Prospect Capital Provides $7.4 Million in Financing for Palladium Equity Partners Portfolio Company

NEW YORK, NY--(Marketwire - August 4, 2008) - Prospect Capital Corporation (NASDAQ: PSEC) ("Prospect") announced today that it has provided $7.4 million in debt financing to Castro Cheese Company, Inc. ("Castro" or "Company"), based in Houston, Texas.

Founded in 1971, the Company is a leading manufacturer, marketer, and distributor of Hispanic cheeses and creams. Castro Cheese markets its products under the "La Vaquita" brand and is well known for the high quality and authenticity of its products. Castro's customers include wholesalers, grocery retailers, and mass merchandisers.

Prospect's second lien secured debt investment supports a prior acquisition of the Company by Palladium Equity Partners ("Palladium"), a private equity firm based in New York with more than $1 billion of assets under management.

"We have a long-term relationship with the Prospect Capital team, and appreciate their support of this growing portfolio company," said Alex Ventosa, Managing Director of Palladium.

"Palladium's private equity sponsorship was an important consideration for our investment," said Montgomery Cook, a Managing Director with Prospect Capital Management. "In addition, we view the branded, recurring revenue consumer products arena as a compelling sector for our capital."

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 Prospect's control, and that Prospect 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 Prospect undertakes no obligation to update any such statement now or in the future.

ABOUT PALLADIUM EQUITY PARTNERS

Palladium Equity Partners, LLC (www.palladiumequity.com) is an investment firm targeting companies in food/restaurants, financial and business services, consumer/retail, healthcare, manufacturing and media. Palladium has a focus on companies that are well-positioned to capitalize on the fast-growing Hispanic market. The principals of Palladium have invested over $2.5 billion of equity in more than 60 portfolio companies over the last two decades. Formed in 1997, Palladium currently has capital under management in excess of $1 billion.

ABOUT CASTRO CHEESE COMPANY

Founded in 1971, Castro Cheese Company (www.castrocheese.com) is a leading manufacturer, marketer, and distributor of queso fresco and other varieties of Hispanic cheeses and creams. Castro's products are marketed under the La Vaquita brand in Texas and other southwestern states and are known for their quality, authenticity, and freshness.

Contact Information: Please send investment proposals to: Grier Eliasek President and Chief Operating Officer (212) 448-9577