Prospect Capital Corporation (NASDAQ: PSEC) ("Company" or
"Prospect") today announced financial results for its fourth fiscal
quarter and fiscal year ended June 30, 2009.
For the year ended June 30, 2009, our net investment income was
$59.2 million, or $1.87 per weighted average number of shares for
the year, an increase of 31% from the prior year on a dollars
basis, and comparable to the prior year per weighted average share
amount of $1.91. Our net asset value per share on June 30, 2009
stood at $12.40 per share.
For the quarter ended June 30, 2009, our net investment income
was $12.0 million, or 32 cents per weighted average number of
shares for the quarter. We estimate that our net investment income
for the current first fiscal quarter ended September 30, 2009 will
be 25 to 30 cents per share. These temporary per share changes from
prior quarters are primarily due to the raising of additional
capital to fund the acquisition of Patriot Capital Funding, Inc.
(NASDAQ: PCAP) ("Patriot"), the benefits of which will be reflected
in our future financial results after the Patriot closing projected
in the fourth quarter. We expect the Patriot acquisition to be
significantly accretive to net investment income per quarter in an
amount approximating at least 9 to 10 cents per share, which could
be greater with early repayments before scheduled maturity dates,
as has occurred with multiple prior Patriot transactions. In
addition, we are currently evaluating a pipeline of potential
additional portfolio and individual investment opportunities,
aggregating more than $1 billion, for which we have significant
cash and credit facility availability on hand.
We expect to announce our first fiscal quarter dividend later
this month.
OPERATING RESULTS
HIGHLIGHTS
Equity Values:
Net assets as of June 30, 2009: $532.60 million
Net asset value per share as of June 30, 2009: $12.40
Fiscal Year Operating Results:
Net investment income: $59.16 million
Net investment income per share: $1.87
Dividends declared to shareholders per share: $1.6175
Fourth Fiscal Quarter Operating Results:
Net investment income: $11.98 million
Net investment income per share: $0.32
Dividends declared to shareholders per share: $0.40625
Fourth 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 in Castro Cheese, TriZetto, and Biotronic, as well as
several follow-on investments in existing portfolio companies,
totaling approximately $96.3 million.
For the year ended June 30, 2009, we fully exited our
investments in Deep Down and Charlevoix, and partially exited our
investments in R-V and Diamondback, including full repayment of the
Diamondback loan.
As of June 30, 2009, we held 30 portfolio company investments
aggregating approximately $547.2 million. Since June 30, 2009, two
additional investments, 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 to acquire Patriot, including assets with an amortized
cost of approximately $311 million, for a purchase price of
approximately $197 million, or 63% of amortized cost. We are
purchasing Patriot with our common stock plus cash to repay all
Patriot debt, anticipated to be approximately $110.5 million when
the acquisition closes. Our common shares will be exchanged at a
ratio of approximately 0.3992 for each Patriot share, or 8,616,467
shares of our common stock for 21,584,251 Patriot shares, with such
exchange ratio decreased for any tax distributions Patriot may
declare before closing. We expect significant accretion of this
discount on a quarterly basis and anticipate a majority of this
accretion to be income not subject to Prospect shareholder
taxation. We are basing our net investment income accretion
assumptions assuming no early repayments. Early repayments would
accelerate the recognition of such accretion income.
The Patriot acquisition reflects our previously articulated
strategy of identifying and closing on opportunities created by the
marketplace credit dislocation, including opportunities to acquire
financial companies and portfolios with attractive assets but with
liquidity issues created by lenders seeking immediate payment. We
are currently evaluating a number of other portfolios, both public
and private, where our ability to provide liquidity has the
potential for significant reward.
In addition, the Patriot acquisition will approximately double
our number of portfolio companies to approximately 60 companies,
thereby expanding our diversification by company, by industry, by
geography, and by business owner. Approximately 70% of the acquired
asset value is in companies where Patriot has a senior secured
position. Our gross assets will also expand by more than 30%,
providing anticipated scaling benefits as a consolidator in the
industry.
LIQUIDITY AND FINANCIAL RESULTS
On June 25, 2009, we completed a first closing on an expanded
$250 million syndicated revolving credit facility (the "Facility").
The new Facility, for which lenders have closed on $175 million to
date, includes an accordion feature which allows the Facility to
accept up to an aggregate total of $250 million of commitments for
which we continue to solicit additional commitments from other
lenders for the additional $75 million. The revolving period of the
Facility extends through June 2010, with an additional one year
amortization period after the completion of the revolving period.
The maturity date of the facility is June 2020. Interest on
borrowings under the credit facility is one-month LIBOR plus 400
basis points, subject to a minimum Libor floor of 200 basis points.
The facility has an investment grade Moody's rating of A2.
We expect to close on an additional lender commitment, for which
lender credit committee approval has already occurred but for which
signed documentation has not yet been received, in the next 30
days, bringing our facility size to $195 million and our number of
lenders to five, providing counterparty diversification
benefits.
As of June 30, 2009, we had $124.8 million outstanding under our
credit facility. We currently have zero outstanding borrowings in
our facility, as well as cash-equivalent instruments of
approximately $60 million. Our unleveraged balance sheet is a
source of significant strength in comparison with many
overleveraged competitors. Our equitized balance sheet also gives
us the potential for future earnings upside as we prudently grow
our revolving credit facility and evaluate term debt solutions
driven by our Facility's investment grade facility rating.
We also continue to generate liquidity through stock offerings
and the realization of portfolio investments. On March 19, April
27, May 26, July 7, and August 20, 2009, we completed stock
offerings aggregating 21,567,186 shares of our common stock,
raising approximately $180.7 million in gross proceeds.
In the second quarter of the fiscal year ended June 30, 2009, we
announced the authorization by our board of directors to repurchase
up to $20 million of 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 such purchases 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 the agreement with Vastardis to provide
sub-administration services. The prior cost of this agreement had
been approximately $700 thousand per annum based on approximately
$600 million of assets. With our chief financial officer having
expanded his finance and administration team in recent months, we
no longer require any services from Vastardis.
CONFERENCE CALL
The Company will host a conference call on Tuesday, September
15, 2009, at 11:00 a.m. Eastern Time. The conference call dial-in
number will be 800-860-2442. A recording of the conference call
will be available for approximately 30 days. To hear a replay, call
877-344-7529 and use passcode 433827.
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)
-------------- --------------
Assets
Investments 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 33,000
Cash 9,942 555
Receivables for:
Interest, net 3,562 4,094
Dividends 28 4,248
Loan principal -- 71
Other 571 567
Prepaid expenses 68 273
Deferred financing costs 6,951 1,440
-------------- --------------
Total Assets 667,025 541,778
-------------- --------------
Liabilities
Credit facility payable 124,800 91,167
Dividends payable -- 11,845
Due to Prospect Administration 842 695
Due to Prospect Capital Management 5,871 5,946
Accrued expenses 2,381 1,104
Other liabilities 535 1,398
-------------- --------------
Total Liabilities 134,429 112,155
-------------- --------------
Net Assets $ 532,596 $ 429,623
============== ==============
Components of Net Assets
Common 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 $ 30
Paid-in capital in excess of par 545,707 441,332
Undistributed net investment income 24,152 1,508
Accumulated 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 Income
Interest 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 Expenses
Investment 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 20,199
Interest and credit facility
expenses 1,333 1,599 6,161 6,318
Sub-administration fees (including
former Chief Financial Officer and
Chief Compliance Officer) 202 239 846 859
Legal fees 357 279 947 2,503
Valuation services 144 146 705 577
Audit, compliance and tax related
fees 167 122 1,015 470
Allocation of overhead from
Prospect Administration 1,092 1,031 2,856 2,139
Insurance expense 61 64 246 256
DirectorsÂ’ fees 65 88 269 253
Other general and administrative
expenses 228 239 1,035 715
Excise 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 $ 15.04
Costs related to the secondary
public offering -- (0.07) -- (0.07)
Net investment income 0.32 0.50 1.87 1.91
Net 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-end investment company that lends to and invests in private
and microcap public businesses. Our investment objective is to
generate both current income and long-term capital appreciation
through debt and equity investments.
We have elected to be treated as a business development company
under the Investment Company Act of 1940 ("1940 Act"). We are
required to comply with a series 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 a regulated
investment company under the Internal Revenue Code of 1986. Failure
to comply with any of the laws and regulations that apply to us
could have an adverse effect on us and our shareholders.
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, whose safe harbor for forward-looking statements does not
apply to business development companies. Any such statements, other
than statements of historical fact, are highly likely to be
affected by other unknowable future events and conditions,
including elements of the future that are or are not under our
control, and that we may or may not have considered; accordingly,
such statements cannot be guarantees or assurances of any aspect of
future performance. Actual developments and results are highly
likely to vary materially from these estimates and projections of
the future. Such statements speak only as of the time when made,
and we undertake no obligation to update any such statement now or
in the future.
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