NEW YORK, NY — (MARKET WIRE) — 02/09/07 — Prospect Energy Corporation (NASDAQ: PSEC)today announced financial results for our second fiscal quarter endedDecember 31, 2006.
Our net investment income for the second fiscal quarter was $4.49 million,a 37% increase over first fiscal quarter net investment income, and 33cents per weighted average number of shares for the quarter, or 35 centsper beginning of the quarter share count. At December 31, 2006, our netasset value per share was $15.24, a $0.38 increase from the prior quarter.
We estimate that our net investment income for the current third fiscalquarter ending March 31, 2007, will be $0.31 to $0.39 per share. We willannounce our third fiscal quarter dividend in the next few weeks.
OPERATING RESULTS
HIGHLIGHTS
Equity Values: Stockholders' equity as of December 31, 2006: $289.24 million Net asset value per share: $15.24Second Fiscal Quarter Operating Results: Net investment income: $4.49 million Net investment income per share: $0.33 Net realized and unrealized depreciation: $(1.55) million Net increase in net assets resulting from operations: $2.94 million Dividends to shareholders per share: $0.385Portfolio: Number of new portfolio companies invested: 2 Number of portfolio companies at end of period: 19
PORTFOLIO AND INVESTMENT ACTIVITY
December 31, 2006 marked our second fiscal quarter and tenth full quartersince our initial public offering. Our portfolio on December 31, 2006 wasinvested approximately $200.82 million in 19 long-term investments, withthe remainder in cash and short-term instruments.
As of December 31, 2006, our portfolio generated a current yield of 17.1%across all our long-term debt and equity investments. This current yieldincludes interest from all our long-term investments as well as dividendsfrom Gas Solutions Holdings, Inc. (“Gas Solutions”) and net profitsinterests and royalties from other portfolio companies. Excluding suchdividends and other income, our weighted average long-term debt yield as ofDecember 31, 2006, was 15.2%.
We completed two new investments, as well as follow-on investments in theexisting portfolio, totaling approximately $62.57 million in the priorquarter, or approximately $45.8 million net of a refinancing. Both of thesenew investments were structured as senior secured debt with equity-likeparticipation rights.
On October 31, 2006, we provided $15.5 million in senior secured debtfinancing to TLOGH, L.P., a Barnett Shale gas development company based inDallas, Texas.
On November 9, 2006, we provided $6.5 million in senior secured debtfinancing to Jettco Marine Services LLC, an offshore supply vessel companybased in Morgan City, Louisiana.
During the prior quarter, we provided additional funding aggregatingapproximately $40.9 million to existing portfolio companies, including a$4.9 million additional investment into Conquest Cherokee LLC and alsoincluding a $22.7 million investment related to the acquisition of StrykerEnergy II, LLC, by Stryker Energy, LLC, which took place on December 4,2006 and included the refinancing of approximately $16.8 million of ourexisting credit to Stryker Energy II, LLC.
LIQUIDITY
On December 13, 2006, we priced a public offering of 6 million shares ofcommon stock at $17.70 per share, raising $106.20 million in grossproceeds. On January 11, 2007, the underwriter exercised its over-allotmentoption to purchase 815,000 shares, raising an additional $14.42 million ingross proceeds.
We maintain a $50.0 million revolving credit facility, which we put inplace on July 25, 2006. That facility is undrawn. We are seeking toincrease the size of our credit facility.
We have approximately $95 million invested in cash and short-terminstruments.
CONFERENCE CALL
We will host a conference call Monday, February 12, 2007, at 11:00amEastern Time. The conference call dial-in number is (877) 407-9205. Arecording of the conference call will be available for approximately 7days. To hear a replay, call (877) 660-6853 and use Playback Access Accountcode 286 and Playback Conference ID code 230846.
STATEMENTS OF NET ASSETS As of As of (in thousands) December 31, June 30, 2006 2006AssetsCash and cash equivalents $ 93,247 $ 1,608Investments in controlled entities at fair value (cost - $86,656 and $39,759, respectively) 98,133 49,585Investments in affiliated entities at fair value (cost - $22,922 and $25,329, respectively) 22,107 25,329Investments in non-controlled and non-affiliated entities, at fair value (cost - $83,677 and $58,505, respectively) 80,580 59,055Interest receivable 2,040 1,639Dividends receivable 161 13Loan Principal Receivable 454 385Due from broker - 369Other receivables 896 -Due from Prospect Capital Management, LLC - 28Due from Prospect Administration, LLC - 5Prepaid expenses 222 77Deferred financing fees 590 355Deferred offering costs - 32Total assets 298,430 138,480LiabilitiesCredit facility payable - 28,500Dividends payable to shareholders 5,413 -Accrued expenses 842 843Due to Prospect Administration, LLC 184 -Due to Prospect Capital Management, LLC 2,347 745Other current liabilities 406 122Total liabilities 9,192 30,210Net Assets $ 289,238 $ 108,270Components of Net AssetsCommon stock, par value $.001 per share, (100,000,000 and 100,000,000 common shares authorized, respectively; 18,975,388 and 7,069,873 issued and outstanding, respectively) $ 19 $ 7Paid-in capital in excess of par 283,440 97,266Undistributed (distributions in excess of) net investment income (4,037) 319Realized gain 2,251 301Net unrealized appreciation 7,565 10,377Net Assets $ 289,238 $ 108,270Net Asset Value Per Share $ 15.24 $ 15.31 STATEMENTS OF OPERATIONS Three months Three months (in thousands) ended ended December 31, December 31, 2006 2005Investment IncomeInterest income, controlled entities (net of foreign tax withholding of $45 and $-, respectively) $ 3,364 $ 828Interest income, affiliated entities (net of foreign tax withholding of $57 and $-, respectively) 1,056 -Interest income, non controlled and non-affiliated entities 2,552 1,964Interest income, cash equivalents - 137Total interest income 6,972 2,929Dividend income, controlled entities 850 843Dividend income, non-controlled and non-affiliated entities - 143Dividend income, money market funds 318 20Total dividend income 1,168 1,006Other income, affiliated entities 3 -Other income, non-controlled and non-affiliated entities 28 -Total other income 31 -Total investment income 8,171 3,935Operating ExpensesInvestment advisory feesBase management fee 1,568 524Income incentive fee 1,123 508Total investment advisory fees 2,691 1,032Interest expense and credit facility costs 370 -Chief Compliance Officer and Sub-administration fees 119 81Legal fees 97 391Valuation services 100 45Sarbanes-Oxley compliance expenses 1 -Other professional fees 47 107Insurance expense 72 85Directors fees 57 55Other general and administrative expenses 124 99Total operating expenses 3,678 1,895Net investment income 4,493 2,040Net realized gain (loss) (1) -Net unrealized appreciation (depreciation) (1,552) 488Net increase in net assets resulting from operations $ 2,940 $ 2,528Net increase in net assets per weighted average shares of common stock resulting from operations $ 0.22 $ 0.36 PER SHARE DATA For the For the three months three months ended ended December 31, December 31, 2006 2005Net asset value, beginning of period $ 14.86 $ 14.60Costs related to the initial public offering - 0.01Costs related to the secondary public offering (0.04) -Net investment income 0.33 0.29Realized gain - -Net unrealized appreciation (depreciation) (0.11) 0.07Net increase in net assets as a result of secondary public offering 0.59 -Dividend declared and paid (0.39) (0.28)Net asset value at end of period $ 15.24 $ 14.69
ABOUT PROSPECT ENERGY CORPORATION
Prospect Energy Corporation (www.prospectenergy.com) is a closed-endinvestment company that lends to and invests in energy-related businesses.Prospect Energy’s investment objective is to generate both current incomeand long-term capital appreciation through debt and equity investments.
Prospect Energy has elected to be treated as a business development companyunder the Investment Company Act of 1940 (“1940 Act”). We are required tocomply with a series of regulatory requirements under the 1940 Act as wellas applicable NASDAQ, federal and state rules and regulations. We haveelected to be treated as a regulated investment company under the InternalRevenue Code of 1986. Failure to comply with any of the laws andregulations that apply to Prospect Energy could have an adverse effect onProspect Energy 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 assurances of any aspect of future performance.Actual developments and results are highly likely to vary materially fromthese estimates and projections of the future. Such statements speak onlyas of the time when made, and the Company undertakes no obligation toupdate any such statement now or in the future.
Please send investment proposals to:Grier EliasekPresident and Chief Operating Officergrier@prospectstreet.comTelephone (212) 448-0702