Prospect Capital Corporation (NASDAQ: PSEC) ("Company," "Prospect"
or "we") today announced financial results for its third fiscal
quarter ended March 31, 2010.
For the three and nine months ended March 31, 2010, our net
investment income was $19.0 million and $48.2 million,
respectively, or 30 cents and 85 cents, respectively, per weighted
average share outstanding for the periods then ended. Our net
investment income increased 12%, and our net investment income per
share increased 3%, from the quarter ended December 31, 2009 to the
quarter ended March 31, 2010.
We closed our acquisition of Patriot Capital Funding, Inc.
(NASDAQ: PCAP) ("Patriot") on December 2, 2009. During the quarter
ended March 31, 2010, we recognized $15.6 million of interest
income in connection with the assets acquired from Patriot,
including $6.7 million of interest income from the acceleration of
purchase discounts upon repricing of three loans.
We have additional liquidity available that can be deployed into
other accretive investments beyond the Patriot acquisition and are
currently moving forward a pipeline of potential additional
portfolio and individual investment opportunities.
We estimate that our net investment income for the current
fourth fiscal quarter ended June 30, 2010 will be 24 to 32 cents
per share. We expect to announce our third fiscal quarter
distribution in June.
OPERATING RESULTS
HIGHLIGHTS
Equity Values:
Net assets as of March 31, 2010: $649.48 million
Net asset value per share as of March 31, 2010: $10.09
Third Fiscal Quarter Operating Results:
Net investment income: $18.97 million
Net investment income per share: $0.30
Dividends declared to shareholders per share: $0.41
Year-to-date Operating Results:
Net investment income: $48.22 million
Net investment income per share: $0.85
Dividends declared to shareholders per share: $1.22625
PORTFOLIO AND INVESTMENT ACTIVITY
At March 31, 2010, our portfolio consisted of 55 long-term
investments with a fair value of approximately $697.0 million,
compared to the same number of long-term investments with a fair
value of $648.1 million at December 31, 2009. This increase in
invested capital resulted primarily from a follow-on investment in
Shearer's Food's, Inc. ("Shearer's") on March 31, 2010, as well as
additional fundings to existing portfolio companies.
During the quarter ended March 31, 2010, we completed a $36.3
million investment in Shearer's, a snack food company, for which we
received $35.0 million of junior secured debt and $1.3 million of
equity interests. Concurrent with this funding, Shearer's repaid
its existing $18.0 million loan to us. During the nine months ended
March 31, 2010, we also made follow-on investments in portfolio
companies and received principal payments of $15.7 million on
loans.
During the three months ended March 31, 2010, we repriced our
loans to Aircraft Fasteners International, LLC ("AFI"), Prince
Mineral Company, Inc. ("Prince") and R-O-M Corporation ("ROM"). The
revised terms were more favorable than the original terms and
increased the present value of the future cash flows. In accordance
with ASC 320-20-35, the cost bases of the new loans were recorded
at par value, resulting in $6.7 million of accelerated original
purchase discount recognized as interest income.
Subsequent to March 31, 2010, we invested $12.3 million in
secured debt in Seaton Corp., a leading vendor-on-premise staffing
company.
Primary investment activity in the marketplace has increased
recently, and we are currently evaluating a growing pipeline of
potential investments, some of which have the potential to close
this quarter. These investments are primarily secured investments
with double digit coupons, sometimes coupled with equity upside
through co-investments or warrants, and diversified across multiple
sectors.
Gas Solutions continues to generate meaningful free cash flows,
with no third party debt. In February 2010, we hired Robert Bourne
as President and CEO of Gas Solutions. Mr. Bourne has over 30 years
of experience in the midstream sector. He is focusing on new
business development and seeking new opportunities to help Gas
Solutions grow beyond its existing footprint. In April 2010, Gas
Solutions purchased a series of propane puts with strike prices of
$1.00 per gallon and $0.95 per gallon covering the periods May 1,
2010, through April 30, 2011, and May 1, 2011, through April 30,
2012, respectively. Gas Solutions hedged approximately 85% of its
current exposure to natural gas liquids based on current plant
volumes. These hedges are expected to reduce the earnings
volatility associated with lower prices of natural gas liquids
without limiting the upside from higher prices, helping Gas
Solutions continue to generate significant cash flows for interest
and dividend payments.
LIQUIDITY AND FINANCIAL RESULTS
On June 25, 2009, we completed a first closing on an expanded
syndicated revolving credit facility (the "Facility"). The Facility
includes an accordion feature which allows the Facility to accept
up to an aggregate total of $250 million of commitments. Since that
initial closing with two lenders, we have added four additional
lenders to the Facility and currently have commitments totaling
$210 million. The Facility has an investment grade Moody's rating
of A2. We are working with our lenders to reduce the cost, grow the
size, increase the advance rate, expand the collateral pool and
extend the duration of the Facility, with such amendment targeted
for completion within the next 45 days.
As of March 31, 2010, we had $54.2 million of borrowings under
our Facility. With the pledging of additional assets from the
Patriot acquisition, we have significant additional credit
availability of $62.5 million, not including further leveragability
of additional collateral that we could add to our Facility with
additional transaction activity, and not including further
availability increases targeted by our Facility amendment.
Our virtually 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
existing revolving credit facility, add additional secured
facilities, and evaluate term debt solutions driven by our
investment grade facility ratings at both the corporate and
Facility levels. We are pleased with the increase in desire of
counterparties to provide us additional credit at significantly
more attractive pricing as compared to what the capital markets
offered a year ago.
CONFERENCE CALL
The Company will host a conference call on Tuesday, May 11,
2010, at 11:00 a.m. Eastern Time. The conference call dial-in
number will be 866-524-3160. A recording of the conference call
will be available for approximately 30 days. To hear a replay, call
877-344-7529 and use passcode 440436.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2010 and June 30, 2009
(in thousands, except share and per share data)
March 31, June 30,
2010 2009
(Unaudited) (Audited)
---------- ----------
Assets
Investments at fair value (cost of $675,534 and
$531,424, respectively, Note 4)
Control investments (cost of $181,894 and
$187,105, respectively) $ 194,647 $ 206,332
Affiliate investments (cost of $63,197 and
$33,544, respectively) 73,516 32,254
Non-control/Non-affiliate investments (cost of
$430,443 and $310,775, respectively) 428,838 308,582
---------- ----------
Total investments at fair value 697,001 547,168
---------- ----------
Investments in money market funds 23,011 98,735
Cash 21,249 9,942
Receivables for:
Interest, net 3,233 3,562
Dividends 1 28
Other 404 571
Prepaid expenses 146 68
Deferred financing costs, net 4,948 6,951
Other assets 534 --
---------- ----------
Total Assets $ 750,527 $ 667,025
---------- ----------
Liabilities
Credit facility payable 54,200 124,800
Dividend payable 26,403 --
Due to Prospect Administration 243 842
Due to Prospect Capital Management 9,246 5,871
Due to broker 1,743 --
Accrued expenses 7,640 2,381
Other liabilities 1,566 535
---------- ----------
Total Liabilities 101,041 134,429
---------- ----------
Net Assets $ 649,486 $ 532,596
========== ==========
Components of Net Assets
Common stock, par value $0.001 per share
(100,000,000 and 100,000,000 common shares
authorized, respectively; 64,398,231 and
42,943,084 issued and outstanding, respectively) $ 64 $ 43
Paid-in capital in excess of par 753,992 545,707
Under/(over) distributed net investment income (21,756) 24,152
Accumulated realized losses on investments (104,281) (53,050)
Unrealized appreciation on investments 21,467 15,744
---------- ----------
Net Assets $ 649,486 $ 532,596
========== ==========
Net Asset Value Per Share $ 10.09 $ 12.40
========== ==========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three and Nine Months Ended March 31, 2010 and 2009
(in thousands, except share and per share data)
(Unaudited)
For The Three Months For The Nine Months
Ended Ended
March 31, March 31,
--------------------- --------------------
2010 2009 2010 2009
--------- ---------- --------- ---------
Investment Income
Interest Income
Control investments (Net of
foreign withholding tax of
$0, $28, ($19), and $137,
respectively) $ 4,494 $ 5,503 $ 14,137 $ 17,300
Affiliate investments 2,731 730 5,119 2,365
Non-control/non-affiliate
investments 20,722 9,832 42,065 31,197
--------- ---------- --------- ---------
Total interest income 27,947 16,065 61,321 50,862
--------- ---------- --------- ---------
Dividend income
Control investments 2,300 4,400 12,660 13,568
Money market funds 1 45 29 265
--------- ---------- --------- ---------
Total dividend income 2,301 4,445 12,689 13,833
--------- ---------- --------- ---------
Other income:
Control/affiliate investments 241 -- 316 831
Gain on Patriot acquisition -- -- 5,714 --
Non-control/non-affiliate
investments 1,516 159 2,365 13,155
--------- ---------- --------- ---------
Total other income 1,757 159 8,395 13,986
--------- ---------- --------- ---------
--------- ---------- --------- ---------
Total Investment Income 32,005 20,669 82,405 78,681
--------- ---------- --------- ---------
Operating Expenses
Investment advisory fees:
Base management fee 3,576 2,977 9,962 8,740
Income incentive fee 4,744 2,930 12,054 11,795
--------- ---------- --------- ---------
Total investment advisory
fees 8,320 5,907 22,016 20,535
Interest and credit facility
expenses 2,111 1,345 5,480 4,828
Sub-administration fees -- 177 -- 644
Legal fees 146 107 469 590
Valuation services 231 139 504 561
Audit, compliance and tax
related fees 181 219 681 848
Allocation of overhead from
Prospect Administration 840 588 2,520 1,764
Insurance expense 64 61 190 185
Directors' fees 64 61 192 204
Potential merger expenses 925 -- 1,148 --
Other general and
administrative expenses 149 345 988 807
Tax expense -- -- -- 533
--------- ---------- --------- ---------
Total Operating Expenses 13,031 8,949 34,188 31,499
--------- ---------- --------- ---------
Net Investment Income 18,974 11,720 48,217 47,182
--------- ---------- --------- ---------
Net realized (loss) gain on
investments (2) -- (51,231) 1,661
Net change in unrealized
appreciation/depreciation on
investments 6,968 3,611 5,723 (12,990)
--------- ---------- --------- ---------
Net Increase in Net Assets
Resulting from Operations $ 25,940 $ 15,331 $ 2,709 $ 35,853
========= ========== ========= =========
Net increase in net assets
resulting from operations per
share: $ 0.41 $ 0.51 $ 0.05 $ 1.21
========= ========== ========= =========
Dividends/distributions
declared per share: $ 0.41 $ 0.41 $ 1.23 $ 1.21
========= ========== ========= =========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
ROLLFORWARD OF NET ASSET VALUE PER SHARE
For the Three and Nine Months Ended March 31, 2010 and 2009
(in actual dollars)
(Unaudited)
For The Three Months For The Nine Months
Ended Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2010 2009 2010 2009
--------- --------- --------- ---------
Per Share Data:
Net asset value at beginning of
period $ 10.06 $ 14.43 $ 12.40 $ 14.55
Net investment income 0.30 0.39 0.85 1.59
Net realized (loss) gain -- -- (0.90) 0.06
Net unrealized appreciation
(depreciation) 0.11 0.12 0.10 (0.44)
Net increase (decrease) in net
assets as a result of public
offerings and DRIP issuance 0.03 (0.34) (0.85) (0.36)
Net increase in net assets as a
result of shares issued for
Patriot acquisition -- -- 0.14 --
Dividends declared (0.41) (0.41) (1.65) (1.21)
--------- --------- --------- ---------
Net asset value at end of
period $ 10.09 $ 14.19 $ 10.09 $ 14.19
========= ========= ========= =========
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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