UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 31, 2020 (August 26, 2020)

Prospect Capital Corporation
(Exact name of registrant as specified in its charter)

 
 
 
 
 
MARYLAND 
 
814-00659
 
43-2048643
(State or other jurisdiction
 
(Commission File Number)
 
(IRS Employer
of incorporation)
 
 
 
Identification No.)

10 East 40th Street, 42nd Floor, New York, New York 10016
(Address of principal executive offices, including zip code)

(212) 448-0702

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock, $0.001 par value
PSEC
NASDAQ Global Select Market
6.25% Notes due 2024, par value $25
PBB
New York Stock Exchange
6.25% Notes due 2028, par value $25
PBY
New York Stock Exchange
6.875% Notes due 2029, par value $25
PBC
New York Stock Exchange




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


 





Item 2.02.   Results of Operations and Financial Condition.

On August 26, 2020, the registrant issued a press release announcing its financial results for its fiscal quarter and year ended June 30, 2020. The text of the press release is included as Exhibit 99.1 to this Form 8-K.

The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD Disclosure.

On August 26, 2020, the registrant issued a press release, included herewith as Exhibit 99.1, and by this reference incorporated herein, announcing the declaration of monthly cash distributions to shareholders in the following amounts and with the following record and payment dates:
•
$0.06 per share for September 2020 to September 30, 2020 record holders with October 22, 2020 payment date; and
•
$0.06 per share for October 2020 to October 30, 2020 record holders with November 19, 2020 payment date.

The information disclosed under this Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.






Item 9.01. Financial Statements and Exhibits
(d) Exhibits

99.1
Press Release, dated August 26, 2020






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

Prospect Capital Corporation


By:     /s/ M. Grier Eliasek
Name: M. Grier Eliasek
Title: Chief Operating Officer
Date:  August 31, 2020




Index to Exhibits
Exhibit
Number
Description
99.1
 
 
 
 
 
 
 
 
 
 





Prospect Reports June 2020 Financial Results, Declares 37th and 38th Consecutive $0.06 per Share Monthly Cash Distributions, and Announces 2.5% Increase in Net Asset Value per Share

NEW YORK - (GLOBE NEWSWIRE) - August 26, 2020 - Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our fiscal quarter and year ended June 30, 2020.

FINANCIAL RESULTS

All amounts in $000’s except
   per share amounts (on weighted average
   basis for period numbers)
Quarter Ended
Quarter Ended
Quarter Ended
June 30, 2020
March 31, 2020
June 30, 2019
 
 
 
 
Net Investment Income (“NII”)
$58,273
$68,476
$69,627
Interest as % of Total Investment Income
88.8%
89.8%
92.2%
 
 
 
 
NII per Share
$0.16
$0.19
$0.19
 
 
 
 
Net Income (Loss)
$162,613
($185,699)
$38,886
Net Income (Loss) per Share
$0.44
($0.51)
$0.11
 
 
 
 
Distributions to Shareholders
$66,823
$66,192
$66,069
Distributions per Share
$0.18
$0.18
$0.18
 
 
 
 
Since October 2017 NII per Share
$2.19
$2.04
$1.47
Since October 2017 Distributions per Share
$1.98
$1.80
$1.26
Since October 2017 NII Less Distributions per Share
$0.21
$0.24
$0.21
 
 
 
 
NAV per Share at Period End
$8.18
$7.98
$9.01
 
 
 
 
Net of Cash Debt to Equity Ratio
69.6%
74.1%
70.0%
Net of Cash Asset Coverage of Debt Ratio
244%
236%
246%
 
 
 
 
Unsecured Debt as % of Total Debt
89.1%
92.5%
93.1%
Unsecured and Non-Recourse Debt as % of Total Debt
100%
100%
100%






All amounts in $000’s except
   per share amounts
Year Ended
Year Ended
June 30, 2020
June 30, 2019
 
 
 
NII
$265,694
$312,859
NII per Share
$0.72
$0.85
 
 
 
Net (Loss) Income
($16,224)
$144,487
Net (Loss) Income per Share
($0.04)
$0.39
 
 
 
Distributions to Shareholders
$265,277
$263,624
Distributions per Share
$0.72
$0.72
 
 
 
NII / Distributions to Shareholders
100%
119%



CASH SHAREHOLDER DISTRIBUTION DECLARATION

Prospect is declaring shareholder distributions as follows:

Monthly Cash Shareholder Distribution
Record Date
Payment Date
Amount ($ per share)
September 2020
9/30/2020
10/22/2020
$0.0600
October 2020
10/30/2020
11/19/2020
$0.0600

These monthly cash distributions represent the 37th and 38th consecutive $0.06 per share distributions.
Prospect expects to declare November 2020, December 2020, and January 2021 distributions in November 2020.
Based on the declarations above, Prospect’s closing stock price of $5.17 at August 25, 2020 delivers to shareholders an annualized distribution yield of 13.9%.

Taking into account past distributions and our current share count for declared distributions, Prospect since inception through our October 2020 distribution will have distributed $18.24 per share to original shareholders, aggregating over $3.16 billion in cumulative distributions to all shareholders.

Since October 2017, our NII per share has aggregated $2.19 while our shareholder distributions per share have aggregated $1.98, resulting in our NII exceeding distributions during this period by $0.21 per share.

Initiatives focused on enhancing accretive NII per share growth include (1) our recently announced $1 billion targeted perpetual preferred equity program, (2) a greater utilization of our cost efficient revolving credit facility (with an incremental cost of approximately 1.4% at today’s one month Libor), and (3) increased originations in senior secured debt and selected equity investments to deliver targeted risk-adjusted yields and total returns as we deploy available capital from our current underleveraged balance sheet.






INSIDER PURCHASES

During the month of March 2020, our senior management team made open market purchases of $138 million of Prospect shares. Senior management and employee insider ownership is now over 27% of shares outstanding.


PORTFOLIO UPDATE AND INVESTMENT ACTIVITY

All amounts in $000’s except
   per unit amounts
As of
As of
As of
June 30, 2020
March 31, 2020
June 30, 2019
 
 
 
 
Total Investments (at fair value)
$5,232,328
$5,144,542
$5,653,553
Number of Portfolio Companies
121
121
135
% Controlled Investments (at fair value)
43.2%
43.0%
43.8%
 
 
 
 
Secured First Lien
46.9%
44.8%
43.9%
Other Senior Secured Debt
24.4%
23.6%
23.5%
Subordinated Structured Notes
13.5%
13.7%
15.1%
Unsecured and Other Debt
1.0%
0.9%
1.4%
Equity Investments
14.2%
17.0%
16.1%
Mix of Investments with Underlying Collateral Security
84.8%
82.1%
83.3%
 
 
 
 
Annualized Current Yield - All Investments
9.7%
10.1%
10.6%
Annualized Current Yield - Performing Interest Bearing Investments
11.4%
12.4%
13.1%
 
 
 
 
Top Industry Concentration(1)
15.2%
14.7%
14.6%
Retail Industry Concentration(1)
0%
0%
0%
Energy Industry Concentration(1)
1.6%
1.7%
2.7%
Hotels, Restaurants & Leisure Concentration(1)
0.4%
0.4%
0.7%
 
 
 
 
Non-Accrual Loans as % of Total Assets (2)
0.9%
1.6%
2.9%
 
 
 
 
Weighted Average Portfolio Net Leverage(3)
4.51x
4.63x
4.67x
Weighted Average Portfolio EBITDA(3)
$71,970
$72,281
$60,669
(1)
Excluding our underlying industry-diversified structured credit portfolio.
(2)
Calculated at fair value.
(3)
For additional disclosure see “Weighted Average Portfolio EBITDA and Net Leverage” at the end of this release.During the June 2020 and March 2020 quarters, our investment origination and repayment activity was as follows:





All amounts in $000’s
Quarter Ended
Quarter Ended
June 30, 2020
March 31, 2020
 
 
 
Total Originations
$36,563
$402,370
 
 
 
Real Estate
52.8%
0.0%
Agented Sponsor Debt
35.8%
62.6%
Non-Agented Debt
0.0%
27.3%
Rated Secured Structured Notes
2.9%
8.8%
Corporate Yield Buyouts
8.5%
1.3%
Total Repayments
$64,110
$266,510
 
 
 
Originations, Net of Repayments
($27,547)
$135,860
Note: “Agented” debt refers to non-control debt investments where Prospect acts as the administrative agent or similar role, while “Non-agented” debt refers to non-control debt investments where Prospect has no such role. “Sponsor” refers to third-party institutional ownership.

We have invested in structured credit investments benefiting from individual standalone financings non-recourse to Prospect with our risk limited in each case to our net investment. At June 30, 2020 and March 31, 2020, our subordinated structured note portfolio at fair value consisted of the following:
All amounts in $000’s except
   per unit amounts
As of
As of
June 30, 2020
March 31, 2020
 
 
 
Total Subordinated Structured Notes
$708,961
$704,403
 
 
 
# of Investments
39
39
 
 
 
TTM Average Cash Yield(1)(2)
17.4%
18.3%
Annualized Cash Yield(1)(2)
13.0%
18.1%
Annualized GAAP Yield on Fair Value(1)(2)
12.5%
15.0%
Annualized GAAP Yield on Amortized Cost(2)(3)
8.1%
9.7%
 
 
 
Cumulative Cash Distributions
$1,211,395
$1,188,308
% of Original Investment
86.6%
84.9%
 
 
 
# of Underlying Collateral Loans
1,658
1,683
Total Asset Base of Underlying Portfolio
$17,530,303
$17,810,722
 
 
 
Prospect TTM Default Rate
1.46%
0.91%
Broadly Syndicated Market TTM Default Rate
3.23%
1.84%
Prospect Default Rate Outperformance vs. Market
1.77%
0.93%
(1)
Calculation based on fair value.
(2)
Excludes investments being redeemed.
(3)
Calculation based on amortized cost.





To date, including called investments being liquidated, we have exited nine subordinated structured notes totaling $263.4 million with an expected pooled average realized IRR of 16.7% and cash on cash multiple of 1.48 times.
Since December 31, 2017 through today, 27 of our structured credit investments have completed multi-year extensions of their reinvestment periods (typically at reduced liability spreads and with increased weighted average life asset benefits). We believe further long-term optionality upside exists in our structured credit portfolio through additional refinancings and reinvestment period extensions.
To date during the September 2020 quarter, we have completed new and follow-on investments as follows:
All amounts in $000’s
Quarter Ended
September 30, 2020
 
 
Total Originations
$109,875
 
 
Agented Sponsor Debt
43.9%
Non-Agented Debt
22.7%
Rated Secured Structured Notes
20.0%
Real Estate
13.4%
 
 
Total Repayments
$64,110
Originations, Net of Repayments
$45,765

CAPITAL AND LIQUIDITY

Our laddered funding profile includes a revolving credit facility (with 30 lenders), program notes, listed baby bonds, institutional bonds, and convertible bonds. We have retired upcoming maturities, including a recent retirement in April 2020, and as of today have zero debt maturing until July 2022. On September 9, 2019, we completed an amendment of our existing revolving credit facility (the “Facility”) for Prospect Capital Funding, extending the term 5.0 years from such date. Pricing for amounts drawn under the Facility is one-month Libor plus 2.20%.
The combined amount of our balance sheet cash and undrawn revolving credit facility commitments currently stands at approximately $498 million. Our total unfunded eligible commitments to non-control portfolio companies totals approximately $24 million.




All amounts in $000’s
As of
June 30, 2020
As of
March 31, 2020
As of
June 30, 2019
Net of Cash Debt to Equity Ratio
69.6%
74.1%
70.0%
% of Interest-Bearing Assets at Floating Rates
85.9%
86.1%
87.4%
% of Liabilities at Fixed Rates
89.1%
92.5%
93.1%
 
 
 
 
% of Floating Loans with LIBOR Floors
85.2%
90.1%
84.9%
Weighted Average LIBOR Floor
1.67%
1.55%
1.73%
 
 
 
 
Unencumbered Assets
$3,772,478
$3,561,643
$4,121,775
% of Total Assets
71.2%
68.3%
71.1%

The below table summarizes our June 2020 quarter term debt issuance and repurchase/repayment activity:
All amounts in $000’s
Principal
Rate
Maturity
 
 
 
 
Debt Issuances
 
 
 
    Prospect Capital InterNotes®
$9,054
5.00% - 6.00%
April 15, 2025 - July 15, 2030
Debt Repurchases/Repayments
 
 
 
    2020 Notes
$127,711
4.75%
April 2020
    Prospect Capital InterNotes®
$1,384
4.50% - 6.63%
May 2025 - October 2043
$1.0775 billion of Facility commitments have closed to date with 30 lenders. An accordion feature allows the Facility, at Prospect's discretion, to accept up to $1.5 billion of commitments. The Facility matures September 9, 2024. The Facility includes a revolving period that extends through September 9, 2023, followed by an additional one-year amortization period, with distributions allowed to Prospect after the completion of the revolving period.
On November 7, 2019, we commenced a tender offer to purchase up to $50.0 million of our convertible notes that mature in July 2022 (“2022 Notes”). On December 7, 2019, $13.4 million was validly tendered and accepted, representing 4.4% of the outstanding notes. On December 23, 2019, we commenced a tender offer to purchase up to $25.0 million of the 2022 Notes. On January 22, 2020, $1.3 million was validly tendered and accepted, representing 0.5% of the outstanding notes. We repurchased an additional $32.6 million of the 2022 Notes during the March 2020 quarter. On July 23, 2020, we commenced a tender offer to purchase up to $100.0 million of the 2022 Notes during the September 2020 quarter. On August 20, 2020, $29.4 million was validly tendered and accepted, representing 11.4% of the outstanding notes.
On March 20, 2020, we commenced a tender offer to purchase up to $234.4 million of our unsecured notes that mature in June 2024 (“2024 Notes”). On March 31, 2020, $655 thousand was validly tendered and accepted.
We currently have eight separate unsecured debt issuances aggregating $1.9 billion outstanding, not including our program notes, with laddered maturities extending to June 2029. At June 30, 2020, $680.2 million of program notes were outstanding with laddered maturities through October 2043.
On August 3, 2020, we launched a $1 billion 5.50% perpetual preferred stock offering. Prospect expects to use the net proceeds from the Offering to maintain and enhance balance sheet liquidity, including repaying our credit facility and purchasing high quality short-term debt instruments, and to make long-term investments in accordance with its investment objective. The preferred




stock provides Prospect with a diversified source of accretive fixed-rate capital without creating maturity risk due to the perpetual term.
Prospect holds investment grade company ratings from Standard & Poor’s (BBB-), Moody’s (Baa3), Kroll (BBB-), and Egan-Jones (BBB). Maintaining our investment grade ratings with prudent asset, liability, and risk management is an important objective for Prospect.

DIVIDEND REINVESTMENT PLAN
We have adopted a dividend reinvestment plan (also known as a “DRIP”) that provides for reinvestment of our distributions on behalf of our shareholders, unless a shareholder elects to receive cash. On April 17, 2020, our board of directors approved amendments to the Company’s DRIP, effective May 21, 2020. These amendments principally provide for the number of newly-issued shares pursuant to the DRIP to be determined by dividing (i) the total dollar amount of the distribution payable by (ii) 95% of the closing market price per share of our stock on the valuation date of the distribution (providing a 5% discount to the market price of our common stock), a benefit to shareholders who participate.
HOW TO PARTICIPATE IN OUR DIVIDEND REINVESTMENT PLAN
Shares held with a broker or financial institution
Many shareholders have been automatically “opted out” of our DRIP by their brokers. Even if you have elected to automatically reinvest your PSEC stock with your broker, your broker may have “opted out” of our DRIP (which utilizes DTC’s dividend reinvestment service), and you may therefore not be receiving the 5% pricing discount. Shareholders interested in participating in our DRIP to receive the 5% discount should contact their brokers to make sure each such DRIP participation election has been made through DTC. In making such DRIP election, each shareholder should specify to one’s broker the desire to participate in the "Prospect Capital Corporation DRIP through DTC" that issues shares based on 95% of the market price (a 5% discount to the market price) and not the broker's own "synthetic DRIP” plan (if any) that offers no such discount. Each shareholder should not assume one’s broker will automatically place such shareholder in our DRIP through DTC. Each shareholder will need to make this election proactively with one’s broker or risk not receiving the 5% discount. Each shareholder may also consult with a representative of such shareholder’s broker to request that the number of shares the shareholder wishes to enroll in our DRIP be re-registered by the broker in the shareholder’s own name as record owner in order to participate directly in our DRIP.
Shares registered directly with our transfer agent
If a shareholder holds shares registered in the shareholder’s own name with our transfer agent (less than 0.1% of our shareholders hold shares this way) and wants to make a change to how the shareholder receives dividends, please contact our plan administrator, American Stock Transfer and Trust Company LLC by calling (888) 888-0313 or by mailing American Stock Transfer and Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219.





EARNINGS CONFERENCE CALL
Prospect will host an earnings call on Thursday, August 27, 2020 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to September 28, 2020 visit www.prospectstreet.com or call 877-344-7529 with passcode 10147561.





PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
 
June 30, 2020
 
June 30, 2019
 
 
Assets
 
 
 

Investments at fair value:
 

 
 

Control investments (amortized cost of $2,286,725 and $2,385,806, respectively)
$
2,259,292

 
$
2,475,924

Affiliate investments (amortized cost of $163,484 and $177,616, respectively)
187,537

 
76,682

Non-control/non-affiliate investments (amortized cost of $3,332,509 and $3,368,880, respectively)
2,785,499

 
3,100,947

Total investments at fair value (amortized cost of $5,782,718 and $5,932,302, respectively)
5,232,328

 
5,653,553

Cash
44,561

 
107,098

Receivables for:
 
 
 
Interest, net
11,712

 
26,504

Other
106

 
3,326

Deferred financing costs on Revolving Credit Facility
9,145

 
8,529

Prepaid expenses
1,248

 
1,053

Due from broker
1,063

 
—

Total Assets 
5,300,163

 
5,800,063

 
 
 
 
Liabilities 
 

 
 

Revolving Credit Facility
237,536

 
167,000

Public Notes (less unamortized discount and debt issuance costs of $12,802 and $13,826, respectively)
782,106

 
780,548

Prospect Capital InterNotes® (less unamortized debt issuance costs of $11,613 and $12,349, respectively)
667,427

 
695,350

Convertible Notes (less unamortized discount and debt issuance costs of $8,892 and $13,867, respectively)
450,598

 
739,997

Due to Prospect Capital Management
42,481

 
46,525

Interest payable
29,066

 
34,104

Dividends payable
22,412

 
22,028

Due to Prospect Administration
7,000

 
1,885

Accrued expenses
3,648

 
5,414

Due to broker
1

 
—

Other liabilities
2,027

 
937

Total Liabilities 
2,244,302

 
2,493,788

Commitments and Contingencies
 
 
 
Net Assets 
$
3,055,861

 
$
3,306,275

 
 
 
 
Components of Net Assets 
 

 
 

Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; 373,538,499 and 367,131,025 issued and outstanding, respectively)
$
374

 
$
367

Paid-in capital in excess of par
4,070,874

 
4,039,872

Total distributable earnings (loss)
(1,015,387
)
 
(733,964
)
Net Assets 
$
3,055,861

 
$
3,306,275

Net Asset Value Per Share
$
8.18

 
$
9.01






PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
 
Three Months Ended June 30,
 
Year Ended
June 30,
 
2020
 
2019
 
2020
 
2019
Investment Income
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
Control investments
$
48,647

 
$
50,006

 
$
200,948

 
$
211,212

Affiliate investments
7,324

 
312

 
12,649

 
943

Non-control/non-affiliate investments
50,901

 
66,963

 
229,963

 
271,907

Structured credit securities
22,083

 
34,323

 
110,816

 
140,054

Total interest income
128,955

 
151,604

 
554,376

 
624,116

Dividend income:
 
 
 
 
 
 
 
Control investments
1,000

 
2,850

 
10,335

 
34,127

Affiliate investments
—

 
—

 
—

 
659

Non-control/non-affiliate investments
104

 
462

 
1,109

 
1,243

Total dividend income
1,104

 
3,312

 
11,444

 
36,029

Other income:
 
 
 
 
 
 
 
Control investments
13,299

 
6,680

 
47,311

 
36,011

Affiliate investments
37

 
—

 
38

 
—

Non-control/non-affiliate investments
1,834

 
2,757

 
10,361

 
7,611

Total other income
15,170

 
9,437

 
57,710

 
43,622

Total Investment Income
145,229

 
164,353

 
623,530

 
703,767

Operating Expenses
 
 
 
 
 
 
 
Base management fee
26,279

 
29,149

 
108,910

 
121,833

Income incentive fee
16,202

 
17,407

 
68,057

 
78,215

Interest and credit facility expenses
34,765

 
39,721

 
148,368

 
157,231

Allocation of overhead from Prospect Administration
4,646

 
3,746

 
18,247

 
14,837

Audit, compliance and tax related fees
1,299

 
1,552

 
4,028

 
5,014

Directors’ fees
115

 
116

 
453

 
457

Other general and administrative expenses
1,316

 
3,035

 
9,773

 
13,321

Total Operating Expenses
86,956

 
94,726

 
357,836

 
390,908

Net Investment Income
58,273

 
69,627

 
265,694

 
312,859

Net Realized and Net Change in Unrealized (Losses) Gains from Investments
 
 
 
 
 
 
 
Net realized gains (losses)
 
 
 
 
 
 
 
Control investments
—

 
—

 
—

 
14,309

Affiliate investments
(7,311
)
 
—

 
—

 
—

Non-control/non-affiliate investments
—

 
1,167

 
(7,574
)
 
375

Net realized gains (losses)
(7,311
)
 
1,167

 
(7,574
)
 
14,684

Net change in unrealized (losses) gains
 
 
 
 
 
 
 
Control investments
54,775

 
27,234

 
(117,552
)
 
5,105

Affiliate investments
104,241

 
(11,699
)
 
67,077

 
(35,449
)
Non-control/non-affiliate investments
(47,310
)
 
(45,887
)
 
(221,167
)
 
(144,225
)
Net change in unrealized (losses) gains
111,706

 
(30,352
)
 
(271,642
)
 
(174,569
)
Net Realized and Net Change in Unrealized (Losses) Gains from Investments
104,395

 
(29,185
)
 
(279,216
)
 
(159,885
)
Net realized gains (losses) on extinguishment of debt
(55
)
 
(1,556
)
 
(2,702
)
 
(8,487
)
Net (Decrease) Increase in Net Assets Resulting from Operations
$
162,613

 
$
38,886

 
$
(16,224
)
 
$
144,487

Net (decrease) increase in net assets resulting from operations per share
$
0.44

 
$
0.11

 
$
(0.04
)
 
$
0.39

Dividends declared per share
$
(0.18
)
 
$
(0.18
)
 
$
(0.72
)
 
$
(0.72
)




PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
ROLLFORWARD OF NET ASSET VALUE PER SHARE
(in actual dollars)
 
Three Months Ended June30,
 
Year Ended June 30,
 
2020
 
2019
 
2020
 
2019
Per Share Data
 

 
 

 
 
 
 
Net asset value at beginning of period
$
7.98

 
$
9.08

 
$
9.01

 
$
9.35

Net investment income(1)
0.16

 
0.19

 
0.72

 
0.85

Net realized and change in unrealized gains (losses)(1)
0.28

 
(0.08
)
 
(0.76
)
 
(0.46
)
  Net increase (decrease) from operations
0.44

 
0.11

 
(0.04
)
 
0.39

Distributions of net investment income
(0.18
)
 
(0.18
)
 
(0.72
)
 
(0.72
)
Common stock transactions(2)
(0.05
)
 
—

(3)
(0.07
)
 
(0.01
)
  Net asset value at end of period
$
8.18

(4)
$
9.01

 
$
8.18

 
$
9.01

(1)
Per share data amount is based on the weighted average number of common shares outstanding for the period presented (except for dividends to shareholders which is based on actual rate per share).
(2)
Common stock transactions include the effect of issuances and repurchases of common stock, if any.
(3)
Amount is less than $0.01.
(4)
Does not foot due to rounding.





WEIGHTED AVERAGE PORTFOLIO EBITDA AND NET LEVERAGE

Weighted Average Portfolio Net Leverage (“Portfolio Net Leverage”) and Weighted Average Portfolio EBITDA (“Portfolio EBITDA”) provide clarity into the underlying capital structure of our portfolio debt investments and the likelihood that our overall portfolio will make interest payments and repay principal.     
Portfolio Net Leverage reflects the net leverage of each of our portfolio company debt investments, weighted based on the current debt principal outstanding of such investments. The net leverage for each portfolio company is calculated based on our investment in the capital structure of such portfolio company, with a maximum limit of 10.0x adjusted EBITDA. This calculation excludes debt subordinate to our position within the capital structure because our exposure to interest payment and principal repayment risk is limited beyond that point. Additionally, structured credit residual interests and equity investments, for which principal repayment is not fixed, are also not included in the calculation. The calculation does not exceed 10.0x adjusted EBITDA for any individual investment because 10.0x captures the highest level of risk to us. Portfolio Net Leverage provides us with some guidance as to our exposure to the interest payment and principal repayment risk of our overall debt portfolio. We monitor our Portfolio Net Leverage on a quarterly basis.
Portfolio EBITDA is used by Prospect to supplement Portfolio Net Leverage and generally indicates a portfolio company’s ability to make interest payments and repay principal. Portfolio EBITDA is calculated using the weighted average dollar amount EBITDA of each of our portfolio company debt investments. The calculation provides us with insight into profitability and scale of the portfolio companies within our overall debt investments.
These calculations include addbacks that are typically negotiated and documented in the applicable investment documents, including but not limited to transaction costs, share-based compensation, management fees, foreign currency translation adjustments and other nonrecurring transaction expenses.
Together, Portfolio Net Leverage and Portfolio EBITDA assist us in assessing the likelihood that we will timely receive interest and principal payments. However, these calculations are not meant to substitute for an analysis of our underlying portfolio company debt investments, but to supplement such analysis.





ABOUT PROSPECT CAPITAL CORPORATION

Prospect Capital Corporation (www.prospectstreet.com) is a business development company that focuses on lending to and investing in private 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 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.
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 any forward-looking statements. Such statements speak only as of the time when made. We undertake no obligation to update any such statement now or in the future.
For additional information, contact:
Grier Eliasek, President and Chief Operating Officer
grier@prospectcap.com
Telephone (212) 448-0702