Contact Information: Please send investment proposals to: Grier Eliasek President and Chief Operating Officer grier@prospectstreet.com (212) 448-9577
Prospect Capital Makes Two Debt Investments Aggregating $8 Million and Comments on Investment Strategy
| Source: Prospect Capital Corporation
NEW YORK, NY--(Marketwire - November 5, 2007) - Prospect Capital Corporation (NASDAQ : PSEC )
("Prospect") announced today that it has made two additional debt
investments aggregating $8 million.
Prospect has made a follow-on secured debt investment of $3 million into
its existing controlled portfolio company NRG Manufacturing, Inc. ("NRG"),
in support of NRG's acquisition of Dynafab Corporation ("Dynafab"). Dynafab
is a manufacturer of a range of metal structures and vessels for use in the
oil and gas and transportation industries, including fuel tanks for on-road
and off-road vehicles as well as various drilling rig components. With the
acquisition of Dynafab, NRG now manages three manufacturing facilities with
over 200 employees, all located in the Houston area. The acquisition has
strengthened NRG's position as a leading manufacturer of oilfield
equipment.
"NRG has tripled its EBITDA through organic growth since our initial
investment in September 2006, and this acquisition will expand NRG's
capabilities significantly," said Bart J. de Bie, a Managing Director with
Prospect Capital Management. "NRG's management has done a superb job of
growing its revenues and profits. We are delighted to be in business with
this first-class management team."
Prospect has also made a second lien debt investment of approximately $5
million in a leading nationwide provider of outsourced technical services
based in Pennsylvania. The company currently provides installation,
maintenance, repair, construction, and other technical services to blue
chip customers in the satellite television, telecommunications, broadband
cable, and cellular industries, and is also evaluating entry into the power
and energy markets. The company has a workforce of more than 2,600 people
across four operating subsidiaries. The company's technology neutrality
means that the company benefits from customer migration across platforms.
The CEO has more than 18 years of industry experience and was previously
the chief operating officer of a similar company. Prospect's debt is
supporting the acquisition of the company by HM Capital Partners, L.P.
("HM"), an affiliate of the $1.6 billion Dallas-based private equity
sponsor previously known as Hicks, Muse, Tate & Furst, Inc.
"These investments illustrate key components of our three-pronged
investment strategy, which includes 'Sponsorless,' 'Sponsor,' and 'Buyout'
transaction types," said Grier Eliasek, President and Chief Operating
Officer of Prospect. "The first component of our strategy, which we have
executed on significantly to date, is a 'Sponsorless' transaction in which
we purchase debt and receive an equity participation 'kicker' from a
company controlled by a non-sponsor shareholder group, often management
instead of a financial institution. Our average realized annualized rate of
return to date on these 'Sponsorless' financings is 59%. However, we do not
earn these high absolute returns on every 'Sponsorless' transaction. While
each of our writedowns has occurred in a 'Sponsorless' transaction, we
expect the 'Sponsorless' transaction business, in the aggregate, to
continue to provide compelling net returns. The second component of our
strategy, shown by the technical services deal above, is a 'Sponsor'
transaction in which Prospect provides financing to a leading private
equity fund sponsor that risks significant junior capital underneath
Prospect's debt, typically investing in a larger and more diversified
company than would Prospect itself without a sponsor. While these 'Sponsor'
financings infrequently offer the opportunity to earn a 59% IRR, we believe
they provide significantly enhanced credit quality while adding valuable
portfolio diversification. As we continue to adhere to our disciplined
focus on acceptable leverage multiples and coverage ratios, we see
'Sponsor' financings as attractive reward-to-risk propositions, and we have
increased our business mix with this transaction type. The third component
of our strategy, shown by the NRG investment above, is a 'Buyout'
transaction in which Prospect, in addition to having a debt instrument, has
received controlling ownership and significant equity upside. To date, we
have been successful in acquiring businesses at value-driven prices of
three to five turns of EBITDA through disciplined screening. We expect to
earn our highest absolute returns -- and have achieved our highest
unrealized returns to date, which we anticipate monetizing in the future --
in this third component of our strategy. As we build out an increasingly
diversified portfolio, we expect to continue to pursue all three types of
these transactions, both within the energy and industrial markets as well
as beyond, and we are pleased with the robustness of our transaction flow."
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. Prospect Capital's investment objective is to generate both
current income and 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 laws 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 a material 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 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.