SOURCE: Prospect Capital Corporation

Prospect Capital Corporation

January 07, 2013 07:00 ET

Prospect Capital Corporation Invests $43.5 Million to Recapitalize Credit Central

NEW YORK, NY--(Marketwire - Jan 7, 2013) - Prospect Capital Corporation (NASDAQ: PSEC) ("Prospect") announced today that Prospect has funded a recapitalization of the businesses of Credit Central Holdings, Inc., Credit Central South Holdings, Inc. and Credit Central of Tennessee Holdings, Inc. (collectively "Credit Central") with $43.5 million of combined debt and equity financing.

Founded in 2002, Credit Central is a specialty finance business based in Greenville, South Carolina with over 107 branches and more than 550 employees located in Alabama, Georgia, South Carolina, and Tennessee. Credit Central has a diversified customer base and a history of delivering consistent cash flows. Credit Central holds nearly 120,000 loans on its balance sheet and benefits from strong customer loyalty. As a result of the recapitalization, Prospect is the controlling shareholder of Credit Central. Led by founder and CEO Grover Todd, senior management of Credit Central invested alongside Prospect and own 25% of Credit Central. To support the on-going operations of Credit Central, Wells Fargo provided a $75.0 million revolving facility.

Prospect expects Credit Central to pay out substantially all of its income in the form of dividends on a go-forward basis, providing for an attractive current yield to Prospect and to Credit Central's other owners. Prospect structured the primary operating finance and holding businesses of Credit Central as tax advantaged limited liability companies.

Credit Central is an installment loan provider and not a payday lender. Credit Central uses its branch network and local community relationships to provide customized financing solutions that include secured personal installment loans and optional products that include credit-related insurance. Each of Credit Central's loans is carefully underwritten when the loan is made, with such loans requiring monthly payments of principal and interest designed to allow a borrower to fully pay down the loan over a specific period of time, typically nine months.

Credit Central has a rigorous and consistent underwriting process that evaluates a number of key factors when making credit decisions for each borrower. This disciplined underwriting process, combined with a proven branch base servicing model supported by a high-quality operations team, has delivered consistent credit performance over Credit Central's ten years of operations. Borrowers generally use personal loans from Credit Central to finance consumer purchases and unexpected bills. Credit Central competes successfully with deposit-based commercial banks due to branch location convenience, loan processing speed, customer service, and other factors.

Credit Central has been able to maintain its business strength and consistency throughout the recent credit crisis. The company has delivered profits in every quarter, increased earnings, maintained underwriting quality, and expanded its branch and geographic footprint. The senior management team at Credit Central has worked together for more than a decade and is expected to continue managing the company.

"With its significant borrower diversity, prudent third-party leverage, secured lending orientation, long history, consistent financial performance, steady growth, tax efficiency, and attractive yields, Credit Central represents a compelling portfolio company investment opportunity," said Richard T. Carratu, a Managing Director of Prospect Capital Management LLC. "We are pleased to be partnering with Grover Todd and the rest of the experienced Credit Central management team."

"We are impressed that Credit Central has delivered such solid and consistent financial results over the last ten years," said Jim Clippard, a Vice President of Prospect Capital Management LLC.

"The Credit Central management team looks forward to continuing to deliver growth, and we are eager to partner with Prospect to achieve this goal," said Grover Todd, Chief Executive Officer of Credit Central.

Raymond James served as exclusive financial advisor to Credit Central.

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's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Prospect has elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). Prospect is required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. Prospect has 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 could have an adverse effect on Prospect and its 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 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 any forward-looking statements. 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.