us;-- our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company;-- the adequacy of our cash resources and working capital;-- the timing of cash flows, if any, from the operations of our portfolio companies;-- the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments,-- authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the Securities and Exchange Commission, Internal Revenue Service, the NASDAQ, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business;-- our ability to manage future growth;-- our dependence on Prospect Capital Management's key management personnel;-- the highly competitive market for investment opportunities in which we operate;-- uncertainty as to the value of our portfolio investments;-- additional risks to which senior securities, including debt, expose us;-- changes in interest rates;-- our need to raise additional capital to grow because of the requirement that we distribute most of our income;-- the lack of liquidity in our investments;-- fluctuations in our quarterly results;-- fluctuations in our net asset value;-- potential conflicts of interest and their impact on investment returns;-- our incentive fee's impact on the types of investments made by Prospect Capital Management;-- changes in laws or regulations;-- risks relating to our operation as a business development company;-- risks relating to our investments and securities-- the integration of Patriot or other businesses we acquire or new business ventures we may start;-- uncertainty as to whether Allied will enter into and consummate the proposed transaction with Prospect on the terms set forth in our offer; and-- the risks, uncertainties and other factors we identify in "Risk Factors" and elsewhere in our filings with the SEC.
Although we believe that the assumptions on which these forward-lookingstatements are based are reasonable, any of those assumptions could prove tobe inaccurate, and as a result, the forward-looking statements based on thoseassumptions also could be inaccurate. Important assumptions include our abilityto originate new loans and investments, certain margins and levels ofprofitability and the availability of additional capital. In light of these andother uncertainties, the inclusion of a projection or forward-looking statementin this press release should not be regarded as a representation by us that ourplans and objectives will be achieved. These risks and uncertainties includethose described or identified in “Risk Factors” and elsewhere in our filingswith the SEC. You should not place undue reliance on these forward-lookingstatements, which apply only as of the date of such filings.
Additional Information about the Proposed Transaction and Where to Find It:
This press release is not a proxy statement or a solicitation of proxies anddoes not constitute an offer to sell or a solicitation of an offer to buy anysecurities. This press release relates to a business combination transactionwith Allied proposed by Prospect, which may become the subject of a registrationstatement filed with the Securities and Exchange Commission (the “SEC”). Thismaterial is not a substitute for the prospectus/proxy statement Prospect hasfiled or would file with the SEC regarding the proposed transaction if such anegotiated transaction with Allied is reached or for any other document whichProspect may file with the SEC and send to Allied or Prospect shareholders inconnection with the proposed transaction. Prospect has filed a preliminary proxystatement which, when definitive, will be used to solicit proxies to oppose theproposed merger between Allied and Ares (the “Opposition Proxy Statement”).INVESTORS AND SECURITY HOLDERS OF ALLIED AND PROSPECT ARE URGED TO READ THEDEFINITIVE OPPOSITION PROXY STATEMENT AND ANY OTHER SUCH DOCUMENTS FILED WITHTHE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSETHEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Suchdocuments would be available free of charge through the web site maintained bythe SEC at www.sec.gov or by directing a request to the contact listed below.
Prospect and its directors, executive officers and other persons may be deemedto be participants in any solicitation of shareholders in connection with theproposed transaction. Information about Prospect’s directors and executiveofficers is available in Prospect’s proxy statement for its 2009 annual meetingof shareholders, which was filed with the SEC on October 16, 2009. Otherinformation regarding potential participants in such proxy solicitation and adescription of their direct and indirect interests, by security holdings andotherwise, will be contained in any proxy statement filed in connection withthe proposed transaction.
All information in this communication concerning Allied and Ares was obtainedfrom public sources. While Prospect has no knowledge that any such informationis inaccurate or incomplete, Prospect has not had the opportunity to verify anyof such information.