NEW YORK, NY — (MARKET WIRE) — 09/05/06 — Prospect Energy Corporation (NASDAQ: PSEC)(“Prospect”) announced today that Prospect has acquired a controllingequity interest in and has provided senior secured debt financing to NRGManufacturing, Inc. (“NRG”), a leading fabricator of structures and vesselsfor oil and gas drilling applications based in Tomball, Texas. Prospect’stotal investment is approximately $11.0 million.
Founded in 2001, NRG is a market leader in the fabrication of steelstructures and vessels, particularly focused on the oil and gas productionsector but also on the oil refining, gas compression, waste treatment, andrelated energy and infrastructure sectors. NRG’s largest product lineconsists of drilling solids handling systems, or “mud tanks,” whichconstitute critical components of drilling rigs. Mud tanks filter outsediment within drilling fluids that come up the wellbore during drillingoperations, enabling the reuse of those fluids. NRG also fabricates a widerange of other customized steel products, including skids to housegenerators and ASME-certified pressure vessels. The company has over 140employees and has two facilities in the Houston area comprising more than65,000 square feet of manufacturing capacity. NRG has a significantcontracted backlog of business from a diversified group of drilling rigcontractors, drilling rig equipment suppliers and other industrialcompanies. The company’s founder and former sole shareholder, Mr. RobertLindley, continues as Chief Executive Officer of the company.
Prospect has structured its investment as senior secured debt plus acontrolling equity position. Prospect’s debt, comprising approximately 85%of its total investment, is secured by a first lien on the equipment,receivables, and other assets of NRG. The senior managers of NRG havereceived a minority equity position in the company with incentives based onperformance. Mr. Lindley has received an unsecured note as partialconsideration for the stock sale.
“We are pleased to have chosen Prospect as our partner, given Prospect’strack record in energy investing,” said Mr. Lindley.
“The NRG managers and employees have grown the company into the leadingfabricator of mud tanks, an essential drilling rig system,” said Bart J. deBie, a senior investment professional with Prospect Capital Management. “Welook forward to supporting the NRG team as the company continues focusingon the mud tank market and also expands NRG’s presence in other markets.”
“The NRG investment demonstrates Prospect’s capability to serve as a solesource of capital for acquisitions and other types of transactions,increasing efficiency and eliminating financing risk for counterparties,”said Grier Eliasek, President and Chief Operating Officer of Prospect. “NRGhas a solid management team, a strong market position, a recurring cashflow history, and an attractive valuation of less than four turns of runrate EBITDA. We welcome the potential to pursue other similar opportunitieswith strong management teams in the energy and industrial sectors, eitheras a sole source control investor or as a non-control financing provider.”
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 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 laws 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 a material adverseeffect on Prospect 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 likely to beaffected 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 Officergrier@prospectstreet.com(212) 448-9577