NEW YORK, NY--(Marketwire - January 26, 2010) - Prospect Capital Corporation (
NASDAQ:
PSEC)
("Prospect") announced today that it has delivered a letter to the Board of
Directors of Allied Capital Corporation ("Allied") raising its offer to
acquire Allied. Set forth below is the full text of the letter:
January 26, 2010
Board of Directors
c/o John M. Scheurer
Chief Executive Officer and President
Allied Capital Corporation
1919 Pennsylvania Avenue N.W.
Washington, D.C. 20006
Ladies and Gentlemen:
We hereby increase our offer to acquire Allied Capital Corporation to 0.40
of a share of Prospect common stock for each share of Allied common stock.
As discussed below, the implied value of our offer is now more than 20%
greater than the implied value of Ares' offer to Allied shareholders.
Revised Superior Value: Based on an after-market trading price of $12.56
per share of Prospect common stock on January 25, 2010, Prospect's offer
represents a value of $5.02 per share of Allied common stock, which is an
over 20% premium to the $4.17 value per Allied share implied by an exchange
ratio of 0.325 of a share of Ares common stock in the Ares merger (based on
a $12.84 after-market trading price of Ares common stock price on January
25, 2010).
Revised Superior Dividends: Based on our proposed exchange ratio and Ares'
and our most recent quarterly dividend, our offer would provide Allied
shareholders with a pro forma quarterly dividend of $0.164 per share of
Allied common stock, which is more than 40% higher than the pro forma
quarterly dividend of $0.114 per share of Allied common stock under the
Ares merger.
Superior Upside Potential: Based on our proposed exchange ratio, Allied
shareholders would receive 71.7 million shares of Prospect common stock,
representing 53% of the ownership of the combined entity. A Prospect-Allied
combination would preserve greater upside for existing shareholders of
Allied than would a combination with Ares, where Allied shareholders would
expect to own only 31% of the combined entity, after giving effect to the
proposed equity offering Ares announced yesterday.
Transaction Certainty: We are confident that we can promptly consummate
the proposed transaction. We have reviewed the merger agreement signed
between Allied and Ares and are comfortable, subject to due diligence,
executing an agreement with Allied substantially similar to Allied's
agreement with Ares. We believe we can complete our due diligence within
15 business days once full access to due diligence materials has been
granted. Given our access to debt and equity capital markets and our lower
existing and pro forma leverage profile in comparison to Ares, we are
confident we will be able to maintain or refinance Allied's existing
institutional debt. Unlike Ares, we have successfully merged with another
publicly traded business development company, Patriot Capital, following an
auction, which should dispel any doubt as to our ability and resolve to
complete this merger.
Streamlined Integration: While Ares has not made any public announcement
about the fate of Allied's professional staff in Washington, D.C. or New
York, we are interested in retaining a significant portion of the Allied
team, in order to maximize continuity of asset management and monetization
of the portfolio and to reduce integration risk.
We believe our offer represents a compelling strategic combination that
will generate superior value for Allied shareholders in comparison to the
Ares proposal. Allied has successfully restructured its institutional
debt, does not face a liquidity crisis and has benefited from the
improvement in the debt markets. Accordingly, we do not understand why the
Allied board insists on barreling ahead with an inferior transaction with
Ares without talking to us or engaging with us in any way. We do not see
how completely ignoring a superior offer serves Allied shareholders.
Should the Allied board continue to "stiff arm" us, we are prepared to
pursue all available options, including bringing the matter directly to
Allied shareholders.
We look forward to your favorable response by 5 P.M., Eastern Standard Time
on Thursday, January 28, 2010.
Very truly yours,
Prospect Capital Corporation
By: /s/ M. Grier Eliasek
Name: M. Grier Eliasek
Title: President and COO
cc: Gary Swidler, BofA Merrill Lynch
Ian Simmonds, BofA Merrill Lynch
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.
Forward-Looking Statements
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. Such forward-looking statements may relate to us and/or our
industry and address matters that involve risks and uncertainties.
Forward-looking statements reflect our current views and assumptions with
respect to future events, operations, business plans, business and
investment strategies and portfolio management, the performance of our
investments and our investment management business and the economy. These
forward-looking statements are not historical facts, but rather are based
on current expectations, estimates and projections about our industry, our
beliefs, and our assumptions. Words such as "intends," "intend,"
"intended," "goal," "estimate," "estimates," "expects," "expect,"
"expected," "project," "projected," "projections," "plans," "seeks,"
"anticipates," "anticipated," "should," "could," "may," "will," "designed
to," "foreseeable future," "believe," "believes," "currently anticipates,"
"currently believes" and "scheduled" and variations of these words and
similar expressions are intended to identify forward-looking statements.
Our actual results or outcomes may differ materially from those
anticipated. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date the statement
was made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. These statements are not guarantees of future
performance and are subject to risks, uncertainties, and other factors,
some of which are beyond our control and difficult to predict and could
cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements, including without limitation:
-- our future operating results;
-- our business prospects and the prospects of our portfolio companies;
-- the impact of investments that we expect to make;
-- our contractual arrangements and relationships with third parties;
-- the dependence of our future success on the general economy and its
impact on the industries in which we invest;
-- the ability of our portfolio companies to achieve their objectives;
-- difficulty in obtaining financing or raising capital, especially in the
current credit and equity environment;
-- the level and volatility of prevailing interest rates and credit spreads,
magnified by the current turmoil in the credit markets;
-- adverse developments in the availability of desirable loan and investment
opportunities whether they are due to competition, regulation or otherwise;
-- a compression of the yield on our investments and the cost of our
liabilities, as well as the level of leverage available to us;
-- our regulatory structure and tax treatment, including our ability to
operate as a business development company and a regulated investment
company;
-- the adequacy of our cash resources and working capital;
-- the timing of cash flows, if any, from the operations of our portfolio
companies;
-- the ability of our investment adviser to locate suitable investments for
us and to monitor and administer our investments,
-- authoritative generally accepted accounting principles or policy changes
from such standard-setting bodies as the Financial Accounting Standards
Board, the Securities and Exchange Commission, Internal Revenue Service,
the NASDAQ, and other authorities that we are subject to, as well as their
counterparts in any foreign jurisdictions where we might do business;
-- our ability to manage future growth;
-- our dependence on Prospect Capital Management's key management personnel;
-- the highly competitive market for investment opportunities in which we
operate;
-- uncertainty as to the value of our portfolio investments;
-- additional risks to which senior securities, including debt, expose us;
-- changes in interest rates;
-- our need to raise additional capital to grow because of the requirement
that we distribute most of our income;
-- the lack of liquidity in our investments;
-- fluctuations in our quarterly results;
-- fluctuations in our net asset value;
-- potential conflicts of interest and their impact on investment returns;
-- our incentive fee's impact on the types of investments made by Prospect
Capital Management;
-- changes in laws or regulations;
-- risks relating to our operation as a business development company;
-- risks relating to our investments and securities
-- the integration of Patriot or other businesses we acquire or new business
ventures we may start;
-- uncertainty as to whether Allied will enter into and consummate the
proposed transaction with Prospect on the terms set forth in our offer; and
-- the risks, uncertainties and other factors we identify in "Risk Factors"
and elsewhere in our filings with the SEC.
Although we believe that the assumptions on which these forward-looking
statements are based are reasonable, any of those assumptions could prove
to be inaccurate, and as a result, the forward-looking statements based on
those assumptions also could be inaccurate. Important assumptions include
our ability to originate new loans and investments, certain margins and
levels of profitability and the availability of additional capital. In
light of these and other uncertainties, the inclusion of a projection or
forward-looking statement in this press release should not be regarded as a
representation by us that our plans and objectives will be achieved. These
risks and uncertainties include those described or identified in "Risk
Factors" and elsewhere in our filings with the SEC. You should not place
undue reliance on these forward-looking statements, which apply only as of
the date of such filings.
Additional Information about the Proposed Transaction and Where to Find It:
This press release is not a proxy statement or a solicitation of proxies
and does not constitute an offer to sell or a solicitation of an offer to
buy any securities. This press release relates to a business combination
transaction with Allied proposed by Prospect, which may become the subject
of a registration statement filed with the Securities and Exchange
Commission (the "SEC"). This material is not a substitute for the
prospectus/proxy statement Prospect would file with the SEC regarding the
proposed transaction if such a negotiated transaction with Allied is
reached or for any other document which Prospect may file with the SEC and
send to Allied or Prospect shareholders in connection with the proposed
transaction. INVESTORS AND SECURITY HOLDERS OF ALLIED AND PROSPECT ARE
URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Such documents would
be available free of charge through the web site maintained by the SEC at
www.sec.gov or by directing a request to the contact listed below.
Prospect and its directors, executive officers and other persons may be
deemed to be participants in any solicitation of shareholders in connection
with the proposed transaction. Information about Prospect's directors and
executive officers is available in Prospect's proxy statement for its 2009
annual meeting of shareholders, which was filed with the SEC on October 16,
2009. Other information regarding potential participants in such proxy
solicitation and a description of their direct and indirect interests, by
security holdings and otherwise, will be contained in any proxy statement
filed in connection with the proposed transaction.
All information in this communication concerning Allied and Ares was
obtained from public sources. While Prospect has no knowledge that any
such information is inaccurate or incomplete, Prospect has not had the
opportunity to verify any of such information.