Stockholders' equity as of June 30, 2007: $300.05 million Net asset value per share as of June 30, 2007: $15.04Fourth Fiscal Quarter Portfolio Activity:
Number of new portfolio companies invested: 5 Number of portfolio companies at end of period: 24Fourth Fiscal Quarter Operating Results:
Net investment income: $8.35 million Net investment income per share: $0.42 Net realized and unrealized depreciation: $(3.50) million Net increase in net assets resulting from operations: $4.85 million Dividends to shareholders per share: $0.39Fiscal Year Operating Results: (in $ million, except per share data)
Year Year Ended Ended June 30, June 30, 2007 2006 Net investment income $23.1 $ 8.6 Net investment income per weighted average share $1.47 $1.21 Net realized and unrealized (depreciation) appreciation ($6.4) $ 4.3 Net increase in net assets resulting from operations $16.7 $12.9 Dividends to shareholders per share $1.54 $1.12PORTFOLIO AND INVESTMENT ACTIVITY June 30, 2007, marked our fiscal year end and twelfth full quarter since our initial public offering. At June 30, 2007, the fair value of our portfolio of 24 long-term investments was approximately $328.2 million. As of June 30, 2007, our portfolio generated a current yield of approximately 17.1% across all our long-term debt and equity investments. This current yield includes interest from all our long-term investments as well as dividends and net profits interest and royalties from other portfolio companies. Excluding such dividends and other income, our weighted average investment yield as of June 30, 2007, was 15.9%. During the quarter ended June 30, 2007, we completed five new investments and follow on investments in existing portfolio companies, totaling approximately $130.4 million. The new investments included the following:
-- On April 11, 2007, we invested $12.2 million in senior secured financing to ESA Environmental Specialists, Inc. ("ESA"), a construction, engineering and environmental services firm located in Charlotte, North Carolina. -- On June 4, 2007, we invested $10.8 million in senior secured financing to Ken-Tex Energy Corp., an oil and gas production company in East Texas. -- On June 26, 2007, we invested $19.5 million in second lien financing and equity for the acquisition of R-V Industries, Inc., a diversified engineering and manufacturing company located in Honey Brook, Pennsylvania. -- On June 29, 2007, we invested $45.0 million in senior secured growth financing to H&M Oil & Gas, LLC, an oil and gas production and development company located in Dallas, Texas. -- On June 29, 2007, we invested $25.0 million in second lien financing to Regional Management Corp., a consumer finance installment loan company located in Greenville, South Carolina.Additionally, on June 6, 2007, Charlevoix Energy Trading LLC repaid its $4.8 million loan plus an additional prepayment penalty of $0.4 million. We continue to maintain a net profits interest in Charlevoix. Including the prepayment premium, Prospect Capital realized a 21% internal rate of return on this investment, representing 1.2 times cash on cash. During the first quarter of our fiscal year ending June 2008, we have made the following investments:
-- On July 31, 2007, we invested $15.0 million in senior secured financing to Wind River Resources Corporation and Wind River II Corporation, a privately held oil and gas production business based in Salt Lake City, Utah. -- On August 7, 2007, we invested $6.0 million in senior secured financing to Deep Down, Inc., a deepwater drilling services and manufacturing provider based in Houston, Texas. -- On August 28, 2007, we invested $9.2 million in senior secured financing to Diamondback Operating, LP, a gas production company based in Tulsa, Oklahoma.In addition, on August 16, 2007, Arctic Acquisition Corp. (dba Cougar Pressure Control) repaid its $11.5 million loan in full plus a $0.4 million prepayment premium. We continue to hold warrants in this investment. Including the prepayment premium, Prospect Capital has to date realized a 20% internal rate of return on the Arctic Acquisition investment, representing 1.25 times cash on cash. On August 1, 2007, ESA filed voluntarily for reorganization under the bankruptcy code, in response to a foreclosure action by Prospect Capital after the managers of ESA took unauthorized personal distributions. Currently we are reviewing several potential investment opportunities and have executed letters of intent with eleven companies aggregating approximately $200 million of prospective investments. We are pleased with the volume, quality, and diversification of our transaction flow, both within the energy industry and in additional sectors. LIQUIDITY On June 6, 2007, we closed on a $200.0 million three-year revolving credit facility with Rabobank Nederland as administrative agent and sole lead arranger (the Rabobank Facility). The interest on borrowings under the facility is charged at Libor plus 125 basis points. At June 30, 2007, there were no outstanding borrowings under the facility. At the present time, our borrowings aggregate approximately $60 million under the facility. CONFERENCE CALL We will host a conference call Monday, October 1, 2007, at 11:00 am Eastern Time. The conference call dial-in number is (877) 407-0782. A recording of the conference call will be available for approximately 30 days. To hear a replay, call (877) 660-6853 and use Playback Access Account code 286 and Playback Conference ID code 256553.
CONSOLIDATED STATEMENTS OF NET ASSETS (in thousands) As of As of June 30, June 30, 2007 2006 Assets Cash and cash equivalents $ 41,760 $ 1,608 Investments in controlled entities at fair value (cost - $124,664 and $39,759, respectively) 139,292 49,585 Investments in affiliated entities at fair value (cost - $14,821 and $25,329, respectively) 14,625 25,329 Investments in non-controlled and non-affiliated entities, at fair value (cost - $186,712 and $58,505, respectively) 174,305 59,055 Interest receivable 2,139 1,639 Dividends receivable 263 13 Loan principal receivable - 385 Due from broker - 369 Structuring fees receivable 1,625 - Other receivables 271 - Due from Prospect Capital Management, LLC - 5 Due from Prospect Administration, LLC - 28 Prepaid expenses 471 77 Deferred financing fees 1,751 355 Deferred offering costs - 32 Total assets 376,502 138,480 Liabilities Credit facility payable - 28,500 Payable for securities purchased 70,000 - Accrued expenses 1,312 843 Due to Prospect Administration, LLC 330 - Due to Prospect Capital Management, LLC 4,508 745 Other current liabilities 304 122 Total liabilities 76,454 30,210 Net Assets $ 300,048 $ 108,270 Components of Net Assets Common stock, par value $.001 per share, (100,000,000 and 100,000,000 common shares authorized, respectively; 19,949,065 and 7,069,873 issued and outstanding, respectively) $ 20 $ 7 Paid-in capital in excess of par 299,845 97,266 Undistributed (distributions in excess of) net investment income (4,092) 319 Realized gain 2,250 301 Net unrealized appreciation 2,025 10,377 Net Assets $ 300,048 $ 108,270 Net Asset Value Per Share $ 15.04 $ 15.31 CONSOLIDATED STATEMENTS OF OPERATIONS Year Year (in thousands) Ended Ended June 30, June 30, 2007 2006 Investment Income Interest income, controlled entities (net of foreign tax withholding of $178 and $-, respectively) $ 13,275 $ 4,838 Interest income, affiliated entities (net of foreign tax withholding of $237 and $-, respectively) 3,489 612 Interest income, non controlled and non-affiliated entities 13,320 7,357 Interest income, cash equivalents - 461 Total interest income 30,084 13,268 Dividend income, controlled entities 3,400 3,099 Dividend income, non-controlled and non-affiliated entities - 289 Dividend income, money market funds 2,753 213 Total dividend income 6,153 3,601 Other income, controlled entities 227 - Other income, affiliate investments 3 - Other income, non-controlled and non-affiliated entities 4,214 - Total other income 4,444 - Total investment income 40,681 16,869 Operating Expenses Investment advisory fees Base management fee 5,445 2,082 Income incentive fee 5,781 1,786 Total investment advisory fees 11,226 3,868 Interest expense and credit facility costs 1,903 642 Chief Compliance Officer and Sub-administration fees 549 325 Legal fees 1,365 1,835 Valuation services 395 193 Other professional fees 507 365 Sarbanes-Oxley compliance expenses 101 120 Insurance expense 291 365 Directors fees 230 220 Other general and administrative expenses 983 378 Total operating expenses 17,550 8,311 Net investment income 23,131 8,558 Net realized gain 1,949 303 Net unrealized (depreciation) appreciation (8,352) 4,035 Net increase in net assets resulting from operations $ 16,728 $ 12,896 Net increase in net assets per weighted average shares of common stock resulting from operations $ 1.06 $ 1.83 Year Year ended ended June 30, June 30, PER SHARE DATA 2007 2006 Net asset value, beginning of period $ 15.31 $ 14.59 Costs related to the initial public offering - 0.01 Costs related to the secondary public offering (0.06) - Share issuances related to dividend reinvestment - - Net investment income 1.44 1.21 Realized gain 0.14 0.04 Net unrealized (depreciation) appreciation (0.51) 0.58 Net increase in net assets as a result of secondary public offering 0.26 - Dividend declared and paid (1.54) (1.12) Net asset value at end of period $ 15.04 $ 15.31ABOUT 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. Prospect Capital's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. Prospect Capital has 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 Prospect Capital could have an adverse effect on Prospect Capital and its shareholders. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 the Company's control, and that the Company 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 the Company undertakes no obligation to update any such statement now or in the future.
Contact Information: Please send investment proposals to: Grier Eliasek President and Chief Operating Officer grier@prospectstreet.com Telephone (212) 448-0702