NEW YORK, NY--(Marketwire - August 30, 2010) - Prospect Capital Corporation (
NASDAQ:
PSEC)
("Company" or "Prospect") today announced financial results for our fourth
fiscal quarter and fiscal year ended June 30, 2010.
For the year ended June 30, 2010, our net investment income was $66.5
million, an increase of 12.3% from the prior year on a dollars basis. On a
weighted average share basis, net interest income declined from $1.87 for
the year ended June 30, 2009 to $1.12 for the year ended June 30, 2010.
This decline was primarily the result of raising additional equity capital
early in the year ended June 30, 2010 in order to complete the acquisition
of Patriot Capital Funding, Inc. ("Patriot") in December 2009 as well as to
make new investments in the fourth fiscal quarter.
Our net asset value per share on June 30, 2010 stood at $10.29 per share,
an increase of $0.18 per share from March 31, 2010.
For the quarter ended June 30, 2010, our net investment income was $16.6
million, or $0.25 per weighted average number of shares for the quarter.
Several new investments that we had anticipated would close in the June
2010 quarter were deferred and closed in the current September 2010
quarter. We have closed more than $130 million of new investments in the
current September 2010 quarter. We estimate that our net investment income
for the current first fiscal quarter ended September 30, 2010 will be $0.26
to $0.30 per share.
In addition, we have revised upward our second quarter results to reflect
the settlement of certain 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 fiscal 2010 second
quarter of $0.03, increasing from the previously reported $0.29 to $0.32.
We have previously announced upcoming cash distributions, our 24th, 25th,
26th, and 27th consecutive cash distributions to shareholders, as follows:
10.0250 cents per share for July 2010 (record date of July 30, 2010
and payment date of August 31, 2010); and
10.0500 cents per share for August 2010 (record date of August 31,
2010 and payment date of September 30, 2010); and
10.0625 cents per share for September 2010 (record date of September
30, 2010 and payment date of October 29, 2010); and
10.0750 cents per share for October 2010 (record date of October 29,
2010 and payment date of November 30, 2010).
HIGHLIGHTS
Equity Values:
Net assets as of June 30, 2010: $710.69 million
Net asset value per share as of June 30, 2010: $10.29
Fiscal Year Operating Results:
Net investment income: $66.45 million
Net investment income per share: $1.12
Dividends declared to shareholders per share: $1.32625
Fourth Fiscal Quarter Operating Results:
Net investment income: $16.64 million
Net investment income per share: $0.25
Dividends declared to shareholders per share: $0.10
Fourth Fiscal Quarter Portfolio and Portfolio Activity:
Portfolio investments in quarter: $157.66 million
Total Portfolio investments at cost at June 30, 2010: $728.76 million
Number of portfolio companies at June 30, 2010: 58
PORTFOLIO AND INVESTMENT ACTIVITY
At June 30, 2010, our portfolio consisted of 58 long-term investments with
a fair value of $748.5 million, compared to 55 long-term investments with a
fair value of $697.0 million at March 31, 2010. This increase in invested
capital resulted primarily from investments in Seaton Corporation,
SkillSoft PLC, Hoffmaster, Inc. and EXL Acquisition Corp. during the
quarter, as well as additional fundings to existing portfolio companies.
On April 7, 2010, we purchased $12.3 million of second lien notes in Seaton
Corporation, a human resources services company.
On May 26, 2010, we purchased $15.0 million in senior notes issued by an
affiliate of SkillSoft PLC, a leading "Software as a Service" provider of
on-demand, e-learning, and performance support solutions.
On June 2, 2010, we made a secured second lien debt investment of $20.0
million in Hoffmaster, Inc., which primarily serves the foodservice and
consumer market segments.
On June 18, 2010, we purchased $6.3 million of second lien notes in a
leading provider of coating services for steel suppliers.
On June 24, 2010, we closed a $25.5 million senior secured credit facility
for EXL Acquisition Corp., a leading manufacturer and marketer of
consumable lab testing equipment and supplies.
During the three months ended June 30, 2010, we repriced our loans to EXL
Acquisition Corp. and to LHC Holdings Corp. The revised terms were more
favorable than the original terms and increased the present value of the
future cash flows. In accordance with ASC 320-20-35, the cost bases of the
new loans were recorded at par value, resulting in $1.2 million of
accelerated original purchase discount recognized as interest income. In
addition, Caleel + Hayden, LLC and Custom Direct repaid outstanding debt to
us during the quarter ended June 30, 2010, resulting in the acceleration of
purchase discount of $1.6 million.
The primary source of new investments earlier in the fiscal year ended June
30, 2010 occurred through the acquisition of Patriot in December 2009. In
this acquisition, we acquired 28 investments with a fair value of $207.1
million, thereby expanding the scale, borrower diversity, industry
diversity, and private equity sponsor reach of our business.
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.
The NMS investment is our tenth new investment over a four month period,
with such investments aggregating approximately $250 million.
Our investment pipeline currently aggregates more than $1 billion of
potential opportunities. Primary investment activity in the marketplace has
increased in calendar year 2010, and we are currently evaluating a robust
pipeline of potential investments, some of which have the potential to
close this quarter. These investments are primarily secured investments
with double digit coupons, sometimes coupled with equity upside through
co-investments or warrants, and diversified across multiple sectors.
As we have throughout 2009 and 2010 year to date, 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
sequential growth in top-line revenues and bottom-line profits.
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. The
lenders currently have 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. We are currently scheduling a second closing of the
Facility for an additional $30 million in commitments with current and
additional lenders. We will seek to add additional lenders to the Facility
in order to reach the maximum size. While we are optimistic about these
planned Facility size increases, we cannot guarantee them.
As we make additional investments that are eligible to be pledged under the
Facility, we will 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, representing a significant decrease in
financing cost for us compared to our prior facility. The unused portion of
the Facility has a fee equal to either 75 basis points (if at least half of
the Facility is used) or 100 basis points (if less than half of the
Facility is used). The Facility has been and we believe will be used,
together with our equity capital, to make additional long-term investments.
The Facility has an investment grade Moody's rating of A2.
As of June 30, 2010, we had $100.3 million of borrowings under our
Facility. Including cash and additional assets we are in the process of
pledging to the Facility, and not including either our anticipated second
closing of the Facility or further leveragability of additional collateral
that we could add to our Facility from existing unleveraged investments and
additional new transactions, our available liquidity as of today is
currently in excess of $150 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. On
March 17, 2010, we established an at-the-market program through which we
could sell up to 8,000,000 shares of our common stock. Through this program
we issued 5,251,400 shares of our common stock at an average price of
$11.50 per share, raising $60.4 million of gross proceeds, from March 23,
2010 through June 30, 2010.
During the period from July 1, 2010 to July 21, 2010, we completed the
sales of the remaining 2,748,600 shares of our common stock at an average
price of $9.75 per share, and raised $26.8 million of gross proceeds, under
our at-the-market program.
During the period from July 22, 2010 to August 24, 2010, we issued
3,814,528 shares of our common stock at an average price of $9.71 per
share, and raised $37.1 million of gross proceeds, under our at-the-market
program.
With a debt to equity ratio currently less than 15%, 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.
CONFERENCE CALL
The Company will host a conference call on Tuesday, August 31, 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
443880.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2010 and 2009
(in thousands, except share and per share data)
June 30, June 30,
2010 2009
(audited) (audited)
--------- ---------
Assets
Investments at fair value (net cost of $728,759 and
$531,424, respectively)
Control investments (net cost of $185,720 and
$187,105, respectively) $ 195,958 $ 206,332
Affiliate investments (net cost of $65,082 and
$33,544, respectively) 73,740 32,254
Non-control/Non-affiliate investments (net cost of
$477,957 and $310,775, respectively) 478,785 308,582
--------- ---------
Total investments at fair value 748,483 547,168
--------- ---------
Investments in money market funds 68,871 98,735
Cash 1,081 9,942
Receivables for:
Interest, net 5,356 3,562
Dividends 1 28
Other 419 571
Prepaid expenses 371 68
Deferred financing costs 7,579 6,951
Other assets 534 --
--------- ---------
Total Assets 832,695 667,025
--------- ---------
Liabilities
Credit facility payable 100,300 124,800
Dividends payable 6,909 --
Due to Prospect Administration 294 842
Due to Prospect Capital Management 8,821 5,871
Accrued expenses 4,981 2,381
Other liabilities 705 535
--------- ---------
Total Liabilities 122,010 134,429
--------- ---------
Net Assets $ 710,685 $ 532,596
========= =========
Components of Net Assets
Common stock, par value $0.001 per share (100,000,000
and 100,000,000 common shares authorized,
respectively; 69,086,862 and 42,943,084 issued and
outstanding, respectively) $ 69 $ 43
Paid-in capital in excess of par 805,918 545,707
(Over) undistributed net investment income (10,431) 24,152
Accumulated realized losses on investments (104,595) (53,050)
Unrealized appreciation on investments 19,724 15,744
--------- ---------
Net Assets $ 710,685 $ 532,596
========= =========
Net Asset Value Per Share $ 10.29 $ 12.40
========= =========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and the Year Ended June 30, 2010 and 2009
(in thousands, except share and per share data)
For the Three
Months Ended For the Year Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
(unaudited) (unaudited) (audited) (audited)
---------- ---------- ---------- ----------
Investment Income
Interest income:
Control investments $ 3,081 $ 1,981 $ 17,218 $ 19,281
Affiliate investments 2,838 674 7,957 3,039
Non-control/Non-affiliate
investments 19,278 9,409 61,343 40,606
---------- ---------- ---------- ----------
Total interest income 25,197 12,064 86,518 62,926
---------- ---------- ---------- ----------
Dividend income
Control investments 2,200 8,900 14,860 22,468
Non-control/Non-affiliate
investments 474 -- 474 --
Money market funds 3 60 32 325
---------- ---------- ---------- ----------
Total dividend income 2,677 8,960 15,366 22,793
---------- ---------- ---------- ----------
Other income:
Control/affiliate
investments (55) 418 261 1,249
Affiliate investments 169 -- 169 --
Non-control/Non-affiliate
investments 1,248 358 3,613 13,513
Gain on Patriot
acquisition -- -- 7,708 --
---------- ---------- ---------- ----------
Total other income 1,362 776 11,751 14,762
---------- ---------- ---------- ----------
Total Investment Income 29,236 21,800 113,635 100,481
---------- ---------- ---------- ----------
Operating Expenses
Investment advisory fees:
Base management fee 3,968 3,175 13,929 11,915
Income incentive fee 4,158 2,995 16,613 14,790
---------- ---------- ---------- ----------
Total investment
advisory fees 8,126 6,170 30,542 26,705
---------- ---------- ---------- ----------
Interest and credit
facility expenses 2,902 1,333 8,382 6,161
Sub-administration fees -- 202 -- 846
Legal fees 166 357 702 947
Valuation services 230 144 734 705
Audit, compliance and tax
related fees 299 167 981 1,015
Allocation of overhead from
Prospect Administration 841 1,092 3,361 2,856
Insurance expense 64 61 254 246
Directors' fees 63 65 255 269
Potential merger expenses (73) -- 852 --
Other general and
administrative expenses (22) 228 1,121 1,035
Excise taxes -- -- -- 533
---------- ---------- ---------- ----------
Total Operating
Expenses 12,596 9,819 47,184 41,318
---------- ---------- ---------- ----------
Net Investment Income 16,640 11,981 66,451 59,163
---------- ---------- ---------- ----------
Net realized (loss) gain on
investments (314) (40,739) (51,545) (39,078)
Net change in unrealized
appreciation (depreciation)
on investments (1,743) 28,009 3,980 15,019
---------- ---------- ---------- ----------
Net Increase in Net Assets
Resulting from Operations $ 14,583 $ (749) $ 18,886 $ 35,104
========== ========== ========== ==========
Net increase in net assets
resulting from operations
per share: $ 0.22 $ (0.02) $ 0.32 $ 1.11
========== ========== ========== ==========
Weighted average shares of
common stock outstanding: 66,900,043 37,155,258 59,429,222 31,559,905
========== ========== ========== ==========
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
ROLLFORWARD OF NET ASSET VALUE PER SHARE
For the Three Months and the Year Ended June 30, 2010 and 2009
(in actual dollars)
For the Three
Months Ended For the Year Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
(unaudited)(unaudited) (audited) (audited)
--------- --------- --------- ---------
Per Share Data:
Net asset value at beginning of
period $ 10.11 $ 14.19 $ 12.40 $ 14.55
Net investment income 0.25 0.32 1.12 1.87
Net realized loss -- (1.10) (0.87) (1.24)
Net unrealized (depreciation)
appreciation (0.03) 0.75 0.07 0.48
Net increase (decrease) in net
assets as a result of public
offerings 0.06 (1.76) (0.85) (2.11)
Net increase in net assets as a
result of shares issued for
Patriot acquisition -- -- 0.12 --
Dividends recognized (0.10) -- (1.70) (1.15)
========= ========= ========= =========
Net asset value at end of
period $ 10.29 $ 12.40 $ 10.29 $ 12.40
========= ========= ========= =========
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.