Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or
“we”) today announced financial results for our fiscal quarter
ended March 31, 2023.
FINANCIAL RESULTS
All amounts in $000’s except per share amounts (on weighted average
basis for period numbers) |
Quarter Ended |
Quarter Ended |
Quarter Ended |
March 31, 2023 |
December 31, 2022 |
March 31, 2022 |
|
|
|
|
Net Investment Income (“NII”) |
$102,180 |
$106,704 |
$87,005 |
Basic NII per Common Share(1) |
$0.21 |
$0.23 |
$0.20 |
Interest as % of Total Investment Income |
92.1% |
89.6% |
78.5% |
Basic NII Coverage of Distributions to Common Shareholders |
117% |
128% |
111% |
Annualized Basic NII Return on Common NAV |
8.9% |
9.3% |
7.4% |
|
|
|
|
Net Income (Loss) Applicable to Common Shareholders |
$(108,947) |
$55,623 |
$157,157 |
Basic Net Income (Loss) per Common Share(2) |
$(0.27) |
$0.14 |
$0.40 |
|
|
|
|
Distributions to Common Shareholders |
$72,009 |
$71,670 |
$70,439 |
Distributions per Common Share |
$0.18 |
$0.18 |
$0.18 |
|
|
|
|
Since Oct 2017 Basic NII per Common Share(1) |
$4.40 |
$4.20 |
$3.54 |
Since Oct 2017 Distributions per Common Share |
$3.96 |
$3.78 |
$3.24 |
Since Oct 2017 Basic NII Less Distributions per Common Share |
$0.44 |
$0.42 |
$0.30 |
Since Oct 2017 Basic NII Coverage of Distributions to Common
Shareholders |
111% |
111% |
109% |
|
|
|
|
Net Asset Value (“NAV”) to Common Shareholders |
$3,799,294 |
$3,966,391 |
$4,236,011 |
NAV per Common Share |
$9.48 |
$9.94 |
$10.81 |
|
|
|
|
Balance Sheet Cash + Undrawn Revolving Credit Facility
Commitments |
$954,187 |
$1,017,280 |
$836,962 |
|
|
|
|
Net of Cash Debt to Equity Ratio(3) |
47.1% |
49.4% |
53.9% |
Net of Cash Asset Coverage of Debt Ratio(3) |
311% |
301% |
284% |
|
|
|
|
Unsecured Debt + Preferred Equity as % of Total Debt + Preferred
Equity |
76.7% |
80.3% |
78.1% |
Unsecured or Non-Recourse Debt as % of Total Debt |
100.0% |
100.0% |
100.0% |
(1) |
Basic NII is calculated by dividing NII, less preferred dividends,
by the weighted average number of common shares outstanding. |
(2) |
Basic Net Income (Loss) is
calculated by dividing Net Income (Loss) by the weighted average
number of common shares outstanding. |
(3) |
Including our preferred stock as
equity. |
|
|
All amounts in $000’s except per share amounts |
Nine Months Ended |
Nine Months Ended |
March 31, 2023 |
March 31, 2022 |
|
|
|
Net Investment Income (“NII”) |
$308,150 |
$253,931 |
Basic NII per Common Share |
$0.65 |
$0.61 |
|
|
|
Net Income (Loss) Applicable to Common Shareholders |
$(158,523) |
$613,292 |
Basic Net Income (Loss) per Common Share |
$(0.40) |
$1.57 |
|
|
|
Distributions to Common Shareholders |
$214,751 |
$210,722 |
Distributions per Common Share |
$0.54 |
$0.54 |
|
|
|
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) |
May 2023 |
5/26/2023 |
6/21/2023 |
$0.0600 |
June 2023 |
6/28/2023 |
7/20/2023 |
$0.0600 |
July 2023 |
7/27/2023 |
8/22/2023 |
$0.0600 |
August 2023 |
8/29/2023 |
9/20/2023 |
$0.0600 |
|
|
|
|
These monthly cash distributions are the 69th,
70th, 71st and 72nd consecutive $0.06 per share distributions to
common shareholders.
Prospect expects to declare September 2023 and
October 2023 distributions to common shareholders in August
2023.
Based on the declarations above, Prospect’s
closing stock price of $6.38 at May 8, 2023 delivers to our common
shareholders an annualized distribution yield of 11.3% and an
annualized basic NII yield of 13.2%, representing 117% basic NII
coverage of common distributions.
Prospect's 92.1% interest income as a percent of
total investment income in March 2023 was at the highest level
since September 2020, demonstrating Prospect's strong recurring
revenue model.
Prospect's 47.1% net of cash debt to equity
level, including our preferred stock as equity, stands at the
lowest level since March 2013, demonstrating Prospect's
conservative balance sheet capitalization.
Taking into account past distributions and our
current share count for declared distributions, since inception
through our August 2023 declared distribution, Prospect will have
distributed $20.28 per share to original common shareholders,
representing 2.1 times March 2023 common NAV, aggregating over
$3.96 billion in cumulative distributions to all common
shareholders.
Since inception in 2004, Prospect has invested
$20 billion across 414 investments, exiting 278 of these
investments.
Since October 2017, our NII per common share has
aggregated $4.40 while our common shareholder and preferred
shareholder distributions per common share have aggregated $3.96,
with our NII exceeding common and preferred distributions during
this period by $0.44 per common share ($166 million of excess NII)
and representing 111% coverage.
Drivers focused on enhancing accretive NII per
share growth include (1) our $2.05 billion targeted 6.50% perpetual
preferred stock offerings (which could potentially be increased in
capacity in an accretive fashion), (2) greater utilization of our
cost efficient revolving floating rate credit facility (with an
incremental cost of approximately 6.71% at today’s one month SOFR),
(3) increase of short-term Libor and SOFR rates based on Fed
tightening to boost asset yields, and (4) increased primary and
secondary originations of senior secured debt and selected equity
investments targeting attractive risk-adjusted yields and total
returns as we deploy dry powder from our underleveraged balance
sheet.
Our senior management team and employees own
over 27% of all common shares outstanding, over $1.0 billion of our
common equity as measured at NAV.
CASH PREFERRED SHAREHOLDER DISTRIBUTION
DECLARATION
Prospect is declaring monthly distributions to
5.50% preferred shareholders at an annual rate of 5.50% of the
stated value of $25.00 per share, from the date of issuance or, if
later, from the most recent dividend payment date (the first
business day of the month, with no additional dividend accruing in
April as a result), as follows:
Monthly Cash 5.50% Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Monthly Amount (per share), before pro ration for partial
periods |
June 2023 |
6/21/2023 |
7/3/2023 |
$0.114583 |
July 2023 |
7/19/2023 |
8/1/2023 |
$0.114583 |
August 2023 |
8/16/2023 |
9/1/2023 |
$0.114583 |
|
|
|
|
Prospect is declaring monthly distributions to
6.50% preferred shareholders at an annual rate of 6.50% of the
stated value of $25.00 per share, from the date of issuance or, if
later, from the most recent dividend payment date (the first
business day of the month, with no additional dividend accruing in
April as a result), as follows:
Monthly Cash 6.50% Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Monthly Amount (per share), before pro ration for partial
periods |
June 2023 |
6/21/2023 |
7/3/2023 |
$0.135417 |
July 2023 |
7/19/2023 |
8/1/2023 |
$0.135417 |
August 2023 |
8/16/2023 |
9/1/2023 |
$0.135417 |
|
|
|
|
Prospect is declaring our second quarterly
distribution to Series A preferred shareholders at an annual rate
of 5.35% of the stated value of $25.00 per share, from the date of
issuance or, if later, from the most recent dividend payment date,
as follows:
Quarterly Cash 5.35% Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Amount (per share) |
May 2023 - July 2023 |
7/19/2023 |
8/1/2023 |
$0.334375 |
|
|
|
|
PORTFOLIO UPDATE AND INVESTMENT
ACTIVITY
All amounts in $000’s except per unit amounts |
As of |
As of |
March 31, 2023 |
December 31, 2022 |
|
|
|
Total Investments (at fair value) |
$7,592,777 |
$7,770,336 |
Number of Portfolio Companies |
127 |
130 |
|
|
|
First Lien Debt |
54.4% |
53.0% |
Second Lien Debt |
17.6% |
18.5% |
Subordinated Structured Notes |
9.2% |
9.0% |
Unsecured Debt |
0.2% |
0.2% |
Equity Investments |
18.6% |
19.3% |
Mix of Investments with Underlying Collateral Security |
81.2% |
80.5% |
|
|
|
Annualized Current Yield – All Investments |
10.9% |
10.3% |
Annualized Current Yield – Performing Interest Bearing
Investments |
13.4% |
12.9% |
|
|
|
Top Industry Concentration(1) |
18.1% |
17.7% |
Retail Industry Concentration(1) |
0.4% |
0.4% |
Energy Industry Concentration(1) |
1.7% |
1.6% |
Hotels, Restaurants & Leisure Concentration(1) |
0.3% |
0.3% |
|
|
|
Non-Accrual Loans as % of Total Assets (2) |
0.2% |
0.5% |
|
|
|
Middle-Market Loan Portfolio Company Weighted Average
EBITDA(3) |
$113,841 |
$111,925 |
Middle-Market Loan Portfolio Company Weighted Average Net Leverage
Ratio(3) |
5.3x |
5.4x |
|
|
|
(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 June 2023 (to date), March 2023, and
December 2022 quarters, investment originations and repayments were
as follows:
All amounts in $000’s |
Quarter Ended |
Quarter Ended |
Quarter Ended |
June 30, 2023 (to date) |
March 31, 2023 |
December 31, 2022 |
|
|
|
|
Total Originations |
$136,113 |
$91,698 |
$307,981 |
|
|
|
|
Middle-Market Lending |
51.5% |
26.1% |
86.6% |
Real Estate |
34.5% |
30.4% |
8.5% |
Middle-Market Lending / Buyout |
14.0% |
42.8% |
3.5% |
Structured Notes |
—% |
—% |
1.4% |
Other |
—% |
—% |
—% |
|
|
|
|
Total Repayments |
$26,823 |
$113,997 |
$76,732 |
|
|
|
|
Originations, Net of Repayments |
$109,290 |
$(22,299) |
$231,249 |
|
|
|
|
|
|
|
|
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 March 31, 2023 and December 31, 2022, our subordinated
structured note portfolio at fair value consisted of the
following:
All amounts in $000’s except per unit amounts |
As of |
As of |
March 31, 2023 |
December 31, 2022 |
|
|
|
Total Subordinated Structured Notes |
$698,423 |
$698,957 |
Subordinated Structured Notes as % of Portfolio |
9.2% |
9.0% |
|
|
|
# of Investments(2) |
35 |
37 |
|
|
|
TTM Average Cash Yield(1)(2) |
15.6% |
17.9% |
Annualized GAAP Yield on Fair Value(1)(2) |
13.8% |
14.9% |
Annualized GAAP Yield on Amortized Cost(2) |
9.9% |
10.6% |
|
|
|
Cumulative Cash Distributions on Current Portfolio |
$1,425,330 |
$1,473,278 |
% of Original Investment |
110.0% |
108.4% |
|
|
|
# of Underlying Collateral Loans |
1,644 |
1,657 |
(1) |
Calculation
based on fair value. |
(2) |
Excludes investments being redeemed. |
|
|
To date we have exited 13 subordinated
structured notes with an expected pooled average realized gross IRR
of 13.7% and cash on cash multiple of 1.39 times.
CAPITAL AND LIQUIDITY
Our multi-year, long-term laddered and
diversified historical funding profile has included a $1.78 billion
revolving credit facility (with 51 lenders, an increase of 9
lenders including our prior September 2022 extension and related
upsizing), program notes, institutional bonds, convertible bonds,
listed preferred stock, and program preferred stock. We have
retired multiple upcoming maturities and as of today we have no
debt maturing in calendar year 2023. The combined amount of our
balance sheet cash and undrawn revolving credit facility
commitments is currently approximately $864 million.
On September 15, 2022, we completed an amendment
and upsizing of our existing revolving credit facility (the
“Facility”) for Prospect Capital Funding, extending the term 1.5
years. The Facility includes a revolving period that extends
through September 15, 2026, followed by an additional one-year
amortization period. Pricing for amounts drawn under the Facility
is one-month SOFR plus 2.05%.
Our total unfunded eligible commitments to
non-control portfolio companies totals approximately $53 million,
0.7% of our total assets as of March 31, 2023.
|
As of |
As of |
All amounts in $000’s |
March 31, 2023 |
December 31, 2022 |
Net of Cash Debt to Equity Ratio(1) |
47.1% |
49.4% |
% of Interest-Bearing Assets at Floating Rates |
83.1% |
82.6% |
% of Fixed Rate Debt & Preferred Equity |
76.7% |
80.3% |
|
|
|
% of Floating Loans with Libor or SOFR Floors |
94.0% |
94.1% |
Weighted Average Libor/SOFR Floor |
1.21% |
1.20% |
|
|
|
Balance Sheet Cash + Undrawn Revolving Credit Facility
Commitments |
$954,187 |
$1,017,280 |
|
|
|
Unencumbered Assets |
$5,100,511 |
$5,238,560 |
% of Total Assets |
66.2% |
66.4% |
(1) |
Including our
preferred stock as equity. |
|
|
The below table summarizes our March 2023 quarter
term debt issuance and repurchase/repayment activity:
All amounts in $000’s |
Principal |
Coupon |
Maturity |
Debt Issuances |
|
|
|
Prospect Capital InterNotes® |
$7,857 |
5.50% - 5.95% |
January 2026 – March 2033 |
Total Debt Issuances |
$7,857 |
|
|
|
|
|
|
Debt Repurchases/Repayments |
|
|
|
Prospect Capital InterNotes® |
$2,438 |
2.50% - 5.50% |
March 2026 – January 2052 |
2023 Notes |
$282,115 |
5.875% |
March 2023 |
Total Debt Repurchases/Repayments |
$284,553 |
|
|
|
|
|
|
Net Debt Repurchases/Repayments |
$(276,696) |
|
|
|
|
|
|
We currently have five separate unsecured debt
issuances aggregating over $1.2 billion outstanding, not including
our program notes, with laddered maturities extending through
October 2028. At March 31, 2023, $355.5 million of program notes
were outstanding with laddered maturities through March 2052.
At March 31, 2023, our weighted average cost of
unsecured debt financing was 4.07%, a decrease of 0.26% from
December 31, 2022, and a decrease of 0.28% from March 31, 2022.
On August 3, 2020 and October 3, 2020, we
launched our $1.75 billion 5.50% perpetual preferred stock offering
programs. On October 7, 2022, we amended our existing $1.75 billion
in perpetual preferred stock offering programs to offer new 6.50%
series of shares. On February 10, 2023, we passed an amendment to
upsize our existing $1.75 billion total offering to $2.05 billion.
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. To date we have
issued approximately $1.4 billion of our 6.50% and 5.50% perpetual
preferred stock programs (including $138 million in the March 2023
quarter and, to date, $53 million in the current June 2023
quarter), with the ability potentially to upsize such programs
based on significant balance sheet capacity.
On July 19, 2021, we closed a $150 million
listed 5.35% perpetual preferred stock offering. Prospect used the
net proceeds from the offering to maintain and enhance balance
sheet liquidity, including repaying our credit facility and
redeeming higher cost program notes.
In connection with the 5.50% perpetual preferred
stock offering program, effective August 3, 2020 and as amended on
June 9, 2022, 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.
In connection with the 6.50% perpetual preferred
stock offering program, effective October 7, 2022 we adopted 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.
We currently have over $1.5 billion in preferred
stock outstanding.
Prospect holds recently reaffirmed investment
grade company ratings, all with a stable outlook, from Standard
& Poor’s (BBB-), Moody’s (Baa3), Kroll (BBB-), Egan-Jones
(BBB), and DBRS (BBB (low)). 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 our “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
May 10, 2023 at 9:00 a.m. Eastern
Time. Dial 888-338-7333. For a replay prior to
June 9, 2023 visit www.prospectstreet.com or call 877-344-7529 with
passcode 2705855.
|
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES |
(in thousands, except share and per share
data) |
|
|
March 31, 2023 |
|
June 30, 2022 |
|
(Unaudited) |
|
|
Assets |
|
|
|
Investments at fair value: |
|
|
|
Control investments (amortized cost of $2,884,591 and $2,732,906,
respectively) |
$ |
3,480,094 |
|
|
$ |
3,438,317 |
Affiliate investments (amortized cost of $8,996 and $242,101,
respectively) |
|
7,944 |
|
|
|
393,264 |
Non-control/non-affiliate investments (amortized cost of $4,671,607
and $4,221,824, respectively) |
|
4,104,739 |
|
|
|
3,770,929 |
Total investments at fair value (amortized cost of $7,565,194
and $7,196,831, respectively) |
|
7,592,777 |
|
|
|
7,602,510 |
Cash and Cash Equivalents (restricted cash of $4,442 and $4,197,
respectively) |
|
65,092 |
|
|
|
35,364 |
Receivables for: |
|
|
|
Interest, net |
|
27,029 |
|
|
|
12,925 |
Other |
|
1,063 |
|
|
|
745 |
Deferred financing costs on Revolving Credit Facility |
|
14,842 |
|
|
|
10,801 |
Due from broker |
|
400 |
|
|
|
— |
Prepaid expenses |
|
329 |
|
|
|
1,078 |
Due from Affiliate |
|
1 |
|
|
|
— |
Total Assets |
|
7,701,533 |
|
|
|
7,663,423 |
Liabilities |
|
|
|
Revolving Credit Facility |
|
888,405 |
|
|
|
839,464 |
Public Notes (less unamortized discount and debt issuance costs of
$18,265 and $22,281, respectively) |
|
1,062,975 |
|
|
|
1,343,178 |
Prospect Capital InterNotes® (less unamortized debt issuance costs
of $6,817 and $7,122, respectively) |
|
348,647 |
|
|
|
340,442 |
Convertible Notes (less unamortized discount and debt issuance
costs of $1,802 and $2,477, respectively) |
|
154,366 |
|
|
|
214,192 |
Due to Prospect Capital Management |
|
59,542 |
|
|
|
58,100 |
Dividends payable |
|
24,219 |
|
|
|
23,657 |
Interest payable |
|
19,989 |
|
|
|
26,669 |
Accrued expenses |
|
5,595 |
|
|
|
3,309 |
Due to Prospect Administration |
|
10,128 |
|
|
|
2,281 |
Other liabilities |
|
613 |
|
|
|
932 |
Total Liabilities |
|
2,574,479 |
|
|
|
2,852,224 |
Commitments and Contingencies |
|
|
|
Preferred Stock, par value $0.001 per share (447,900,000 and
227,900,000 shares of preferred stock authorized, with 72,000,000
and 60,000,000 as Series A1, 72,000,000 and 60,000,000 as Series
M1, 72,000,000 and 60,000,000 as Series M2, 20,000,000 as Series
AA1, 20,000,000 as Series MM1, 1,000,000 as Series A2, 6,900,000 as
Series A, 72,000,000 and 0 as Series A3, 72,000,000 and 0 as Series
M3, 20,000,000 and 0 as Series AA2, and 20,000,000 and 0 as Series
MM2, each as of March 31, 2023 and June 30, 2022; 31,091,585 and
20,794,645 Series A1 shares issued and outstanding; 3,922,740 and
2,626,238 Series M1 shares issued and outstanding; 0 and 0 Series
M2 shares issued and outstanding; 0 and 0 Series AA1 shares issued
and outstanding; 0 and 0 Series MM1 shares issued and outstanding;
164,000 and 187,000 Series A2 shares issued and outstanding;
6,000,000 Series A shares issued and outstanding; 15,058,173 and 0
Series A3 shares issued and outstanding; 1,816,637 and 0 Series M3
shares issued and outstanding; 0 Series AA2 shares issued and
outstanding; and 0 Series MM2 shares issued and outstanding as of
March 31, 2023 and June 30, 2022) at carrying value plus cumulative
accrued and unpaid dividends |
|
1,327,760 |
|
|
|
692,076 |
Net Assets Applicable to Common Shares |
$ |
3,799,294 |
|
|
$ |
4,119,123 |
Components of Net Assets Applicable to Common Shares and
Net Assets, respectively |
|
|
|
Common stock, par value $0.001 per share (1,552,100,000 and
1,772,100,000 common shares authorized; 400,833,873 and 393,164,437
issued and outstanding, respectively) |
|
401 |
|
|
|
393 |
Paid-in capital in excess of par |
|
4,103,778 |
|
|
|
4,050,370 |
Total distributable (loss) earnings |
|
(304,885 |
) |
|
|
68,360 |
Net Assets Applicable to Common Shares |
$ |
3,799,294 |
|
|
$ |
4,119,123 |
Net Asset Value Per Common Share |
$ |
9.48 |
|
|
$ |
10.48 |
|
|
|
|
|
|
|
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except share and per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
Nine Months Ended March 31, |
|
2023 |
|
2022 |
2023 |
|
2022 |
Investment Income |
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
Control investments |
$ |
64,496 |
|
|
$ |
53,095 |
|
$ |
187,579 |
|
|
$ |
166,036 |
|
Affiliate investments |
— |
|
|
6,745 |
|
15,034 |
|
|
23,497 |
|
Non-control/non-affiliate investments |
109,601 |
|
|
65,037 |
|
287,735 |
|
|
182,698 |
|
Structured credit securities |
24,039 |
|
|
17,612 |
|
72,982 |
|
|
58,702 |
|
Total interest income |
198,136 |
|
|
142,489 |
|
563,330 |
|
|
430,933 |
|
Dividend income: |
|
|
|
|
|
|
|
|
|
|
Control investments |
800 |
|
|
5,197 |
|
3,157 |
|
|
12,134 |
|
Affiliate investments |
— |
|
|
95 |
|
1,374 |
|
|
95 |
|
Non-control/non-affiliate investments |
1,128 |
|
|
14 |
|
2,515 |
|
|
48 |
|
Total dividend income |
1,928 |
|
|
5,306 |
|
7,046 |
|
|
12,277 |
|
Other income: |
|
|
|
|
|
|
|
|
|
|
Control investments |
14,768 |
|
|
26,571 |
|
50,463 |
|
|
55,306 |
|
Affiliate investments |
— |
|
|
19 |
|
133 |
|
|
3,961 |
|
Non-control/non-affiliate investments |
288 |
|
|
7,046 |
|
9,738 |
|
|
23,804 |
|
Total other income |
15,056 |
|
|
33,636 |
|
60,334 |
|
|
83,071 |
|
Total Investment Income |
215,120 |
|
|
181,431 |
|
630,710 |
|
|
526,281 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
Base management fee |
38,980 |
|
|
36,426 |
|
116,176 |
|
|
102,472 |
|
Income incentive fee |
20,561 |
|
|
19,967 |
|
64,692 |
|
|
59,296 |
|
Interest and credit facility expenses |
37,517 |
|
|
29,235 |
|
109,170 |
|
|
86,952 |
|
Allocation of overhead from Prospect Administration |
9,773 |
|
|
4,126 |
|
16,490 |
|
|
10,891 |
|
Audit, compliance and tax related fees |
1,495 |
|
|
994 |
|
4,032 |
|
|
1,940 |
|
Directors’ fees |
131 |
|
|
131 |
|
393 |
|
|
360 |
|
Other general and administrative expenses |
4,483 |
|
|
3,547 |
|
11,607 |
|
|
10,439 |
|
Total Operating Expenses |
112,940 |
|
|
94,426 |
|
322,560 |
|
|
272,350 |
|
Net Investment Income |
102,180 |
|
|
87,005 |
|
308,150 |
|
|
253,931 |
|
Net Realized and Net Change in Unrealized Gains (Losses)
from Investments |
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) |
|
|
|
|
|
|
|
|
|
|
Control investments |
(800 |
) |
|
5,298 |
|
(2,512 |
) |
|
5,304 |
|
Affiliate investments |
— |
|
|
— |
|
16,143 |
|
|
— |
|
Non-control/non-affiliate investments |
(31,413 |
) |
|
(7,552 |
) |
(52,723 |
) |
|
(17,386 |
) |
Net realized gains (losses) |
(32,213 |
) |
|
(2,254 |
) |
(39,092 |
) |
|
(12,082 |
) |
Net change in unrealized (losses) gains |
|
|
|
|
|
|
|
|
|
|
Control investments |
(41,162 |
) |
|
96,162 |
|
(109,909 |
) |
|
352,558 |
|
Affiliate investments |
— |
|
|
(11,610 |
) |
(89,034 |
) |
|
26,016 |
|
Non-control/non-affiliate investments |
(117,761 |
) |
|
(4,066 |
) |
(179,153 |
) |
|
19,766 |
|
Net change in unrealized (losses) gains |
(158,923 |
) |
|
80,486 |
|
(378,096 |
) |
|
398,340 |
|
Net Realized and Net Change in Unrealized (Losses) Gains
from Investments |
(191,136 |
) |
|
78,232 |
|
(417,188 |
) |
|
386,258 |
|
Net realized losses on extinguishment of debt |
(58 |
) |
|
(941 |
) |
(138 |
) |
|
(10,149 |
) |
Net Increase (Decrease) in Net Assets Resulting from
Operations |
(89,014 |
) |
|
164,296 |
|
(109,176 |
) |
|
630,040 |
|
Preferred stock dividend |
19,933 |
|
|
7,139 |
|
49,347 |
|
|
16,748 |
|
Net Increase (Decrease) in Net Assets Resulting from
Operations applicable to Common Stockholders |
$ |
(108,947 |
) |
|
$ |
157,157 |
|
$ |
(158,523 |
) |
|
$ |
613,292 |
|
|
|
|
|
|
|
|
|
|
|
|
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES |
ROLLFORWARD OF NET ASSET VALUE PER COMMON
SHARE |
(in actual dollars) |
|
|
Three Months Ended March 31, |
|
Nine Months Ended March 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Per Share Data |
|
|
|
|
|
|
|
Net asset value per common share at beginning of period |
$ |
9.94 |
|
|
$ |
10.60 |
|
|
$ |
10.48 |
|
|
$ |
9.81 |
|
Net investment income(1) |
|
0.26 |
|
|
|
0.22 |
|
|
|
0.78 |
|
|
|
0.65 |
|
Net realized and change in unrealized (losses) gains(1) |
|
(0.48 |
) |
|
|
0.20 |
|
|
|
(1.05 |
) |
|
|
0.96 |
|
Net increase (decrease) from operations |
|
(0.22 |
) |
|
|
0.42 |
|
|
|
(0.27 |
) |
|
|
1.61 |
|
Distributions of net investment income to preferred
stockholders |
|
(0.05 |
) |
|
|
(0.01 |
) |
|
|
(0.12 |
) |
|
|
(0.03 |
) |
Distributions of capital gains to preferred stockholders |
|
— |
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
(0.01 |
) |
Net increase (decrease) from operations applicable to common
stockholders(4) |
|
(0.27 |
) |
|
|
0.40 |
|
|
|
(0.40 |
) |
(5) |
|
1.57 |
|
Distributions of net investment income to common stockholders |
|
(0.18 |
) |
(3) |
|
(0.13 |
) |
|
|
(0.52 |
) |
(3) |
|
(0.48 |
) |
Distributions of capital gains to common stockholders |
|
— |
|
|
|
(0.05 |
) |
|
|
(0.02 |
) |
|
|
(0.05 |
) |
Return of Capital to common stockholders |
|
— |
|
(3) |
|
— |
|
|
|
— |
|
(3) |
|
(0.01 |
) |
Common stock transactions(2) |
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.07 |
) |
|
|
(0.03 |
) |
Offering costs from issuance of preferred stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.03 |
) |
Reclassification of preferred stock issuance costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.03 |
|
Net asset value per common share at end of period |
$ |
9.48 |
|
|
$ |
10.81 |
|
|
$ |
9.48 |
|
(5) |
$ |
10.81 |
|
(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, and common
shares issued pursuant to the Holder Optional Conversion of our
5.50% and 6.50% Preferred Stock. |
(3) |
Not finalized for the respective
fiscal period. |
(4) |
Diluted net decrease from
operations applicable to common stockholders was $0.27 for the
three months ended March 31, 2023. Diluted net increase from
operations applicable to common stockholders was $0.38 for the
three months ended March 31, 2022. Diluted net decrease from
operations applicable to common stockholders was $0.40 for the nine
months ended March 31, 2023. Diluted net increase from operations
applicable to common stockholders was $1.50 for the nine months
ended March 31, 2022. |
(5) |
Does not foot due to
rounding. |
|
|
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 fair market
value of such debt 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 EBITDA of each of PSEC’s middle-market loan portfolio
companies, weighted based on the current fair market value of the
related 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 Lending - 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
closing to sellers, and the opportunity for management to continue
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 senior
living. NPRC seeks to identify properties that have historically
attractive 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
Officer grier@prospectcap.com Telephone (212) 448-0702
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