Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or
“we”) today announced financial results for our fiscal quarter
ended December 31, 2020.
FINANCIAL RESULTS
All amounts in $000’s except per share amounts (on weighted average
basis for period numbers) |
Quarter EndedDecember 31, 2020 |
Quarter EndedSeptember 30, 2020 |
Quarter EndedDecember 31, 2019 |
|
|
|
|
Net Investment Income (“NII”) |
$ |
81,561 |
|
$ |
57,545 |
|
$ |
67,885 |
|
NII per Common Share |
$ |
0.21 |
|
$ |
0.15 |
|
$ |
0.18 |
|
Interest as % of Total Investment Income |
|
84.0 |
% |
|
92.6 |
% |
|
86.9 |
% |
|
|
|
|
Net Income (Loss) |
$ |
305,967 |
|
$ |
167,746 |
|
$ |
(11,203 |
) |
Net Income (Loss) per Common Share |
$ |
0.80 |
|
$ |
0.45 |
|
$ |
(0.03 |
) |
|
|
|
|
Distributions to Common Shareholders |
$ |
68,824 |
|
$ |
67,861 |
|
$ |
66,152 |
|
Distributions per Common Share |
$ |
0.18 |
|
$ |
0.18 |
|
$ |
0.18 |
|
|
|
|
|
Since Oct 2017 NII per Common Share |
$ |
2.55 |
|
$ |
2.34 |
|
$ |
1.84 |
|
Since Oct 2017 Distributions per Common Share |
$ |
2.34 |
|
$ |
2.16 |
|
$ |
1.62 |
|
Since Oct 2017 NII Less Distributions per Common Share |
$ |
0.21 |
|
$ |
0.18 |
|
$ |
0.22 |
|
|
|
|
|
Net Asset Value (“NAV”) to Common Shareholders |
$ |
3,442,734 |
|
$ |
3,181,027 |
|
$ |
3,183,865 |
|
NAV per Common Share |
$ |
8.96 |
|
$ |
8.40 |
|
$ |
8.66 |
|
|
|
|
|
Net of Cash Debt to Equity Ratio(1) |
|
61.1 |
% |
|
68.1 |
% |
|
64.1 |
% |
Net of Cash Asset Coverage of Debt Ratio |
|
265 |
% |
|
247 |
% |
|
261 |
% |
|
|
|
|
Unsecured Debt as % of Total Debt |
|
86.8 |
% |
|
88.6 |
% |
|
95.8 |
% |
Unsecured and Non-Recourse Debt as % of Total Debt |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
(1) Including our Preferred
Stock as equity.
CASH COMMON SHAREHOLDER DISTRIBUTION
DECLARATION
Prospect is declaring distributions to common
shareholders as follows:
Monthly Cash Common Shareholder Distribution |
Record Date |
Payment Date |
Amount ($ per share) |
February 2021 |
2/26/2021 |
3/18/2021 |
$ |
0.0600 |
March 2021 |
3/31/2021 |
4/22/2021 |
$ |
0.0600 |
April 2021 |
4/30/2021 |
5/20/2021 |
$ |
0.0600 |
These monthly cash distributions represent the
42nd, 43rd, and 44th consecutive $0.06 per share distributions to
common shareholders.
Prospect expects to declare May, June, July, and
August 2021 distributions to common shareholders in May 2021.
Based on the declarations above, Prospect’s
closing stock price of $6.72 at February 8, 2021 delivers to our
common shareholders an annualized distribution yield of 10.7%.
Taking into account past distributions and our
current share count for declared distributions, and since inception
through our April 2021 declared distribution, Prospect will have
distributed $18.60 per share to original common shareholders,
aggregating approximately $3.3 billion in cumulative distributions
to all common shareholders.
Since October 2017, our NII per common share has
aggregated $2.55 while our common shareholder distributions per
share have aggregated $2.34, resulting in our NII exceeding
distributions during this period by $0.21 per common share.
Initiatives focused on enhancing accretive NII
per share growth include (1) our recently announced $1.25 billion
targeted perpetual preferred equity programs, (2) a greater
utilization of our cost efficient revolving credit facility (with
an incremental cost of approximately 1.3% at today’s one month
Libor), (3) retirement of higher cost liabilities (including
multiple recent successful tender offers), (4) issuing lower cost
notes (including recent five year senior unsecured notes issuances
with coupons of approximately 3.0% to 3.7%), and (5) increased
originations in senior secured debt and selected equity investments
to deliver targeted risk-adjusted yields and total returns as we
deploy available capital from our current underleveraged balance
sheet.
Our senior management team and employee insider
ownership is currently over 27% of shares outstanding, representing
over $950 million of our net asset value.
CASH PREFERRED SHAREHOLDER DISTRIBUTION
DECLARATION
Prospect is declaring distributions to preferred
shareholders based on an annual rate equal to 5.50% of the stated
value of $25 per share, from the date of issuance or, if later,
from the most recent dividend payment date, as follows:
Monthly Cash Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Monthly Amount ($ per share), before pro ration for partial
periods |
March 2021 |
3/17/2021 |
4/1/2021 |
$ |
0.114583 |
April 2021 |
4/21/2021 |
5/3/2021 |
$ |
0.114583 |
May 2021 |
5/19/2021 |
6/1/2021 |
$ |
0.114583 |
PORTFOLIO UPDATE AND INVESTMENT ACTIVITY
All amounts in $000’s except per unit amounts |
As ofDecember 31, 2020 |
As ofSeptember 30, 2020 |
|
|
|
Total Investments (at fair value) |
$ |
5,625,405 |
|
$ |
5,386,385 |
|
Number of Portfolio Companies |
|
122 |
|
|
122 |
|
|
|
|
Secured First Lien |
|
47.3 |
% |
|
45.9 |
% |
Other Senior Secured Debt |
|
21.2 |
% |
|
24.1 |
% |
Subordinated Structured Notes |
|
13.3 |
% |
|
13.6 |
% |
Unsecured and Other Debt |
|
0.0 |
% |
|
1.0 |
% |
Equity Investments |
|
18.2 |
% |
|
15.4 |
% |
Mix of Investments with Underlying Collateral Security |
|
81.8 |
% |
|
83.6 |
% |
|
|
|
Annualized Current Yield – All Investments |
|
9.9 |
% |
|
9.7 |
% |
Annualized Current Yield – Performing Interest Bearing
Investments |
|
12.2 |
% |
|
11.6 |
% |
|
|
|
Top Industry Concentration(1) |
|
16.2 |
% |
|
15.4 |
% |
Retail Industry Concentration(1) |
|
0 |
% |
|
0 |
% |
Energy Industry Concentration(1) |
|
1.2 |
% |
|
1.2 |
% |
Hotels, Restaurants & Leisure Concentration(1) |
|
0.4 |
% |
|
0.4 |
% |
|
|
|
Non-Accrual Loans as % of Total Assets (2) |
|
0.7 |
% |
|
0.7 |
% |
|
|
|
Middle-Market Loan Portfolio Company Weighted Average
EBITDA(3) |
$ |
83,092 |
|
$ |
78,548 |
|
As of the quarter ended December 31, 2020,
Prospect had a 4.97x middle-market loan portfolio company weighted
average net debt leverage ratio.
(1) Excluding our underlying
industry-diversified structured credit
portfolio.(2) Calculated at fair value.(3) For additional
disclosure see “Middle-Market Loan Portfolio Company Weighted
Average EBITDA and Net Leverage” at the end of this release.
During the December 2020 and September 2020
quarters, our investment origination and repayment activity was as
follows:
|
Quarter Ended |
Quarter Ended |
All amounts in $000’s |
December 31, 2020 |
September 30, 2020 |
|
|
|
Total Originations |
$ |
345,578 |
|
$ |
177,141 |
|
|
|
|
Middle-Market Finance |
|
75.0 |
% |
|
75.9 |
% |
Real Estate |
|
24.8 |
% |
|
10.4 |
% |
Middle-Market Lending / Buyout |
|
0.2 |
% |
|
0.0 |
% |
Other |
|
0.0 |
% |
|
13.7 |
% |
|
|
|
Total Repayments |
$ |
338,011 |
|
$ |
145,410 |
|
|
|
|
Originations, Net of Repayments |
$ |
7,567 |
|
$ |
31,731 |
|
Note: For additional disclosure see “Primary
Origination Strategies” at the end of this release.
We have invested in subordinated structured notes benefiting
from individual standalone financings non-recourse to Prospect with
our risk limited in each case to our net investment. At December
31, 2020 and September 30, 2020, our subordinated structured note
portfolio at fair value consisted of the following:
All amounts in $000’s except per unit amounts |
As ofDecember 31, 2020 |
As ofSeptember 30, 2020 |
|
|
|
Total Subordinated Structured Notes |
$ |
745,390 |
|
$ |
730,514 |
|
|
|
|
# of Investments |
|
39 |
|
|
39 |
|
|
|
|
TTM Average Cash Yield(1)(2) |
|
13.4 |
% |
|
13.8 |
% |
Annualized Cash Yield(1)(2) |
|
17.2 |
% |
|
7.1 |
% |
Annualized GAAP Yield on Fair Value(1)(2) |
|
16.8 |
% |
|
13.6 |
% |
Annualized GAAP Yield on Amortized Cost(2) |
|
11.4 |
% |
|
9.0 |
% |
|
|
|
Cumulative Cash Distributions |
$ |
1,256,426 |
|
$ |
1,224,434 |
|
% of Original Investment |
|
89.8 |
% |
|
87.5 |
% |
|
|
|
# of Underlying Collateral Loans |
|
1,677 |
|
|
1,658 |
|
Total Asset Base of Underlying Portfolio |
$ |
17,063,856 |
|
$ |
17,348,603 |
|
|
|
|
Prospect TTM Default Rate |
|
2.06 |
% |
|
2.20 |
% |
Broadly Syndicated Market TTM Default Rate |
|
3.83 |
% |
|
4.17 |
% |
Prospect Default Rate Outperformance vs. Market |
|
1.77 |
% |
|
1.97 |
% |
(1) Calculation based on fair
value.(2) Excludes investments being redeemed.
To date, including called investments being
redeemed, we have exited nine subordinated structured notes
totaling $263.4 million with an expected pooled average realized
IRR of 16.7% and cash on cash multiple of 1.48 times.
Since December 31, 2017 through today, 27 of our
subordinated structured note investments have completed multi-year
extensions of their reinvestment periods (typically at reduced
liability spreads and with increased weighted average life asset
benefits). We believe further long-term optionality upside exists
in our structured credit portfolio through additional refinancings
and reinvestment period extensions.
To date during the March 2021 quarter, we have
completed new and follow-on investments as follows:
|
Quarter Ended |
All amounts in $000’s |
March 31, 2021 |
|
|
Total Originations |
$ |
12,166 |
|
|
|
Real Estate |
|
56.5 |
% |
Middle-Market Finance |
|
41.4 |
% |
Middle-Market Lending / Buyout |
|
2.1 |
% |
|
|
Total Repayments |
$ |
52,850 |
|
Originations, Net of Repayments |
$ |
(40,684 |
) |
Note: For additional disclosure see “Primary
Origination Strategies” at the end of this release.
CAPITAL AND LIQUIDITY
Our multi-year, long-term laddered funding
profile includes a revolving credit facility (with 30 lenders),
program notes, listed baby bonds, institutional bonds, convertible
bonds, and our newly launched preferred stock. We have retired
upcoming maturities, including a recent retirement in April 2020,
and as of today have zero debt maturing until July 2022. On
September 9, 2019, we completed an amendment of our existing
revolving credit facility (the “Facility”) for Prospect Capital
Funding, extending the term 5.0 years from such date. Pricing for
amounts drawn under the Facility is one-month Libor plus 2.20%.
The combined amount of our balance sheet cash
and undrawn revolving credit facility commitments currently stands
at approximately $845 million. Our total unfunded eligible
commitments to non-control portfolio companies totals approximately
$21 million.
All amounts in $000’s |
As ofDecember 31, 2020 |
As ofSeptember 30, 2020 |
As ofDecember 31, 2019 |
Net of Cash Debt to Equity Ratio(1) |
|
61.1 |
% |
|
69.8 |
% |
|
64.1 |
% |
% of Interest-Bearing Assets at Floating Rates |
|
86.6 |
% |
|
85.9 |
% |
|
86.3 |
% |
% of Liabilities at Fixed Rates |
|
86.8 |
% |
|
88.6 |
% |
|
95.8 |
% |
|
|
|
|
% of Floating Loans with Libor Floors |
|
89.6 |
% |
|
83.5 |
% |
|
89.2 |
% |
Weighted Average Libor Floor |
|
1.62 |
% |
|
1.66 |
% |
|
1.42 |
% |
|
|
|
|
Unencumbered Assets |
$ |
4,208,925 |
|
$ |
3,907,362 |
|
$ |
3,943,616 |
|
% of Total Assets |
|
73.8 |
% |
|
71.9 |
% |
|
72.6 |
% |
(1) Including our Preferred Stock as
equity.
The below table summarizes our December 2020 quarter term debt
issuance and repurchase/repayment activity:
All amounts in $000’s |
Principal |
Rate |
Maturity |
Debt Issuances |
|
|
|
Prospect Capital InterNotes® |
$ |
42,810 |
4.25% – 5.25 |
% |
October 2025 – December 2030 |
Debt Repurchases/Repayments |
|
|
|
2022 Notes |
$ |
65,898 |
4.95 |
% |
July 2022 |
2023 Notes |
$ |
30,000 |
5.875 |
% |
March 2023 |
2024 Notes |
$ |
10,000 |
6.375 |
% |
January 2024 |
Prospect Capital InterNotes® |
$ |
2,124 |
4.00% - 6.625 |
% |
April 2024 – October 2043 |
$1.0775 billion of Facility commitments have
closed to date with 30 lenders. An accordion feature allows the
Facility, at Prospect's discretion, to accept up to $1.5 billion of
commitments. The Facility matures September 9, 2024. The Facility
includes a revolving period that extends through September 9, 2023,
followed by an additional one-year amortization period, with
distributions allowed to Prospect after the completion of the
revolving period.
On September 3, 2020, we commenced a tender
offer to purchase for cash any and all of the 2022 Notes. On
October 1, 2020, $6.035 million was validly tendered and accepted
representing 2.64% of the outstanding notes. On October 19, 2020,
we commenced a tender offer to purchase for cash any and all of the
2022 Notes. On November 16, 2020, $59.863 million was validly
tendered and accepted representing 26.87% of the outstanding notes.
On December 16, 2020, we commenced a tender offer to purchase for
cash any and all of the 2022 Notes. On January 15, 2021, $26.694
million was validly tendered and accepted representing 16.38% of
the notes.
On November 17, 2020, we commenced a tender
offer to purchase for cash up to $30 million of the 2023 Notes. On
December 15, 2020, $36.644 million was validly tendered, of which
$30 million, representing 9.38% of the notes, was validly
accepted.
On November 17, 2020, we commenced a tender
offer to purchase for cash up to $10 million of the 6.375% 2024
Notes. On December 15, 2020, $11.848 million was validly tendered,
of which $10 million, representing 10% of the notes, was validly
accepted.
On December 28, 2020, we commenced a tender
offer to purchase for cash up to $20 million of the 2025 Notes. On
January 27, 2021, $108.616 million was validly tendered, of which
$20 million, representing 10% of the notes, was validly
accepted.
We currently have eight separate unsecured debt
issuances aggregating $1.4 billion outstanding, not including our
program notes, with laddered maturities extending to June 2029. At
December 31, 2020, $759.0 million of program notes were outstanding
with laddered maturities through October 2043.
On January 14, 2021, we announced the issuance
of $325 million of 3.706% senior unsecured notes that mature on
January 22, 2026, (the “2026 Notes”).
On August 3, 2020 and on October 30, 2020, we
launched a $1 billion 5.50% perpetual preferred stock offering
program and a $250 million 5.50% perpetual preferred stock offering
program, respectively. Prospect expects to use the net proceeds
from the offering programs to maintain and enhance balance sheet
liquidity, including repaying our credit facility and purchasing
high quality short-term debt instruments, and to make long-term
investments in accordance with our investment objective. The
preferred stock provides Prospect with a diversified source of
accretive fixed-rate capital without creating maturity risk due to
the perpetual term.
In connection with the preferred stock offering
programs, effective August 3, 2020 and as amended on October 30,
2020, we adopted and amended, respectively, a Preferred Stock
Dividend Reinvestment Plan, pursuant to which holders of the
preferred stock will have dividends on their preferred stock
automatically reinvested in additional shares of such preferred
stock at a price per share of $25.00, if they elect.
Prospect holds recently reaffirmed investment
grade company ratings from Standard & Poor’s (BBB-), Moody’s
(Baa3), Kroll (BBB-), and Egan-Jones (BBB). Maintaining our
investment grade ratings with prudent asset, liability, and risk
management is an important objective for Prospect.
DIVIDEND REINVESTMENT PLAN
We have adopted a dividend reinvestment plan
(also known as a “DRIP”) that provides for reinvestment of our
distributions on behalf of our shareholders, unless a shareholder
elects to receive cash. On April 17, 2020, our board of directors
approved amendments to the Company’s DRIP, effective May 21, 2020.
These amendments principally provide for the number of newly-issued
shares pursuant to the DRIP to be determined by dividing (i) the
total dollar amount of the distribution payable by (ii) 95% of the
closing market price per share of our stock on the valuation date
of the distribution (providing a 5% discount to the market price of
our common stock), a benefit to shareholders who participate.
HOW TO PARTICIPATE IN OUR DIVIDEND
REINVESTMENT PLAN
Shares held with a broker or financial
institution
Many shareholders have been automatically “opted
out” of our DRIP by their brokers. Even if you have elected to
automatically reinvest your PSEC stock with your broker, your
broker may have “opted out” of our DRIP (which utilizes DTC’s
dividend reinvestment service), and you may therefore not be
receiving the 5% pricing discount. Shareholders interested in
participating in our DRIP to receive the 5% discount should contact
their brokers to make sure each such DRIP participation election
has been made through DTC. In making such DRIP election, each
shareholder should specify to one’s broker the desire to
participate in the "Prospect Capital Corporation DRIP through DTC"
that issues shares based on 95% of the market price (a 5% discount
to the market price) and not the broker's own "synthetic DRIP” plan
(if any) that offers no such discount. Each shareholder should not
assume one’s broker will automatically place such shareholder in
our DRIP through DTC. Each shareholder will need to make this
election proactively with one’s broker or risk not receiving the 5%
discount. Each shareholder may also consult with a representative
of such shareholder’s broker to request that the number of shares
the shareholder wishes to enroll in our DRIP be re-registered by
the broker in the shareholder’s own name as record owner in order
to participate directly in our DRIP.
Shares registered directly with our transfer
agent
If a shareholder holds shares registered in the
shareholder’s own name with our transfer agent (less than 0.1% of
our shareholders hold shares this way) and wants to make a change
to how the shareholder receives dividends, please contact our plan
administrator, American Stock Transfer and Trust Company LLC by
calling (888) 888-0313 or by mailing American Stock Transfer and
Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219.
EARNINGS CONFERENCE CALL
Prospect will host an earnings call on Wednesday,
February 10, 2021 at 11:00 am. Eastern
Time. Dial 888-338-7333. For a replay prior to
March 9, 2021 visit www.prospectstreet.com or call 877-344-7529
with passcode 10152214.
PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES(in thousands, except share and per
share data)
|
|
December 31,2020 |
|
|
|
June 30, 2020 |
|
Assets |
|
|
|
|
|
|
|
Investments at fair
value: |
|
|
|
|
|
|
|
Control investments (amortized cost of $2,394,568 and $2,286,725,
respectively) |
$ |
2,548,723 |
|
|
$ |
2,259,292 |
|
Affiliate investments (amortized cost of $154,176 and $163,484,
respectively) |
|
263,935 |
|
|
|
187,537 |
|
Non-control/non-affiliate investments (amortized cost of $3,293,434
and $3,332,509, respectively) |
|
2,812,747 |
|
|
|
2,785,499 |
|
Total investments at fair value (amortized cost of $5,842,178 and
$5,782,718, respectively) |
|
5,625,405 |
|
|
|
5,232,328 |
|
Cash |
|
50,097 |
|
|
|
44,561 |
|
Receivables for: |
|
|
|
Interest, net |
|
13,743 |
|
|
|
11,712 |
|
Other |
|
2,906 |
|
|
|
106 |
|
Deferred financing costs on
Revolving Credit Facility |
|
8,047 |
|
|
|
9,145 |
|
Prepaid expenses |
|
550 |
|
|
|
1,248 |
|
Due from broker |
|
— |
|
|
|
1,063 |
|
Due from Affiliate |
|
6 |
|
|
|
— |
|
Total Assets |
|
5,700,754 |
|
|
|
5,300,163 |
|
Liabilities |
|
|
|
|
|
|
|
Revolving Credit Facility |
|
284,895 |
|
|
|
237,536 |
|
Prospect Capital
InterNotes® (less unamortized debt issuance costs of $13,278
and $12,802, respectively) |
|
745,729 |
|
|
|
667,427 |
|
Public Notes (less
unamortized debt issuance costs of $10,179 and
$11,613, respectively) |
|
743,540 |
|
|
|
782,106 |
|
Convertible Notes (less
unamortized debt issuance costs of $6,571 and $8,892,
respectively) |
|
357,601 |
|
|
|
450,598 |
|
Due to Prospect Capital
Management |
|
48,550 |
|
|
|
42,481 |
|
Interest payable |
|
27,187 |
|
|
|
29,066 |
|
Dividends payable |
|
23,046 |
|
|
|
22,412 |
|
Due to Prospect
Administration |
|
9,240 |
|
|
|
7,000 |
|
Accrued expenses |
|
3,512 |
|
|
|
3,648 |
|
Due to broker |
|
31 |
|
|
|
1 |
|
Other liabilities |
|
903 |
|
|
|
2,027 |
|
Total Liabilities |
|
2,244,234 |
|
|
|
2,244,302 |
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
Net Assets |
$ |
3,456,520 |
|
|
$ |
3,055,861 |
|
|
|
|
|
|
|
|
|
Components of Net
Assets |
|
|
|
|
|
|
|
Convertible Preferred Stock, par value $0.001 per share
(140,000,000 shares authorized, with 40,000,000 shares of preferred
stock authorized for each of the Series A1, Series M1, and Series
M2 shares and 20,000,000 shares of preferred stock authorized for
the Series AA1 shares; 551,424 and 0 Series A1 shares issued and
outstanding, respectively; 0 and 0 Series AA1 shares issued and
outstanding, respectively; 0 and 0 Series M1 shares issued and
outstanding, respectively; and 0 and 0 Series M2 shares issued and
outstanding, respectively) |
$ |
13,786 |
|
|
$ |
— |
|
Common stock, par value $0.001 per share (1,860,000,000 common
shares authorized; 384,097,645 and 373,538,499 issued and
outstanding, respectively) |
|
384 |
|
|
|
374 |
|
Paid-in capital in excess of
par |
|
4,023,978 |
|
|
|
3,986,417 |
|
Total distributable earnings
(loss) |
|
(581,628 |
) |
|
|
(930,930 |
) |
Net Assets |
$ |
3,456,520 |
|
|
$ |
3,055,861 |
|
Net Asset Value Per
Common Share |
$ |
8.96 |
|
|
$ |
8.18 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Investment
Income |
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
Control investments |
$ |
50,633 |
|
|
$ |
49,602 |
|
|
$ |
99,360 |
|
|
$ |
100,468 |
|
Affiliate investments |
10,826 |
|
|
2,463 |
|
|
18,188 |
|
|
2,702 |
|
Non-control/non-affiliate investments |
52,029 |
|
|
59,152 |
|
|
103,279 |
|
|
121,102 |
|
Structured credit securities |
31,299 |
|
|
29,442 |
|
|
56,199 |
|
|
62,343 |
|
Total interest income |
144,787 |
|
|
140,659 |
|
|
277,026 |
|
|
286,615 |
|
Dividend income: |
|
|
|
|
|
|
|
Control investments |
2,261 |
|
|
3,268 |
|
|
2,261 |
|
|
7,068 |
|
Non-control/non-affiliate investments |
19 |
|
|
241 |
|
|
44 |
|
|
695 |
|
Total dividend income |
2,280 |
|
|
3,509 |
|
|
2,305 |
|
|
7,763 |
|
Other income: |
|
|
|
|
|
|
|
Control investments |
20,545 |
|
|
13,189 |
|
|
29,616 |
|
|
24,572 |
|
Affiliate investments |
64 |
|
|
— |
|
|
64 |
|
|
— |
|
Non-control/non-affiliate investments |
4,616 |
|
|
4,560 |
|
|
6,161 |
|
|
4,850 |
|
Total other income |
25,225 |
|
|
17,749 |
|
|
35,841 |
|
|
29,422 |
|
Total Investment Income |
172,292 |
|
|
161,917 |
|
|
315,172 |
|
|
323,800 |
|
Operating
Expenses |
|
|
|
|
|
|
|
Base management fee |
27,833 |
|
|
27,543 |
|
|
54,683 |
|
|
56,006 |
|
Income incentive fee |
20,717 |
|
|
16,971 |
|
|
35,103 |
|
|
34,736 |
|
Interest and credit facility
expenses |
33,727 |
|
|
37,059 |
|
|
67,776 |
|
|
75,957 |
|
Allocation of overhead from
Prospect Administration |
3,426 |
|
|
6,011 |
|
|
8,083 |
|
|
9,505 |
|
Audit, compliance and tax
related fees |
340 |
|
|
1,933 |
|
|
1,278 |
|
|
2,308 |
|
Directors’ fees |
113 |
|
|
113 |
|
|
226 |
|
|
226 |
|
Other general and
administrative expenses |
4,575 |
|
|
4,402 |
|
|
8,917 |
|
|
6,117 |
|
Total Operating Expenses |
90,731 |
|
|
94,032 |
|
|
176,066 |
|
|
184,855 |
|
Net Investment Income |
81,561 |
|
|
67,885 |
|
|
139,106 |
|
|
138,945 |
|
Net Realized and Net
Change in Unrealized (Losses) Gains from Investments |
|
|
|
|
|
|
|
Net realized gains
(losses) |
|
|
|
|
|
|
|
Control investments |
— |
|
|
— |
|
|
2,832 |
|
|
— |
|
Affiliate investments |
3,724 |
|
|
— |
|
|
3,724 |
|
|
— |
|
Non-control/non-affiliate investments |
3 |
|
|
1,909 |
|
|
14 |
|
|
(289 |
) |
Net realized gains (losses) |
3,727 |
|
|
1,909 |
|
|
6,570 |
|
|
(289 |
) |
Net change in unrealized gains
(losses) |
|
|
|
|
|
|
|
Control investments |
168,053 |
|
|
(35,863 |
) |
|
181,588 |
|
|
(74,884 |
) |
Affiliate investments |
19,233 |
|
|
12,242 |
|
|
85,706 |
|
|
30,262 |
|
Non-control/non-affiliate investments |
38,487 |
|
|
(54,271 |
) |
|
66,323 |
|
|
(81,729 |
) |
Net change in unrealized gains (losses) |
225,773 |
|
|
(77,892 |
) |
|
333,617 |
|
|
(126,351 |
) |
Net Realized and Net Change in Unrealized Gains (Losses)
from Investments |
229,500 |
|
|
(75,983 |
) |
|
340,187 |
|
|
(126,640 |
) |
Net realized losses on extinguishment of debt |
(5,094 |
) |
|
(3,105 |
) |
|
(5,580 |
) |
|
(5,443 |
) |
Net Increase (Decrease) in Net Assets Resulting from
Operations |
|
305,967 |
|
|
|
(11,203 |
) |
|
|
473,713 |
|
|
|
6,862 |
|
Preferred stock dividend |
|
46 |
|
|
|
— |
|
|
|
46 |
|
|
|
— |
|
Net Increase (Decrease) in Net Assets Resulting from
Operations attributable to Common Stockholders |
$ |
305,921 |
|
|
$ |
(11,203 |
) |
|
$ |
473,667 |
|
|
$ |
6,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Six Months EndedDecember 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Per Share Data |
|
|
|
|
|
|
|
|
Net asset value per common share at beginning of period |
$ |
8.40 |
|
|
$ |
8.87 |
|
|
$ |
8.18 |
|
|
$ |
9.01 |
|
|
Net
investment income(1) |
0.21 |
|
|
0.18 |
|
|
0.37 |
|
|
0.37 |
|
|
Net
realized and change in unrealized gains (losses) (1) |
0.59 |
|
|
(0.21 |
) |
|
0.88 |
|
|
(0.35 |
) |
|
Net
increase (decrease) from operations |
0.80 |
|
|
(0.03 |
) |
|
1.25 |
|
|
0.02 |
|
|
Distributions of net investment income to preferred
stockholders |
|
— |
|
(3) |
— |
|
(4) |
|
— |
|
(3) |
|
— |
|
(4) |
Distributions of net investment income to common stockholders |
(0.18 |
) |
|
(0.18 |
) |
|
(0.36 |
) |
|
(0.36 |
) |
|
Return
of Capital to common stockholders |
— |
|
(4) |
(0.03 |
) |
|
(0.03 |
) |
|
(0.03 |
) |
|
Common
stock transactions(2) |
(0.05 |
) |
|
— |
|
(3) |
(0.10 |
) |
|
(0.01 |
) |
|
Net
asset value per common share at end of period |
$ |
8.96 |
|
|
$ |
8.66 |
|
|
$ |
8.96 |
|
|
$ |
8.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Per share data amount is based on the
weighted average number of common shares outstanding for the period
presented (except for dividends to stockholders which is based on
actual rate per share).
(2) Common stock transactions include the effect
of our issuance of common stock in public offerings (net of
underwriting and offering costs), shares issued in connection with
our common stock dividend reinvestment plan, common shares issued
to acquire investments and common shares repurchased below net
asset value pursuant to our Repurchase Program.
(3) Amount is less than $0.01.
(4) Not applicable for the respective fiscal
period.
MIDDLE-MARKET LOAN PORTFOLIO COMPANY WEIGHTED AVERAGE
EBITDA AND NET LEVERAGE
Middle-Market Loan Portfolio Company Weighted Average Net
Leverage (“Middle-Market Portfolio Net Leverage”) and Middle-Market
Loan Portfolio Company Weighted Average EBITDA (“Middle-Market
Portfolio EBITDA”) provide clarity into the underlying capital
structure of PSEC’s middle-market loan portfolio investments and
the likelihood that PSEC’s overall portfolio will make interest
payments and repay principal.
Middle-Market Portfolio Net Leverage reflects the net leverage of
each of PSEC’s middle-market loan portfolio company debt
investments, weighted based on the current debt principal
outstanding of such investments. The net leverage for each
middle-market loan portfolio company is calculated based on PSEC’s
investment in the capital structure of such portfolio company, with
a maximum limit of 10.0x adjusted EBITDA. This calculation excludes
debt subordinate to PSEC’s position within the capital structure
because PSEC’s exposure to interest payment and principal repayment
risk is limited beyond that point. Additionally, subordinated
structured notes, other structured credit, real estate investments,
investments for which EBITDA is not available, and equity
investments, for which principal repayment is not fixed, are also
not included in the calculation. The calculation does not exceed
10.0x adjusted EBITDA for any individual investment because 10.0x
captures the highest level of risk to PSEC. Middle-Market Portfolio
Net Leverage provides PSEC with some guidance as to PSEC’s exposure
to the interest payment and principal repayment risk of PSEC’s
overall debt portfolio. PSEC monitors its Middle-Market Portfolio
Net Leverage on a quarterly basis.
Middle-Market Portfolio EBITDA is used by PSEC to supplement
Middle-Market Portfolio Net Leverage and generally indicates a
portfolio company’s ability to make interest payments and repay
principal. Middle-Market Portfolio EBITDA is calculated using the
weighted average dollar amount EBITDA of each of PSEC’s
middle-market loan portfolio company debt investments. The
calculation provides PSEC with insight into profitability and scale
of the portfolio companies within our overall debt investments.
These calculations include addbacks that are typically
negotiated and documented in the applicable investment documents,
including but not limited to transaction costs, share-based
compensation, management fees, foreign currency translation
adjustments and other nonrecurring transaction expenses.
Together, Middle-Market Portfolio Net Leverage and Middle-Market
Portfolio EBITDA assist PSEC in assessing the likelihood that PSEC
will timely receive interest and principal payments. However, these
calculations are not meant to substitute for an analysis of PSEC’s
our underlying portfolio company debt investments, but to
supplement such analysis.PRIMARY ORIGINATION
STRATEGIES
Middle-Market Finance - We make
directly-originated, agented loans to companies, including
companies which are controlled by private equity sponsors and
companies that are not controlled by private equity sponsors (such
as companies that are controlled by the management team, the
founder, a family or public shareholders). This debt can take the
form of first lien, second lien, unitranche or unsecured loans.
These loans typically have equity subordinate to our loan position.
We may also purchase selected equity co-investments in such
companies. In addition to directly-originated, agented loans, we
also invest in senior and secured loans syndicated loans and high
yield bonds that have been sold to a club or syndicate of buyers,
both in the primary and secondary markets. These investments are
often purchased with a long term, buy-and-hold outlook, and we
often look to provide significant input to the transaction by
providing anchoring orders.
Middle-Market Lending / Buyout - This strategy
involves purchasing senior and secured yield-producing debt and
controlling equity positions in operating companies across various
industries We believe this strategy provides enhanced certainty of
closure, liquidity to sellers, and the opportunity for management
to continue on in their current roles. These investments are often
structured in tax-efficient partnerships, enhancing returns.
Real Estate - We purchase debt and controlling
equity positions in tax-efficient real estate investment trusts
(“REIT” or “REITs”). The real estate investments of National
Property REIT Corp. (“NPRC”) are in various classes of developed
and occupied real estate properties that generate current yields,
including multi-family properties, student housing, and
self-storage. NPRC seeks to identify properties that have
historically significant occupancy rates and recurring cash flow
generation. NPRC generally co-invests with established and
experienced property management teams that manage such properties
after acquisition.
Subordinated Structured Notes - We make
investments in structured credit, often taking a significant
position in subordinated structured notes (equity) and rated
secured structured notes (debt). The underlying portfolio of each
structured credit investment is diversified across approximately
100 to 200 broadly syndicated loans and does not have direct
exposure to real estate, mortgages, or consumer-based credit
assets. The structured credit portfolios in which we invest are
managed by established collateral management teams with many years
of experience in the industry.
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation
(www.prospectstreet.com) is a business development company that
focuses on lending to and investing in private 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 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.
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 any forward-looking
statements. Such statements speak only as of the time when made. We
undertake no obligation to update any such statement now or in the
future.
For additional information, contact:
Grier Eliasek, President and Chief Operating
Officergrier@prospectcap.comTelephone (212) 448-0702
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