NEW YORK, NY--(Marketwire - Feb 9, 2012) - Prospect Capital Corporation (
For the three and six months ended December 31, 2011, our net income was $64.5 million and $104.4 million, respectively, or $0.59 per share and $0.96 per share, respectively. For the September 2011 quarter, our net income was $39.9 million or $0.37 per share.
Our net income increased 62%, and our net income per share was up 60%, from the September 2011 quarter to the December 2011 quarter. These increases are primarily due to growing interest income from additional investments, higher dividend income from our investments in Energy Solutions Holdings, Inc. ("Energy Solutions") and NRG Manufacturing, Inc. ("NRG"), and significant realized and unrealized gains recognized in connection with Energy Solutions and NRG. These companies have delivered significantly enhanced operating results, and NRG has generated realizations in December 2011 and early calendar year 2012.
Our net investment income ("NII") was $36.5 million and $19.1 million for the December 2011 quarter and December 2010 quarter, respectively, or $0.33 per share and $0.23 per share, respectively. Our NII was $64.4 million and $40.1 million for the six months ended December 31, 2011 and December 31, 2010, respectively, or $0.59 per share and $0.51 per share, respectively. Our NII was $27.9 million for the September 2011 quarter, or $0.26 per share. Increases in the December 2011 quarter were primarily due to growing interest income from additional investments and higher dividends from our investments in Energy Solutions and NRG. Our NII per share in the December 2011 quarter represented an increase of 27% from the September 2011 quarter and an increase of 43% from the December 2010 quarter.
We are targeting growth in NII per share as we utilize prudent leverage to finance our growth through new originations, given our debt to equity ratio stood at less than 49% as of December 31, 2011 and stands at approximately 37% as of today. We estimate that our NII for the current third fiscal quarter ended March 31, 2012 will be $0.53 to $0.58 per share.
Our net asset value per share on December 31, 2011 stood at $10.69 per share, an increase of $0.28 per share from September 30, 2011. Our portfolio continued to perform during the December 2011 quarter, with increases in the value of our assets. None of our loans originated in over four years has gone on non-accrual status.
We have generated cumulative NII in excess of cumulative distributions to shareholders for both the current August 2012 tax year as well as since Prospect's initial public offering almost eight years ago. Depending on future distributions to shareholders, spillback dividend classification, and other factors, we may retain significantly all or a portion of recent realizations and reinvest them in additional income-producing investments.
We recently declared our 43rd, 44th, and 45th consecutive cash distributions to shareholders, including 22 consecutive per share monthly cash distribution increases, as follows:
HIGHLIGHTS
Equity Values:
Net assets as of December 31, 2011: $1.172 billion
Net asset value per share as of December 31, 2011: $10.69
Second Fiscal Quarter Operating Results:
Net investment income: $36.51 million
Net investment income per share: $0.33
Net increase in net assets resulting from operations: $64.49 million
Net increase in net assets per share resulting from operations: $0.59
Dividends to shareholders per share: $0.304125
Second Fiscal Quarter Portfolio Activity:
New portfolio investments in quarter: $154.70 million
Fiscal Year to Date Operating Results:
Net investment income: $64.39 million
Net investment income per share: $0.59
Net increase in net assets resulting from operations: $104.39 million
Net increase in net assets per share resulting from operations: $0.96
Dividends to shareholders per share: $0.608025
Fiscal Year to Date Portfolio and Portfolio Activity:
New portfolio investments during the six months ended December 31, 2011: $377.27 million
Total portfolio investments at cost at December 31, 2011: $1.648 billion
Total portfolio investments at fair value at December 31, 2011: $1.717 billion
Number of portfolio companies at December 31, 2011: 75
PORTFOLIO AND INVESTMENT ACTIVITY
Our origination efforts during the December 2011 quarter have focused primarily on secured lending, continuing to prioritize first-lien loans, though we also continue to close selected junior debt and equity investments. In addition to targeting investments senior in corporate capital structures with our new originations, we have also increased our new investments in third party private equity sponsor owned companies, which tend to have more third-party equity capital supporting our debt investments than in non-sponsor transactions, while still maintaining flexibility to pursue attractive non-sponsor investments. With our scale team of more than 45 professionals, one of the largest dedicated middle-market credit groups in the industry, we believe we are well positioned to select in a disciplined manner a small number of investments out of thousands of investment opportunities sourced per annum.
At December 31, 2011, our portfolio consisted of 75 long-term investments with a fair value of $1.717 billion, compared to 72 long-term investments with a fair value of $1.463 billion at June 30, 2011, and compared to 58 long-term investments with a fair value of $748.5 million at June 30, 2010.
During the December 2011 quarter, we completed new and follow-on investments aggregating approximately $154.7 million. Our repayments in the December 2011 quarter were $120.2 million, resulting in $34.5 million of investments net of repayments.
Since December 31, 2011 (in the current March 2012 quarter), we have completed one new investment and one add-on investment aggregating approximately $35 million. Three loan investments have been repaid since December 31, 2011.
We are pleased with the overall credit quality of our portfolio, with many of our companies generating year-over-year and sequential growth in top-line revenues and bottom-line profits. None of our loans originated in over four years has gone on non-accrual status. The fair market value of our loan assets on non-accrual as a percentage of total assets stood at approximately 3.1% on December 31, 2011, down from 3.5% on June 30, 2011.
Because of the performance of several controlled positions in our portfolio, we have selectively monetized certain such companies and may monetize other positions if we identify attractive opportunities for exit. As such exits materialize, we expect to reinvest such proceeds into new income-producing opportunities. We are pleased with the performance of our controlled portfolio companies, and are actively exploring other new investment opportunities at attractive multiples of cash flow.
Our advanced investment pipeline aggregates nearly $300 million of potential opportunities. These investments are primarily secured investments with double digit coupons, sometimes coupled with equity upside through additional investments, and diversified across multiple sectors.
LIQUIDITY AND FINANCIAL RESULTS
Our modestly leveraged balance sheet is a source of significant strength. Our debt to equity ratio stood at 49% at December 31, 2011 and stands at approximately 37% as of today. Our equitized balance sheet also gives us the potential for future earnings upside as we prudently look to utilize and grow our existing revolving credit facility as well as potentially add additional secured or unsecured term facilities, made more attractive by our investment-grade ratings at corporate, revolving facility, and term debt levels.
In addition, our repeat issuance in the past two calendar years in the five-year and greater unsecured term debt market has extended our liability duration, thereby better matching our assets and liabilities for balance sheet risk management.
We also have significantly diversified our counterparty risk. We currently have 11 institutional lenders in our revolving facility, up from five lenders at June 30, 2010, two lenders at June 30, 2009, and one lender at June 30, 2008.
On December 21, 2010, we issued $150 million of five-year unsecured 6.25% convertible notes due December 2015 ("2015 Notes"). The 2015 Notes are convertible into shares of common stock at a conversion price of approximately $11.35 per share of common stock, subject to adjustment in certain circumstances.
On February 18, 2011, we issued $172.5 million of 5.5-year unsecured 5.50% convertible notes due August 2016 ("2016 Notes"). The 2016 Notes are convertible into shares of common stock at a conversion price of approximately $12.76 per share of common stock, subject to adjustment in certain circumstances.
The 2015 and 2016 Notes are general unsecured obligations of Prospect, with no financial covenants, no technical cross default provisions, and no payment cross default provisions with respect to our revolving credit facility.
The 2015 and 2016 Notes have no restrictions related to the type and security of assets in which Prospect might invest. The issuance of these notes has enabled us to grow our investment program in calendar year 2011 and commit to loans with maturities longer than our existing revolving credit facility maturity. These 2015 and 2016 Notes have an investment-grade S&P rating of BBB.
Between January 30, 2012 and February 2, 2012, we repurchased $5.0 million of our 2016 Notes at a price of 97.5% of par, including commissions. We may look to make additional repurchases of the 2015 or 2016 Notes at our discretion if attractive opportunities become available.
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, with the amendment completed on January 13, 2011, allows commitments to increase to up to $400 million without the need for re-approval from the existing lenders. Since the closing on June 11, 2010 we have been obtaining additional commitments to the facility, and on September 1, 2011, we closed on the final upsizing in the Facility to reach our $400 million accordion target.
As we make additional investments, we generate additional availability to the extent such investments are eligible to be placed into the borrowing base. The revolving period of the Facility extends through June 2012, with an additional one year amortization period, with distributions allowed after the completion of the revolving period. Interest on borrowings under the Facility is one-month Libor plus 325 basis points, subject to a minimum Libor floor of 100 basis points. The Facility was recently upgraded to an investment grade Moody's rating of Aa3.
We are currently in negotiations with our lending syndicate and additional lenders regarding an extension and upsizing of the Facility to a five-year term, comprised of three years for the revolving period followed by two years for the amortization period, with distributions allowed. We anticipate, but cannot guarantee, a reduction in our spread on borrowings, an increase in our advance rate, and an improvement in covenants.
We currently have borrowed $119.0 million under our Facility. Assuming sufficient assets are pledged to the Facility and we are in compliance with all terms, we would have $281 million of new investment capacity based on a $400 million Facility size. Any principal repayments or other monetizations of our assets would further increase our investment capacity. Any increase in our Facility size or issuance of other debt, including term debt, would also further increase our investment capacity.
CONFERENCE CALL
Prospect will host a conference call on Friday, February 10, 2012 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 10009837.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY | ||||||||||
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES | ||||||||||
December 31, 2011 and June 30, 2011 | ||||||||||
(in thousands, except share and per share data) | ||||||||||
December 31, 2011 |
June 30, 2011 |
|||||||||
Assets | (Unaudited) | (Audited) | ||||||||
Investments at fair value: | ||||||||||
Control investments (net cost of $273,496 and $262,301, respectively) | $ | 386,552 | $ | 310,072 | ||||||
Affiliate investments (net cost of $59,488 and $56,833, respectively) | 67,872 | 72,337 | ||||||||
Non-control/Non-affiliate investments (net cost of $1,315,227 and $1,116,600, respectively) | 1,262,179 | 1,080,601 | ||||||||
Total investments at fair value (net cost of $1,648,211 and $1,435,734, respectively) | 1,716,603 | 1,463,010 | ||||||||
Investments in money market funds | 60,705 | 59,903 | ||||||||
Cash | 1,861 | 1,492 | ||||||||
Receivables for: | ||||||||||
Interest, net | 9,739 | 9,269 | ||||||||
Other | 517 | 267 | ||||||||
Prepaid expenses | 387 | 101 | ||||||||
Deferred financing costs | 12,410 | 15,275 | ||||||||
Total Assets | 1,802,222 | 1,549,317 | ||||||||
Liabilities | ||||||||||
Credit facility payable | 252,000 | 84,200 | ||||||||
Senior convertible notes | 322,500 | 322,500 | ||||||||
Dividends payable | 11,123 | 10,895 | ||||||||
Due to Broker | 17,339 | -- | ||||||||
Due to Prospect Administration | 628 | 212 | ||||||||
Due to Prospect Capital Management | 17,459 | 7,706 | ||||||||
Accrued expenses | 5,966 | 5,876 | ||||||||
Other liabilities | 2,723 | 3,571 | ||||||||
Total Liabilities | 629,738 | 434,960 | ||||||||
Net Assets | $ | 1,172,484 | $ | 1,114,357 | ||||||
Components of Net Assets | ||||||||||
Common stock, par value $0.001 per share (200,000,000 common shares authorized; 109,691,051 and 107,606,690 issued and outstanding, respectively) | $ | 110 | $ | 108 | ||||||
Paid-in capital in excess of par | 1,217,027 | 1,196,741 | ||||||||
Distributions in excess of net investment income | (23,806 | ) | (21,638 | ) | ||||||
Accumulated net realized losses on investments | (89,239 | ) | (88,130 | ) | ||||||
Net unrealized appreciation on investments | 68,392 | 27,276 | ||||||||
Net Assets | $ | 1,172,484 | $ | 1,114,357 | ||||||
Net Asset Value Per Share | $ | 10.69 | $ | 10.36 |
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY | |||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
For the Three and Six Months Ended December 31, 2011 and 2010 | |||||||||||||||
(in thousands, except share and per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
For The Three Months Ended |
For The Six Months Ended |
||||||||||||||
December 31, | December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Investment Income | |||||||||||||||
Interest Income: | |||||||||||||||
Control investments | $ | 6,415 | $ | 5,428 | $ | 12,580 | $ | 10,617 | |||||||
Affiliate investments | 2,399 | 3,524 | 4,801 | 6,474 | |||||||||||
Non-control/Non-affiliate investments | 36,714 | 18,410 | 70,034 | 39,192 | |||||||||||
Total interest income | 45,528 | 27,362 | 87,415 | 56,283 | |||||||||||
Dividend income: | |||||||||||||||
Control investments | 17,645 | 2,300 | 24,345 | 4,050 | |||||||||||
Non-control/Non-affiliate investments | 1,992 | 1,068 | 2,841 | 1,508 | |||||||||||
Money market funds | - | 3 | 1 | 7 | |||||||||||
Total dividend income | 19,637 | 3,371 | 27,187 | 5,565 | |||||||||||
Other income: | |||||||||||||||
Control investments | 612 | 14 | 618 | 1,785 | |||||||||||
Affiliate investments | 13 | 7 | 74 | 154 | |||||||||||
Non-control/Non-affiliate investments | 1,473 | 2,546 | 7,311 | 4,725 | |||||||||||
Total other income | 2,098 | 2,567 | 8,003 | 6,664 | |||||||||||
Total Investment Income | 67,263 | 33,300 | 122,605 | 68,512 | |||||||||||
Operating Expenses | |||||||||||||||
Investment advisory fees: | |||||||||||||||
Base management fee | 8,825 | 4,903 | 17,036 | 9,179 | |||||||||||
Income incentive fee | 9,127 | 4,769 | 16,096 | 10,018 | |||||||||||
Total investment advisory fees | 17,952 | 9,672 | 33,132 | 19,197 | |||||||||||
Interest and credit facility expenses | 9,759 | 2,261 | 18,719 | 4,522 | |||||||||||
Legal fees | 510 | 170 | 942 | 480 | |||||||||||
Valuation services | 306 | 231 | 608 | 448 | |||||||||||
Audit, compliance and tax related fees | 525 | 265 | 865 | 481 | |||||||||||
Allocation of overhead from Prospect Administration | 1,117 | 840 | 2,233 | 1,640 | |||||||||||
Insurance expense | 20 | 72 | 99 | 143 | |||||||||||
Directors' fees | 63 | 64 | 127 | 128 | |||||||||||
Other general and administrative expenses | 503 | 645 | 1,495 | 1,398 | |||||||||||
Total Operating Expenses | 30,755 | 14,220 | 58,220 | 28,437 | |||||||||||
Net Investment Income | 36,508 | 19,080 | 64,385 | 40,075 | |||||||||||
Net realized gain (loss) on investments | 13,498 | 4,489 | (1,109 | ) | 5,016 | ||||||||||
Net change in unrealized appreciation on investments | 14,486 | 8,371 | 41,116 | 12,429 | |||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 64,492 | $ | 31,940 | $ | 104,392 | $ | 57,520 | |||||||
Net increase in net assets resulting from operations per share: | $ | 0.59 | $ | 0.38 | $ | 0.96 | $ | 0.73 | |||||||
Dividends declared per share | $ | 0.31 | $ | 0.30 | $ | 0.61 | $ | 0.60 |
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY | |||||||||||||||||
ROLLFORWARD OF NET ASSET VALUE PER SHARE | |||||||||||||||||
For the Three and Six Months Ended December 31, 2011 and 2010 | |||||||||||||||||
(in actual dollars) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
For The Three Months Ended | For The Six Months Ended | ||||||||||||||||
December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||||||||||||||
Per Share Data: | |||||||||||||||||
Net asset value at beginning of period | $ | 10.41 | $ | 10.24 | $ | 10.36 | $ | 10.30 | |||||||||
Net investment income | 0.33 | 0.23 | 0.59 | 0.51 | |||||||||||||
Net realized gain (loss) | 0.12 | 0.05 | (0.01 | ) | 0.06 | ||||||||||||
Net unrealized appreciation (depreciation) | 0.14 | 0.10 | 0.38 | 0.16 | |||||||||||||
Net decrease in net assets as a result of public offerings | - | (0.06 | ) | (0.01 | ) | (0.16 | ) | ||||||||||
Dividends declared and paid | (0.31 | ) | (0.31 | ) | (0.62 | ) | (0.62 | ) | |||||||||
Net asset value at end of period | $ | 10.69 | $ | 10.25 | $ | 10.69 | $ | 10.25 | |||||||||
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.