Equity Values: Net assets as of March 31, 2009: $444.02 million Net asset value per share as of March 31, 2009: $14.19 Third Fiscal Quarter Operating Results: Net investment income: $11.72 million Net investment income per share: $0.39 Net increase in net assets resulting from operations: $15.33 million Net increase in net assets resulting from operations per share: $0.51 Dividends to shareholders per share: $0.405 Third Fiscal Quarter Portfolio Summary: Total portfolio investments at cost: $567.3 million Number of portfolio companies at end of period: 31PORTFOLIO AND INVESTMENT ACTIVITY On January 20, 2009, Diamondback Operating, LP ("Diamondback") repaid our $9.2 million loan in full from the sale of 65% of Diamondback's Rock Springs oil and gas property interests. We have realized an approximately 17% cash on cash internal rate of return ("IRR") on the Diamondback investment. We continue to hold the right to receive 15% of any future Diamondback equity distributions. On March 31, 2009, the fair value of our portfolio of 31 long-term investments was approximately $555.0 million. As of March 31, 2009, our portfolio generated a current yield of approximately 15.1% across all our long-term debt and equity investments. This current yield includes interest from all our long-term investments as well as dividends from certain portfolio companies. During the quarter ended March 31, 2009, we continued to evaluate a number of new investment opportunities in the primary and secondary markets. We are currently pursuing multiple investment opportunities, including purchases of portfolios from private and public companies, as well as individual transactions. We believe such opportunities, if successfully consummated, would drive long-term value for our company, and we have recently expanded our capital base with such opportunities in mind. Motivated sellers, including commercial finance companies, hedge funds, other business development companies, total return swap counterparties, banks, collateralized loan obligation funds, and other entities, are suffering from excess leverage, and we believe we are well positioned to capitalize as potential buyers of such assets at attractive prices. On May 6, 2009, we received a net profits distribution from Charlevoix, a gas marketing company in the Midwest, raising our cash on cash IRR on our Charlevoix investment to 22%. We have previously exited our debt investment in Charlevoix with full repayment by the borrower. We continue to negotiate a sale of Gas Solutions with several interested parties. While we wish to monetize the value we see in Gas Solutions, we do not wish to enter into any final agreement that does not recognize the long term value we see in Gas Solutions. As a hedged midstream asset generating significant cash flows to us, Gas Solutions is a valuable asset that we wish to sell at a value-maximizing price, or not at all. The multi-year puts purchased by Gas Solutions in 2008 are substantially in the money, providing downside protection against commodity price declines. Gas Solutions has generated approximately $26.2 million of EBITDA during the year ended December 31, 2008, an increase of 67.1% from 2007 results. LIQUIDITY AND FINANCIAL RESULTS At March 31, 2009, borrowings under our credit facility stood at approximately $137.6 million. We are currently seeking an increase in our revolving credit facility from its present size of $200 million. Over the past few months we have worked with rating agencies to structure this expanded facility. The closing of the facility is subject to lender syndication and other conditions customary for a transaction of this type. As of March 31, 2009, debt as reduced by cash and money market securities on hand was 17.4% of total assets, or 575% asset coverage. As of May 11, 2009, we have reduced our outstanding debt to $129.0 million, and as of May 11, 2009 we have increased our cash and money market investments on hand to $48.4 million. On March 19, 2009 and April 27, 2009, we completed two offerings of common shares aggregating 5.18 million shares and $40.82 million in gross proceeds. In the second quarter, 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 has 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 significant services from Vastardis. CONFERENCE CALL We will host a conference call on Tuesday, May 12, 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, please call 877-344-7529 and use passcode 430576.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2009 and June 30, 2008
(in thousands, except share and per share data)
March 31, June 30,
2009 2008
(Unaudited) (Audited)
----------- -----------
Assets
Investments at fair value (cost of $567,306 and
$496,805, respectively)
Control investments (cost of $221,744 and
$203,661, respectively) $ 220,263 $ 205,827
Affiliate investments (cost of $33,546 and
$5,609, respectively) 30,819 6,043
Non-control/Non-affiliate investments (cost
of $312,016 and $287,535, respectively) 303,959 285,660
----------- -----------
Total investments at fair value 555,041 497,530
----------- -----------
Investments in money market funds 39,254 33,000
Cash 449 555
Receivables for:
Interest, net 5,929 4,094
Dividends 16 4,248
Loan principal -- 71
Managerial assistance 473 380
Prepaid prospective deal expenses 86 --
Other 109 187
Prepaid expenses 221 273
Deferred financing costs 1,228 1,440
----------- -----------
Total Assets 602,806 541,778
----------- -----------
Liabilities
Credit facility payable 137,567 91,167
Dividends payable 12,671 11,845
Due to Prospect Administration 742 695
Due to Prospect Capital Management 5,813 5,946
Accrued expenses 1,324 1,104
Other liabilities 665 1,398
----------- -----------
Total Liabilities 158,782 112,155
----------- -----------
Net Assets $ 444,024 $ 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; 31,286,128 and
29,520,379 issued and outstanding,
respectively) $ 31 $ 30
Paid-in capital in excess of par 456,398 441,332
Undistributed net investment income 12,171 1,508
Accumulated realized losses on investments (12,311) (13,972)
Unrealized (depreciation) appreciation on
investments (12,265) 725
----------- -----------
Net Assets $ 444,024 $ 429,623
=========== ===========
Net Asset Value Per Share $ 14.19 $ 14.55
=========== ===========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three and Nine Months Ended March 31, 2009 and 2008
(in thousands, except share and per share data)
(Unaudited)
For The Three Months For The Nine Months
Ended March 31, Ended March 31,
--------------------- --------------------
2009 2008 2009 2008
---------- --------- --------- ---------
Investment Income
Interest Income
Control investments (Net of
foreign withholding tax of
$28, $35, $137, and $193,
respectively) $ 5,503 $ 4,556 $ 17,300 $ 15,111
Affiliate investments (Net
of foreign withholding tax
of $0, $0, $0, and $70,
respectively) 730 290 2,365 1,612
Non-control/Non-affiliate
investments 9,832 10,044 31,197 25,815
---------- --------- --------- ---------
Total interest income 16,065 14,890 50,862 42,538
---------- --------- --------- ---------
Dividend income
Control investments 4,400 3,300 13,568 6,950
Money market funds 45 123 265 557
---------- --------- --------- ---------
Total dividend income 4,445 3,423 13,833 7,507
---------- --------- --------- ---------
Other income:
Control/Affiliate investments -- 200 831 210
Non-control/Non-affiliate
investments 159 3,487 13,155 5,699
---------- --------- --------- ---------
Total other income 159 3,687 13,986 5,909
---------- --------- --------- ---------
Total Investment Income 20,669 22,000 78,681 55,954
---------- --------- --------- ---------
Operating Expenses
Investment advisory fees:
Base management fee 2,977 2,388 8,740 6,366
Income incentive fee 2,930 3,230 11,795 7,861
---------- --------- --------- ---------
Total investment advisory
fees 5,907 5,618 20,535 14,227
Interest and credit facility
expenses 1,345 1,863 4,828 4,719
Sub-administration fees
(including former Chief
Financial Officer and Chief
Compliance Officer) 177 228 644 620
Legal fees 107 449 590 2,224
Valuation services 139 198 561 431
Audit, compliance and tax
related fees 219 45 848 348
Allocation of overhead from
Prospect Administration 588 588 1,764 1,108
Insurance expense 61 64 185 192
Directors' fees 61 55 204 165
Other general and
administrative expenses 345 (27) 807 476
Excise taxes -- -- 533 --
---------- --------- --------- ---------
Total Operating Expenses 8,949 9,081 31,499 24,510
---------- --------- --------- ---------
Net Investment Income 11,720 12,919 47,182 31,444
---------- --------- --------- ---------
Net realized gain (loss) on
investments -- 208 1,661 (18,413)
Net change in unrealized
appreciation/depreciation on
investments 3,611 (14,386) (12,990) (9,426)
---------- --------- --------- ---------
Net Increase (Decrease) in Net
Assets Resulting from
Operations $ 15,331 $ (1,259) $ 35,853 $ 3,605
========== ========= ========= =========
Net increase (decrease) in net
assets resulting from
operations per share $ 0.51 $ (0.05) $ 1.21 $ 0.16
========== ========= ========= =========
Dividends declared per share: $ 0.41 $ 0.40 $ 1.21 $ 1.18
========== ========= ========= =========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
ROLLFORWARD OF NET ASSET VALUE PER SHARE
For The Three and Nine Months Ended March 31, 2009 and 2008
(in actual dollars)
(Unaudited)
For The Three Months For The Nine Months
Ended Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2009 2008 2009 2008
--------- --------- --------- ---------
Per Share Data:
Net asset value at beginning of
period $ 14.43 $ 14.58 $ 14.55 $ 15.04
Net investment income 0.39 0.54 1.59 1.41
Net realized gain (loss) -- 0.01 0.06 (0.82)
Net unrealized appreciation
(depreciation) 0.12 (0.60) (0.44) (0.42)
Shares issued for dividend
reinvestments (0.01) -- (0.02) --
Net (decrease) increase in net
assets as a result of public
offerings (0.33) 0.02 (0.34) 0.12
Dividends declared (0.41) (0.40) (1.21) (1.18)
--------- --------- --------- ---------
Net asset value at end of
period $ 14.19 $ 14.15 $ 14.19 $ 14.15
========= ========= ========= =========
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.
Contact Information: For additional information, contact: Grier Eliasek President and Chief Operating Officer Telephone (212) 448-0702