NEW YORK, NY--(Marketwire - November 9, 2010) - Prospect Capital Corporation (
NASDAQ:
PSEC)
("Company" or "Prospect") today announced financial results for our first
fiscal quarter ended September 30, 2010.
For the quarter ended September 30, 2010, our net investment income was
$21.0 million, or $0.28 per weighted average number of shares for the
quarter, up from $16.6 million, or $0.25 per weighted average number of
shares for the quarter ended June 30, 2010 and up from $12.3 million, or
$0.25 per weighted average number of shares for the quarter ended September
30, 2009. New and follow-on investments in excess of $137 million closed in
the September 2010 quarter contributed to the improved results.
For the quarter ended September 30, 2010, our net assets resulting from
operations increased by $25.6 million, or $0.34 per weighted average number
of shares for the quarter, up from $14.6 million, or $0.22 per weighted
average number of shares for the quarter ended June 30, 2010. Our net
asset value per share on September 30, 2010 stood at $10.24 per share.
In addition, we have revised upward our results for the second quarter of
our fiscal year ended June 30, 2010 to reflect the final settlement of all
accrued liabilities assumed in connection with our acquisition of Patriot,
which had been estimated on a tentative basis at the time of the
acquisition of Patriot in the December 2009 quarter. The settlement of
these accruals at less than the estimated cost resulted in an increase in
our net investment income per share for the December 2009 quarter of $0.01,
increasing from the previously reported $0.32 to $0.33.
We estimate that our net investment income for the current second fiscal
quarter ended December 31, 2010 will be $0.26 to $0.30 per share.
We have previously announced upcoming cash distributions, our 27th, 28th,
29th, and 30th consecutive cash distributions to shareholders, as follows:
10.0750 cents per share for October 2010 (record date of October 29,
2010 and payment date of November 30, 2010);
10.0875 cents per share for November 2010 (record date of November
30, 2010 and payment date of December 31, 2010);
10.1000 cents per share for December 2010 (record date of December
31, 2010 and payment date of January 31, 2011); and
10.1125 cents per share for January 2011 (record date of January 31,
2011 and payment date of February 28, 2011).
HIGHLIGHTS
Equity Values:
Net assets as of September 30, 2010: $802.82 million
Net asset value per share as of September 30, 2010: $10.24
First Fiscal Quarter Operating Results:
Net investment income: $21.00 million
Net investment income per share: $0.28
Net increase in net assets resulting from operations per share: $0.34
Dividends declared to shareholders per share: $0.301375
First Fiscal Quarter Portfolio and Portfolio Activity:
Portfolio investments in quarter: $137.80 million
Total portfolio investments at cost at September 30, 2010: $806.40
million
Number of portfolio companies at September 30, 2010: 57
PORTFOLIO AND INVESTMENT ACTIVITY
At September 30, 2010, our portfolio consisted of 57 long-term investments
with a fair value of $830.2 million, compared to 58 long-term investments
with a fair value of $748.5 million at June 30, 2010. Since June 30, 2010,
we have completed four new investments aggregating more than $130 million.
On July 14, 2010, we closed a $37.4 million first lien senior secured
credit facility to support the acquisition by H.I.G. Capital of a leading
consumer credit enhancement services company.
On July 23, 2010, we made a secured debt investment of $21.0 million in
SonicWALL, Inc., a global leader in network security and data protection
for small, mid-sized, and large enterprise organizations.
On July 30, 2010, we invested $52.4 million of combined debt and equity in
the acquisition of AIRMALL USA Inc., a leading infrastructure-like
developer and manager of long-term contract airport retail operations.
On July 30, 2010, we closed a $21.5 million senior secured credit facility
for Northwestern Management Services, LLC ("NMS"), a leading dental
practice management company in the Southeast Florida market.
During the quarter ended September 30, 2010, we recognized $4.0 million of
interest income due to purchase discount accretion from the assets acquired
from Patriot. Included in this amount is $1.1 million of accretion
resulting from the $12.8 million repayment by Impact Products, LLC. We were
also repaid in full on our $25.8 million loan to Regional Management
Corporation. In addition, we recapitalized our debt investment in NMS, with
our new loan issued at market terms comparable to other industry
transactions. In accordance with ASC 320-20-35, the cost basis of the new
NMS loan was recorded at par value, precipitating the acceleration of $1.6
million of original purchase discount which was recognized as interest
income.
Since September 30, 2010, we have closed on one additional investment and
received repayment on two other investments.
On October 12, 2010, we made a senior secured debt investment of $32.5
million in ICON Health & Fitness, Inc., a leading manufacturer and marketer
of branded health and fitness equipment.
On October 29, 2010, Castro Cheese Company, Inc. repaid our $7.7 million
loan.
On November 3, 2010, TriZetto Group repaid our $15.5 million loan.
Our investment pipeline currently aggregates more than $1.5 billion of
potential opportunities, including more than $300 million of advanced
opportunities targeted by counterparties to close during the next 45 days
for tax rate change and other time-sensitive reasons. These investments are
secured and unsecured investments with double digit coupons, sometimes
coupled with equity upside through co-investments or warrants, and
diversified across multiple sectors. While we cannot guarantee the volume
of transactions we will close before quarter end, we anticipate a busy
period of closings in the near future.
As we have throughout 2009 and 2010, we also continue to evaluate potential
acquisitions of lending and other financial services platforms, portfolios,
and assets, utilizing our significant liquidity and balance sheet strength
to go on offense to drive shareholder value.
We are pleased with the overall stability of the credit quality of our
portfolio, with many of our companies generating year-over-year and
quarterly sequential growth in top-line revenues and bottom-line profits.
Our multiple loan payoffs in the past few months have continued our track
record of successful realizations while adding prepayment and accretion
income, as well as providing additional liquidity for new loan
originations.
LIQUIDITY AND FINANCIAL RESULTS
On June 11, 2010, we held a first closing of an extension and expansion of
our revolving credit facility ("Facility") with a syndicate of lenders who
extended commitments of $210 million under the Facility. The Facility
includes an accordion feature which allows an increase to up to $300
million of commitments without the need for re-approval from the existing
lenders. Since June 30, 2010, we have closed on an additional $50 million
in commitments with one existing and two additional new lenders, raising
the total commitment under the facility to $260 million. We will seek to
add additional commitments to the Facility in order to reach the maximum
size. While we are optimistic about these planned Facility size increases,
we cannot guarantee them. The Facility has an investment grade Moody's
rating of A2.
As of September 30, 2010, we had $46.6 million of borrowings under our
Facility. Since September 30, 2010, we have paid down the credit facility
to $14.3 million, and our available liquidity as of today is currently in
excess of $200 million for new investments.
Our at-the-market stock distribution program has proven to be a cost
effective source of new equity capital to fund investment activity. During
the September 2010 quarter, we sold 9,051,000 shares of our common stock at
an average price of $9.74 per share, and raised $88.2 million of gross
proceeds. During the period from October 1, 2010 to November 3, 2010, we
issued an additional 4,929,556 shares of our common stock at an average
price of $9.86 per share, and raised $48.6 million of gross proceeds.
With a debt to equity ratio currently less than 2%, our modestly leveraged
balance sheet is a source of significant strength. Our equitized balance
sheet also gives us the potential for future earnings upside as we
prudently look to grow our existing revolving credit facility, add
additional secured facilities, and evaluate term debt solutions made more
attractive by our investment grade facility ratings at both the corporate
and Facility levels.
With significant expected near-term originations, coupled with recently
successful peer group term debt issuances, we are actively exploring
potential term debt issuance as a means of accretively expanding our
balance sheet while lengthening our weighted average debt maturities. Our
discussions include both public and private debt, as well as both unsecured
and secured debt, with expected maturities of five years or more. We
believe that historically low Treasury rates make the current environment
an attractive period for a strong, diversified, and scale balance sheet
company like Prospect to consider term debt issuance during the near and
medium term.
CONFERENCE CALL
The Company will host a conference call on Wednesday, November 10, 2010, at
11:00 a.m. Eastern Time. The conference call dial-in number will be
877-317-6789. A recording of the conference call will be available for
approximately 30 days. To hear a replay, call 877-344-7529 and use passcode
445937.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2010 and June 30, 2010
(in thousands, except share and per share data)
September 30, June 30,
2010 2010
(Unaudited) (Audited)
------------- -------------
Assets
Investments at fair value:
Control investments (cost of $238,633 and
$185,720, respectively) $ 258,831 $ 195,958
Affiliate investments (cost of $64,429 and
$65,082, respectively) 70,254 73,740
Non-control/Non-affiliate investments (cost
of $503,333 and $477,957, respectively) 501,092 478,785
------------- -------------
Total investments at fair value (cost of
$806,395 and $728,759, respectively) 830,177 748,483
------------- -------------
Investments in money market funds 21,040 68,871
Cash 1,062 1,081
Receivables for:
Interest, net 5,898 5,356
Dividends 1,751 1
Other 679 419
Prepaid expenses 297 371
Deferred financing costs, net 7,359 7,579
Due from broker 1,803 --
Other assets 534 534
------------- -------------
Total Assets 870,600 832,695
------------- -------------
Liabilities
Credit facility payable 46,600 100,300
Dividends payable 7,889 6,909
Due to broker 1,980 --
Due to Prospect Administration 407 294
Due to Prospect Capital Management 6,818 9,006
Accrued expenses 3,044 4,057
Other liabilities 1,038 705
------------- -------------
Total Liabilities 67,776 121,271
------------- -------------
Net Assets $ 802,824 $ 711,424
============= =============
Components of Net Assets
Common stock, par value $0.001 per share
(200,000,000 and 100,000,000 common shares
authorized, respectively; 78,401,363 and
69,086,862 issued and outstanding,
respectively) $ 78 $ 69
Paid-in capital in excess of par 894,568 805,918
Distributions in excess of net investment
income (11,536) (9,692)
Accumulated realized losses on investments (104,068) (104,595)
Unrealized appreciation on investments 23,782 19,724
------------- -------------
Net Assets $ 802,824 $ 711,424
============= =============
Net Asset Value Per Share $ 10.24 $ 10.30
============= =============
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended September 30, 2010 and 2009
(in thousands, except share and per share data)
(Unaudited)
For Three Months Ended
September 30,
----------------------
2010 2009
----------- ----------
Investment Income
Interest income:
Control investments (Net of foreign withholding
tax of $0 and $32, respectively) $ 5,189 $ 4,591
Affiliate investments 2,950 849
Non-control/Non-affiliate investments 20,782 9,395
----------- ----------
Total interest income 28,921 14,835
----------- ----------
Dividend income:
Control investments 1,750 6,200
Non-control/Non-affiliate investments 440 --
Money market funds 4 18
----------- ----------
Total dividend income 2,194 6,218
----------- ----------
Other income:
Control/affiliate investments 1,771 --
Affiliate investments 147 --
Non-control/Non-affiliate investments 2,179 464
----------- ----------
Total other income 4,097 464
----------- ----------
Total Investment Income 35,212 21,517
----------- ----------
Operating Expenses
Investment advisory fees:
Base management fee 4,276 3,209
Income incentive fee 5,249 3,080
----------- ----------
Total investment advisory fees 9,525 6,289
----------- ----------
Interest and credit facility expenses 2,261 1,374
Legal fees 310 --
Valuation services 217 120
Audit, compliance and tax related fees 216 262
Allocation of overhead from Prospect Administration 800 840
Insurance expense 71 63
Directors' fees 64 64
Other general and administrative expenses 753 187
----------- ----------
Total Operating Expenses 14,217 9,199
----------- ----------
Net Investment Income 20,995 12,318
----------- ----------
Net realized gain on investments 527 --
Net change in unrealized appreciation
(depreciation) on investments 4,058 (18,696)
----------- ----------
Net Increase (Decrease) in Net Assets Resulting
from Operations $ 25,580 $ (6,378)
=========== ==========
Net increase (decrease) in net assets resulting
from operations per share $ 0.34 $ (0.13)
=========== ==========
Dividends declared per share $ 0.30 $ 0.41
=========== ==========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
ROLLFORWARD OF NET ASSET VALUE PER SHARE
For the Three Months Ended September 30, 2010 and 2009
(in actual dollars)
(Unaudited)
For The Three Months
Ended
September 30,
------------------------
2010 2009
----------- -----------
Per Share Data:
Net asset value at beginning of period $ 10.30 $ 12.40
Net investment income 0.28 0.25
Realized gain 0.01 -
Net unrealized appreciation (depreciation) 0.05 (0.38)
Net decrease in net assets as a result of public
offerings (0.09) (0.77)
Dividends declared and paid (0.31) (0.39)
----------- -----------
Net asset value at end of period $ 10.24 $ 11.11
=========== ===========
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.