PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| Control Investments (greater than 25.00% voting control)(40) | | | | | | | |
| | | | | | | | | | | |
| National Property REIT Corp. (26) | Equity Real Estate Investment Trusts (REITs) / Online Lending / Structured Finance | First Lien Term Loan A | 12/31/2018 | 6.94% (3M SOFR+ 1.44%) plus 3.53% PIK | 3.00 | | 12/31/2023 | $ | 528,657 | | $ | 528,657 | | $ | 528,657 | | 14.2% | (10)(39) |
| First Lien Term Loan B | 12/31/2018 | 7.50% (3M SOFR+ 2.00%) plus 5.50% PIK | 3.00 | | 12/31/2023 | 21,580 | | 21,580 | | 21,580 | | 0.6% | (10)(39) |
| First Lien Term Loan C | 10/31/2019 | 15.50% (3M SOFR+ 10.00%) plus 2.25% PIK | 1.00 | | 12/31/2023 | 200,600 | | 200,600 | | 200,600 | | 5.4% | (10)(39) |
| First Lien Term Loan D | 6/19/2020 | 6.00% (3M SOFR+ 0.50%) plus 2.50% PIK | 3.00 | | 12/31/2023 | 183,425 | | 183,425 | | 183,425 | | 4.9% | (10)(39) |
| First Lien Term Loan E | 11/14/2022 | 7.50% (3M SOFR + 2.00%) plus 7.00% PIK | 5.00 | | 12/31/2023 | 13,621 | | 13,621 | | 13,621 | | 0.4% | (10)(39) |
| Residual Profit Interest | 12/31/2018 | | — | | N/A | — | | — | | 56,254 | | 1.5% | (35) |
Common Stock (3,350,519 shares) | 12/31/2013 | | — | | N/A | — | | 15,430 | | 655,839 | | 17.5% | (16)(45) |
| | | | | | | | 963,313 | | 1,659,976 | | 44.5% | |
| Nationwide Loan Company LLC (27) | Consumer Finance | First Lien Term Loan | 6/18/2014 | 10.00% plus 10.00% PIK | — | | 6/18/2024 | 22,597 | | 22,597 | | 22,597 | | 0.6% | (14)(39) |
Class A Units (38,550,460 units) | 1/31/2013 | | — | | N/A | — | | 20,846 | | 24,975 | | 0.7% | (14)(16) |
| | | | | | | | 43,443 | | 47,572 | | 1.3% | |
| NMMB, Inc. (28) | Media | First Lien Term Loan | 12/30/2019 | 14.00% (3M SOFR+ 8.50%) | 2.00 | | 3/31/2027 | 29,723 | | 29,723 | | 29,723 | | 0.8% | (3) (10) |
Common Stock (21,418 shares) | 12/30/2019 | | — | | N/A | — | | — | | 64,457 | | 1.7% | |
| | | | | | | | 29,723 | | 94,180 | | 2.5% | |
| Pacific World Corporation (36) | Personal Products | First Lien Revolving Line of Credit - $26,000 Commitment | 9/26/2014 | 12.61% PIK (1M SOFR+ 7.25%) | 1.00 | | 9/26/2025 | 30,458 | | 30,458 | | 30,458 | | 0.8% | (10)(15)(39) |
| First Lien Term Loan A | 12/31/2014 | 10.61% PIK (1M SOFR+ 5.25%) | 1.00 | | 9/26/2025 | 59,122 | | 59,122 | | 35,288 | | 0.9% | (10)(39) |
Convertible Preferred Equity (344,882 shares) | 6/15/2018 | 6.50% PIK | — | | N/A | — | | 189,295 | | — | | —% | (16) |
Common Stock (6,778,414 shares) | 9/29/2017 | | — | | N/A | — | | — | | — | | —% | (16) |
| | | | | | | | 278,875 | | 65,746 | | 1.7% | |
| R-V Industries, Inc. | Machinery | First Lien Term Loan | 12/15/2020 | 14.50% (3M SOFR+ 9.00%) | 1.00 | | 12/15/2028 | 33,622 | | 33,622 | | 33,622 | | 0.9% | (3) (10) |
Common Stock (745,107 shares) | 6/26/2007 | | — | | N/A | — | | 6,866 | | 47,886 | | 1.3% | (16) |
| | | | | | | | 40,488 | | 81,508 | | 2.2% | |
| Universal Turbine Parts, LLC (34) | Trading Companies & Distributors | First Lien Delayed Draw Term Loan - $6,965 Commitment | 2/28/2019 | 13.25% (3M SOFR+ 7.75%) | 2.50 | | 4/5/2025 | 3,109 | | 3,109 | | 3,109 | | 0.1% | (10)(15) |
| First Lien Term Loan A | 7/22/2016 | 11.25% (3M SOFR+ 5.75%) | 1.00 | | 4/5/2025 | 29,575 | | 29,575 | | 29,575 | | 0.8% | (3) (10) |
Preferred Units(62,897,245 units) | 3/31/2021 | | — | | N/A | — | | 32,500 | | 12,381 | | 0.3% | (16) |
Common Stock (10,000 units) | 12/10/2018 | | — | | N/A | — | | — | | — | | —% | (16) |
| | | | | | | | 65,184 | | 45,065 | | 1.2% | |
| USES Corp. (30) | Commercial Services & Supplies | First Lien Term Loan | 12/30/2020 | 14.36% (1M SOFR + 9.00%) | 1.00 | | 7/29/2024 | 2,000 | | 2,000 | | 1,922 | | 0.1% | (10) |
| First Lien Equipment Term Loan | 8/3/2022 | 14.36% (1M SOFR + 9.00%) | 1.00 | | 7/29/2024 | 10,674 | | 10,674 | | 10,257 | | 0.3% | (10)(39) |
| First Lien Term Loan A | 3/31/2014 | 9.00% PIK | — | | 7/29/2024 | 66,107 | | 30,651 | | 7,348 | | 0.2% | (9) |
| First Lien Term Loan B | 3/31/2014 | 15.50% PIK | — | | 7/29/2024 | 105,882 | | 35,568 | | — | | —% | (9) |
Common Stock (268,962 shares) | 6/15/2016 | | — | | N/A | — | | — | | — | | —% | (16) |
| | | | | | | | 78,893 | | 19,527 | | 0.6% | |
| Valley Electric Company, Inc. (31) | Construction & Engineering | First Lien Term Loan to Valley Electric Co. of Mt. Vernon, Inc. | 12/31/2012 | 10.50% (3M SOFR+ 5.00%) plus 2.50% PIK | 3.00 | | 12/31/2024 | 10,452 | | 10,452 | | 10,452 | | 0.3% | (3) (10)(39) |
| First Lien Term Loan | 6/24/2014 | 8.00% plus 10.00% PIK | — | | 4/30/2028 | 35,872 | | 35,872 | | 35,872 | | 1.0% | (3) (39) |
| First Lien Term Loan B | 3/28/2022 | 4.50% plus 8.00% PIK | — | | 4/30/2028 | 32,771 | | 32,771 | | 32,771 | | 0.9% | (3) (39) |
Consolidated Revenue Interest (2.00%) | 6/22/2018 | | — | | N/A | — | | — | | 889 | | —% | (12) |
Common Stock (50,000 shares) | 12/31/2012 | | — | | N/A | — | | 12,053 | | 85,800 | | 2.3% | |
| | | | | | | | 91,148 | | 165,784 | | 4.5% | |
| Total Control Investments | $ | 2,988,496 | | $ | 3,571,697 | | 95.7% | |
See notes to consolidated financial statements.
20
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Affiliate Investments (5.00% to 24.99% voting control)(43) | | | | | | | |
| | | | | | | | | | | |
| Nixon, Inc. (32) | Textiles, Apparel & Luxury Goods | Common Stock (857 units) | 5/12/2017 | | | N/A | | $ | — | | $ | — | | —% | (16) |
| | | | | | | | — | | — | | —% | |
| RGIS Services, LLC | Commercial Services & Supplies | Membership Interest (5.27%) | 6/25/2020 | | — | | N/A | — | | 8,855 | | 10,397 | | 0.3% | |
| | | | | | | | 8,855 | | 10,397 | | 0.3% | |
| Total Affiliate Investments | $ | 8,855 | | $ | 10,397 | | 0.3% | |
See notes to consolidated financial statements.
21
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| 8th Avenue Food & Provisions, Inc. | Food Products | Second Lien Term Loan | 9/21/2018 | 12.97% (1M SOFR+ 7.75%) | — | | 10/1/2026 | $ | 32,133 | | $ | 32,005 | | $ | 28,810 | | 0.8 | % | (8)(10) |
| | | | | | | | 32,005 | | 28,810 | | 0.8 | % | |
| ABG Intermediate Holdings 2 LLC | Textiles, Apparel & Luxury Goods | Second Lien Term Loan | 12/20/2021 | 11.20% (1M SOFR+ 6.00%) | 0.50 | | 12/20/2029 | 9,000 | | 8,945 | | 9,000 | | 0.2 | % | (3)(8)(10) |
| | | | | | | | 8,945 | | 9,000 | | 0.2 | % | |
| Apidos CLO XI | Structured Finance | Subordinated Structured Note | 12/6/2012 | Residual Interest, current yield 12.01% | — | | 4/17/2034 | 67,782 | | 39,008 | | 29,875 | | 0.8 | % | (5) (14) |
| | | | | | | | 39,008 | | 29,875 | | 0.8 | % | |
| Apidos CLO XII | Structured Finance | Subordinated Structured Note | 3/15/2013 | Residual Interest, current yield 12.24% | — | | 4/15/2031 | 52,203 | | 33,439 | | 29,443 | | 0.8 | % | (5) (14) |
| | | | | | | | 33,439 | | 29,443 | | 0.8 | % | |
| Apidos CLO XV | Structured Finance | Subordinated Structured Note | 9/13/2013 | Residual Interest, current yield 10.99% | — | | 4/21/2031 | 48,515 | | 34,686 | | 29,537 | | 0.9 | % | (5) (14) |
| | | | | | | | 34,686 | | 29,537 | | 0.9 | % | |
| Apidos CLO XXII | Structured Finance | Subordinated Structured Note | 9/16/2015 | Residual Interest, current yield 15.28% | — | | 4/21/2031 | 35,855 | | 29,588 | | 25,578 | | 0.7 | % | (5) (14) |
| | | | | | | | 29,588 | | 25,578 | | 0.7 | % | |
| Atlantis Health Care Group (Puerto Rico), Inc. | Health Care Providers & Services | First Lien Revolving Line of Credit - $2,000 Commitment | 2/21/2013 | 14.24% (3M SOFR+ 8.75%) | 2.00 | | 5/15/2024 | 2,000 | | 2,000 | | 1,874 | | 0.1 | % | (10)(15) |
| First Lien Term Loan | 2/21/2013 | 14.24% (3M SOFR+ 8.75%) | 2.00 | | 5/15/2024 | 61,000 | | 61,000 | | 57,165 | | 1.5 | % | (3) (10) |
| | | | | | | | 63,000 | | 59,039 | | 1.6 | % | |
| Aventiv Technologies, LLC (f/k/a Securus Technologies Holdings, Inc.) | Communications Equipment | First Lien Term Loan | 8/2/2019 | 10.23% (6ML+ 4.50%) | 1.00 | | 11/1/2024 | 9,594 | | 9,249 | | 9,594 | | 0.3 | % | (3)(8)(10) |
| Second Lien Term Loan | 6/20/2017 | 13.98% (6ML+ 8.25%) | 1.00 | | 11/1/2025 | 50,662 | | 50,603 | | 50,083 | | 1.3 | % | (3)(8)(10) |
| | | | | | | | 59,852 | | 59,677 | | 1.6 | % | |
| Barings CLO 2018-III | Structured Finance | Subordinated Structured Note | 10/9/2014 | Residual Interest, current yield 0.00% | — | | 7/20/2029 | 82,808 | | 32,226 | | 12,544 | | 0.3 | % | (5) (14)(17) |
| | | | | | | | 32,226 | | 12,544 | | 0.3 | % | |
| Barracuda Parent, LLC | IT Services | Second Lien Term Loan | 8/15/2022 | 12.05% (3M SOFR + 7.00%) | 0.50 | | 8/15/2030 | 20,000 | | 19,469 | | 19,447 | | 0.5 | % | (8)(10) |
| | | | | | | | 19,469 | | 19,447 | | 0.5 | % | |
| BCPE North Star US Holdco 2, Inc. | Food Products | Second Lien Delayed Draw Term Loan - $5,185 Commitment | 6/7/2021 | 12.75% (3M SOFR+ 7.25%) | 0.75 | | 6/11/2029 | 5,185 | | 5,139 | | 4,646 | | 0.1 | % | (8)(10)(15) |
| Second Lien Term Loan | 6/7/2021 | 12.75% (3M SOFR+ 7.25%) | 0.75 | | 6/11/2029 | 94,815 | | 94,211 | | 84,947 | | 2.3 | % | (3)(8)(10) |
| | | | | | | | 99,350 | | 89,593 | | 2.4 | % | |
| BCPE Osprey Buyer, Inc. | Health Care Technology | First Lien Revolving Line of Credit - $4,239 Commitment | 10/18/2021 | 10.90% (1ML+ 5.75%) | 0.75 | | 8/21/2026 | 1,601 | | 1,601 | | 1,569 | | — | % | (8)(10)(15) |
| First Lien Term Loan | 10/18/2021 | 11.14% (3ML+ 5.75%) | 0.75 | | 8/23/2028 | 64,025 | | 64,025 | | 62,711 | | 1.7 | % | (8)(10) |
First Lien Delayed Draw Term Loan - $22,609 Commitment | 10/18/2021 | 11.14% (3ML+ 5.75%) | 0.75 | | 8/23/2028 | — | | — | | — | | — | % | (8)(10)(15) |
| | | | | | | | 65,626 | | 64,280 | | 1.7 | % | |
| Belnick, LLC (d/b/a The Ubique Group) | Household Durables | First Lien Term Loan | 1/20/2022 | 13.00% (3M SOFR+ 7.50%) | 1.00 | | 1/20/2027 | 89,094 | | 89,094 | | 89,094 | | 2.4 | % | (3) (10) |
| | | | | | | | 89,094 | | 89,094 | | 2.4 | % | |
| Boostability Parent, Inc. (f/k/a SEOTownCenter, Inc.) | IT Services | First Lien Term Loan | 1/31/2022 | 13.50% (3M SOFR + 8.00%) | 1.00 | | 1/31/2027 | 50,314 | | 50,314 | | 48,815 | | 1.3 | % | (3) (10) |
| | | | | | | | 50,314 | | 48,815 | | 1.3 | % | |
| Broder Bros., Co. | Textiles, Apparel & Luxury Goods | First Lien Term Loan | 12/4/2017 | 11.50% (3M SOFR+ 6.00%) | 1.00 | | 12/4/2025 | 158,530 | | 158,530 | | 158,530 | | 4.2 | % | (3) (10) |
| | | | | | | | 158,530 | | 158,530 | | 4.2 | % | |
| Burgess Point Purchaser Corporation | Automobile Components | Second Lien Term Loan | 7/25/2022 | 14.36% (3M SOFR + 9.00%) | 0.75 | | 7/25/2030 | 30,000 | | 30,000 | | 30,000 | | 0.8 | % | (3)(8)(10) |
| | | | | | | | 30,000 | | 30,000 | | 0.8 | % | |
See notes to consolidated financial statements.
22
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| California Street CLO IX Ltd. | Structured Finance | Subordinated Structured Note | 4/19/2012 | Residual Interest, current yield 10.08% | — | | 7/16/2032 | $ | 58,914 | | $ | 42,980 | | $ | 29,417 | | 0.8 | % | (5) (14) |
| | | | | | | | 42,980 | | 29,417 | | 0.8 | % | |
| Capstone Logistics Acquisition, Inc. | Commercial Services & Supplies | Second Lien Term Loan | 11/12/2020 | 13.95% (1M SOFR+ 8.75%) | 1.00 | | 11/13/2028 | 8,500 | | 8,286 | | 8,500 | | 0.2 | % | (3)(8)(10) |
| | | | | | | | 8,286 | | 8,500 | | 0.2 | % | |
| Carlyle C17 CLO Limited | Structured Finance | Subordinated Structured Note | 1/24/2013 | Residual Interest, current yield 6.02% | — | | 4/30/2031 | 24,870 | | 14,552 | | 11,368 | | 0.3 | % | (5) (14) |
| | | | | | | | 14,552 | | 11,368 | | 0.3 | % | |
| Carlyle Global Market Strategies CLO 2014-4-R, Ltd. | Structured Finance | Subordinated Structured Note | 4/7/2017 | Residual Interest, current yield 13.35% | — | | 7/15/2030 | 25,534 | | 17,776 | | 15,777 | | 0.4 | % | (5) (14) |
| | | | | | | | 17,776 | | 15,777 | | 0.4 | % | |
| Carlyle Global Market Strategies CLO 2016-3, Ltd. | Structured Finance | Subordinated Structured Note | 8/9/2016 | Residual Interest, current yield 11.12% | — | | 7/20/2034 | 32,200 | | 30,919 | | 25,873 | | 0.7 | % | (5) (14) |
| | | | | | | | 30,919 | | 25,873 | | 0.7 | % | |
| Cent CLO 21 Limited | Structured Finance | Subordinated Structured Note | 5/15/2014 | Residual Interest, current yield 0.00% | — | | 7/29/2030 | 49,551 | | 31,642 | | 13,992 | | 0.4 | % | (5) (14)(17) |
| | | | | | | | 31,642 | | 13,992 | | 0.4 | % | |
| CIFC Funding 2013-III-R, Ltd. | Structured Finance | Subordinated Structured Note | 8/2/2013 | Residual Interest, current yield 11.72% | — | | 4/24/2031 | 44,100 | | 26,972 | | 20,853 | | 0.6 | % | (5) (14) |
| | | | | | | | 26,972 | | 20,853 | | 0.6 | % | |
| CIFC Funding 2013-IV, Ltd. | Structured Finance | Subordinated Structured Note | 10/22/2013 | Residual Interest, current yield 13.83% | — | | 4/28/2031 | 45,500 | | 31,675 | | 27,752 | | 0.7 | % | (5) (14) |
| | | | | | | | 31,675 | | 27,752 | | 0.7 | % | |
| CIFC Funding 2014-IV-R, Ltd. | Structured Finance | Subordinated Structured Note | 8/5/2014 | Residual Interest, current yield 13.50% | — | | 10/17/2030 | 50,142 | | 34,988 | | 26,573 | | 0.7 | % | (5) (14) |
| | | | | | | | 34,988 | | 26,573 | | 0.7 | % | |
| CIFC Funding 2016-I, Ltd. | Structured Finance | Subordinated Structured Note | 12/9/2016 | Residual Interest, current yield 15.95% | — | | 10/21/2031 | 34,000 | | 32,467 | | 29,344 | | 0.8 | % | (5) (14) |
| | | | | | | | 32,467 | | 29,344 | | 0.8 | % | |
| Collections Acquisition Company, Inc. | Diversified Financial Services | First Lien Term Loan | 12/3/2019 | 13.15% (3M SOFR+ 7.65%) | 2.50 | | 6/3/2024 | 36,504 | | 36,504 | | 36,504 | | 1.0 | % | (3) (10) |
| | | | | | | | 36,504 | | 36,504 | | 1.0 | % | |
| Columbia Cent CLO 27 Limited | Structured Finance | Subordinated Structured Note | 12/18/2013 | Residual Interest, current yield 13.14% | — | | 1/25/2035 | 48,978 | | 31,918 | | 27,407 | | 0.7 | % | (5) (14) |
| | | | | | | | 31,918 | | 27,407 | | 0.7 | % | |
| CP IRIS Holdco I, Inc. (48) | Building Products | Second Lien Term Loan | 10/1/2021 | 12.20% (1M SOFR+ 7.00%) | 0.50 | | 10/1/2029 | 35,000 | | 35,000 | | 33,120 | | 0.9 | % | (3)(8)(10) |
| | | | | | | | 35,000 | | 33,120 | | 0.9 | % | |
| Curo Group Holdings Corp. | Consumer Finance | First Lien Term Loan | 7/30/2021 | 7.50% | — | | 8/1/2028 | 47,000 | | 47,024 | | 17,039 | | 0.5 | % | (8)(14) |
| | | | | | | | 47,024 | | 17,039 | | 0.5 | % | |
| DRI Holding Inc. | Commercial Services & Supplies | First Lien Term Loan | 12/21/2021 | 10.45% (1M SOFR+ 5.25%) | 0.50 | | 12/21/2028 | 33,990 | | 32,871 | | 33,787 | | 0.9 | % | (3)(8)(10) |
| Second Lien Term Loan | 12/21/2021 | 13.20% (1M SOFR+ 8.00%) | 0.50 | | 12/21/2029 | 145,000 | | 145,000 | | 141,817 | | 3.8 | % | (3) (10) |
| | | | | | | | 177,871 | | 175,604 | | 4.7 | % | |
| DTI Holdco, Inc. | Professional Services | First Lien Term Loan | 4/26/2022 | 9.80% (3M SOFR+ 4.75%) | 0.75 | | 4/26/2029 | 18,361 | | 18,053 | | 17,604 | | 0.5 | % | (3)(8)(10) |
| Second Lien Term Loan | 4/26/2022 | 12.80% (3M SOFR+ 7.75%) | 0.75 | | 4/26/2030 | 75,000 | | 75,000 | | 71,712 | | 1.9 | % | (3)(8)(10) |
| | | | | | | | 93,053 | | 89,316 | | 2.4 | % | |
See notes to consolidated financial statements.
23
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| Dukes Root Control Inc. | Commercial Services & Supplies | First Lien Revolving Line of Credit - $4,464 Commitment | 12/8/2022 | 11.56% (6M SOFR + 6.50%) | 1.00 | | 12/8/2028 | $ | 357 | | $ | 357 | | $ | 357 | | — | % | (8)(10)(15) |
First Lien Revolving Line of Credit - $4,464 Commitment | 12/8/2022 | 11.72% (3M SOFR + 6.50%) | 1.00 | | 12/8/2028 | 1,429 | | 1,429 | | 1,429 | | — | % | (8)(10)(15) |
First Lien Delayed Draw Term Loan - $8,929 Commitment | 12/8/2022 | 11.56% (6M SOFR + 6.50%) | 1.00 | | 12/8/2028 | 2,054 | | 2,054 | | 2,054 | | 0.1 | % | (8)(10)(15) |
| First Lien Term Loan | 12/8/2022 | 11.56% (6M SOFR + 6.50%) | 1.00 | | 12/8/2028 | 36,424 | | 36,424 | | 36,424 | | 1.0 | % | (3)(8)(10) |
| | | | | | | | 40,264 | | 40,264 | | 1.1 | % | |
| Easy Gardener Products, Inc. | Household Durables | Class A Units of EZG Holdings, LLC(200 units) | 6/11/2020 | | — | | N/A | — | | 313 | | — | | — | % | (16) |
Class B Units of EZG Holdings, LLC (12,525 units) | 6/11/2020 | | — | | N/A | — | | 1,688 | | — | | — | % | (16) |
| | | | | | | | 2,001 | | — | | — | % | |
| Engine Group, Inc. (7) | Media | First Lien Term Loan | 11/17/2020 | 16.25% (PRIME+ 8.00%) | 1.00 | | 11/17/2023 | 3,546 | | 3,546 | | 1,447 | | — | % | (8)(9)(10) |
Class B Common Units (1,039,554 units) | 11/17/2020 | | — | | N/A | — | | 26,991 | | — | | — | % | (8)(16) |
| | | | | | | | 30,537 | | 1,447 | | — | % | |
| Engineered Machinery Holdings, Inc. | Machinery | Incremental Amendment No. 2 Second Lien Term Loan | 5/6/2021 | 12.04% (3ML+ 6.50%) | 0.75 | | 7/18/2025 | 5,000 | | 4,988 | | 5,000 | | 0.1 | % | (3)(8)(10) |
| Incremental Amendment No. 3 Second Lien Term Loan | 8/6/2021 | 11.54% (3ML+ 6.00%) | 0.75 | | 5/21/2029 | 5,000 | | 5,000 | | 4,928 | | 0.1 | % | (3)(8)(10) |
| | | | | | | | 9,988 | | 9,928 | | 0.2 | % | |
| Enseo Acquisition, Inc. | IT Services | First Lien Term Loan | 6/2/2021 | 13.50% (3M SOFR+ 8.00%) | 1.00 | | 6/2/2026 | 53,666 | | 53,666 | | 52,658 | | 1.4 | % | (3) (10) |
| | | | | | | | 53,666 | | 52,658 | | 1.4 | % | |
| Eze Castle Integration, Inc. | IT Services | First Lien Delayed Draw Term Loan - $1,786 Commitment | 7/15/2020 | 15.22% (3ML+ 10.00%) plus 0.75% PIK | 1.50 | | 7/15/2025 | 892 | | 892 | | 892 | | — | % | (10)(15)(39) |
| First Lien Term Loan | 7/15/2020 | 15.27% (3ML+ 10.00%) plus 0.75% PIK | 1.50 | | 7/15/2025 | 46,547 | | 46,547 | | 46,547 | | 1.2 | % | (3) (10)(39) |
| | | | | | | | 47,439 | | 47,439 | | 1.2 | % | |
| Faraday Buyer, LLC | Electrical Equipment | First Lien Delayed Draw Term Loan - $5,833 Commitment | 10/11/2022 | 11.86% (6M SOFR + 7.00%) | 1.00 | | 10/11/2028 | 4,457 | | 4,392 | | 4,457 | | 0.1 | % | (8)(10)(15) |
| First Lien Term Loan | 10/11/2022 | 11.86% (6M SOFR + 7.00%) | 1.00 | | 10/11/2028 | 64,007 | | 64,007 | | 64,007 | | 1.7 | % | (3)(8)(10) |
| | | | | | | | 68,399 | | 68,464 | | 1.8 | % | |
| First Brands Group | Automobile Components | First Lien Term Loan | 3/24/2021 | 10.25% (6M SOFR+ 5.00%) | 1.00 | | 3/30/2027 | 22,354 | | 22,284 | | 22,209 | | 0.6 | % | (3)(8)(10) |
| Second Lien Term Loan | 3/24/2021 | 13.60% (6ML+ 8.50%) | 1.00 | | 3/30/2028 | 37,000 | | 36,676 | | 36,807 | | 1.0 | % | (3)(8)(10) |
| | | | | | | | 58,960 | | 59,016 | | 1.6 | % | |
| Galaxy XV CLO, Ltd. | Structured Finance | Subordinated Structured Note | 2/13/2013 | Residual Interest, current yield 11.57% | — | | 10/15/2030 | 50,524 | | 32,622 | | 25,211 | | 0.8 | % | (5) (14) |
| | | | | | | | 32,622 | | 25,211 | | 0.8 | % | |
| Galaxy XXVII CLO, Ltd. | Structured Finance | Subordinated Structured Note | 9/30/2013 | Residual Interest, current yield 18.59% | — | | 5/16/2031 | 24,575 | | 16,322 | | 13,430 | | 0.4 | % | (5) (14) |
| | | | | | | | 16,322 | | 13,430 | | 0.4 | % | |
| Galaxy XXVIII CLO, Ltd. | Structured Finance | Subordinated Structured Note | 5/30/2014 | Residual Interest, current yield 18.42% | — | | 7/15/2031 | 39,905 | | 27,431 | | 20,825 | | 0.6 | % | (5) (14) |
| | | | | | | | 27,431 | | 20,825 | | 0.6 | % | |
| Halcyon Loan Advisors Funding 2012-1 Ltd. | Structured Finance | Subordinated Structured Note | 8/7/2012 | Residual Interest, current yield 0.00% | — | | 8/15/2023 | 23,188 | | 3,704 | | — | | — | % | (5) (14)(17) |
| | | | | | | | 3,704 | | — | | — | % | |
| Halcyon Loan Advisors Funding 2014-2 Ltd. | Structured Finance | Subordinated Structured Note | 4/14/2014 | Residual Interest, current yield 0.00% | — | | 4/28/2025 | 41,164 | | 21,322 | | 18 | | — | % | (5) (14)(17) |
| | | | | | | | 21,322 | | 18 | | — | % | |
See notes to consolidated financial statements.
24
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| Halcyon Loan Advisors Funding 2015-3 Ltd. | Structured Finance | Subordinated Structured Note | 7/23/2015 | Residual Interest, current yield 0.00% | — | | 10/18/2027 | 39,598 | | 29,557 | | 123 | | — | % | (5) (14)(17) |
| | | | | | | | 29,557 | | 123 | | — | % | |
| HarbourView CLO VII-R, Ltd. | Structured Finance | Subordinated Structured Note | 6/5/2015 | Residual Interest, current yield 0.00% | — | | 7/18/2031 | 19,025 | | 13,448 | | 6,344 | | 0.2 | % | (5) (14)(17) |
| | | | | | | | 13,448 | | 6,344 | | 0.2 | % | |
| Help/Systems Holdings, Inc. (d/b/a Forta, LLC) | Software | Second Lien Term Loan | 11/14/2019 | 11.95%(1M SOFR+ 6.75%) | 0.75 | | 11/19/2027 | 52,500 | | 52,350 | | 49,111 | | 1.3 | % | (3)(8)(10) |
| | | | | | | | 52,350 | | 49,111 | | 1.3 | % | |
| The Hiller Companies, LLC | Commercial Services & Supplies | First Lien Term Loan | 10/11/2022 | 12.52% (6M SOFR + 7.00%) | 1.00 | | 9/15/2028 | 37,000 | | 37,000 | | 37,000 | | 1.0 | % | (3)(8)(10)(49) |
| | | | | | | | 37,000 | | 37,000 | | 1.0 | % | |
| Interventional Management Services, LLC | Health Care Providers & Services | First Lien Revolving Line of Credit - $5,000 Commitment | 2/22/2021 | 14.49% (3M SOFR+ 9.00%) | 1.00 | | 2/22/2025 | 5,000 | | 5,000 | | 5,000 | | 0.1 | % | (10)(15) |
| First Lien Term Loan | 2/22/2021 | 14.49% (3M SOFR+ 9.00%) | 1.00 | | 2/20/2026 | 66,975 | | 66,975 | | 66,975 | | 1.8 | % | (3) (10) |
| | | | | | | | 71,975 | | 71,975 | | 1.9 | % | |
| Japs-Olson Company, LLC (33) | Commercial Services & Supplies | First Lien Term Loan | 5/25/2023 | 12.11% (3M SOFR + 6.75%) | 2.00 | | 5/25/2028 | 70,852 | | 70,852 | | 70,852 | | 1.9 | % | (3) (10) |
| | | | | | | | 70,852 | | 70,852 | | 1.9 | % | |
| Jefferson Mill CLO Ltd. | Structured Finance | Subordinated Structured Note | 6/26/2015 | Residual Interest, current yield 12.33% | — | | 10/20/2031 | 23,593 | | 17,966 | | 14,214 | | 0.4 | % | (5) (14) |
| | | | | | | | 17,966 | | 14,214 | | 0.4 | % | |
| K&N HoldCo, LLC | Automobile Components | Class A Common Units | 2/14/2023 | | — | | N/A | — | | 25,697 | | 1,156 | | — | % | (8)(16) |
| | | | | | | | 25,697 | | 1,156 | | — | % | |
| KM2 Solutions LLC | IT Services | First Lien Term Loan | 12/17/2020 | 14.39% (3M SOFR+ 9.00%) | 1.00 | | 12/17/2025 | 23,675 | | 23,675 | | 23,675 | | 0.6 | % | (3) (10) |
| | | | | | | | 23,675 | | 23,675 | | 0.6 | % | |
| LCM XIV Ltd. | Structured Finance | Subordinated Structured Note | 6/25/2013 | Residual Interest, current yield 10.64% | — | | 7/21/2031 | 49,933 | | 24,754 | | 20,099 | | 0.5 | % | (5) (14) |
| | | | | | | | 24,754 | | 20,099 | | 0.5 | % | |
| LGC US FINCO, LLC | Machinery | First Lien Term Loan | 1/17/2020 | 11.72% (1M SOFR+ 6.50%) | 1.00 | | 12/20/2025 | 29,876 | | 29,460 | | 29,876 | | 0.8 | % | (3)(8)(10) |
| | | | | | | | 29,460 | | 29,876 | | 0.8 | % | |
| Lucky US BuyerCo LLC | Professional Services | First Lien Revolving Line of Credit - $2,775 Commitment | 4/3/2023 | 12.39% (3M SOFR + 7.50%) | 1.00 | | 4/1/2029 | — | | — | | — | | — | % | (8)(10)(15) |
| First Lien Term Loan | 4/3/2023 | 12.39% (3M SOFR + 7.50%) | 1.00 | | 4/1/2029 | 21,674 | | 21,674 | | 21,674 | | 0.6 | % | (3)(8)(10) |
| | | | | | | | 21,674 | | 21,674 | | 0.6 | % | |
| MAC Discount, LLC | Household Durables | First Lien Term Loan | 5/11/2023 | 13.49% (3M SOFR + 8.00%) | 1.50 | | 5/11/2028 | 37,810 | | 37,453 | | 37,810 | | 1.0 | % | (3) (10) |
Class A Senior Preferred Stock to MAC Discount Investments, LLC (1,500,000 shares) | 5/11/2023 | 12.00% | — | | 5/11/2028 | — | | 1,500 | | 1,523 | | — | % | (16) |
| | | | | | | | 38,953 | | 39,333 | | 1.0 | % | |
| Magnate Worldwide, LLC | Air Freight & Logistics | First Lien Delayed Draw Term Loan - $2,357 Commitment | 3/11/2022 | 10.84% (3M SOFR+ 5.50%) | 0.75 | | 12/30/2028 | 1,208 | | 1,184 | | 1,208 | | — | % | (8)(10)(15) |
| First Lien Term Loan | 3/11/2022 | 10.84% (3M SOFR+ 5.50%) | 0.75 | | 12/30/2028 | 30,186 | | 30,186 | | 30,186 | | 0.8 | % | (3)(8)(10) |
| Second Lien Term Loan | 12/30/2021 | 13.89% (3M SOFR+ 8.50%) | 0.75 | | 12/30/2029 | 95,000 | | 95,000 | | 95,000 | | 2.5 | % | (3)(10) |
| | | | | | | | 126,370 | | 126,394 | | 3.3 | % | |
| Mamba Purchaser, Inc. | Health Care Providers & Services | Second Lien Term Loan | 9/29/2021 | 11.72% (1M SOFR+ 6.50%) | 0.50 | | 10/14/2029 | 23,000 | | 22,863 | | 23,000 | | 0.6 | % | (3)(8)(10) |
| | | | | | | | 22,863 | | 23,000 | | 0.6 | % | |
See notes to consolidated financial statements.
25
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| Medical Solutions Holdings, Inc. (4) | Health Care Providers & Services | Second Lien Term Loan | 11/1/2021 | 12.36% (3M SOFR+ 7.00%) | 0.50 | | 11/1/2029 | $ | 54,463 | | $ | 54,428 | | $ | 54,463 | | 1.5 | % | (3)(8)(10) |
| | | | | | | | 54,428 | | 54,463 | | 1.5 | % | |
| Mountain View CLO 2013-I Ltd. | Structured Finance | Subordinated Structured Note | 4/17/2013 | Residual Interest, current yield 0.00% | — | | 10/15/2030 | 43,650 | | 21,588 | | 13,629 | | 0.4 | % | (5) (14)(17) |
| | | | | | | | 21,588 | | 13,629 | | 0.4 | % | |
| Mountain View CLO IX Ltd. | Structured Finance | Subordinated Structured Note | 5/13/2015 | Residual Interest, current yield 9.95% | — | | 7/15/2031 | 47,829 | | 23,395 | | 19,004 | | 0.5 | % | (5) (14) |
| | | | | | | | 23,395 | | 19,004 | | 0.5 | % | |
| Nexus Buyer LLC | Capital Markets | Second Lien Term Loan | 11/5/2021 | 11.45% (1M SOFR+ 6.25%) | 0.50 | | 11/5/2029 | 42,500 | | 42,500 | | 39,984 | | 1.1 | % | (8)(10) |
| | | | | | | | 42,500 | | 39,984 | | 1.1 | % | |
| NH Kronos Buyer, Inc. | Pharmaceuticals | First Lien Term Loan | 12/7/2022 | 11.64% (3M SOFR + 6.25%) | 1.00 | | 11/1/2028 | 74,531 | | 74,531 | | 74,531 | | 2.0 | % | (3)(8)(10) |
| | | | | | | | 74,531 | | 74,531 | | 2.0 | % | |
| Octagon Investment Partners XV, Ltd. | Structured Finance | Subordinated Structured Note | 1/24/2013 | Residual Interest, current yield 5.11% | — | | 7/19/2030 | 42,064 | | 27,168 | | 21,341 | | 0.6 | % | (5) (14) |
| | | | | | | | 27,168 | | 21,341 | | 0.6 | % | |
| Octagon Investment Partners 18-R Ltd. | Structured Finance | Subordinated Structured Note | 8/12/2015 | Residual Interest, current yield 7.93% | — | | 4/16/2031 | 46,016 | | 20,619 | | 15,429 | | 0.4 | % | (5) (14) |
| | | | | | | | 20,619 | | 15,429 | | 0.4 | % | |
| OneTouchPoint Corp | Professional Services | First Lien Term Loan | 2/19/2021 | 13.49% (3M SOFR+ 8.00%) | 1.00 | | 2/19/2026 | 38,678 | | 38,678 | | 38,678 | | 1.0 | % | (3) (10) |
| | | | | | | | 38,678 | | 38,678 | | 1.0 | % | |
| PeopleConnect Holdings, LLC (11) | Interactive Media & Services | First Lien Term Loan | 1/22/2020 | 13.64% (3M SOFR+ 8.25%) | 2.75 | | 1/22/2025 | 160,281 | | 160,281 | | 160,281 | | 4.3 | % | (3) (10) |
| | | | | | | | 160,281 | | 160,281 | | 4.3 | % | |
| PetVet Care Centers, LLC (f/k/a Pearl Intermediate Parent LLC) | Health Care Providers & Services | Second Lien Term Loan | 2/1/2018 | 11.44% (1ML+ 6.25%) | — | | 2/15/2026 | 16,000 | | 15,957 | | 15,319 | | 0.4 | % | (3)(8)(10) |
| | | | | | | | 15,957 | | 15,319 | | 0.4 | % | |
| PGX Holdings, Inc. (6) | Diversified Consumer Services | First Lien Term Loan | 7/21/2021 | 12.85% (1M SOFR + 7.75%) | 1.50 | | 7/21/2026 | 70,639 | | 70,639 | | 70,639 | | 1.9% | (8)(9)(10) |
| First Lien DIP Term Loan | 5/31/2023 | 13.99% (3M SOFR + 8.50%) | 1.50 | | 7/21/2026 | 4,376 | | 4,376 | | 4,376 | | 0.1% | (8)(10) |
| Second Lien Term Loan | 7/21/2021 | 12.00% PIK | — | | 7/27/2027 | 186,326 | | 179,986 | | — | | —% | (9)(39) |
Class B of PGX TopCo LLC (999 Non-Voting Units) | 5/27/2020 | | — | | N/A | — | | — | | — | | —% | (16) |
| | | | | | | | 255,001 | | 75,015 | | 2.0 | % | |
| PlayPower, Inc. | Leisure Products | First Lien Term Loan | 5/7/2019 | 10.57% (3M SOFR+ 5.50%) | — | | 5/10/2026 | 5,776 | | 5,749 | | 5,436 | | 0.1 | % | (3)(8)(10) |
| | | | | | | | 5,749 | | 5,436 | | 0.1 | % | |
| Precisely Software Incorporated (f/k/a Vision Solutions, Inc.) (29) | IT Services | Second Lien Term Loan | 4/23/2021 | 12.51% (3ML + 7.25%) | 0.75 | | 4/23/2029 | 80,000 | | 79,331 | | 75,962 | | 2.0 | % | (3)(8)(10) |
| | | | | | | | 79,331 | | 75,962 | | 2.0 | % | |
| Preventics, Inc. (d/b/a Legere Pharmaceuticals) (46) | Health Care Providers & Services | First Lien Term Loan | 11/12/2021 | 16.04% (3ML+ 10.50%) | 1.00 | | 11/12/2026 | 9,150 | | 9,150 | | 9,150 | | 0.2 | % | (3) (10) |
Series A Convertible Preferred Stock(320 units) | 11/12/2021 | 8.00% | — | | N/A | — | | 127 | | 158 | | — | % | (16) |
Series C Convertible Preferred Stock (3,575 units) | 11/12/2021 | 8.00% | — | | N/A | — | | 1,419 | | 1,769 | | — | % | (16) |
| | | | | | | | 10,696 | | 11,077 | | 0.2 | % | |
| Raisin Acquisition Co, Inc. | Pharmaceuticals | First Lien Revolving Line of Credit | 6/17/2022 | 12.51% (3M SOFR+ 7.00%) | 1.00 | | 12/13/2026 | — | | — | | — | | — | % | (8)(10)(15) |
| First Lien Delayed Draw Term Loan | 6/17/2022 | 12.50% (3M SOFR+ 7.00%) | 1.00 | | 12/13/2026 | 1,503 | | 1,472 | | 1,468 | | — | % | (8)(10)(15) |
| First Lien Term Loan | 6/17/2022 | 12.51% (3M SOFR+ 7.00%) | 1.00 | | 12/13/2026 | 23,848 | | 23,266 | | 23,290 | | 0.6 | % | (3)(8)(10) |
| | | | | | | | 24,738 | | 24,758 | | 0.6 | % | |
See notes to consolidated financial statements.
26
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| RC Buyer, Inc. | Automobile Components | Second Lien Term Loan | 7/26/2021 | 11.84% (3M SOFR+ 6.50%) | 0.75 | | 7/30/2029 | $ | 20,000 | | $ | 19,924 | | $ | 19,353 | | 0.5 | % | (3)(8)(10) |
| | | | | | | | 19,924 | | 19,353 | | 0.5 | % | |
| Reception Purchaser, LLC | Air Freight & Logistics | First Lien Term Loan | 4/28/2022 | 11.39% (3M SOFR+ 6.00%) | 0.75 | | 3/24/2028 | 62,731 | | 61,801 | | 62,552 | | 1.8 | % | (3)(8)(10) |
| | | | | | | | 61,801 | | 62,552 | | 1.8 | % | |
| Redstone Holdco 2 LP (22) | IT Services | Second Lien Term Loan | 4/16/2021 | 13.04% (3ML+ 7.75%) | 0.75 | | 4/27/2029 | 50,000 | | 49,350 | | 43,655 | | 1.2 | % | (3)(8)(10) |
| | | | | | | | 49,350 | | 43,655 | | 1.2 | % | |
| Research Now Group, LLC (f/k/a Research Now Group, Inc.) and Dynata, LLC (f/k/a Survey Sampling International, LLC) | Professional Services | First Lien Term Loan | 12/8/2017 | 10.80% (3ML+ 5.50%) | 1.00 | | 12/20/2024 | 9,475 | | 9,352 | | 8,872 | | 0.2 | % | (3)(8)(10) |
| Second Lien Term Loan | 12/8/2017 | 14.80% (3ML+ 9.50%) | 1.00 | | 12/20/2025 | 50,000 | | 48,936 | | 42,954 | | 1.2 | % | (3)(8)(10) |
| | | | | | | | 58,288 | | 51,826 | | 1.4 | % | |
| Rising Tide Holdings, Inc. | Diversified Consumer Services | First Lien Term Loan | 3/23/2023 | 13.76% PIK (3M SOFR+ 8.25%) | 0.75 | | 6/1/2029 | 12,394 | | 12,265 | | 11,332 | | 0.3 | % | (8)(10)(39)(50) |
| Second Lien Term Loan | 3/23/2023 | 13.76% PIK (3M SOFR + 8.25%) | 0.75 | | 6/1/2029 | 12,166 | | 11,630 | | — | | — | % | (8)(9)(10) |
| | | | | | | | 23,895 | | 11,332 | | 0.3 | % | |
| The RK Logistics Group, Inc. | Commercial Services & Supplies | First Lien Term Loan | 3/24/2022 | 16.04% (3ML+ 10.50%) | 1.00 | | 3/24/2027 | 5,826 | | 5,826 | | 5,826 | | 0.2 | % | (3) (10) |
Class A Common Units (263,000 units) | 3/24/2022 | | — | | N/A | — | | 263 | | 2,565 | | 0.1 | % | (16) |
Class B Common Units (1,237,000 units) | 3/24/2022 | | — | | N/A | — | | 1,237 | | 12,062 | | 0.3 | % | (16) |
| | | | | | | | 7,326 | | 20,453 | | 0.6 | % | |
| RME Group Holding Company | Media | First Lien Term Loan A | 5/4/2017 | 10.99% (3M SOFR+ 5.50%) | 1.00 | | 5/6/2024 | 22,116 | | 22,116 | | 22,116 | | 0.6 | % | (3) (10) |
| First Lien Term Loan B | 5/4/2017 | 16.49% (3M SOFR+ 11.00%) | 1.00 | | 5/6/2024 | 21,033 | | 21,033 | | 21,033 | | 0.6 | % | (3) (10) |
| | | | | | | | 43,149 | | 43,149 | | 1.2 | % | |
| Romark WM-R Ltd. | Structured Finance | Subordinated Structured Note | 4/11/2014 | Residual Interest, current yield 13.44% | — | | 4/21/2031 | 27,725 | | 19,564 | | 15,086 | | 0.4 | % | (5) (14) |
| | | | | | | | 19,564 | | 15,086 | | 0.4 | % | |
| Rosa Mexicano | Hotels, Restaurants & Leisure | First Lien Revolving Line of Credit - $500 Commitment | 3/29/2018 | 13.00% (3M SOFR+ 7.50%) | 1.25 | | 6/13/2024 | 191 | | 191 | | 183 | | — | % | (10)(15) |
| First Lien Term Loan | 3/29/2018 | 13.00% (3M SOFR+ 7.50%) | 1.25 | | 6/13/2024 | 21,510 | | 21,510 | | 20,593 | | 0.6 | % | (1,000.0) |
| | | | | | | | 21,701 | | 20,776 | | 0.6 | % | |
| Shearer’s Foods, LLC | Food Products | Second Lien Term Loan | 9/15/2020 | 12.97% (1M SOFR+ 7.75%) | 0.75 | | 9/23/2028 | 3,600 | | 3,534 | | 3,600 | | 0.1 | % | (3)(8)(10) |
| | | | | | | | 3,534 | | 3,600 | | 0.1 | % | |
| ShiftKey, LLC | Health Care Technology | First Lien Term Loan | 6/21/2022 | 11.25% (3M SOFR+ 5.75%) | 1.00 | | 6/21/2027 | 64,513 | | 64,058 | | 64,513 | | 1.8 | % | (3) (10) |
| | | | | | | | 64,058 | | 64,513 | | 1.8 | % | |
| Shutterfly Finance, LLC | Internet & Direct Marketing Retail | First Lien Term Loan | 6/5/2023 | 11.13% (3M SOFR+ 6.00%) | 1.00 | | 10/1/2027 | 2,406 | | 2,406 | | 2,406 | | 0.1 | % | (8)(10) |
| Second Lien Term Loan | 6/6/2023 | 10.13% (3M SOFR + 5.00%) | 1.00 | | 10/1/2027 | 14,563 | | 14,563 | | 11,690 | | 0.3 | % | (8)(10) |
| Second Lien Term Loan | 6/6/2023 | 10.24% (3M SOFR + 5.00%) | 1.00 | | 10/1/2027 | 3,518 | | 3,518 | | 2,824 | | 0.1 | % | (8)(10) |
| | | | | | | | 20,487 | | 16,920 | | 0.5 | % | |
| Sorenson Communications, LLC | Diversified Telecommunication Services | First Lien Term Loan | 3/12/2021 | 10.69% (1ML+ 5.50%) | 0.75 | | 3/17/2026 | 31,172 | | 30,844 | | 31,130 | | 0.8 | % | (3)(8)(10) |
| | | | | | | | 30,844 | | 31,130 | | 0.8 | % | |
| Southern Veterinary Partners | Health Care Providers & Services | Second Lien Term Loan | 10/2/2020 | 12.95% (1M SOFR+ 7.75%) | 1.00 | | 10/5/2028 | 8,000 | | 7,947 | | 8,000 | | 0.2 | % | (3)(8)(10) |
| | | | | | | | 7,947 | | 8,000 | | 0.2 | % | |
See notes to consolidated financial statements.
27
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| Spectrum Holdings III Corp | Health Care Equipment & Supplies | Second Lien Term Loan | 1/26/2018 | 12.58% (6ML+ 7.00%) | 1.00 | | 1/31/2026 | $ | 7,500 | | $ | 7,488 | | $ | 7,500 | | 0.2 | % | (8)(10) |
| | | | | | | | 7,488 | | 7,500 | | 0.2 | % | |
| Spectrum Vision Holdings, LLC | Health Care Providers & Services | First Lien Term Loan | 5/2/2023 | 11.84% (3M SOFR + 6.50%) | 1.00 | | 11/17/2024 | 29,924 | | 29,924 | | 29,924 | | 0.8 | % | (3)(8)(10) |
| | | | | | | | 29,924 | | 29,924 | | 0.8 | % | |
| Staples, Inc. | Distributors | First Lien Term Loan | 11/18/2019 | 10.30% (3ML+ 5.00%) | — | | 4/16/2026 | 8,683 | | 8,644 | | 7,481 | | 0.2 | % | (3)(8)(10)(47) |
| | | | | | | | 8,644 | | 7,481 | | 0.2 | % | |
| Strategic Materials Holding Corp. | Household Durables | Second Lien Term Loan | 10/27/2017 | 13.06% (3M SOFR+ 7.75%) | 1.00 | | 11/1/2025 | 7,000 | | 6,980 | | 4,288 | | 0.1 | % | (8)(10) |
| | | | | | | | 6,980 | | 4,288 | | 0.1 | % | |
| Stryker Energy, LLC | Energy Equipment & Services | Overriding Royalty Interest | 12/4/2006 | | — | | N/A | — | | — | | — | | — | % | (13) |
| | | | | | | | — | | — | | — | % | |
| Symphony CLO XIV, Ltd. | Structured Finance | Subordinated Structured Note | 5/6/2014 | Residual Interest, current yield 0.00% | — | | 7/14/2026 | 49,250 | | 22,824 | | 3,197 | | 0.1 | % | (5) (14)(17)(19) |
| | | | | | | | 22,824 | | 3,197 | | 0.1 | % | |
| Symphony CLO XV, Ltd. | Structured Finance | Subordinated Structured Note | 10/17/2014 | Residual Interest, current yield 5.33% | — | | 1/19/2032 | 63,831 | | 41,390 | | 26,870 | | 0.7 | % | (5) (14) |
| | | | | | | | 41,390 | | 26,870 | | 0.7 | % | |
| Town & Country Holdings, Inc. | Distributors | First Lien Term Loan | 1/26/2018 | 12.00% PIK | — | | 2/27/2026 | 175,147 | | 175,147 | | 175,147 | | 4.8 | % | (39) |
| First Lien Term Loan | 11/17/2022 | 12.00% PIK | — | | 2/27/2026 | 15,085 | | 15,085 | | 15,085 | | 0.4% | (39) |
Class W Interests of Town & Country Housewares Group, LP (188,105 Non-Voting Interests) | 8/31/2022 | 4.00% | — | | N/A | — | | — | | 16 | | —% | (16) |
Class B of Town & Country TopCo LLC (999 Non-Voting Units) | 11/17/2022 | | — | | N/A | — | | — | | 39,107 | | 1.0% | (16) |
| | | | | | | | 190,232 | | 229,355 | | 6.2 | % | |
| TPS, LLC | Machinery | First Lien Term Loan | 11/30/2020 | 14.50% (3M SOFR+ 9.00%) plus 1.50%PIK | 1.00 | | 11/30/2025 | 23,337 | | 23,337 | | 23,337 | | 0.6 | % | (3) (10)(39) |
| | | | | | | | 23,337 | | 23,337 | | 0.6 | % | |
| United Sporting Companies, Inc. (18) | Distributors | Second Lien Term Loan | 9/28/2012 | 16.19% (1ML+ 11.00%) plus 2.00% PIK | 2.25 | | 11/16/2019 | 130,140 | | 89,178 | | 6,988 | | 0.2 | % | (9)(10) |
| | | | | | | | 89,178 | | 6,988 | | 0.2 | % | |
| Upstream Newco, Inc. | Health Care Providers & Services | Second Lien Term Loan | 11/20/2019 | 13.84% (3M SOFR+ 8.50%) | — | | 11/20/2027 | 22,000 | | 21,886 | | 19,876 | | 0.5 | % | (3)(8)(10) |
| | | | | | | | 21,886 | | 19,876 | | 0.5 | % | |
| USG Intermediate, LLC | Leisure Products | First Lien Revolving Line of Credit - $4,000 Commitment | 4/15/2015 | 14.45% (1M SOFR+ 9.25%) | 1.00 | | 2/9/2028 | 4,000 | | 4,000 | | 4,000 | | 0.1 | % | (10)(15) |
| First Lien Term Loan B | 4/15/2015 | 16.95% (1M SOFR+ 11.75%) | 1.00 | | 2/9/2028 | 59,944 | | 59,944 | | 59,944 | | 1.6 | % | (3) (10) |
| Equity | 4/15/2015 | | — | | N/A | — | | 1 | | — | | — | % | (16) |
| | | | | | | | 63,945 | | 63,944 | | 1.7 | % | |
| VC GB Holdings I Corp | Household Durables | Second Lien Term Loan | 6/30/2021 | 12.23% (3ML+ 6.75%) | 0.50 | | 7/23/2029 | 23,000 | | 22,826 | | 22,930 | | 0.6 | % | (3)(8)(10) |
| | | | | | | | 22,826 | | 22,930 | | 0.6 | % | |
| ViaPath Technologies. (f/k/a Global Tel*Link Corporation) | Diversified Telecommunication Services | First Lien Term Loan | 8/7/2019 | 9.45% (1M SOFR+ 4.25%) | — | | 11/29/2025 | 9,597 | | 9,439 | | 9,218 | | 0.2 | % | (3)(8)(10) |
| Second Lien Term Loan | 11/20/2018 | 15.20% (1M SOFR+ 10.00%) | — | | 11/29/2026 | 122,670 | | 121,956 | | 121,328 | | 3.3 | % | (3)(8)(10) |
| | | | | | | | 131,395 | | 130,546 | | 3.5 | % | |
| Victor Technology, LLC | Commercial Services & Supplies | First Lien Term Loan | 12/3/2021 | 13.00%(3M SOFR+ 7.50%) | 1.00 | | 12/3/2028 | 29,550 | | 29,550 | | 28,158 | | 0.8 | % | (3) (10) |
| | | | | | | | 29,550 | | 28,158 | | 0.8 | % | |
See notes to consolidated financial statements.
28
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2023 (Continued)
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2023 | |
| Portfolio Company | Industry | Investments(1)(37) | Acquisition Date(44) | Coupon/Yield | Floor | Legal Maturity | Principal Value | Amortized Cost | Fair Value(2) | % of Net Assets | |
| | | | | | | | | | | |
| PORTFOLIO INVESTMENTS | | | | | | | | | |
| | | | | | | | | | | |
| Non-Control/Non-Affiliate Investments (less than 5.00% voting control) | | | | | | | |
| | | | | | | | | | | |
| Voya CLO 2012-4, Ltd. | Structured Finance | Subordinated Structured Note | 11/5/2012 | Residual Interest, current yield 0.00% | — | | 10/15/2030 | $ | 40,613 | | $ | 25,760 | | $ | 19,291 | | 0.5 | % | (5) (14)(17) |
| | | | | | | | 25,760 | | 19,291 | | 0.5 | % | |
| Voya CLO 2014-1, Ltd. | Structured Finance | Subordinated Structured Note | 2/5/2014 | Residual Interest, current yield 0.75% | — | | 4/18/2031 | 40,773 | | 23,324 | | 15,895 | | 0.4 | % | (5) (14) |
| | | | | | | | 23,324 | | 15,895 | | 0.4 | % | |
| Voya CLO 2016-3, Ltd. | Structured Finance | Subordinated Structured Note | 9/30/2016 | Residual Interest, current yield 10.28% | — | | 10/20/2031 | 28,100 | | 23,295 | | 19,297 | | 0.5 | % | (5) (14) |
| | | | | | | | 23,295 | | 19,297 | | 0.5 | % | |
| Voya CLO 2017-3, Ltd. | Structured Finance | Subordinated Structured Note | 6/13/2017 | Residual Interest, current yield 13.32% | — | | 4/20/2034 | 44,885 | | 51,926 | | 40,366 | | 1.2 | % | (5) (14) |
| | | | | | | | 51,926 | | 40,366 | | 1.2 | % | |
| VT Topco, Inc. | Commercial Services & Supplies | Second Lien Term Loan | 8/14/2018 | 11.97% (1M SOFR+ 6.75%) | — | | 8/17/2026 | 12,000 | | 11,944 | | 11,879 | | 0.3 | % | (3)(8)(10) |
| 2021 Second Lien Term Loan | 7/30/2021 | 11.97% (1M SOFR+ 6.75%) | 0.75 | | 8/17/2026 | 20,250 | | 20,144 | | 20,046 | | 0.5 | % | (3)(8)(10) |
| | | | | | | | 32,088 | | 31,925 | | 0.8 | % | |
| WatchGuard Technologies, Inc. | IT Services | First Lien Term Loan | 8/17/2022 | 10.11% (6M SOFR + 5.25% | 0.75 | | 6/30/2029 | 34,738 | | 34,738 | | 34,637 | | 0.9 | % | (3)(8)(10) |
| | | | | | | | 34,738 | | 34,637 | | 0.9 | % | |
| Wellful Inc. (f/k/a KNS Acquisition Corp.) | Food & Staples Retailing | First Lien Term Loan | 5/13/2019 | 11.47% (1M SOFR + 6.25%) | — | | 10/1/2025 | 14,240 | | 14,130 | | 13,784 | | 0.4 | % | (3)(8)(10) |
| Incremental First Lien Term Loan | 9/25/2018 | 11.47% (1M SOFR + 6.25%) | — | | 10/1/2026 | 37,000 | | 36,710 | | 33,941 | | 0.9 | % | (3)(8)(10) |
| | | | | | | | 50,840 | | 47,725 | | 1.3 | % | |
| Wellpath Holdings, Inc. (f/k/a CCS-CMGC Holdings, Inc.) | Health Care Providers & Services | First Lien Term Loan | 5/13/2019 | 10.98% (3ML+ 5.50%) | — | | 10/1/2025 | 14,240 | | 14,130 | | 13,784 | | 0.4 | % | (3)(8)(10) |
| Second Lien Term Loan | 9/25/2018 | 14.48% (3ML+ 9.00%) | — | | 10/1/2026 | 37,000 | | 36,710 | | 33,941 | | 0.9 | % | (3)(8)(10) |
| | | | | | | | 50,840 | | 47,725 | | 1.3 | % | |
| Total Non-Control/Non-Affiliate Investments | $ | 4,803,245 | | $ | 4,142,837 | | 111.0 | % | |
| | | | |
| Total Portfolio Investments | $ | 7,800,596 | | $ | 7,724,931 | | 207.0 | % | |
See notes to consolidated financial statements.
29
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023
(1)The terms “Prospect,” “the Company,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise. The securities in which Prospect has invested were acquired in transactions that were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These securities may be resold only in transactions that are exempt from registration under the Securities Act.
(2)Fair value is determined by or under the direction of our Board of Directors. Unless otherwise indicated by endnote 47 below, all of our investments are valued using significant unobservable inputs. In accordance with ASC 820, such investments are classified as Level 3 within the fair value hierarchy. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.
(3)Security, or a portion thereof, is held by Prospect Capital Funding LLC (“PCF”), our wholly owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the Revolving Credit Facility and such security is not available as collateral to our general creditors (see Note 4). The fair value of the investments held by PCF at September 30, 2023 and June 30, 2023 were $2,969,277 and $3,051,668, respectively, representing 38.4% and 39.5% of our total investments, respectively.
(4)Medical Solutions Holdings, Inc. and Medical Solutions, LLC are joint borrowers on the Second Lien Term Loan.
(5)This investment is in the equity class of the collateralized loan obligation (“CLO”) security, which is referred to as “Subordinated Structured Note,” or “SSN”. The SSN investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield, calculated using amortized cost, is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.
(6)On December 28, 2022, we provided $15,000 of additional Second Lien Term Loans and $30,000 of Second Lien Delayed Draw Term Loan commitments to PGX Holdings, Inc. (“PGX”). Also as of December 28, 2022, we contributed our existing equity interest in PGX to PGX TopCo LLC, an entity in which we own 100% of the Class B non-voting shares. Given the only equity we hold in the PGX structure is non-voting, we classify our investment in the PGX structure as non-control/non-affiliate beginning December 31, 2022 and as of June 30, 2023. On September 28, 2023, in connection with a Chapter 11 process, PGX sold the majority of its assets to a new entity, Credit.com Holdings, LLC (“Credit.com”). As part of the transaction, we rolled the majority of our existing First Lien Term Loan into a new First Lien Term Loan A and new First Lien Term Loan B at Credit.com. We were also issued equity at Credit.com, which we hold through our Class B non-voting equity investment in PGX Topco II LLC.
(7)Engine Group, Inc., EMX Digital, Inc. (f/k/a Clearstream.TV, Inc.), and Engine International, Inc., are joint borrowers on the first lien term loan.
(8)Syndicated investment which was originated by a financial institution and broadly distributed.
(9)Investment on non-accrual status as of the reporting date (See Note 2).
(10)Certain variable rate securities in our portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. The 1-Month LIBOR, or “1ML”, was 5.43% as of September 30, 2023 and 5.22% as of June 30, 2023. The 3-Month LIBOR, or “3ML”, was 5.66% as of September 30, 2023 and 5.55% as of June 30, 2023. The 6-Month LIBOR, or “6ML”, was 5.90% as of September 30, 2023 and 5.76% as of June 30, 2023. The 1-Month Secured Overnight Financing Rate or “1M SOFR”, was 5.32% as of September 30, 2023 and 5.14% as of June 30, 2023. The 3-Month Secured Overnight Financing Rate or “3M SOFR”, was 5.40% as of September 30, 2023 and 5.27% as of June 30, 2023. The 6-Month Secured Overnight Financing Rate or “6M SOFR” was 5.47% as of September 30, 2023 and 5.39% as of June 30, 2023. The PRIME Rate or “PRIME” was 8.50% as of September 30, 2023 and 8.25% as of June 30, 2023. The impact of a SOFR credit spread adjustment, if applicable, is included within the stated all-in interest rate.
(11)PeopleConnect Holdings, Inc. and Pubrec Holdings, Inc. are joint borrowers.
(12)The consolidated revenue interest is equal to the lesser of (i) 2.0% of consolidated revenue for the twelve-month period ending on the last day of the prior fiscal quarter (or portion thereof) and (ii) 25% of the amount of interest accrued on the Notes at the cash interest rate for such fiscal quarter (or portion thereof).
See notes to consolidated financial statements.
30
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(13)The overriding royalty interests held receive payments at the stated rates based upon operations of the borrower.
(14)Investment has been designated as an investment not “qualifying” under Section 55(a) of the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2023 and June 30, 2023, our qualifying assets, as a percentage of total assets, stood at 82.29% and 82.08%, respectively. We monitor the status of these assets on an ongoing basis.
(15)Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of September 30, 2023 and June 30, 2023, we had $27,316 and $47,875, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.
(16)Represents non-income producing security that has not paid a dividend in the year preceding the reporting date.
(17)The effective yield has been estimated to be 0% as expected future cash flows are anticipated to not be sufficient to repay the investment at cost. If the expected investment proceeds increase, there is a potential for future investment income from the investment. Distributions, once received, will be recognized as return of capital, and when called, any remaining unamortized investment costs will be written off if the actual distributions are less than the amortized investment cost. To the extent that the cost basis of the SSN is fully recovered, any future distributions will be recorded as realized gains.
(18)Ellett Brothers, LLC, Evans Sports, Inc., Jerry’s Sports, Inc., Simmons Gun Specialties, Inc., Bonitz Brothers, Inc., and Outdoor Sports Headquarters, Inc. are joint borrowers on the second lien term loan. United Sporting Companies, Inc. (“USC”) is a parent guarantor of this debt investment, and is 100% owned by SportCo Holdings, Inc. (“SportCo”). In June 2019, USC filed for Chapter 11 bankruptcy and began liquidating its remaining assets.
(19)Security was called for redemption and the liquidation of the underlying loan portfolio is ongoing.
(20)CP Holdings of Delaware LLC (“CP Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 99.8% of CP Energy Services Inc. (“CP Energy”) as of September 30, 2023 and June 30, 2023. CP Energy owns directly or indirectly 100% of each of CP Well Testing, LLC; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. We report CP Energy as a separate controlled company. In June 2019, CP Energy purchased a controlling interest in the common equity of Spartan Energy Holdings, Inc. (“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”), a portfolio company of Prospect with $32,021 in first lien term loans (the “Spartan Term Loans”) due to us as of September 30, 2023. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loans are presented as control investments under CP Energy. Spartan remains the direct borrower and guarantor to Prospect for the Spartan Term Loans. In September 2020, we made a new $26,193 Series A preferred stock investment in Spartan Energy Holdings, Inc., which equates to 100% of the Series A non-voting non-convertible preferred stock outstanding.
(21)Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 99.8% and 99.0% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of September 30, 2023 and June 30, 2023, respectively. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC, the operating companies. We report Credit Central as a separate controlled company. Effective December 10, 2021, Credit Central’s term loan lenders were granted a first priority security interest on certain assets of Credit Central and our investment became classified as a First Lien Term Loan.
(22)Redstone Holdco 2 LP is the parent borrower on the second lien term loan. Redstone Buyer, LLC, Redstone Intermediate (Archer) HoldCo LLC, Redstone Intermediate (FRI) HoldCo LLC, Redstone Intermediate (NetWitness) HoldCo, LLC, and Redstone Intermediate (SecurID) HoldCo, LLC are joint borrowers on the Second Lien Term Loan.
(23)First Tower Holdings of Delaware LLC (“First Tower Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 80.10% of the voting interest and 78.06% of the fully-diluted economic interest of First Tower Finance Company LLC (“First Tower Finance”). First Tower Finance owns 100% of First Tower, LLC, the operating company. We report First Tower Finance as a separate controlled company. Effective March 17, 2021, the First Tower, LLC lenders were granted a first priority security interest in First Tower Finance’s assets and our investment became classified as a First Lien Term Loan. Effective June 30, 2021, we increased our investment in our first lien term loan in the aggregate principal amount of $50,000 and the proceeds were returned to us as a distribution on our equity investment in First Tower, LLC.
See notes to consolidated financial statements.
31
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(24)Energy Solutions Holdings Inc., a consolidated entity in which we own 100% of the equity, owns 100% of Freedom Marine Solutions, LLC (“Freedom Marine”), which owns Vessel Company, LLC, Vessel Company II, LLC and Vessel Company III, LLC. We report Freedom Marine as a separate controlled company.
(25)MITY Holdings of Delaware Inc. (“MITY Delaware”), a consolidated entity in which we own 100% of the common stock, owns 100% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”). MITY owns 100% of each of MITY-Lite, Inc. (“Mity-Lite”); Broda Enterprises USA, Inc.; and Broda Enterprises ULC (“Broda Canada”). We report MITY as a separate controlled company. Our subordinated unsecured note issued and outstanding to Broda Canada is denominated in Canadian Dollars (“CAD”). As of September 30, 2023 and June 30, 2023, the principal balance of this note was CAD 7,371. In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedule of Investments in USD. We formed a separate legal entity domiciled in the United States, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 100% of the equity. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distributes it to its shareholder.
(26)NPH Property Holdings, LLC (“NPH”), a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of National Property REIT Corp. (“NPRC”) (f/k/a National Property Holdings Corp.), a property REIT which holds investments in several real estate properties. Additionally, NPRC invests in online consumer loans and rated secured structured notes through American Consumer Lending Limited (“ACLL”) and National General Lending Limited (“NGL”), respectively, its wholly owned subsidiaries. We report NPRC as a separate controlled company. See Note 3 for further discussion of the investments held by NPRC.
(27)Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 94.48% of Nationwide Loan Company LLC, the operating company, as of September 30, 2023 and June 30, 2023. We report Nationwide Loan Company LLC as a separate controlled company. Prospect has a first priority security interest in the assets of Nationwide.
(28)NMMB Holdings, Inc. (“NMMB Holdings”), a consolidated entity in which we own 100% of the equity, owns 92.77% and 90.42% of the fully diluted equity of NMMB, Inc. (“NMMB”) as of September 30, 2023 and June 30, 2023, respectively. NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc. We report NMMB as a separate controlled company.
(29)Vision Solutions, Inc. and Precisely Software Incorporate are joint borrowers on the Second Lien Term Loan.
(30)Prospect owns 99.96% of the equity of USES Corp. as of September 30, 2023 and June 30, 2023.
(31)Valley Electric Holdings I, Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), another consolidated entity. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”). Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. We report Valley Electric as a separate controlled company.
(32)As of September 30, 2023 and June 30, 2023, Prospect owns 8.57% of the equity in Encinitas Watches Holdco, LLC, the parent company of Nixon, Inc.
(33)Japs-Olson Company, LLC, Alpha Mail Debt Merger Sub, LLC and J-O Building Company LLC are joint borrowers on the First Lien Term Loan.
(34)UTP Holdings Group, Inc. (“UTP Holdings”) owns all of the voting stock of Universal Turbine Parts, LLC (“UTP”) and has appointed a Board of Directors to UTP Holdings, consisting of three employees of the Investment Advisor. UTP Holdings owns UTP. UTP Holdings is a wholly-owned holding company controlled by Prospect and therefore Prospect’s investment in UTP is classified as a control investment.
(35)As of September 30, 2023 and June 30, 2023, the residual profit interest includes both (i) 8.33% of New TLA, TLD and TLE residual profit and (ii) 100% of TLC residual profits, with both calculated quarterly in arrears.
(36)Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% ownership interest of Pacific World as of September 30, 2023 and as of June 30, 2023. As a result, Prospect’s investment in Pacific World is classified as a control investment.
(37)The following shows the composition of our investment portfolio at cost by control designation, investment type and by
See notes to consolidated financial statements.
32
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
industry as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Cost Total |
| Control Investments | | | | | | |
| Aerospace & Defense | $ | 54,739 | | $ | — | | $ | — | | $ | — | | $ | 55,581 | | $ | 110,320 | |
| Commercial Services & Supplies | 129,509 | | — | | — | | 7,200 | | 27,348 | | 164,057 | |
| Construction & Engineering | 79,095 | | — | | — | | — | | 12,053 | | 91,148 | |
| Consumer Finance | 503,134 | | — | | — | | — | | 82,843 | | 585,977 | |
| Diversified Consumer Services | — | | — | | — | | — | | 2,378 | | 2,378 | |
| Energy Equipment & Services | 106,972 | | — | | — | | — | | 221,800 | | 328,772 | |
| Equity Real Estate Investment Trusts (REITs) | 776,749 | | — | | — | | — | | 15,430 | | 792,179 | |
| Health Care Providers & Services | 298,734 | | — | | — | | — | | 45,118 | | 343,852 | |
| Machinery | 37,322 | | — | | — | | — | | 6,866 | | 44,188 | |
| Media | 29,723 | | — | | — | | — | | — | | 29,723 | |
| Online Lending | 20,630 | | — | | — | | — | | — | | 20,630 | |
| Personal Products | 91,907 | | — | | — | | — | | 189,295 | | 281,202 | |
| Trading Companies & Distributors | 32,675 | | — | | — | | — | | 32,500 | | 65,175 | |
| Structured Finance | 200,600 | | — | | — | | — | | — | | 200,600 | |
| Total Control Investments | $ | 2,361,789 | | $ | — | | $ | — | | $ | 7,200 | | $ | 691,212 | | $ | 3,060,201 | |
| Affiliate Investments | | | | | | |
| Commercial Services & Supplies | $ | — | | $ | — | | $ | — | | $ | — | | $ | 10,162 | | $ | 10,162 | |
| | | | | | |
| | | | | | |
| Total Affiliate Investments | $ | — | | $ | — | | $ | — | | $ | — | | $ | 10,162 | | $ | 10,162 | |
| Non-Control/Non-Affiliate Investments | | | | | | |
| Air Freight & Logistics | $ | 93,222 | | $ | 95,000 | | $ | — | | $ | — | | $ | — | | $ | 188,222 | |
| Automobile Components | 22,187 | | 86,647 | | — | | — | | 25,697 | | 134,531 | |
| Building Products | — | | 35,000 | | — | | — | | — | | 35,000 | |
| Capital Markets | — | | 42,500 | | — | | — | | — | | 42,500 | |
| Commercial Services & Supplies | 202,585 | | 153,296 | | — | | — | | 1,500 | | 357,381 | |
| Communications Equipment | 9,260 | | 50,609 | | — | | — | | — | | 59,869 | |
| Consumer Finance | 47,023 | | — | | — | | — | | — | | 47,023 | |
| Distributors | 204,685 | | 89,178 | | — | | — | | — | | 293,863 | |
| Diversified Consumer Services | 84,101 | | — | | — | | — | | 23,898 | | 107,999 | |
| Diversified Financial Services | 36,410 | | — | | — | | — | | — | | 36,410 | |
| Diversified Telecommunication Services | 39,300 | | 122,008 | | — | | — | | — | | 161,308 | |
| Electrical Equipment | 68,229 | | — | | — | | — | | — | | 68,229 | |
| | | | | | |
| | | | | | |
| Food & Staples Retailing | 27,040 | | — | | — | | — | | — | | 27,040 | |
| Food Products | — | | 134,931 | | — | | — | | — | | 134,931 | |
| Health Care Equipment & Supplies | — | | — | | — | | — | | — | | — | |
| Health Care Providers & Services | 187,324 | | 159,832 | | — | | — | | 1,546 | | 348,702 | |
| Health Care Technology | 132,923 | | — | | — | | — | | — | | 132,923 | |
| Hotels, Restaurants & Leisure | 21,256 | | — | | — | | — | | — | | 21,256 | |
| Household Durables | 125,798 | | 29,813 | | — | | — | | 3,501 | | 159,112 | |
| | | | | | |
| | | | | | |
| Interactive Media & Services | 153,131 | | — | | — | | — | | — | | 153,131 | |
| Internet & Direct Marketing Retail | 2,411 | | 18,306 | | — | | — | | — | | 20,717 | |
| IT Services | 210,410 | | 148,225 | | — | | — | | — | | 358,635 | |
| Leisure Products | 69,429 | | — | | — | | — | | 1 | | 69,430 | |
| Machinery | 52,621 | | 9,989 | | — | | — | | — | | 62,610 | |
| Media | 43,396 | | — | | — | | — | | 26,991 | | 70,387 | |
| | | | | | |
| | | | | | |
| Pharmaceuticals | 98,748 | | — | | — | | — | | — | | 98,748 | |
| Professional Services | 87,435 | | 124,046 | | — | | — | | — | | 211,481 | |
| | | | | | |
| Software | — | | 52,364 | | — | | — | | — | | 52,364 | |
| | | | | | |
| | | | | | |
| Textiles, Apparel & Luxury Goods | 177,397 | | 3,547 | | — | | — | | — | | 180,944 | |
| | | | | | |
| | | | | | |
| Structured Finance (A) | — | | — | | 908,744 | | — | | — | | 908,744 | |
| Total Non-Control/Non-Affiliate | $ | 2,196,321 | | $ | 1,355,291 | | $ | 908,744 | | $ | — | | $ | 83,134 | | $ | 4,543,490 | |
See notes to consolidated financial statements.
33
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Cost Total |
| Total Portfolio Investment Cost | $ | 4,558,110 | | $ | 1,355,291 | | $ | 908,744 | | $ | 7,200 | | $ | 784,508 | | $ | 7,613,853 | |
The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Fair Value Total | Fair Value % of Net Assets Applicable to Common Stock |
| Control Investments | | | | | | | |
| Aerospace & Defense | $ | 54,739 | | $ | — | | $ | — | | $ | — | | $ | 8,541 | | $ | 63,280 | | 1.7 | % |
| Commercial Services & Supplies | 69,840 | | — | | — | | 7,200 | | 18,467 | | 95,507 | | 2.5 | % |
| Construction & Engineering | 79,095 | | — | | — | | — | | 110,397 | | 189,492 | | 5.0 | % |
| Consumer Finance | 502,244 | | — | | — | | — | | 236,377 | | 738,621 | | 19.5 | % |
| Diversified Consumer Services | — | | — | | — | | — | | 3,242 | | 3,242 | | 0.1 | % |
| Energy Equipment & Services | 105,578 | | — | | — | | — | | 20,397 | | 125,975 | | 3.3 | % |
| Equity Real Estate Investment Trusts (REITs) | 776,749 | | — | | — | | — | | 631,763 | | 1,408,512 | | 37.3 | % |
| Health Care Providers & Services | 298,734 | | — | | — | | — | | 159,446 | | 458,180 | | 12.1 | % |
| Machinery | 37,322 | | — | | — | | — | | 67,412 | | 104,734 | | 2.8 | % |
| Media | 29,723 | | — | | — | | — | | 75,024 | | 104,747 | | 2.8 | % |
| Online Lending | 20,630 | | — | | — | | — | | — | | 20,630 | | 0.5 | % |
| Personal Products | 63,223 | | — | | — | | — | | — | | 63,223 | | 1.7 | % |
| Trading Companies & Distributors | 32,675 | | — | | — | | — | | 16,190 | | 48,865 | | 1.3 | % |
| Structured Finance (A) | 200,600 | | — | | — | | — | | — | | 200,600 | | 5.3 | % |
| Total Control Investments | $ | 2,271,152 | | $ | — | | $ | — | | $ | 7,200 | | $ | 1,347,256 | | $ | 3,625,608 | | 95.9 | % |
| Fair Value % of Net Assets | 60.1 | % | — | % | — | % | 0.2 | % | 35.6 | % | 95.9 | % | |
| Affiliate Investments | | | | | | | |
| Commercial Services & Supplies | $ | — | | $ | — | | $ | — | | $ | — | | $ | 12,541 | | $ | 12,541 | | 0.3 | % |
| | | | | | | |
| | | | | | | |
| Total Affiliate Investments | $ | — | | $ | — | | $ | — | | $ | — | | $ | 12,541 | | $ | 12,541 | | 0.3 | % |
| Fair Value % of Net Assets | — | % | — | % | — | % | — | % | 0.3 | % | 0.3 | % | |
| Non-Control/Non-Affiliate Investments | | | | | | | |
| Air Freight & Logistics | $ | 92,420 | | $ | 95,000 | | $ | — | | $ | — | | $ | — | | $ | 187,420 | | 5.0 | % |
| Automobile Components | 22,129 | | 86,653 | | — | | — | | 1,444 | | 110,226 | | 2.9 | % |
| Building Products | — | | 32,984 | | — | | — | | — | | 32,984 | | 0.9 | % |
| Capital Markets | — | | 42,500 | | — | | — | | — | | 42,500 | | 1.1 | % |
| | | | | | | |
| Commercial Services & Supplies | 203,615 | | 152,922 | | — | | — | | 14,532 | | 371,069 | | 9.8 | % |
| Communications Equipment | 9,387 | | 47,849 | | — | | — | | — | | 57,236 | | 1.5 | % |
| Consumer Finance | 18,183 | | — | | — | | — | | — | | 18,183 | | 0.5 | % |
| Distributors | 203,562 | | 7,227 | | — | | — | | 47,647 | | 258,436 | | 6.8 | % |
| Diversified Consumer Services | 84,345 | | — | | — | | — | | 17,461 | | 101,806 | | 2.7 | % |
| Diversified Financial Services | 36,410 | | — | | — | | — | | — | | 36,410 | | 1.0 | % |
| Diversified Telecommunication Services | 39,485 | | 122,670 | | — | | — | | — | | 162,155 | | 4.3 | % |
| Electrical Equipment | 68,292 | | — | | — | | — | | — | | 68,292 | | 1.8 | % |
| | | | | | | |
| | | | | | | |
| Food & Staples Retailing | 26,824 | | — | | — | | — | | — | | 26,824 | | 0.7 | % |
| Food Products | — | | 126,168 | | — | | — | | — | | 126,168 | | 3.3 | % |
| Health Care Equipment & Supplies | — | | — | | — | | — | | — | | — | | — | % |
| Health Care Providers & Services | 186,094 | | 155,739 | | — | | — | | 2,276 | | 344,109 | | 9.1 | % |
| Health Care Technology | 133,401 | | — | | — | | — | | — | | 133,401 | | 3.5 | % |
| Hotels, Restaurants & Leisure | 20,098 | | — | | — | | — | | — | | 20,098 | | 0.5 | % |
| Household Durables | 126,136 | | 24,625 | | — | | — | | 1,567 | | 152,328 | | 4.0 | % |
| | | | | | | |
| | | | | | | |
| Interactive Media & Services | 153,131 | | — | | — | | — | | — | | 153,131 | | 4.1 | % |
| Internet & Direct Marketing Retail | 2,406 | | 14,125 | | — | | — | | — | | 16,531 | | 0.4 | % |
| IT Services | 209,197 | | 139,672 | | — | | — | | — | | 348,869 | | 9.3 | % |
See notes to consolidated financial statements.
34
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Fair Value Total | Fair Value % of Net Assets Applicable to Common Stock |
| Leisure Products | 69,286 | | — | | — | | — | | — | | 69,286 | | 1.8 | % |
| Machinery | 52,994 | | 10,000 | | — | | — | | — | | 62,994 | | 1.7 | % |
| Media | 41,331 | | — | | — | | — | | — | | 41,331 | | 1.1 | % |
| | | | | | | |
| | | | | | | |
| Pharmaceuticals | 99,209 | | — | | — | | — | | — | | 99,209 | | 2.6 | % |
| Professional Services | 86,495 | | 111,332 | | — | | — | | — | | 197,827 | | 5.2 | % |
| | | | | | | |
| Software | — | | 52,102 | | — | | — | | — | | 52,102 | | 1.4 | % |
| | | | | | | |
| | | | | | | |
| Textiles, Apparel & Luxury Goods | 177,397 | | 3,600 | | — | | — | | — | | 180,997 | | 4.8 | % |
| | | | | | | |
| | | | | | | |
| Structured Finance (A) | — | | — | | 626,746 | | — | | — | | 626,746 | | 16.6 | % |
| Total Non-Control/Non-Affiliate | $ | 2,161,827 | | $ | 1,225,168 | | $ | 626,746 | | $ | — | | $ | 84,927 | | $ | 4,098,668 | | 108.4 | % |
| Fair Value % of Net Assets | 57.2 | % | 32.4 | % | 16.6 | % | — | % | 2.2 | % | 108.4 | % | |
| Total Portfolio | $ | 4,432,979 | | $ | 1,225,168 | | $ | 626,746 | | $ | 7,200 | | $ | 1,444,724 | | $ | 7,736,817 | | 204.6 | % |
| Fair Value % of Net Assets | 117.3 | % | 32.4 | % | 16.6 | % | 0.2 | % | 38.1 | % | 204.6 | % | |
(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.
(38)The following table shows the composition of our investment portfolio at cost by control designation, investment type and by industry as of June 30, 2023: | | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Cost Total |
| Control Investments | | | | | | |
| Aerospace & Defense | $ | 56,600 | | $ | — | | $ | — | | $ | — | | $ | 55,581 | | $ | 112,181 | |
| Commercial Services & Supplies | 129,241 | | — | | — | | 7,200 | | 27,349 | | 163,790 | |
| Construction & Engineering | 79,095 | | — | | — | | — | | 12,053 | | 91,148 | |
| Consumer Finance | 495,166 | | — | | — | | — | | 82,843 | | 578,009 | |
| Diversified Consumer Services | — | | — | | — | | — | | 2,378 | | 2,378 | |
| Energy Equipment & Services | 103,310 | | — | | — | | — | | 221,800 | | 325,110 | |
| Equity Real Estate Investment Trusts (REITs) | 725,703 | | — | | — | | — | | 15,430 | | 741,133 | |
| Health Care Providers & Services | 293,179 | | — | | — | | — | | 45,118 | | 338,297 | |
| Machinery | 33,622 | | — | | — | | — | | 6,866 | | 40,488 | |
| Media | 29,723 | | — | | — | | — | | — | | 29,723 | |
| Online Lending | 21,580 | | — | | — | | — | | — | | 21,580 | |
| Personal Products | 89,580 | | — | | — | | — | | 189,295 | | 278,875 | |
| Trading Companies & Distributors | 32,684 | | — | | — | | — | | 32,500 | | 65,184 | |
| Structured Finance (A) | 200,600 | | — | | — | | — | | — | | 200,600 | |
| Total Control Investments | $ | 2,290,083 | | $ | — | | $ | — | | $ | 7,200 | | $ | 691,213 | | $ | 2,988,496 | |
| Affiliate Investments | | | | | | |
| Commercial Services & Supplies | $ | — | | $ | — | | $ | — | | $ | — | | $ | 8,855 | | $ | 8,855 | |
| | | | | | |
| | | | | | |
| Total Affiliate Investments | $ | — | | $ | — | | $ | — | | $ | — | | $ | 8,855 | | $ | 8,855 | |
| Non-Control/Non-Affiliate Investments | | | | | | |
| Air Freight & Logistics | $ | 93,171 | | $ | 95,000 | | $ | — | | $ | — | | $ | — | | $ | 188,171 | |
| Auto Components | 22,284 | | 86,600 | | — | | — | | 25,697 | | 134,581 | |
| Building Products | — | | 35,000 | | — | | — | | — | | 35,000 | |
| Capital Markets | — | | 42,500 | | — | | — | | — | | 42,500 | |
| Commercial Services & Supplies | 216,363 | | 185,374 | | — | | — | | 1,500 | | 403,237 | |
| Communications Equipment | 9,249 | | 50,603 | | — | | — | | — | | 59,852 | |
| Consumer Finance | 47,024 | | — | | — | | — | | — | | 47,024 | |
| Distributors | 198,876 | | 89,178 | | — | | — | | — | | 288,054 | |
| Diversified Consumer Services | 87,280 | | 191,616 | | — | | — | | — | | 278,896 | |
| Diversified Financial Services | 36,504 | | — | | — | | — | | — | | 36,504 | |
| Diversified Telecommunication Services | 40,283 | | 121,956 | | — | | — | | — | | 162,239 | |
| Electrical Equipment | 68,399 | | — | | — | | — | | — | | 68,399 | |
| Food & Staples Retailing | 27,139 | | — | | — | | — | | — | | 27,139 | |
See notes to consolidated financial statements.
35
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Cost Total |
| Food Products | — | | 134,889 | | — | | — | | — | | 134,889 | |
| Health Care Equipment & Supplies | — | | 7,488 | | — | | — | | — | | 7,488 | |
| Health Care Providers & Services | 188,179 | | 159,791 | | — | | — | | 1,546 | | 349,516 | |
| Health Care Technology | 129,684 | | — | | — | | — | | — | | 129,684 | |
| Hotels, Restaurants & Leisure | 21,701 | | — | | — | | — | | — | | 21,701 | |
| Household Durables | 126,547 | | 29,806 | | — | | — | | 3,501 | | 159,854 | |
| Household Products | — | | — | | — | | — | | — | | — | |
| Insurance | — | | — | | — | | — | | — | | — | |
| Interactive Media & Services | 160,281 | | — | | — | | — | | — | | 160,281 | |
| Internet & Direct Marketing Retail | 2,406 | | 18,081 | | — | | — | | — | | 20,487 | |
| IT Services | 209,832 | | 148,150 | | — | | — | | — | | 357,982 | |
| Leisure Products | 69,693 | | — | | — | | — | | 1 | | 69,694 | |
| Machinery | 52,797 | | 9,988 | | — | | — | | — | | 62,785 | |
| Media | 46,695 | | — | | — | | — | | 26,991 | | 73,686 | |
| Paper & Forest Products | — | | — | | — | | — | | — | | — | |
| Pharmaceuticals | 99,269 | | — | | — | | — | | — | | 99,269 | |
| Professional Services | 87,757 | | 123,936 | | — | | — | | — | | 211,693 | |
| | | | | | |
| Software | — | | 52,350 | | — | | — | | — | | 52,350 | |
| Technology Hardware, Storage & Peripherals | — | | — | | — | | — | | — | | — | |
| Textiles, Apparel & Luxury Goods | 158,530 | | 8,945 | | — | | — | | — | | 167,475 | |
| Structured Finance | — | | — | | 952,815 | | — | | — | | 952,815 | |
| Total Non-Control/Non-Affiliate | $ | 2,199,943 | | $ | 1,591,251 | | $ | 952,815 | | $ | — | | $ | 59,236 | | $ | 4,803,245 | |
| Total Portfolio Investment Cost | $ | 4,490,026 | | $ | 1,591,251 | | $ | 952,815 | | $ | 7,200 | | $ | 759,304 | | $ | 7,800,596 | |
The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of June 30, 2023: | | | | | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Fair Value Total | Fair Value % of Net Assets |
| Control Investments | | | | | | | |
| Aerospace & Defense | $ | 56,600 | | $ | — | | $ | — | | $ | — | | $ | 7,598 | | $ | 64,198 | | 1.7 | % |
| Commercial Services & Supplies | 69,875 | | — | | — | | 7,200 | | 10,630 | | 87,705 | | 2.3 | % |
| Construction & Engineering | 79,095 | | — | | — | | — | | 86,689 | | 165,784 | | 4.4 | % |
| Consumer Finance | 492,165 | | — | | — | | — | | 227,431 | | 719,596 | | 19.3 | % |
| Diversified Consumer Services | — | | — | | — | | — | | 3,242 | | 3,242 | | 0.1 | % |
| Energy Equipment & Services | 103,310 | | — | | — | | — | | 23,420 | | 126,730 | | 3.4 | % |
| Equity Real Estate Investment Trusts (REITs) | 725,703 | | — | | — | | — | | 712,093 | | 1,437,796 | | 38.5 | % |
| Health Care Providers & Services | 293,179 | | — | | — | | — | | 164,788 | | 457,967 | | 12.3 | % |
| Machinery | 33,622 | | — | | — | | — | | 47,886 | | 81,508 | | 2.2 | % |
| Media | 29,723 | | — | | — | | — | | 64,457 | | 94,180 | | 2.5 | % |
| Online Lending | 21,580 | | — | | — | | — | | — | | 21,580 | | 0.6 | % |
| Personal Products | 65,746 | | — | | — | | — | | — | | 65,746 | | 1.8 | % |
| Trading Companies & Distributors | 32,684 | | — | | — | | — | | 12,381 | | 45,065 | | 1.2 | % |
| Structured Finance (A) | 200,600 | | — | | — | | — | | — | | 200,600 | | 5.4 | % |
| Total Control Investments | $ | 2,203,882 | | $ | — | | $ | — | | $ | 7,200 | | $ | 1,360,615 | | $ | 3,571,697 | | 95.7 | % |
| Fair Value % of Net Assets | 59.0 | % | — | % | — | % | 0.2 | % | 36.5 | % | 95.7 | % | |
| Affiliate Investments | | | | | | | |
| Commerical Sevices & Supplies | $ | — | | $ | — | | $ | — | | $ | — | | $ | 10,397 | | $ | 10,397 | | 0.3 | % |
| Diversified Consumer Services | — | | — | | — | | — | | — | | — | | — | % |
| Textiles, Apparel & Luxury Goods | — | | — | | — | | — | | — | | — | | — | % |
| Total Affiliate Investments | $ | — | | $ | — | | $ | — | | $ | — | | $ | 10,397 | | $ | 10,397 | | 0.3 | % |
| Fair Value % of Net Assets | — | % | — | % | — | % | — | % | 0.3 | % | 0.3 | % | |
| Non-Control/Non-Affiliate Investments | | | | | | | |
| Air Freight & Logistics | $ | 93,946 | | $ | 95,000 | | $ | — | | $ | — | | $ | — | | $ | 188,946 | | 5.1 | % |
| Auto Components | 22,209 | | 86,160 | | — | | — | | 1,156 | | 109,525 | | 2.9 | % |
See notes to consolidated financial statements.
36
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Industry | 1st Lien Term Loan | 2nd Lien Term Loan | Subordinated Structured Notes | Unsecured Debt | Equity (B) | Fair Value Total | Fair Value % of Net Assets |
| Commercial Services & Supplies | 215,887 | | 182,242 | | — | | — | | 14,627 | | 412,756 | | 11.1 | % |
| Communications Equipment | 9,594 | | 50,083 | | — | | — | | — | | 59,677 | | 1.6 | % |
| Building Products | — | | 33,120 | | — | | — | | — | | 33,120 | | 0.9 | % |
| Capital Markets | — | | 39,984 | | — | | — | | — | | 39,984 | | 1.1 | % |
| Consumer Finance | 17,039 | | — | | — | | — | | — | | 17,039 | | 0.5 | % |
| Distributors | 197,713 | | 6,988 | | — | | — | | 39,123 | | 243,824 | | 6.5 | % |
| Diversified Consumer Services | 86,347 | | — | | — | | — | | — | | 86,347 | | 2.2 | % |
| Diversified Financial Services | 36,504 | | — | | — | | — | | — | | 36,504 | | 1.0 | % |
| Diversified Telecommunication Services | 40,348 | | 121,328 | | — | | — | | — | | 161,676 | | 4.3 | % |
| Electrical Equipment | 68,464 | | — | | — | | — | | — | | 68,464 | | 1.7 | % |
| Food & Staples Retailing | 26,828 | | — | | — | | — | | — | | 26,828 | | 0.7 | % |
| Food Products | — | | 122,003 | | — | | — | | — | | 122,003 | | 3.3 | % |
| Health Care Equipment & Supplies | — | | 7,500 | | — | | — | | — | | 7,500 | | 0.2 | % |
| Health Care Providers & Services | 183,872 | | 154,599 | | — | | — | | 1,927 | | 340,398 | | 9.0 | % |
| Health Care Technology | 128,793 | | — | | — | | — | | — | | 128,793 | | 3.5 | % |
| Hotels, Restaurants & Leisure | 20,776 | | — | | — | | — | | — | | 20,776 | | 0.6 | % |
| Household Durables | 126,904 | | 27,218 | | — | | — | | 1,523 | | 155,645 | | 4.2 | % |
| Household Products | — | | — | | — | | — | | — | | — | | — | % |
| Insurance | — | | — | | — | | — | | — | | — | | — | % |
| Interactive Media & Services | 160,281 | | — | | — | | — | | — | | 160,281 | | 4.3 | % |
| Internet & Direct Marketing Retail | 2,406 | | 14,514 | | — | | — | | — | | 16,920 | | 0.5 | % |
| IT Services | 207,224 | | 139,064 | | — | | — | | — | | 346,288 | | 9.3 | % |
| Leisure Products | 69,380 | | — | | — | | — | | — | | 69,380 | | 1.9 | % |
| Machinery | 53,213 | | 9,928 | | — | | — | | — | | 63,141 | | 1.7 | % |
| Media | 44,596 | | — | | — | | — | | — | | 44,596 | | 1.2 | % |
| Paper & Forest Products | — | | — | | — | | — | | — | | — | | — | % |
| Pharmaceuticals | 99,289 | | — | | — | | — | | — | | 99,289 | | 2.7 | % |
| Professional Services | 86,828 | | 114,666 | | — | | — | | — | | 201,494 | | 5.4 | % |
| Software | — | | 49,111 | | — | | — | | — | | 49,111 | | 1.3 | % |
| Technology Hardware, Storage & Peripherals | — | | — | | — | | — | | — | | — | | — | % |
| Textiles, Apparel & Luxury Goods | 158,530 | | 9,000 | | — | | — | | — | | 167,530 | | 4.5 | % |
| Structured Finance | — | | — | | 665,002 | | — | | — | | 665,002 | | 17.8 | % |
| Total Non-Control/Non-Affiliate | $ | 2,156,971 | | $ | 1,262,508 | | $ | 665,002 | | $ | — | | $ | 58,356 | | $ | 4,142,837 | | 111.0 | % |
| Fair Value % of Net Assets | 57.8 | % | 33.8 | % | 17.8 | % | — | % | 1.6 | % | 111.0 | % | |
| Total Portfolio | $ | 4,360,853 | | $ | 1,262,508 | | $ | 665,002 | | $ | 7,200 | | $ | 1,429,368 | | $ | 7,724,931 | | 207.0 | % |
| Fair Value % of Net Assets | 116.8 | % | 33.8 | % | 17.8 | % | 0.2 | % | 38.4 | % | 207.0 | % | |
(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.
See notes to consolidated financial statements.
37
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(39)The interest rate on these investments, excluding those on non-accrual, contains a paid in kind (“PIK”) provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments.
The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for three months ended September 30, 2023:
| | | | | | | | | | | | | | |
| Security Name | PIK Rate - Capitalized | PIK Rate - Paid as cash | Maximum Current PIK Rate | |
| CP Energy Services Inc. - First Lien Term Loan | N/A | N/A | N/A | (A) |
| CP Energy Services Inc. - First Lien Term Loan | N/A | N/A | N/A | (A) |
| CP Energy Services Inc. - First Lien Term Loan | N/A | N/A | N/A | (A) |
| CP Energy Services Inc. - First Lien Term Loan A to Spartan Energy Services, LLC | 13.59% | —% | 13.59% | (B) |
| Credit Central Loan Company, LLC - First Lien Term Loan | 10.00% | —% | 5.00% | (C) |
| | | | |
| Eze Castle Integration, Inc. - First Lien Term Loan | 0.75% | —% | 0.75% | |
| Eze Castle Integration, Inc. - Delayed Draw Term Loan | 0.75% | —% | 0.75% | |
| First Tower Finance Company LLC - First Lien Term Loan | 8.15% | 6.85% | 5.00% | (D) |
| InterDent, Inc. - First Lien Term Loan B | 12.00% | —% | 12.00% | |
| | | | |
| MITY, Inc. - First Lien Term Loan B | —% | 10.00% | 10.00% | |
| National Property REIT Corp. - First Lien Term Loan A | —% | 2.00% | 2.00% | |
| National Property REIT Corp. - First Lien Term Loan B | —% | 5.50% | N/A | (E) |
| National Property REIT Corp. - First Lien Term Loan C | —% | 2.25% | 2.25% | |
| National Property REIT Corp. - First Lien Term Loan D | —% | 2.50% | 2.00% | |
| National Property REIT Corp. - First Lien Term Loan E | 7.00% | —% | 7.00% | |
| Nationwide Loan Company LLC - First Lien Term Loan | 10.00% | —% | 10.00% | |
| Pacific World Corporation - First Lien Revolving Line of Credit | 12.83% | —% | 12.83% | (F) |
| Pacific World Corporation - First Lien Term Loan A | 8.92% | 1.91% | 10.83% | |
| | | | |
| | | | |
| | | | |
| | | | |
| Shutterfly, LLC - Second Lien Term Loan | 4.00% | —% | 4.00% | |
| Town & Country Holdings, Inc. - First Lien Term Loan | 12.00% | —% | 12.00% | (G) |
| Town & Country Holdings, Inc. - First Lien Term Loan | 12.00% | —% | 12.00% | (G) |
| TPS, LLC - First Lien Term Loan | 1.50% | —% | 1.50% | |
| USES Corp. - First Lien Equipment Term Loan | 14.59% | —% | 14.59% | (H) |
| Valley Electric Co. of Mt. Vernon, Inc. - First Lien Term Loan | —% | 2.50% | 2.50% | |
| Valley Electric Company, Inc. - First Lien Term Loan | N/A | N/A | N/A | (I) |
| Valley Electric Company, Inc. - First Lien Term Loan B | N/A | N/A | N/A | (I) |
(A) On January 6, 2023, the CP Energy Services, Inc. Amendment No. 16 to Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.50%. PIK was due October 2, 2023 for CP Energy Services, Inc. loans. The Maximum PIK rate that was capitalized into the balance of the loans was 14.50%.
(B) On August 22, 2022, the Spartan Energy Services, LLC Twenty-Fifth Amendment to Amended and Restated Senior Secured Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 13.59%.
(C) On September 30, 2022, the Credit Central Senior Subordinated Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 10.00%..
(D) On December 30, 2022, the First Tower Finance Company LLC Amendment No. 15 was amended to reduce the PIK rate to 5.00% and allow the interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 15.00%.
(E) On October 4, 2023, the National Property REIT Corp. fifteenth Amended and Restated Credit Agreement effective as of September 29, 2023 has removed the PIK component of the First Lien Term Loan B.
(F) Effective as of December 29, 2021, the Pacific World Corporation Amendment No. 8 was amended to allow the Revolving Line of Credit interest accruing in cash to be payable in kind resulting in a maximum current rate of 12.83%.
(G) On November 17, 2022, the Town & Country Holdings, Inc. Eighth Amendment to Loan Agreement was amended to a fixed PIK rate of 12.00%.
(H) On March 28, 2023, the USES Corp. First Lien Equipment Term loan was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.59%.
(I) PIK was due October 2, 2023 for Valley Electric Company, Inc. loans. The Maximum PIK rate that was capitalized into the balance of the
First Lien Term Loan and First Lien Term Loan B was 10.00% and 8.00%, respectively.
See notes to consolidated financial statements.
38
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for three months ended June 30, 2023: | | | | | | | | | | | | | | |
| Security Name | PIK Rate - Capitalized | PIK Rate - Paid as cash | Maximum Current PIK Rate | |
| CP Energy Services Inc. - First Lien Term Loan | 14.50% | —% | 14.50% | (A) |
| CP Energy Services Inc. - First Lien Term Loan | 14.50% | —% | 14.50% | (A) |
| CP Energy Services Inc. - First Lien Term Loan | 14.50% | —% | 14.50% | (A) |
| CP Energy Services Inc. - First Lien Term Loan A to Spartan Energy Services, LLC | 13.36% | —% | 13.36% | (B) |
| Credit Central Loan Company, LLC - First Lien Term Loan | 10.00% | —% | 5.00% | (C) |
| Echelon Transportation, LLC - First Lien Term Loan | —% | —% | —% | (D) |
| Eze Castle Integration, Inc. - First Lien Term Loan | 0.75% | —% | 0.75% | |
| Eze Castle Integration, Inc. - Delayed Draw Term Loan | 0.75% | —% | 0.75% | |
| First Tower Finance Company LLC - First Lien Term Loan | 12.06% | 2.94% | 5.00% | (E) |
| InterDent, Inc. - First Lien Term Loan B | 12.00% | —% | 12.00% | |
| MITY, Inc. - First Lien Term Loan A | 2.58% | 9.93% | —% | (F) |
| MITY, Inc. - First Lien Term Loan B | 6.92% | 15.58% | 10.00% | (F) |
| National Property REIT Corp. - First Lien Term Loan A | —% | 3.53% | 3.53% | |
| National Property REIT Corp. - First Lien Term Loan B | —% | 5.50% | 5.50% | |
| National Property REIT Corp. - First Lien Term Loan C | —% | 2.25% | 2.25% | |
| National Property REIT Corp. - First Lien Term Loan D | —% | 2.50% | 2.50% | |
| National Property REIT Corp. - First Lien Term Loan E | 7.00% | —% | 7.00% | |
| Nationwide Loan Company LLC - First Lien Term Loan | 10.00% | —% | 10.00% | |
| Pacific World Corporation - First Lien Revolving Line of Credit | 12.61% | —% | 12.61% | (G) |
| Pacific World Corporation - First Lien Term Loan A | 8.70% | 1.91% | 10.61% | |
| Rising Tide Holdings, Inc. - First Lien Term Loan | 13.76% | —% | 13.76% | (H) |
| Town & Country Holdings, Inc. - First Lien Term Loan | 12.00% | —% | 12.00% | (I) |
| Town & Country Holdings, Inc. - First Lien Term Loan | 12.00% | —% | 12.00% | (I) |
| TPS, LLC - First Lien Term Loan | 1.50% | —% | 1.50% | |
| USES Corp. - First Lien Equipment Term Loan | 14.36% | —% | 14.36% | (J) |
| Valley Electric Co. of Mt. Vernon, Inc. - First Lien Term Loan | —% | 2.50% | 2.50% | |
| Valley Electric Company, Inc. - First Lien Term Loan | 10.00% | —% | 10.00% | |
| Valley Electric Company, Inc. - First Lien Term Loan B | 8.00% | —% | 8.00% | |
(A) On January 6, 2023, the CP Energy Services, Inc. Amendment No. 16 to Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.50%.
(B) On August 22, 2022, the Spartan Energy Services, LLC Twenty-Fifth Amendment to Amended and Restated Senior Secured Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 13.36%.
(C) On September 30, 2022, the Credit Central Senior Subordinated Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 10.00%.
(D) On January 31, 2022, the Echelon Fifth Amendment and Restated Credit Agreement was amended to remove the PIK rate and to allow the interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 8.57%.
(E) On December 30, 2022, the First Tower Finance Company LLC Amendment No. 15 was amended to reduce the PIK rate to 5.00% and allow the interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 15.00%.
(F) On March 23, 2021, the Mity Amendment No. 1 and Waiver to Note Purchase Agreement was amended to allow Senior Secured Note A and Senior Secured Note B interest accruing in cash to be payable in kind resulting in a maximum current TLA PIK rate of 12.50% and TLB PIK rate of 22.50%.
(G) Effective as of December 29, 2021, the Pacific World Corporation Amendment No. 8 was amended to allow the Revolving Line of Credit interest accruing in cash to be payable in kind resulting in a maximum current rate of 12.61%
(H) Next PIK payment/capitalization date is August 31, 2023.
(I) On November 17, 2022, the Town & Country Holdings, Inc. Eighth Amendment to Loan Agreement was amended to a fixed PIK rate of 12.00%.
(J) On March 28, 2023, the USES Corp. First Lien Equipment Term Loan was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.36%.
See notes to consolidated financial statements.
39
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(40)As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the three months ended September 30, 2023 with these controlled investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Controlled Companies | Fair Value at June 30, 2023 | Gross Additions (Cost)(A) | Gross Reductions (Cost)(B) | Net unrealized gains (losses) | Fair Value at September 30, 2023 | Interest income | Dividend income | Other income | Net realized gains (losses) |
| CP Energy Services Inc. | $ | 79,355 | | $ | 2,900 | | $ | — | | $ | (939) | | $ | 81,316 | | $ | 2,727 | | $ | — | | $ | — | | $ | — | |
| CP Energy - Spartan Energy Services, Inc. | 34,665 | | 762 | | — | | (3,406) | | 32,021 | | 1,134 | | — | | — | | — | |
| Credit Central Loan Company, LLC | 73,642 | | 1,595 | | — | | 2,110 | | 77,347 | | 2,254 | | — | | — | | — | |
| Echelon Transportation, LLC | 64,198 | | — | | (1,862) | | 944 | | 63,280 | | 781 | | — | | — | | — | |
| First Tower Finance Company LLC | 598,382 | | 5,588 | | — | | 11,622 | | 615,592 | | 15,308 | | — | | — | | — | |
| Freedom Marine Solutions, LLC | 12,710 | | — | | — | | (72) | | 12,638 | | — | | — | | — | | — | |
| InterDent, Inc. | 457,967 | | 5,554 | | — | | (5,341) | | 458,180 | | 9,009 | | — | | — | | — | |
| Kickapoo Ranch Pet Resort | 3,242 | | — | | — | | — | | 3,242 | | — | | 80 | | — | | — | |
| MITY, Inc. | 68,178 | | — | | — | | 7,837 | | 76,015 | | 2,205 | | — | | — | | — | |
| National Property REIT Corp. | 1,659,976 | | 63,546 | | (13,450) | | (80,330) | | 1,629,742 | | 29,239 | | — | | 29,472 | | — | |
| Nationwide Loan Company LLC | 47,572 | | 785 | | — | | (2,675) | | 45,682 | | 1,175 | | — | | — | | — | |
| NMMB, Inc. | 94,180 | | — | | — | | 10,567 | | 104,747 | | 1,064 | | 147 | | — | | (147) | |
| Pacific World Corporation | 65,746 | | 2,327 | | — | | (4,850) | | 63,223 | | 2,646 | | — | | — | | — | |
| R-V Industries, Inc. | 81,508 | | 3,700 | | — | | 19,526 | | 104,734 | | 1,252 | | — | | 106 | | — | |
| Universal Turbine Parts, LLC | 45,065 | | — | | (8) | | 3,808 | | 48,865 | | 956 | | — | | — | | — | |
| USES Corp. | 19,527 | | 268 | | — | | (303) | | 19,492 | | 473 | | — | | — | | — | |
| Valley Electric Company, Inc. | 165,784 | | — | | — | | 23,708 | | 189,492 | | 3,020 | | — | | 167 | | — | |
| Total | $ | 3,571,697 | | $ | 87,025 | | $ | (15,320) | | $ | (17,794) | | $ | 3,625,608 | | $ | 73,243 | | $ | 227 | | $ | 29,745 | | $ | (147) | |
(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, OID accretion and PIK interest, and any transfer of investments.
(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.
(41)As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the three months ended September 30, 2023 with these affiliated investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Affiliated Companies | Fair Value at June 30, 2023 | Gross Additions (Cost)(A) | Gross Reductions (Cost)(B) | Net unrealized gains (losses) | Fair Value at September 30, 2023 | Interest income | Dividend income | Other income | Net realized gains (losses) |
| | | | | | | | | |
| Nixon, Inc. | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| RGIS Services, LLC | 10,397 | | — | | 1,307 | | 837 | | 12,541 | | — | | 1,307 | | — | | — | |
| Total | $ | 10,397 | | $ | — | | $ | 1,307 | | $ | 837 | | $ | 12,541 | | $ | — | | $ | 1,307 | | $ | — | | $ | — | |
(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.
(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.
See notes to consolidated financial statements.
40
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(42)As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2023 with these controlled investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Fair Value at June 30, 2022 | Gross Additions (Cost)(A) | Gross Reductions (Cost)(B) | Net unrealized gains (losses) | Fair Value at June 30, 2023 | Interest income | Dividend income | Other income | Net realized gains (losses) |
| CP Energy Services Inc. | $ | 64,260 | | $ | 17,959 | | $ | — | | $ | (2,864) | | $ | 79,355 | | $ | 7,969 | | $ | — | | $ | — | | $ | — | |
| CP Energy - Spartan Energy Services, LLC | 48,441 | | 6,005 | | — | | (19,781) | | 34,665 | | 3,510 | | — | | — | | — | |
| Credit Central Loan Company, LLC | 76,935 | | 14,261 | | — | | (17,554) | | 73,642 | | 8,040 | | — | | 123 | | — | |
| Echelon Transportation LLC | 65,766 | | 3,391 | | — | | (4,959) | | 64,198 | | 4,086 | | — | | — | | — | |
| First Tower Finance Company LLC | 607,283 | | 40,688 | | (987) | | (48,602) | | 598,382 | | 63,364 | | — | | — | | — | |
| Freedom Marine Solutions, LLC | 13,899 | | 650 | | — | | (1,839) | | 12,710 | | — | | — | | — | | — | |
| InterDent, Inc. | 406,194 | | 20,681 | | (950) | | 32,042 | | 457,967 | | 32,523 | | — | | — | | — | |
| Kickapoo Ranch Pet Resort | 3,833 | | — | | — | | (591) | | 3,242 | | — | | 150 | | — | | — | |
| MITY, Inc. | 59,999 | | 2,692 | | (3,265) | | 8,752 | | 68,178 | | 8,177 | | — | | — | | (2) | |
| National Property REIT Corp. | 1,615,737 | | 213,469 | | (113,352) | | (55,878) | | 1,659,976 | | 95,004 | | — | | 63,792 | | — | |
| Nationwide Loan Company LLC | 50,400 | | 2,337 | | — | | (5,165) | | 47,572 | | 4,306 | | — | | — | | — | |
| NMMB, Inc. | 109,943 | | — | | — | | (15,763) | | 94,180 | | 3,754 | | 2,510 | | — | | (2,510) | |
| Pacific World Corporation | 59,179 | | 18,479 | | — | | (11,912) | | 65,746 | | 8,052 | | — | | 105 | | — | |
| R-V Industries, Inc. | 56,923 | | — | | — | | 24,585 | | 81,508 | | 4,467 | | — | | 158 | | — | |
| Universal Turbine Parts, LLC | 31,147 | | — | | (32) | | 13,950 | | 45,065 | | 3,280 | | — | | — | | — | |
| USES Corp. | 22,395 | | 10,675 | | — | | (13,543) | | 19,527 | | 1,039 | | — | | — | | — | |
| Valley Electric Company, Inc. | 145,983 | | 22,341 | | 548 | | (3,088) | | 165,784 | | 9,403 | | 547 | | 1,046 | | — | |
| Total | $ | 3,438,317 | | $ | 373,628 | | $ | (118,038) | | $ | (122,210) | | $ | 3,571,697 | | $ | 256,974 | | $ | 3,207 | | $ | 65,224 | | $ | (2,512) | |
(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.
(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.
(43)As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2023 with these affiliated investments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portfolio Company | Fair Value at June 30, 2022 | Gross Additions (Cost)(A) | Gross Reductions (Cost)(B) | Net unrealized gains (losses) | Fair Value at June 30, 2023 | Interest income | Dividend income | Other income | Net realized gains (losses) |
| Nixon, Inc. | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| PGX Holdings, Inc. (C) | 340,253 | | — | | (288,494) | | (51,759) | | — | | 15,003 | | — | | 133 | | — | |
| RGIS Services, LLC | 17,004 | | — | | (5,128) | | (1,479) | | 10,397 | | 31 | | 1,374 | | — | | — | |
| Targus Cayman HoldCo Limited | 36,007 | | — | | (2,805) | | (33,202) | | — | | — | | — | | — | | 16,143 | |
| 393,264 | | — | | (296,427) | | (86,440) | | 10,397 | | 15,034 | | 1,374 | | 133 | | 16,143 | |
(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.
(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.
(C) The investment was transferred to non-control investment classification as $287,751, the fair market value of the investment at the beginning of the three month period ended December 31, 2022.
See notes to consolidated financial statements.
41
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(44)Acquisition date represents the date of PSEC's initial investment. Follow-on acquisitions have occurred on the following dates to arrive at PSEC's current investment (excluding effects of capitalized PIK interest, premium/original issue discount amortization/accretion, and partial repayments) (See endnote 45 for NPRC equity follow-on acquisitions):
| | | | | | | | | | | |
| Portfolio Company | Investment | Follow-On Acquisition Dates | Follow-On Acquisitions (Excluding initial investment cost) |
| 8th Avenue Food & Provisions, Inc. | Second Lien Term Loan | 11/17/2020, 9/17/2021 | $ | 7,051 | |
| Apidos CLO XI | Subordinated Structured Note | 11/2/2016, 4/8/2021 | 7,559 | |
| Apidos CLO XII | Subordinated Structured Note | 1/26/2018 | 4,070 | |
| Apidos CLO XV | Subordinated Structured Note | 3/29/2018 | 6,480 | |
| Apidos CLO XXII | Subordinated Structured Note | 2/24/2020 | 1,912 | |
| Atlantis Health Care Group (Puerto Rico), Inc. | First Lien Revolving Line of Credit | 4/15/2013, 5/21/2013, 3/11/2014, 6/26/2017, 9/29/2017, 10/12/2017, 10/31/2017, 5/10/2023 | 9,500 | |
| Atlantis Health Care Group (Puerto Rico), Inc. | First Lien Term Loan | 12/9/2016 | 42,000 | |
| Aventiv Technologies, LLC | Second Lien Term Loan | 11/13/2017, 11/24/2017, 8/6/2018, 8/24/2018, 3/18/2019 | 22,750 | |
| Barings CLO 2018-III | Subordinated Structured Note | 5/18/2018 | 9,255 | |
| BCPE North Star US Holdco 2, Inc. | Second Lien Delayed Draw Term Loan | 10/28/2022 | 5,133 | |
| BCPE North Star US Holdco 2, Inc. | Second Lien Term Loan | 12/30/2021 | 65,000 | |
| BCPE Osprey Buyer, Inc. | First Lien Revolving Line of Credit | 2/22/2023, 5/23/2023, 9/14/2023 | 3,486 | |
| BCPE Osprey Buyer, Inc. | First Lien Delayed Draw Term Loan | 9/26/2023 | 4,639 | |
| Belnick, LLC (d/b/a The Ubique Group) | First Lien Term Loan | 6/27/2022 | 5,000 | |
| Broder Bros., Co. | First Lien Term Loan | 1/29/2019, 2/28/2019, 9/10/2021, 9/30/2021 | 25,370 | |
| California Street CLO IX Ltd. | Subordinated Structured Note | 9/6/2016, 10/17/2016 | 6,842 | |
| Cent CLO 21 Limited | Subordinated Structured Note | 7/12/2018 | 1,024 | |
| CIFC Funding 2014-IV-R, Ltd. | Subordinated Structured Note | 10/12/2018, 12/20/2021 | 2,860 | |
| Collections Acquisition Company, Inc. | First Lien Term Loan | 1/13/2022 | 6,900 | |
| Columbia Cent CLO 27 Limited | Subordinated Structured Note | 12/2/2021 | 7,815 | |
| CP Energy Services Inc. | First Lien Term Loan | 8/31/2023 | 2,900 | |
| CP Energy Services Inc. | First Lien Term Loan A to Spartan Energy Services, LLC | 4/9/2021, 1/10/2022, 2/10/2023 | 14,681 | |
| CP Energy Services Inc. | Common Stock | 10/11/2013, 12/26/2013, 4/6/2018, 12/31/2019 | 69,586 | |
| Credit Central Loan Company, LLC | Class A Units | 12/28/2012, 3/28/2014, 6/26/2014, 9/28/2016, 8/21/2019 | 11,975 | |
| Credit Central Loan Company, LLC | Class P Units | 1/27/2023 | 1,540 | |
| Credit Central Loan Company, LLC | First Lien Term Loan | 6/26/2014, 9/28/2016, 12/16/2022, 1/27/2023 | 45,995 | |
| Curo Group Holdings Corp. | First Lien Term Loan | 8/31/2021, 11/18/2021, 1/12/2022 | 17,033 | |
| DRI Holding, Inc. | First Lien Term Loan | 4/26/2022, 7/21/2022 | 12,999 | |
| DRI Holding, Inc. | Second Lien Term Loan | 5/18/2022 | 10,000 | |
| Dukes Root Control Inc. | First Lien Revolving Line of Credit | 4/24/2023 | 1,429 | |
| Dukes Root Control Inc. | First Lien Delayed Draw Term Loan | 5/26/2023 | 2,054 | |
| Echelon Transportation, LLC | Membership Interest | 3/31/2014, 9/30/2014, 12/9/2016 | 22,488 | |
| Echelon Transportation, LLC | First Lien Term Loan | 11/14/2018, 7/9/2019, 5/5/2020, 10/9/2020, 1/21/2021, 3/18/2021 | 5,465 | |
| Eze Castle Integration, Inc. | First Lien Delayed Draw Term Loan | 10/7/2022, 9/5/2023 | 1,786 | |
| Faraday Buyer, LLC | First Lien Delayed Draw Term Loan | 5/18/2023 | 4,468 | |
| First Brands Group | First Lien Term Loan | 4/27/2022 | 5,955 | |
| First Brands Group | Second Lien Term Loan | 5/12/2022 | 4,938 | |
| First Tower Finance Company LLC | Class A Units | 12/30/2013, 6/24/2014, 12/15/2015, 11/21/2016, 3/9/2018 | 39,885 | |
| First Tower Finance Company LLC | First Lien Term Loan to First Tower, LLC | 12/15/2015, 3/9/2018, 3/24/2022 | 43,047 | |
| Freedom Marine Solutions, LLC | Membership Interest | 10/1/2009, 12/22/2009, 1/13/2010, 3/30/2010, 5/13/2010, 2/14/2011, 4/28/2011, 7/7/2011, 10/20/2011, 10/30/2015, 1/7/2016, 4/11/2016, 8/11/2016, 1/30/2017, 4/20/2017, 6/13/2017, 8/30/2017, 1/17/2018, 2/15/2018, 5/8/2018, 10/31/2018, 5/14/2021, 4/18/2022, 2/15/2023 | 42,118 | |
| Galaxy XV CLO, Ltd. | Subordinated Structured Note | 8/21/2015, 3/10/2017 | 9,161 | |
| Galaxy XXVII CLO, Ltd. | Subordinated Structured Note | 6/11/2015 | 1,460 | |
Help/Systems Holdings, Inc. (d/b/a Forta, LLC)
| Second Lien Term Loan | 5/11/2021, 10/14/2021 | 54,649 | |
See notes to consolidated financial statements.
42
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | |
| Portfolio Company | Investment | Follow-On Acquisition Dates | Follow-On Acquisitions (Excluding initial investment cost) |
| The Hiller Companies, LLC | First Lien Term Loan | 4/6/2023 | 17,000 | |
| InterDent, Inc. | First Lien Term Loan A | 2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014, 7/14/2021, 3/28/2022 | 93,903 | |
| InterDent, Inc. | First Lien Term Loan B | 2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014 | 76,125 | |
| Interventional Management Services, LLC | First Lien Revolving Line of Credit | 2/25/2021, 11/17/2021 | 5,000 | |
| Jefferson Mill CLO Ltd. | Subordinated Structured Note | 9/21/2018 | 2,047 | |
| Kickapoo Ranch Pet Resort | Membership Interest | 10/21/2019, 12/4/2019 | 28 | |
| LCM XIV Ltd. | Subordinated Structured Note | 9/25/2015, 5/18/2018 | 9,422 | |
| LGC US FINCO, LLC | First Lien Term Loan | 3/2/2022 | 2,095 | |
| Magnate Worldwide, LLC | First Lien Delayed Draw Term Loan | 10/26/2022, 6/1/2023 | 2,310 | |
| Mamba Purchaser, Inc. | Second Lien Term Loan | 5/4/2022, 5/10/2022 | 17,860 | |
| Medical Solutions Holdings, Inc. | Second Lien Term Loan | 5/4/2022, 9/22/2022 | 1,423 | |
| MITY, Inc. | Common Stock | 6/23/2014 | 7,200 | |
| MITY, Inc. | First Lien Term Loan A | 1/17/2017, 3/23/2021 | 10,650 | |
| MITY, Inc. | First Lien Term Loan B | 1/17/2017, 6/3/2019 | 11,000 | |
| Nationwide Loan Company LLC | Class A Units | 3/28/2014, 6/18/2014, 9/30/2014, 6/29/2015, 3/31/2016, 8/31/2016, 5/31/2017, 10/31/2017 | 20,469 | |
| Nationwide Loan Company LLC | First Lien Term Loan | 12/28/2015, 8/31/2016 | 1,999 | |
| National Property REIT Corp. | First Lien Term Loan A | 4/3/2020, 5/15/2020, 6/10/2020, 7/29/2020, 8/14/2020, 9/15/2020,10/15/2020, 10/30/2020, 11/10/2020, 11/13/2020, 11/19/2020, 12/11/2020, 1/27/2021, 2/25/2021, 3/11/2021, 5/14/2021, 6/14/2021, 6/25/2021, 8/16/2021, 11/15/2021, 11/26/2021, 12/1/2021, 12/28/2021, 1/14/2022, 2/15/2022, 3/17/2022, 3/28/2022, 4/1/2022, 4/7/2022, 5/24/2022, 6/6/2022, 7/5/2022, 8/31/2022, 10/6/2022, 1/10/2023, 2/28/2023, 4/4/2023, 4/6/2023, 4/28/2023, 6/9/2023, 6/14/2023, 7/5/2023, 7/14/2023, 8/31/2023, 9/29/2023 | 696,133 | |
| National Property REIT Corp. | First Lien Term Loan B | 12/8/2021, 12/17/2021, 1/13/2022, 2/8/2022, 2/14/2022, 2/17/2022, 2/24/2022 | 28,880 | |
| National Property REIT Corp. | First Lien Term Loan C | 10/23/2019, 1/23/2020, 3/31/2020, 4/8/2020, 8/4/2020, 12/7/2021, 1/7/2022, 2/2/2022, 5/12/2022, 5/19/2022, 6/6/2022, 8/1/2022, 9/15/2022, 9/19/2022, 10/21/2022, 6/6/2023 | 253,600 | |
| NMMB, Inc. | First Lien Term Loan | 12/30/2019, 3/28/2022 | 40,100 | |
| Octagon Investment Partners XV, Ltd. | Subordinated Structured Note | 4/27/2015, 8/3/2015, 6/27/2017 | 10,516 | |
| Octagon Investment Partners 18-R Ltd. | Subordinated Structured Note | 3/23/2018 | 8,908 | |
| Pacific World Corporation | First Lien Revolving Line of Credit | 10/21/2014, 12/19/2014, 4/7/2015, 4/22/2015, 8/12/2016, 10/18/2016, 2/7/2017, 2/21/2017, 4/26/2017, 10/11/2017, 10/17/2017, 1/16/2018, 12/27/2018, 3/15/2019, 7/2/2019, 8/15/2019, 9/1/2021, 10/19/2021, 9/6/2022 | 41,325 | |
| Pacific World Corporation | Convertible Preferred Equity | 4/3/2019, 4/29/2019, 6/3/2019, 10/4/2019, 11/12/2019, 12/20/2019, 1/7/2020, 3/5/2020, 12/30/2021 | 22,600 | |
| Pacific World Corporation | First Lien Term Loan A | 12/22/2022 | 10,500 | |
| PeopleConnect Holdings, LLC | First Lien Term Loan | 10/21/2021 | 82,005 | |
| PetVet Care Centers, LLC | Second Lien Term Loan | 11/22/2021, 5/10/2022 | 10,950 | |
| PGX Holdings, Inc. | First Lien Term Loan | 11/16/2021, 5/25/2022 | 25,000 | |
| PGX Holdings, Inc. | First Lien DIP Term Loan | 8/4/2023 | 2,327 | |
| PGX Holdings, Inc. | Second Lien Term Loan | 12/28/2022 | 15,000 | |
| Precisely Software Incorporated | Second Lien Term Loan | 5/28/2021, 6/24/2021, 6/3/2022 | 59,333 | |
| Reception Purchaser, LLC | First Lien Term Loan | 7/29/2022, 9/22/2022 | 9,655 | |
| Redstone Holdco 2 LP | Second Lien Term Loan | 9/10/2021 | 17,903 | |
| Romark WM-R Ltd. | Subordinated Structured Note | 3/29/2018 | 5,125 | |
| Rosa Mexicano | First Lien Revolving Line of Credit | 3/27/2020 | 500 | |
| R-V Industries, Inc. | First Lien Term Loan | 3/4/2022, 9/25/2023 | 8,700 | |
| R-V Industries, Inc. | Common Stock | 12/27/2016 | 1,854 | |
| Shiftkey, LLC | First Lien Term Loan | 8/26/2022, 9/14/2022, 9/23/2022 | 39,450 | |
| Sorenson Communications, LLC | First Lien Term Loan | 5/12/2022, 5/19/2022 | 19,675 | |
| Symphony CLO XV, Ltd. | Subordinated Structured Note | 12/7/2018 | 2,655 | |
| Town & Country Holdings, Inc. | First Lien Term Loan | 7/13/2018, 7/16/2018 | 105,000 | |
| United Sporting Companies, Inc. | Second Lien Term Loan | 3/7/2013 | 58,650 | |
See notes to consolidated financial statements.
43
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
| | | | | | | | | | | |
| Portfolio Company | Investment | Follow-On Acquisition Dates | Follow-On Acquisitions (Excluding initial investment cost) |
| Universal Turbine Parts, LLC | First Lien Delayed Draw Term Loan | 10/24/2019, 2/7/2020, 2/26/2020, 4/5/2021 | 3,216 | |
| USES Corp. | First Lien Term Loan A | 6/15/2016, 6/29/2016, 2/22/2017, 4/27/2017, 5/4/2017, 8/30/2017, 10/11/2017, 12/11/2018, 8/30/2019 | 14,100 | |
| USES Corp. | First Lien Equipment Term Loan | 6/23/2023 | 3,900 | |
| USG Intermediate, LLC | First Lien Revolving Line of Credit | 7/2/2015, 9/23/2015, 9/14/2017, 8/21/2019, 9/17/2020, 9/18/2021, 5/19/2022, 5/22/2023 | 11,700 | |
| USG Intermediate, LLC | First Lien Term Loan B | 8/24/2017, 7/30/2021, 2/9/2022, 8/17/2022, 5/12/2023 | 84,475 | |
| USG Intermediate, LLC | Equity | 5/12/2023 | 100 | |
| Valley Electric Company, Inc. | Common Stock | 12/31/2012, 6/24/2014 | 18,502 | |
| Valley Electric Company, Inc. | First Lien Term Loan | 6/30/2014, 8/31/2018, 3/28/2022 | 18,129 | |
| Valley Electric Company, Inc. | First Lien Term Loan B | 5/1/2023 | 19,000 | |
| ViaPath Technologies | Second Lien Term Loan | 4/10/2019, 8/22/2019, 9/20/2019, 9/14/2021, 9/17/2021, 12/17/2021, 2/7/2022 | 96,743 | |
| Voya CLO 2014-1, Ltd. | Subordinated Structured Note | 3/29/2018 | 3,943 | |
| VT Topco, Inc. | Second Lien Term Loan | 5/2/2022, 5/12/2022 | 4,941 | |
| VT Topco, Inc. | 2021 Second Lien Term Loan | 4/27/2022, 5/12/2022 | 6,939 | |
| Wellful Inc. | First Lien Term Loan | 7/28/2022 | 3,860 | |
| Wellpath Holdings, Inc. | First Lien Term Loan | 10/8/2019, 10/8/2021 | 9,592 | |
| Wellpath Holdings, Inc. | Second Lien Term Loan | 8/20/2019 | 1,993 | |
See notes to consolidated financial statements.
44
PROSPECT CAPITAL CORPORATION
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)
Endnote Explanations as of September 30, 2023 (Unaudited) and June 30, 2023 (Continued)
(45)Since Prospect's initial common equity investment in NPRC on December 31, 2013, we have made numerous additional follow-on investments that have been used to invest in new and existing properties as well as online consumer loans and rated secured structured notes. These follow-on acquisitions are summarized by fiscal year below (excluding effects of return of capital distributions). Details of specific transactions are included in the respective fiscal year Form 10-K filing (refer to endnote 44 for NPRC term loan follow-on investments):
| | | | | |
| Fiscal Year | Follow-On Investments (NPRC Common Stock, excluding cost of initial investment) |
| 2014 | $ | 4,555 | |
| 2015 | 68,693 | |
| 2016 | 93,857 | |
| 2017 | 116,830 | |
| 2018 | 137,024 | |
| 2019 | 11,582 | |
| 2020 | 19,800 | |
| 2022 | 15,620 | |
| 2023 | 3,600 | |
| |
(46)Prospect owns 38.95% of the preferred stock of Legere Pharmaceutical Holdings, Inc. (“Legere”), which represents 4.98% voting interest in Legere. Legere is the parent company of the borrower, Preventics, Inc. (d/b/a Legere Pharmaceuticals).
(47)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2023 and June 30, 2023. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.
(48)CP Iris Holdco I, Inc. and CP Iris Holdco II, Inc. are joint borrowers on the Second Lien Term Loan.
(49)Investment represents a unitranche loan with characteristics of a traditional first lien senior secured loan, but which pursuant to an agreement among lenders is divided among unaffiliated lenders into “first out” and “last out” tranches yielding different interest rates. Our investment is the “last out” tranche of such unitranche loan, subject to payment priority in favor of a first out tranche held by an unaffiliated lender.
(50)The Company has entered into an intercreditor agreement that entitles the Company to the “last out” tranche of the first lien secured loans, whereby the “first out” tranche will receive priority as to the “last out” tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the “first out” lenders and the Consolidated Schedule of Investments above reflects such higher rate.
See notes to consolidated financial statements.
45
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except share and per share data)
Note 1. Organization
In this report, the terms “Prospect”, “the Company”, “we”, “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.
Prospect is a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company incorporated in Maryland. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As a BDC, we have elected to be treated as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). We were organized on April 13, 2004, and were funded in an initial public offering completed on July 27, 2004.
On May 15, 2007, we formed a wholly owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds a portion of our collateralized loan obligations (“CLOs”), which we also refer to as subordinated structured notes (“SSNs”). Each of these subsidiaries have been consolidated since operations commenced.
We consolidate certain of our wholly owned and substantially wholly owned holding companies formed by us in order to facilitate our investment strategy. The following companies are included in our consolidated financial statements and are collectively referred to as the “Consolidated Holding Companies”: CP Holdings of Delaware LLC (“CP Holdings”); Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC (“First Tower Delaware”); MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc. (“NMMB Holdings”); NPH Property Holdings, LLC (“NPH”); Prospect Opportunity Holdings I, Inc. (“POHI”); SB Forging Company, Inc. (“SB Forging”); STI Holding, Inc.; UTP Holdings Group Inc. (“UTP Holdings”); Valley Electric Holdings I, Inc. (“Valley Holdings I”); and Valley Electric Holdings II, Inc. (“Valley Holdings II”).
We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration” or the “Administrator”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.
Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. We work with the management teams or financial sponsors to identify investments with historical cash flows, asset collateral or contracted pro forma cash flows for investment.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Note 2. Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with GAAP are omitted. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending June 30, 2024.
Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of Prospect, PCF, PYC, and the Consolidated Holding Companies. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated in consolidation. The financial results of our non-substantially wholly-owned holding companies and operating portfolio company investments are not consolidated in the financial statements. Any operating companies owned by the Consolidated Holding Companies are not consolidated.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Cash, cash equivalents, and restricted cash are carried at cost, which approximates fair value.
All cash and restricted cash balances are maintained with high credit quality financial institutions. Cash and restricted cash held at financial institutions, at times, has exceeded the Federal Deposit Insurance Corporation (“FDIC”) insured limit. The Company has not incurred any losses on these accounts, and the credit risk exposure is mitigated by the financial strength of the banking institutions where the amounts are held.
Restricted cash relates to a contractual requirement for our Revolving Credit Facility to maintain a minimum cash balance in a reserve account. The contractual requirement is based upon our outstanding borrowing on our Revolving Credit Facility.
Use of Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of the issuers of our investment portfolio and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.
Investment Classification
We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses a beneficial ownership of more than 25% of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” are defined by a lesser degree of influence and are deemed to exist through owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of another person. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.
As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of September 30, 2023 and June 30, 2023, our qualifying assets as a percentage of total assets, stood at 82.29% and 82.08%, respectively.
Investment Transactions
Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. We determine the fair
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
value of our investments on a quarterly basis (as discussed in Investment Valuation below), with changes in fair value reflected as a net change in unrealized gains (losses) from investments in the Consolidated Statement of Operations.
Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Realized gains or losses on the sale of investments are calculated using the specific identification method. Amounts for investments traded but not yet settled are reported in Due to Broker or Due from Broker, in the Consolidated Statements of Assets and Liabilities. As of September 30, 2023 and June 30, 2023, we have no assets going through foreclosure.
Foreign Currency
Foreign currency amounts are translated into US Dollars (USD) on the following basis:
i.fair value of investment securities, other assets and liabilities—at the spot exchange rate on the last business day of the period; and
ii.purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such investment transactions, income or expenses.
We do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held or disposed of during the period. Such fluctuations are included within the net realized and net change in unrealized gains or losses from investments in the Consolidated Statements of Operations.
Investment Risks
Our investments are subject to a variety of risks. Those risks include the following:
Market Risk
Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.
Credit Risk
Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.
Liquidity Risk
Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.
Interest Rate Risk
Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.
Prepayment Risk
Many of our debt investments allow for prepayment of principal without penalty. Downward changes in interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the security and making us less likely to fully earn all of the expected income of that security and reinvesting in a lower yielding instrument.
Structured Credit Related Risk
CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.
Foreign Currency
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.
Other Risks
Political developments, including civil conflicts and war, sanctions or other measures by the United States or other governments, natural disasters, public health crises and other events outside the Company's control can directly or indirectly have a material adverse impact on the Company and our portfolio companies.
Investment Valuation
As a BDC, and in accordance with the 1940 Act, we fair value our investment portfolio on a quarterly basis, with any unrealized gains and losses reflected in net increase (decrease) in net assets resulting from operations on our Consolidated Statement of Operations. To value our investments, we follow the guidance of ASC 820, Fair Value Measurement (“ASC 820”), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.
Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.
Investments for which market quotations are readily available are valued at such market quotations.
For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, due to factors such as volume and frequency of price quotes, our Board of Directors has approved a multi-step valuation process each quarter, as described below.
1.Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.
2.The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.
3.The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.
4.The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.
Our non-CLO investments that are classified as Level 3 are valued utilizing a yield technique, enterprise value (“EV”) technique, net asset value technique, asset recovery technique, discounted cash flow technique, or a combination of techniques, as appropriate. The yield technique uses loan spreads for loans and other relevant information implied by market data involving
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
identical or comparable assets or liabilities. Under the EV technique, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market (multiples) valuation approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions, and/or a discounted cash flow technique. The net asset value technique, an income approach, is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The asset recovery technique is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow technique converts future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The fair value measurement is based on the net present value indicated by current market expectations about those future amounts.
In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.
Our investments in CLOs are classified as Level 3 fair value measured securities under ASC 820 and are valued using a discounted multi-path cash flow model. The CLO structures are analyzed to identify the risk exposures and to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations, which is a simulation used to model the probability of different outcomes, to generate probability-weighted (i.e., multi-path) cash flows from the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market as well as certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the multi-path cash flows. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold, as those portfolios are managed by non-affiliated third-party CLO collateral managers. The main risk factors are default risk, prepayment risk, interest rate risk, downgrade risk, and credit spread risk.
Convertible Notes
We have recorded the Convertible Notes at their contractual amounts and at issuance, we determined that the embedded conversion options in the Convertible Unsecured Notes are not required to be separately accounted for as a derivative under ASC 815, Derivatives and Hedging. See Note 5 for further discussion on our Convertible Notes outstanding.
Revenue Recognition
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Original issue discounts and market discounts are capitalized and accreted into interest income over the respective terms of the applicable loans using the effective interest method or straight-line, as applicable, and adjusted only for material amendments or prepayments. Upon a prepayment of a loan, prepayment premiums, original issue discount, or market discounts are recorded as interest income.
Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans are either applied to the cost basis or interest income, depending upon management’s judgment of the collectability of the loan receivable. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current and future principal and interest collections when due are probable. Interest received and applied against cost while a loan is on non-accrual, and PIK interest capitalized but not recognized while on non-accrual, is recognized prospectively on the effective yield basis through maturity of the loan when placed back on accrual status, to the extent deemed collectible by management. As of September 30, 2023 and June 30, 2023, approximately 0.2% and 1.1% of our total assets at fair value are in non-accrual status, respectively.
Some of our loans and other investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK income computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, we capitalize the accrued interest (reflecting such amounts in the basis as additional
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
securities received). PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. At the point that we believe PIK is not fully expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are reversed from the related receivable through interest or dividend income, respectively. We do not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if we believe that PIK is expected to be realized.
Interest income from investments in Subordinated Structured Notes (typically preferred shares, income notes or subordinated notes of CLO funds) and “equity” class of security of securitized trust is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. We monitor the expected cash inflows from our CLO and securitized trust equity investments, including the expected residual payments, and the effective yield is determined and updated periodically.
Dividend income is recorded on the ex-dividend date. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient current or accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.
For the quarter ended September 30, 2023 and 2022, we recorded dividend income of $3,059 and $2,901, respectively. For the quarter ended September 30, 2022, we recorded return of capital distributions of $4,780.
Other income consists of structuring fees, amendment fees, overriding royalty interests, receipts related to net profit and revenue interests, deal deposits, administrative agent fees, and other miscellaneous receipts, which are recognized as revenue when received.
Structuring fees and certain other amendment or advisory fees are considered fees in exchange for the provision of certain services and are subject to the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). All other types of income are derived from lending or equity investments, which is recognized in accordance with ASC 310-20, Nonrefundable Fees and Other Costs. See Note 10 Other Income.
Realized gains or losses on the sale of investments are calculated using the specific identification method. Refer to Investment Transactions above.
Federal and State Income Taxes
We have elected to be treated as a RIC and intend to continue to comply with the requirements of the Code applicable to RICs. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.
If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. As of September 30, 2023, we do not expect to have any excise tax due for the 2023 calendar year. Thus, we have not accrued any excise tax for this period.
If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate income tax rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our stockholders our accumulated earnings and profits attributable to non-RIC years. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of five years.
We follow ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of September 30, 2023, we did not record any unrecognized tax benefits or liabilities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our federal tax returns for the tax years ended August 31, 2020 and thereafter remain subject to examination by the Internal Revenue Service.
Dividends and Distributions to Common Shareholders
Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and is generally based upon our management’s estimate of our future taxable earnings. Net realized capital gains, if any, are distributed at least annually.
Our distributions may exceed our earnings, and therefore, portions of the distributions that we make may be a return of the money originally invested and represent a return of capital distribution to shareholders for tax purposes.
Financing Costs
We record origination expenses related to our Revolving Credit Facility as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation for our Revolving Credit Facility. Debt issuance costs and origination discounts related to our Convertible Notes and Public Notes are presented net against the outstanding principal of the respective instrument and amortized as part of interest expense using the effective interest method over the stated life of the respective instrument. Debt issuance costs and origination discounts related to our Prospect Capital InterNotes® (collectively, with our Convertible Notes and Public Notes, our “Unsecured Notes”) are net against the outstanding principal amount of our Prospect Capital InterNotes® and are amortized as part of interest expense using the straight-line method over the stated maturity of the respective note. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.
Unamortized deferred financing costs are presented as a direct deduction to the respective Unsecured Notes (see Notes 5, 6, and 7).
We may record registration expenses related to shelf filings as prepaid expenses. These expenses consist principally of the Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These prepaid expenses are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. As of September 30, 2023 and June 30, 2023, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.
Per Share Information
In accordance with ASC 946, senior equity securities, such as preferred stock, are not considered in the calculation of net asset value per share. Net asset value per share also excludes the effects of assumed conversion of outstanding convertible securities, regardless of whether their conversion would have a diluting effect. Therefore, our net asset value is presented on the basis of per common share outstanding as of the applicable period end.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
We compute earnings per common share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Basic earnings per common share is calculated by dividing the net increase (decrease) in net assets resulting from operations applicable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per share gives effect to all dilutive potential common shares outstanding using the if-converted method for our Convertible Preferred Stock and Convertible Notes (together, “convertible instruments”). Diluted earnings per share excludes all dilutive potential common shares if their effect is anti-dilutive.
Preferred Stock
In accordance with ASC 480-10-S99-3A, the Company’s Preferred Stock (as defined in “Note 9. Equity Offerings, Offering Expenses, and Distributions”) has been classified in temporary equity on the Statement of Assets and Liabilities beginning the period ended September 30, 2021 due to limitations on our ability to exercise our Issuer Optional Conversion (as defined in Note 9) and the possibility of redemption outside of the Company’s control if dividends on the Preferred Stock have accumulated and been unpaid for a period of two years. The Preferred Stock issued as temporary equity is recorded net of offering costs and issuance costs. 5.50% Preferred Stock issued prior to the issuance of our 5.35% Series A Preferred Stock has a carrying value on our Consolidated Statement of Assets and Liabilities equal to liquidation value per share. Accrued and unpaid dividends relating to the Preferred Stock are included in the preferred stock carrying value on the Statement of Assets and Liabilities. Dividends declared on the Preferred Stock are included in preferred stock dividends on the Statement of Operations.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). The Company has assessed currently issued ASUs and has determined that they are not applicable or expected to have minimal impact on its consolidated financial statements.
Note 3. Portfolio Investments
At September 30, 2023, we had investments in 128 long-term portfolio investments and CLOs, which had an amortized cost of $7,613,853 and a fair value of $7,736,817. At June 30, 2023, we had investments in 130 long-term portfolio investments and CLOs, which had an amortized cost of $7,800,596 and a fair value of $7,724,931.
The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $131,074 and $304,530 during the three months ended September 30, 2023 and September 30, 2022, respectively. Debt repayments and considerations from sales of equity securities of approximately $93,646 and $135,991 were received during the three months ended September 30, 2023 and September 30, 2022, respectively.
Throughout the remainder of this footnote, we aggregate our portfolio investments by type of investment, which may differ slightly from the nomenclature used by the constituent instruments defining the rights of holders of the investment, as disclosed on our Consolidated Schedules of Investments (“SOI”). The following investments are included in each category:
•First Lien Revolving Line of Credit includes our debt investments in first lien revolvers as well as our debt investments in delayed draw term loans.
•First Lien Debt includes our debt investments listed on the SOI such as first lien term loans (including “unitranche” loans, which are loans that combine both senior and subordinated debt and “last out” loans which are loans that have a secondary payment priority behind “first out” first-lien loans).
•Second Lien Revolving Line of Credit includes our debt investments in second lien revolvers as well as our debt investments in delayed draw term loans.
•Second Lien Debt includes our debt investments listed on the SOI as second lien term loans.
•Third Lien Debt includes our debt investments listed on the SOI as third lien term loans.
•Unsecured Debt includes our debt investments listed on the SOI as unsecured.
•Subordinated Structured Notes includes our investments in the “equity” security class of CLO funds such as income notes, preference shares, and subordinated notes.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
•Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.
The following table shows the composition of our investment portfolio as of September 30, 2023 and June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 | | June 30, 2023 |
| | Cost | | Fair Value | | Cost | | Fair Value |
| First Lien Revolving Line of Credit | $ | 63,638 | | | $ | 63,751 | | | $ | 58,139 | | | $ | 58,058 | |
| First Lien Debt (1) | 4,494,472 | | | 4,369,228 | | | 4,431,887 | | | 4,302,795 | |
| Second Lien Revolving Line of Credit | 5,141 | | | 4,769 | | | 5,139 | | | 4,646 | |
| Second Lien Debt | 1,350,150 | | | 1,220,399 | | | 1,586,112 | | | 1,257,862 | |
| Unsecured Debt | 7,200 | | | 7,200 | | | 7,200 | | | 7,200 | |
| Subordinated Structured Notes | 908,744 | | | 626,746 | | | 952,815 | | | 665,002 | |
| Equity | 784,508 | | | 1,444,724 | | | 759,304 | | | 1,429,368 | |
| Total Investments | $ | 7,613,853 | | | $ | 7,736,817 | | | $ | 7,800,596 | | | $ | 7,724,931 | |
(1) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out” The total amortized cost and fair value of the unitranche and/or last out loans were $37,000 and $37,000, respectively, as of September 30, 2023. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| First Lien Revolving Line of Credit | $ | — | | | $ | — | | | $ | 63,751 | | | $ | 63,751 | |
| First Lien Debt(1) | — | | | 47,946 | | | 4,321,283 | | | 4,369,229 | |
| Second Lien Revolving Line of Credit | — | | | — | | | 4,769 | | | 4,769 | |
| Second Lien Debt | — | | | — | | | 1,220,399 | | | 1,220,399 | |
| Unsecured Debt | — | | | — | | | 7,200 | | | 7,200 | |
| Subordinated Structured Notes | — | | | — | | | 626,746 | | | 626,746 | |
| Equity | — | | | — | | | 1,444,723 | | | 1,444,723 | |
| Total Investments | $ | — | | | $ | 47,946 | | | $ | 7,688,871 | | | $ | 7,736,817 | |
(1) First lien debt includes a loan that the Company classifies as “unitranche”. The total amortized cost and fair value of the unitranche loan was $37,000 and $37,000, respectively, as of September 30, 2023.
The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| First Lien Revolving Line of Credit | $ | — | | | $ | — | | | $ | 58,058 | | | $ | 58,058 | |
| First Lien Debt (1) | — | | | 7,481 | | | 4,295,314 | | | 4,302,795 | |
| Second Lien Revolving Line of Credit | — | | | — | | | 4,646 | | | 4,646 | |
| Second Lien Debt | — | | | — | | | 1,257,862 | | | 1,257,862 | |
| Unsecured Debt | — | | | — | | | 7,200 | | | 7,200 | |
| Subordinated Structured Notes | — | | | — | | | 665,002 | | | 665,002 | |
| Equity | — | | | — | | | 1,429,368 | | | 1,429,368 | |
| Total Investments | $ | — | | | $ | 7,481 | | | $ | 7,717,450 | | | $ | 7,724,931 | |
(1) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out”. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.
The following tables show the aggregate changes in the fair value of our Level 3 investments during the three months ended September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements Using Unobservable Inputs (Level 3) |
| | Control Investments | | Affiliate Investments | | Non-Control/ Non-Affiliate Investments | | Total |
| Fair value as of June 30, 2023 | $ | 3,571,697 | | | $ | 10,397 | | | $ | 4,135,356 | | | $ | 7,717,450 | |
| Net realized gains (losses) on investments | (147) | | | — | | | (207,342) | | | (207,489) | |
| Net change in unrealized gains (losses) | (17,794) | | | 837 | | | 214,788 | | | 197,831 | |
| Net realized and unrealized gains (losses) | (17,941) | | | 837 | | | 7,446 | | | (9,658) | |
| Purchases of portfolio investments(3) | 69,905 | | | — | | | 36,604 | | | 106,509 | |
| Payment-in-kind interest | 16,870 | | | — | | | 6,233 | | | 23,103 | |
Accretion of discounts and premiums, net | 250 | | | — | | | 1,067 | | | 1,317 | |
| Decrease to Subordinated Structured Notes cost, net(4) | — | | | — | | | (18,223) | | | (18,223) | |
| Repayments and sales of portfolio investments(3) | (15,173) | | | 1,307 | | | (77,948) | | | (91,814) | |
| | | | | | | |
| Transfers out of Level 3(1) | — | | | — | | | (39,813) | | | (39,813) | |
| | | | | | | |
| Fair value as of September 30, 2023 | $ | 3,625,608 | | | $ | 12,541 | | | $ | 4,050,722 | | | $ | 7,688,871 | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First Lien Revolving Line of Credit | | First Lien Debt(2) | | Second Lien Revolving Line of Credit | | Second Lien Debt | | Unsecured Debt | | Subordinated Structured Notes | | Equity | | Total |
| Fair value as of June 30, 2023 | $ | 58,058 | | | $ | 4,295,314 | | | $ | 4,646 | | | $ | 1,257,862 | | | $ | 7,200 | | | $ | 665,002 | | | $ | 1,429,368 | | | $ | 7,717,450 | |
| Net realized gains (losses) on investments | — | | | (1,505) | | | — | | | (179,986) | | | — | | | (25,851) | | | (147) | | | (207,489) | |
| Net change in unrealized gains (losses) | 194 | | | 3,047 | | | 121 | | | 198,499 | | | — | | | 5,818 | | | (9,848) | | | 197,831 | |
| Net realized and unrealized gains (losses) | 194 | | | 1,542 | | | 121 | | | 18,513 | | | — | | | (20,033) | | | (9,995) | | | (9,658) | |
| Purchases of portfolio investments(3) | 7,414 | | | 86,826 | | | — | | | (11,630) | | | — | | | — | | | 23,899 | | | 106,509 | |
| Payment-in-kind interest | 995 | | | 21,883 | | | — | | | 225 | | | — | | | — | | | — | | | 23,103 | |
| Accretion of discounts and premiums, net | 10 | | | 726 | | | 2 | | | 579 | | | — | | | — | | | — | | | 1,317 | |
| Decrease to Subordinated Structured Notes cost, net(4) | — | | | — | | | — | | | — | | | — | | | (18,223) | | | — | | | (18,223) | |
| Repayments and sales of portfolio investments(3) | (2,920) | | | (45,198) | | | — | | | (45,150) | | | — | | | — | | | 1,454 | | | (91,814) | |
| | | | | | | | | | | | | | | |
| Transfers out of Level 3(1) | — | | | (39,813) | | | — | | | — | | | — | | | — | | | — | | | (39,813) | |
| | | | | | | | | | | | | | | |
| Fair value as of September 30, 2023 | $ | 63,751 | | | $ | 4,321,280 | | | $ | 4,769 | | | $ | 1,220,399 | | | $ | 7,200 | | | $ | 626,746 | | | $ | 1,444,726 | | | $ | 7,688,871 | |
| | | | | | | | | | | | | | | |
(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended September 30, 2023, two of our first lien notes transferred out of Level 3 to Level 2 because inputs to the valuation became observable.
(2) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out”. The total amortized cost and fair value of the unitranche and/or last out loans were $37,000 and $37,000, respectively, as of September 30, 2023. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.
(3)Includes reorganizations and restructuring of investments.
(4) Reduction to cost value of our Subordinated Structured Notes investments represents the difference between distributions received, or entitled to be received, for the three months ended September 30, 2023, of $35,046 and the effective yield interest income recognized on our Subordinated Structured Notes of $16,821.
The following tables show the aggregate changes in the fair value of our Level 3 investments during the three months ended September 30, 2022: | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements Using Unobservable Inputs (Level 3) |
| | Control Investments | | Affiliate Investments | | Non-Control/ Non-Affiliate Investments | | Total |
| Fair value as of June 30, 2022 | $ | 3,438,317 | | | $ | 393,264 | | | $ | 3,697,113 | | | $ | 7,528,694 | |
| Net realized gains (losses) on investments | (1,093) | | | — | | | (22,084) | | | (23,177) | |
| Net change in unrealized gains (losses) | (47,289) | | | (70,786) | | | (46,057) | | | (164,132) | |
| Net realized and unrealized gains (losses) | (48,382) | | | (70,786) | | | (68,141) | | | (187,309) | |
| Purchases of portfolio investments | 84,100 | | | — | | | 196,236 | | | 280,336 | |
| Payment-in-kind interest | 22,202 | | | — | | | 1,992 | | | 24,194 | |
Accretion (amortization) of discounts and premiums, net | 185 | | | — | | | 1,324 | | | 1,509 | |
| Decrease to Subordinated Structured Notes cost, net(2) | — | | | — | | | (6,979) | | | (6,979) | |
| Repayments and sales of portfolio investments | (51,944) | | | (5,203) | | | (70,066) | | | (127,213) | |
| | | | | | | |
| | | | | | | |
| Transfers into Level 3(1) | — | | | — | | | 17,454 | | | 17,454 | |
Fair Value as of as of September 30, 2022 | $ | 3,444,478 | | | $ | 317,275 | | | $ | 3,768,933 | | | $ | 7,530,686 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First Lien Revolving Line of Credit | | First Lien Debt | | | | | | | Second Lien Debt | | | | Unsecured Debt | | Subordinated Structured Notes | | Equity | | Total |
| Fair value as of June 30, 2022 | $ | 39,746 | | | $ | 3,684,144 | | | | | | | | $ | 1,471,336 | | | | | $ | 7,200 | | | $ | 711,429 | | | $ | 1,614,839 | | | $ | 7,528,694 | |
| Net realized gains (losses) on investments | — | | | (14,472) | | | | | | | | (8,791) | | | | | — | | | 1,179 | | | (1,093) | | | (23,177) | |
| Net change in unrealized gains (losses) | (95) | | | (9,584) | | | | | | | | (34,959) | | | | | — | | | (9,157) | | | (110,337) | | | (164,132) | |
| Net realized and unrealized gains (losses) | (95) | | | (24,056) | | | | | | | | (43,750) | | | | | — | | | (7,978) | | | (111,430) | | | (187,309) | |
| Purchases of portfolio investments | 500 | | | 215,937 | | | | | | | | 50,319 | | | | | — | | | — | | | 13,580 | | | 280,336 | |
| Payment-in-kind interest | 654 | | | 23,540 | | | | | | | | — | | | | | — | | | — | | | — | | | 24,194 | |
| Accretion (amortization) of discounts and premiums, net | 2 | | | 694 | | | | | | | | 813 | | | | | — | | | — | | | — | | | 1,509 | |
| Decrease to Subordinated Structured Notes cost, net(2) | — | | | — | | | | | | | | — | | | | | — | | | (6,979) | | | — | | | (6,979) | |
| Repayments and sales of portfolio investments | (56) | | | (84,900) | | | | | | | | (37,434) | | | | | — | | | (1,180) | | | (3,643) | | | (127,213) | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Transfers into Level 3(1) | — | | | 17,454 | | | | | | | | — | | | | | — | | | — | | | — | | | 17,454 | |
| Fair value as of September 30, 2022 | $ | 40,751 | | | $ | 3,832,813 | | | | | | | | $ | 1,441,284 | | | | | $ | 7,200 | | | $ | 695,292 | | | $ | 1,513,346 | | | $ | 7,530,686 | |
(1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended September 30, 2022, one of our first lien notes transferred out of Level 2 to Level 3 because inputs to the valuation became unobservable.
(2) Reduction to cost value of our Subordinated Structured Notes investments represents the difference between distributions received, or
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
entitled to be received, for the three months ended September 30, 2022, of $29,872 and the effective yield interest income recognized on our Subordinated Structured Notes of $22,895.
The net change in unrealized (losses) gains on the investments that use Level 3 inputs was $1,424 and $(172,715) for investments still held as of September 30, 2023 and September 30, 2022, respectively.
The following table shows industries that comprise of greater than 10% of our portfolio at fair value as of September 30, 2023 and June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 | | June 30, 2023 |
| | Cost | | Fair Value | | % of Portfolio | | Cost | | Fair Value | | % of Portfolio |
| Equity Real Estate Investment Trusts (REITs) | $ | 792,179 | | | $ | 1,408,512 | | | 18.2 | % | | $ | 741,133 | | | $ | 1,437,796 | | | 18.6 | % |
| Health Care Providers & Services | 692,554 | | | 802,289 | | | 10.4 | % | | 687,813 | | | 798,365 | | | 10.3 | % |
| Consumer Finance | 633,000 | | | 756,804 | | | 9.8 | % | | 625,033 | | | 736,635 | | | 9.5 | % |
| All Other Industries | 5,496,120 | | | 4,769,212 | | | 61.6 | % | | 5,746,617 | | | 4,752,135 | | | 61.6 | % |
| Total | $ | 7,613,853 | | | $ | 7,736,817 | | | 100.0 | % | | $ | 7,800,596 | | | $ | 7,724,931 | | | 100.0 | % |
As of September 30, 2023 investments in California comprised 10.2% of our investments at fair value, with a cost of $1,013,409 and a fair value of $1,629,742. As of June 30, 2023 investments in California comprised 10.3% of our investments at fair value, with a cost of $933,559 and a fair value of $791,860.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of September 30, 2023 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unobservable Input |
| Asset Category | | Fair Value | | Primary Valuation Approach or Technique | | Input | | Range | | Weighted Average (5) |
| First Lien Debt | | $ | 1,838,046 | | | Discounted cash flow (Yield analysis) | | Market yield | | 9.5% | to | 33.3% | | 13.0% |
| First Lien Debt | | 723,957 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 5.5x | to | 12.0x | | 9.4x |
| First Lien Debt | | 29,366 | | | Discounted cash flow (Yield analysis) | | Market yield | | 17.4% | to | 17.4% | | 17.4% |
| | Enterprise value waterfall (Market approach) | | Revenue multiple | | 1.0x | to | 1.5x | | 1.3x |
| | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 12.3% | to | 55.0% | | 33.6% |
| First Lien Debt | | 49,935 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 1.0x | to | 1.5x | | 1.3x |
| | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 12.3% | to | 55.0% | | 33.6% |
| First Lien Debt | | 188,293 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 0.2x | to | 2.0x | | 1.0x |
| First Lien Debt | | 54,739 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 6.3% | to | 8.3% | | 7.3% |
| First Lien Debt (1) | | 20,630 | | | Enterprise value waterfall (Discounted cash flow) | | Loss-adjusted discount rate | | 7.6% | to | 9.9% | | 8.0% |
| Projected loss rates | | —% | to | 3.6% | | 3.2% |
| First Lien Debt (2) | | 200,600 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate (3) | | 12.0% | to | 22.1% | | 14.0% |
| First Lien Debt | | 100,730 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 1.0x | to | 2.0x | | 1.5x |
| First Lien Debt | | 401,514 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 2.5x | to | 2.9x | | 2.7x |
| | | Earnings multiple | | 8.5x | to | 11.5x | | 10.0x |
| First Lien Debt | | 776,749 | | | Discounted cash flow | | Discount Rate | | 6.3% | to | 9.8% | | 7.1% |
| | | Terminal Cap Rate | | 5.3% | to | 8.3% | | 5.9% |
| First Lien Debt | | 474 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Second Lien Debt | | 1,216,316 | | | Discounted cash flow (Yield analysis) | | Market yield | | 10.0% | to | 35.6% | | 15.1% |
| Second Lien Debt | | 1,625 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 7.0x | to | 8.0x | | 7.5x |
| Second Lien Debt | | 7,227 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Unsecured Debt | | 7,200 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 5.5x | to | 7.5x | | 6.5x |
| Subordinated Structured Notes | | 626,746 | | | Discounted cash flow | | Discount rate (3) | | 8.2% | to | 32.0% | | 23.2% |
| Preferred Equity | | 10,035 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 0.2x | to | 2.0x | | 1.1x |
| Preferred Equity | | 17,759 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 6.8x | to | 9.0x | | 8.4x |
| Preferred Equity | | 8,541 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 6.3% | to | 8.3% | | 7.3% |
| Common Equity/Interests/Warrants | | 506,246 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 4.8x | to | 12.0x | | 9.2x |
| Common Equity/Interests/Warrants | | 5,849 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 0.2x | to | 2.0x | | 0.6x |
| Common Equity/Interests/Warrants | | 11,612 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 1.0x | to | 1.5x | | 1.3x |
| | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 12.3% | to | 55.0% | | 33.6% |
| Common Equity/Interests/Warrants (1) | | 1,208 | | | Enterprise value waterfall (Discounted cash flow) | | Loss-adjusted discount rate | | 7.6% | to | 9.9% | | 8.0% |
| | | Projected loss rates | | —% | to | 3.6% | | 3.2% |
| Common Equity/Interests/Warrants (2) | | 36,111 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate (3) | | 12.0% | to | 22.1% | | 14.0% |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unobservable Input |
| Asset Category | | Fair Value | | Primary Valuation Approach or Technique | | Input | | Range | | Weighted Average (5) |
| Common Equity/Interests/Warrants (4) | | 49,537 | | | Discounted cash flow | | Discount rate | | 6.3% | to | 9.8% | | 7.1% |
| | | Terminal Cap Rate | | 5.3% | to | 8.3% | | 5.9% |
| Common Equity/Interests/Warrants | | 22,299 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 1.0x | to | 2.0x | | 1.3x |
| Common Equity/Interests/Warrants | | 214,078 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 2.5x | to | 2.9x | | 2.7x |
| | | Earnings multiple | | 8.5x | to | 11.5x | | 10.0x |
| Common Equity/Interests/Warrants | | 544,907 | | | Discounted cash flow | | Discount rate | | 6.3% | to | 9.8% | | 7.1% |
| | | Terminal Cap Rate | | 5.3% | to | 8.3% | | 5.9% |
| Common Equity/Interests/Warrants | | 3,904 | | | Enterprise value waterfall (Discounted cash flow) | | Discount Rate | | 6.3% | to | 30.0% | | 23.1% |
| Common Equity/Interests/Warrants | | 12,638 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Total Level 3 Investments | | $ | 7,688,871 | | | | | | | | | | | |
(1)Represents the fair value of online consumer loans held by NPRC (see National Property REIT Corp section below) through its wholly owned subsidiary, American Consumer Lending Limited (“ACLL”), and valued using a discounted cash flow valuation technique.
(2)Represents the fair value of rated secured structured notes held by NPRC through its wholly owned subsidiary, National General Lending Limited (“NGL”), and valued using a discounted cash flow valuation technique.
(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.
(4)Represents Residual Profit Interests in Real Estate Investments.
(5)The weighted average information is generally derived by assigning each disclosed unobservable input a proportionate weight based on the fair value of the related investment. For the Loss-adjusted discount rate and Projected loss rate unobservable inputs of investments represented in (1), the weighted average is determined based on the purchase yield of recently issued loans within each respective term-grade cohort.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unobservable Input |
| Asset Category | | Fair Value | | Primary Valuation Approach or Technique | | Input | | Range | | Weighted Average (5) |
| First Lien Debt | | $ | 1,871,464 | | | Discounted cash flow (Yield analysis) | | Market yield | | 9.2% | to | 34.3% | | 12.8% |
| First Lien Debt | | 708,883 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 4.8x | to | 11.5x | | 9.3x |
| First Lien Debt | | 75,015 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 1.0x | to | 1.5x | | 1.3x |
| | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 11.8% | to | 55.0% | | 33.4% |
| First Lien Debt | | 199,915 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 0.2x | to | 2.0x | | 1.0x |
| First Lien Debt | | 56,600 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 6.0% | to | 8.0% | | 7.0% |
| First Lien Debt (1) | | 21,580 | | | Enterprise value waterfall (Discounted cash flow) | | Loss-adjusted discount rate | | 7.6% | to | 13.2% | | 8.1% |
| Projected loss rates | | 0.2% | to | 6.8% | | 5.2% |
| First Lien Debt (2) | | 200,600 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate (3) | | 11.7% | to | 19.3% | | 13.4% |
| First Lien Debt | | 96,239 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 1.0x | to | 2.0x | | 1.4x |
| First Lien Debt | | 395,926 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 2.8x | to | 3.0x | | 2.9x |
| Earnings multiple | | 7.3x | to | 9.3x | | 8.3x |
| First Lien Debt | | 725,703 | | | Discounted cash flow | | Discount Rate | | 6.3% | to | 9.8% | | 7.0% |
| | | Terminal Cap Rate | | 5.0% | to | 8.3% | | 5.8% |
| First Lien Debt | | 1,447 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Second Lien Debt | | 1,255,520 | | | Discounted cash flow (Yield analysis) | | Market yield | | 10.2% | to | 45.7% | | 14.8% |
| Second Lien Debt | | 6,988 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Unsecured Debt | | 7,200 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 4.8x | to | 7.5x | | 6.1x |
| Subordinated Structured Notes | | 665,002 | | | Discounted cash flow | | Discount rate (3) | | 4.0% | to | 37.1% | | 23.4% |
| Preferred Equity | | 12,637 | | | Enterprise value waterfall (Market approach) | | Revenue multiple | | 0.2x | to | 2.0x | | 1.1x |
| Preferred Equity | | 13,920 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 6.8x | to | 9.3x | | 8.6x |
| Preferred Equity | | 7,598 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 6.0% | to | 8.0% | | 7.0% |
| Common Equity/Interests/Warrants | | 438,848 | | | Enterprise value waterfall (Market approach) | | EBITDA multiple | | 4.8x | to | 11.5x | | 9.1x |
| Common Equity/Interests/Warrants (1) | | 1,400 | | | Enterprise value waterfall (Discounted cash flow) | | Loss-adjusted discount rate | | 7.6% | to | 13.2% | | 8.1% |
| Projected loss rates | | 0.2% | to | 6.8% | | 5.2% |
| Common Equity/Interests/Warrants (2) | | 35,648 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate (3) | | 11.7% | to | 19.3% | | 13.4% |
| Common Equity/Interests/Warrants (4) | | 56,254 | | | Discounted cash flow | | Discount rate | | 6.3% | to | 9.8% | | 7.0% |
| | | Terminal Cap Rate | | 5.0% | to | 8.3% | | 5.8% |
| Common Equity/Interests/Warrants | | 24,975 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 1.0x | to | 2.0x | | 1.3x |
| Common Equity/Interests/Warrants | | 202,456 | | | Enterprise value waterfall (Market approach) | | Tangible book value multiple | | 2.8x | to | 3.0x | | 2.9x |
| Earnings multiple | | 7.3x | to | 9.3x | | 8.3x |
| Common Equity/Interests/Warrants | | 618,791 | | | Discounted cash flow | | Discount rate | | 6.3% | to | 9.8% | | 7.0% |
| | | Terminal Cap Rate | | 5.0% | to | 8.3% | | 5.8% |
| Common Equity/Interests/Warrants | | 4,131 | | | Enterprise value waterfall (Discounted cash flow) | | Discount rate | | 13.0% | to | 30.0% | | 22.5% |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unobservable Input |
| Asset Category | | Fair Value | | Primary Valuation Approach or Technique | | Input | | Range | | Weighted Average (5) |
| Common Equity/Interests/Warrants | | 12,710 | | | Asset recovery analysis | | Recoverable amount | | n/a | | n/a |
| Total Level 3 Investments | | $ | 7,717,450 | | | | | | | | | | | |
(1)Represents the fair value of online consumer loans held by NPRC through its wholly owned subsidiary, American Consumer Lending Limited (“ACLL”), and valued using a discounted cash flow valuation technique.
(2)Represents the fair value of rated secured structured notes held by NPRC through its wholly owned subsidiary, National General Lending Limited (“NGL”), and valued using a discounted cash flow valuation technique.
(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.
(4)Represents Residual Profit Interests in Real Estate Investments.
(5)The weighted average information is generally derived by assigning each disclosed unobservable input a proportionate weight based on the fair value of the related investment. For the Loss-adjusted discount rate and Projected loss rate unobservable inputs of investments represented in (1), the weighted average is determined based on the purchase yield of recently issued loans within each respective term-grade cohort.
Investments for which market quotations are readily available are valued at such market quotations. In order to validate market quotations, management and the independent valuation firm look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. These investments are classified as Level 1 or Level 2 in the fair value hierarchy.
The fair value of debt investments specifically classified as Level 2 in the fair value hierarchy are generally valued by an independent pricing agent or more than one principal market maker, if available, otherwise a principal market maker or a primary market dealer. We generally value over-the-counter securities by using the prevailing bid and ask prices from dealers during the relevant period end, which were provided by an independent pricing agent and screened for validity by such service.
In determining the range of values for debt instruments where market quotations are not readily available, and are therefore classified as Level 3 in the fair value hierarchy, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow technique was then applied using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying a market approach such as using earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions and/or an income approach, such as the discounted cash flow technique. The enterprise value technique may also be used to value debt investments which are credit impaired. For stressed debt and equity investments, asset recovery analysis was used.
In determining the range of values for our investments in CLOs, the independent valuation firm uses a discounted multi-path cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model.
Our portfolio consists of residual interests and debt investments in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
have direct rights against the underlying borrowers or the entity that sponsored the CLOs. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, the prices of indices and securities underlying our CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us would be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.
The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the CLOs’ underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value. These investments are classified as Level 3 in the fair value hierarchy.
An increase in SOFR would materially increase the CLO’s financing costs. Since most of the collateral positions within the CLOs have SOFR floors, there may not be corresponding increases in investment income (if SOFR increases but stays below the SOFR floor rate of such investments) resulting in materially smaller distribution payments to the residual interest investors.
We hold more than a 10% interest in certain foreign corporations that are treated as controlled foreign corporations (“CFC”) for U.S. federal income tax purposes (including our residual interest tranche investments in CLOs). Therefore, we are treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporations in an amount equal to our pro rata share of the corporation’s income for that tax year (including both ordinary earnings and capital gains). We are required to include such deemed distributions from a CFC in our taxable income and we are required to distribute at least 90% of such income to maintain our RIC status, regardless of whether or not the CFC makes an actual distribution during such year.
If we acquire shares in “passive foreign investment companies” (“PFICs”) (including residual interest tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFIC’s income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain our status as a RIC.
Legislation known as FATCA and regulations thereunder impose a withholding tax of 30% on payments of U.S. source interest and dividends, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its United States account holders and its United States owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to residual interest and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.
If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices management would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose.
The significant unobservable input used to value our investments based on the yield technique and discounted cash flow technique is the market yield (or applicable discount rate) used to discount the estimated future cash flows expected to be received from the underlying investment, which includes both future principal and interest/dividend payments. Increases or decreases in the market yield (or applicable discount rate) would result in a decrease or increase, respectively, in the fair value measurement. Management and the independent valuation firms consider the following factors when selecting market yields or discount rates: risk of default, rating of the investment and comparable company investments, and call provisions.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow technique. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple would result in an increase or decrease, respectively, in EV which would result in an increase or decrease in the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.
The significant unobservable input used to value our private REIT investments based on the discounted cash flow analysis is the discount rate and terminal capitalization rate applied to projected cash flows of the underlying properties. Increases or decreases in the discount rate and terminal capitalization rate would result in a decrease or increase, respectively, in the fair value measurement.
Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.
Changes in Valuation Techniques
During the three months ended September 30, 2023, the valuation methodology for DTI Holdco, Inc. (“Epiq”) for the First Lien Term Loan changed from a combination of the yield analysis and market quotes to relying solely on market quotes, since market quotes were more active in the current period. As a result of the quoted prices of the First Lien Term Loan, the fair value of our investment in Epiq First Lien Term Loan increased to $18,315 as of September 30, 2023, a premium of $295 from its amortized cost, compared to the $449 unrealized discount recorded at June 30, 2023.
During the three months ended September 30, 2023, the valuation methodology for First Brands Group for the First Lien Term Loan changed from a combination of the yield analysis and market quotes to relying solely on market quotes, since market quotes were more active in the current period. As a result of the quoted prices of the First Lien Term Loan, the fair value of our investment in First Brands Group First Lien Term Loan was $22,129 as of September 30, 2023, a discount of $58 from its amortized cost, compared to the $75 unrealized discount recorded at June 30, 2023.
During the three months ended September 30, 2023, the valuation methodology for Strategic Materials changed from the yield analysis to the market approach, given the company’s interest payment default. As a result, the fair value of our investment in Strategic Materials decreased to $1,625 as of September 30, 2023, a discount of $5,355 to its amortized cost, compared to the unrealized discount of $2,692 recorded at June 30, 2023.
Credit Quality Indicators and Undrawn Commitments
As of September 30, 2023, $4,623,066 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR or SOFR floors ranging from 0.0% - 5.9%. As of September 30, 2023, $1,042,281 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 4.0% to 15.5%. As of June 30, 2023, $4,664,827 of our loans to portfolio companies, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.0% to 5.0%. As of June 30, 2023, $965,734 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 5.0% to 20.0%
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
As of September 30, 2023 and June 30, 2023 , the cost basis of our loans on non-accrual status amounted to $164,916 and $421,198 respectively, with fair value of $15,876 and $86,422, respectively. The fair values of these investments represent approximately 0.2% and 1.1% of our total assets at fair value as of September 30, 2023 and June 30, 2023, respectively.
Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of September 30, 2023 and June 30, 2023, we had $46,490 and $49,160, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of September 30, 2023 and June 30, 2023 as they were all floating rate instruments that repriced frequently.
National Property REIT Corp.
Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”), a consolidated holding company which owns 100% of the common equity of NPRC.
NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (“JV”). Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans and rated secured structured notes (“RSSN”).
During the three months ended September 30, 2023, we provided $63,305 of debt financing to NPRC to fund real estate capital expenditures and provide working capital.
During the three months ended September 30, 2023, we received partial repayments of $13,450 of our loans previously outstanding with NPRC and its wholly owned subsidiary.
During the three months ended September 30, 2022, we provided $74,000 of debt financing and $3,600 of equity financing to NPRC to fund capital expenditures for existing real estate properties, to provide working capital, and to fund purchases of rated secured structured notes.
During the three months ended September 30, 2022, we received partial repayments of $48,500 of our loans previously outstanding with NPRC and its wholly owned subsidiaries and $4,000 as a return of capital on our equity investment in NPRC.
The online consumer loan investments held by certain of NPRC’s wholly owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 60 months to 84 months. As of September 30, 2023, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 38 individual loans valued at $125, residual interest in two securitizations valued at $3,592, and one corporate bond valued at $16,733, for an aggregate fair value of $20,450. As of September 30, 2023, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $21,838.
The rated secured structured note investments held by certain of NPRC’s wholly owned subsidiaries are subordinated debt interests in broadly syndicated loans managed by established collateral management teams with many years of experience in the industry. As of September 30, 2023, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 94 investments with a fair value of $422,844 and face value of $448,390. The average outstanding note is approximately $4,769 with an expected maturity date ranging from April 2026 to October 2033 and weighted-average expected maturity of 5 years as of September 30, 2023. Coupons range from three-month SOFR (“3M”) plus 5.20% to 9.23% with a weighted-average coupon of 3M + 6.92%. As of September 30, 2023, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $236,711. As of September 30, 2023, based on outstanding notional balance, 12.7% of the portfolio was invested in Single - B rated tranches and 87.3% of the portfolio in BB rated tranches.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
As of September 30, 2023, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $1,013,409 and a fair value of $1,629,742, including our investment in online consumer lending and rated secured structured notes as discussed above. As of September 30, 2023, our investment in NPRC and its wholly-owned subsidiaries relating to the real estate portfolio had a fair value of $1,408,512. This portfolio was comprised of forty-eight multi-family properties, eight student housing properties, four senior living properties, and three commercial properties. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| No. | | Property Name | | City | | Acquisition Date | | Purchase Price | | Mortgage Outstanding |
| 1 | | Filet of Chicken | | Forest Park, GA | | 10/24/2012 | | $ | 7,400 | | | $ | — | |
| 2 | | Arlington Park Marietta, LLC | | Marietta, GA | | 5/8/2013 | | 14,850 | | | 13,492 | |
| 3 | | Taco Bell, OK | | Yukon, OK | | 6/4/2014 | | 1,719 | | | — | |
| 4 | | Taco Bell, MO | | Marshall, MO | | 6/4/2014 | | 1,405 | | | — | |
| 5 | | Abbie Lakes OH Partners, LLC | | Canal Winchester, OH | | 9/30/2014 | | 12,600 | | | 14,741 | |
| 6 | | Kengary Way OH Partners, LLC | | Reynoldsburg, OH | | 9/30/2014 | | 11,500 | | | 14,904 | |
| 7 | | Lakeview Trail OH Partners, LLC | | Canal Winchester, OH | | 9/30/2014 | | 26,500 | | | 28,429 | |
| 8 | | Lakepoint OH Partners, LLC | | Pickerington, OH | | 9/30/2014 | | 11,000 | | | 16,180 | |
| 9 | | Sunbury OH Partners, LLC | | Columbus, OH | | 9/30/2014 | | 13,000 | | | 16,409 | |
| 10 | | Heatherbridge OH Partners, LLC | | Blacklick, OH | | 9/30/2014 | | 18,416 | | | 23,434 | |
| 11 | | Jefferson Chase OH Partners, LLC | | Blacklick, OH | | 9/30/2014 | | 13,551 | | | 18,262 | |
| 12 | | Goldenstrand OH Partners, LLC | | Hilliard, OH | | 10/29/2014 | | 7,810 | | | 11,126 | |
| 13 | | SSIL I, LLC | | Aurora, IL | | 11/5/2015 | | 34,500 | | | 24,795 | |
| 14 | | Vesper Tuscaloosa, LLC | | Tuscaloosa, AL | | 9/28/2016 | | 54,500 | | | 41,670 | |
| 15 | | Vesper Iowa City, LLC | | Iowa City, IA | | 9/28/2016 | | 32,750 | | | 24,029 | |
| 16 | | Vesper Corpus Christi, LLC | | Corpus Christi, TX | | 9/28/2016 | | 14,250 | | | 10,454 | |
| 17 | | Vesper Campus Quarters, LLC | | Corpus Christi, TX | | 9/28/2016 | | 18,350 | | | 13,721 | |
| 18 | | Vesper College Station, LLC | | College Station, TX | | 9/28/2016 | | 41,500 | | | 31,031 | |
| 19 | | Vesper Kennesaw, LLC | | Kennesaw, GA | | 9/28/2016 | | 57,900 | | | 49,420 | |
| 20 | | Vesper Statesboro, LLC | | Statesboro, GA | | 9/28/2016 | | 7,500 | | | 7,480 | |
| 21 | | Vesper Manhattan KS, LLC | | Manhattan, KS | | 9/28/2016 | | 23,250 | | | 14,679 | |
| 22 | | 9220 Old Lantern Way, LLC | | Laurel, MD | | 1/30/2017 | | 187,250 | | | 153,580 | |
| 23 | | 7915 Baymeadows Circle Owner, LLC | | Jacksonville, FL | | 10/31/2017 | | 95,700 | | | 89,610 | |
| 24 | | 8025 Baymeadows Circle Owner, LLC | | Jacksonville, FL | | 10/31/2017 | | 15,300 | | | 15,590 | |
| 25 | | 23275 Riverside Drive Owner, LLC | | Southfield, MI | | 11/8/2017 | | 52,000 | | | 54,320 | |
| 26 | | 23741 Pond Road Owner, LLC | | Southfield, MI | | 11/8/2017 | | 16,500 | | | 18,811 | |
| 27 | | 150 Steeplechase Way Owner, LLC | | Largo, MD | | 1/10/2018 | | 44,500 | | | 36,307 | |
| 28 | | Olentangy Commons Owner LLC | | Columbus, OH | | 6/1/2018 | | 113,000 | | | 92,876 | |
| 29 | | Villages of Wildwood Holdings LLC | | Fairfield, OH | | 7/20/2018 | | 46,500 | | | 58,393 | |
| 30 | | Falling Creek Holdings LLC | | Richmond, VA | | 8/8/2018 | | 25,000 | | | 25,374 | |
| 31 | | Crown Pointe Passthrough LLC | | Danbury, CT | | 8/30/2018 | | 108,500 | | | 89,400 | |
| 32 | | Lorring Owner LLC | | Forestville, MD | | 10/30/2018 | | 58,521 | | | 47,680 | |
| 33 | | Hamptons Apartments Owner, LLC | | Beachwood, OH | | 1/9/2019 | | 96,500 | | | 79,520 | |
| 34 | | 5224 Long Road Holdings, LLC | | Orlando, FL | | 6/28/2019 | | 26,500 | | | 21,200 | |
| 35 | | Druid Hills Holdings LLC | | Atlanta, GA | | 7/30/2019 | | 96,000 | | | 79,104 | |
| 36 | | Bel Canto NPRC Parcstone LLC | | Fayetteville, NC | | 10/15/2019 | | 45,000 | | | 42,793 | |
| 37 | | Bel Canto NPRC Stone Ridge LLC | | Fayetteville, NC | | 10/15/2019 | | 21,900 | | | 21,545 | |
| 38 | | Sterling Place Holdings LLC | | Columbus, OH | | 10/28/2019 | | 41,500 | | | 34,196 | |
| 39 | | SPCP Hampton LLC | | Dallas, TX | | 11/2/2020 | | 36,000 | | | 38,843 | |
| 40 | | Palmetto Creek Holdings LLC | | North Charleston, SC | | 11/10/2020 | | 33,182 | | | 25,865 | |
| 41 | | Valora at Homewood Holdings LLC | | Homewood, AL | | 11/19/2020 | | 81,250 | | | 63,844 | |
| 42 | | NPRC Fairburn LLC | | Fairburn, GA | | 12/14/2020 | | 52,140 | | | 43,900 | |
| 43 | | NPRC Grayson LLC | | Grayson, GA | | 12/14/2020 | | 47,860 | | | 40,500 | |
| 44 | | NPRC Taylors LLC | | Taylors, SC | | 1/27/2021 | | 18,762 | | | 14,075 | |
| 45 | | Parkside at Laurel West Owner LLC | | Spartanburg, SC | | 2/26/2021 | | 57,005 | | | 42,025 | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| No. | | Property Name | | City | | Acquisition Date | | Purchase Price | | Mortgage Outstanding |
| 46 | | Willows at North End Owner LLC | | Spartanburg, SC | | 2/26/2021 | | 23,255 | | | 19,000 | |
| 47 | | SPCP Edge CL Owner LLC | | Webster, TX | | 3/12/2021 | | 34,000 | | | 25,496 | |
| 48 | | Jackson Pear Orchard LLC | | Ridgeland, MS | | 6/28/2021 | | 50,900 | | | 42,975 | |
| 49 | | Jackson Lakeshore Landing LLC | | Ridgeland, MS | | 6/28/2021 | | 22,600 | | | 17,955 | |
| 50 | | Jackson Reflection Pointe LLC | | Flowood, MS | | 6/28/2021 | | 45,100 | | | 33,203 | |
| 51 | | Jackson Crosswinds LLC | | Pearl, MS | | 6/28/2021 | | 41,400 | | | 38,601 | |
| 52 | | Elliot Apartments Norcross, LLC | | Norcross, GA | | 11/30/2021 | | 128,000 | | | 104,908 | |
| 53 | | Orlando 442 Owner, LLC (West Vue Apartments) | | Orlando, FL | | 12/30/2021 | | 97,500 | | | 73,000 | |
| 54 | | NPRC Wolfchase LLC | | Memphis, TN | | 3/18/2022 | | 82,100 | | | 60,000 | |
| 55 | | NPRC Twin Oaks LLC | | Hattiesburg. MS | | 3/18/2022 | | 44,850 | | | 35,032 | |
| 56 | | NPRC Lancaster LLC | | Birmingham, AL | | 3/18/2022 | | 37,550 | | | 29,042 | |
| 57 | | NPRC Rutland LLC | | Macon, GA | | 3/18/2022 | | 29,750 | | | 23,182 | |
| 58 | | Southport Owner LLC (Southport Crossing) | | Indianapolis, IN | | 3/29/2022 | | 48,100 | | | 36,075 | |
| 59 | | TP Cheyenne, LLC | | Cheyenne, WY | | 5/26/2022 | | 27,500 | | | 17,656 | |
| 60 | | TP Pueblo, LLC | | Pueblo, CO | | 5/26/2022 | | 31,500 | | | 20,166 | |
| 61 | | TP Stillwater, LLC | | Stillwater, OK | | 5/26/2022 | | 26,100 | | | 15,328 | |
| 62 | | TP Kokomo, LLC | | Kokomo, IN | | 5/26/2022 | | 20,500 | | | 12,753 | |
| 63 | | Terraces at Perkins Rowe JV LLC | | Baton Rouge, LA | | 11/14/2022 | | 41,400 | | | 29,566 | |
| | | | | | | | $ | 2,672,726 | | | $ | 2,237,545 | |
Unconsolidated Significant Subsidiaries
Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Regulation S-X 3-09 and Regulation S-X 4-08(g), we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries,” if any, as defined in Rule 1-02(w)(2) for BDC’s and closed end investment companies. Regulation S-X 3-09 requires separate audited financial statements of an unconsolidated subsidiary in an annual report. Regulation S-X 4-08(g) requires summarized financial information in an annual report.
Pursuant to Regulation S-X 10-01(b), Interim Financial Statements, summarized interim income statement information is required for an unconsolidated subsidiary within a quarterly report if the unconsolidated subsidiary would otherwise require separate audited financial statements within an annual report pursuant to Regulation S-X 3-09.
During the three months ended September 30, 2023 and the three months ended September 30, 2022, NPRC was deemed to be a significant subsidiary due to income. The following table shows summarized income statement information for NPRC for the periods included in this quarterly report:
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | |
| Summary Statement of Operations | 2023 | | 2022 | | | | |
| Total Income | $ | 104,139 | | | $ | 103,621 | | | | | |
| Operating Expenses | (54,490) | | | (52,484) | | | | | |
| Operating Income | 49,649 | | | 51,137 | | | | | |
| Interest Expense | (73,896) | | | (69,479) | | | | | |
| Depreciation and amortization | (26,428) | | | (29,323) | | | | | |
| Fair Value Adjustment | (2,017) | | | (7,068) | | | | | |
| Net loss | $ | (52,692) | | | $ | (54,733) | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
During the three months ended September 30, 2023, First Tower Finance Company LLC (“First Tower Finance”) was deemed a significant subsidiary due to income. The following table shows First Tower Finance summarized income statement information for the periods included within this quarterly report:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | |
| Summary Statement of Operations | | | 2023 | | 2022 | | | | |
| Total income | | | $ | 225,022 | | | $ | 222,372 | | | | | |
| Gross Profit | | | 267,033 | | | 254,206 | | | | | |
| Net loss | | | $ | (42,011) | | | $ | (31,834) | | | | | |
| | | | | | | | | |
Note 4. Revolving Credit Facility
On May 15, 2007, we formed our wholly owned subsidiary, PCF, a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Since origination of the revolving credit facility, we have renegotiated the terms and extended the commitments of the revolving credit facility several times. Most recently, effective September 15, 2022, we completed an extension and upsizing of the revolving credit facility (the “Revolving Credit Facility”). The lenders have extended commitments of $1,954,500 as of September 30, 2023. The Revolving Credit Facility includes an accordion feature which allows commitments to be increased up to $2,000,000 in the aggregate. The extension and upsizing of the Revolving Credit Facility extended the maturity date to September 15, 2027 and the revolving period through September 15, 2026, followed by an additional one-year amortization period, with distributions allowed to Prospect after the completion of the revolving period. During such one-year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one-year amortization period, the remaining balance will become due.
The Revolving Credit Facility contains restrictions pertaining to the geographic and industry concentrations of funded loans, maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements, among other items. The Revolving Credit Facility also contains certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, violation of which could result in the early termination of the Revolving Credit Facility. As of September 30, 2023, we were in compliance with the applicable covenants of the Revolving Credit Facility.
Interest on borrowings under the Revolving Credit Facility is one-month SOFR plus 205 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 40 basis points if more than 60% of the credit facility is drawn, 70 basis points if more than 35% and an amount less than or equal to 60% of the credit facility is drawn, or 150 basis points if an amount less than or equal to 35% of the credit facility is drawn. The Revolving Credit Facility requires us to pledge assets as collateral in order to borrow under the credit facility. As of September 30, 2023, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $3,021,215, which represents 38.7% of our total investments, including cash and cash equivalents. These assets are held and owned by PCF, a bankruptcy remote special purpose entity, and, as such, these investments are not available to our general creditors. As additional eligible investments are transferred to PCF and pledged under the Revolving Credit Facility, PCF will generate additional availability up to the current commitment amount of $1,954,500. The release of any assets from PCF requires the approval of the facility agent.
For the three months ended September 30, 2023, and September 30, 2022, the average stated interest rate (i.e., rate in effect plus the spread) and average outstanding borrowings for the Revolving Credit Facility were as follows:
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | |
| 2023 | | 2022 | | | | | | |
| Average stated interest rate | 7.31% | | 4.23% | | | | | | |
| Average outstanding balance | $ | 1,100,598 | | | $ | 966,173 | | | | | | | |
As of September 30, 2023 and June 30, 2023, we had $799,833 and $697,325, respectively, available to us for borrowing under the Revolving Credit Facility, net of $915,021 and $1,014,703 outstanding borrowings as of the respective balance sheet dates.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
In connection with the origination and amendments of the Revolving Credit Facility, we incurred $26,878 of fees, all of which are being amortized over the term of the facility. As of September 30, 2023 and June 30, 2023, $14,906 and $15,569, respectively, of the fees remain to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.
During the three months ended September 30, 2023 and September 30, 2022, we recorded $22,700 and $11,726, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.
Note 5. Convertible Notes
2022 Notes
On April 11, 2017, we issued $225,000 aggregate principal amount of convertible notes that matured on July 15, 2022 (the “Original 2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Original 2022 Notes bore interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2017. Total proceeds from the issuance of the Original 2022 Notes, net of underwriting discounts and offering costs, were $218,010. On May 18, 2018, we issued an additional $103,500 aggregate principal amount of convertible notes that matured on July 15, 2022 (the “Additional 2022 Notes,” and together with the Original 2022 Notes, the “2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Additional 2022 Notes were a further issuance of, and were fully fungible and ranked equally in right of payment with, the Original 2022 Notes and bore interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2018. Total proceeds from the issuance of the Additional 2022 Notes, net of underwriting discounts and offering costs, were $100,749.
On July 14, 2022, we converted $3 in outstanding principal amount of the 2022 Notes to 300 shares of common stock at a rate of 100.2305 shares of common stock per $1 principal amount, together with cash in lieu of fractional shares, in accordance with a Holder Conversion Notice.
On July 15, 2022 we repaid the remaining outstanding principal amount of $60,498 of the 2022 Notes, plus interest, at maturity. Following the maturity of the 2022 Notes, none of the 2022 Notes remained outstanding.
2025 Notes
On March 1, 2019, we issued $175,000 aggregate principal amount of senior convertible notes that mature on March 1, 2025 (the “2025 Notes”), unless previously converted or repurchased in accordance with their terms. We granted the underwriters a 13-day over-allotment option to purchase up to an additional $26,250 aggregate principal amount of the 2025 Notes. The underwriters fully exercised the over-allotment option on March 11, 2019 and we issued $26,250 aggregate principal amount of 2025 Notes at settlement on March 13, 2019. The 2025 Notes bear interest at a rate of 6.375% per year, payable semi-annually on March 1 and September 1 each year, beginning September 1, 2019. Total proceeds from the issuance of the 2025 Notes, net of underwriting discounts and offering costs, were $198,674.
As of September 30, 2023 and June 30, 2023, the outstanding aggregate principal amount of the 2025 Notes were $156,168 and $156,168, respectively.
Certain key terms related to the convertible features for the 2025 Notes are listed below:
| | | | | | | | | | |
| | | | | 2025 Notes |
| Initial conversion rate(1) | | | | 110.7420 | |
| Initial conversion price | | | | $ | 9.03 | |
| Conversion rate at September 30, 2023(1)(2) | | | | 110.7420 | |
| Conversion price at September 30, 2023(2)(3) | | | | $ | 9.03 | |
| Last conversion price calculation date | | | | 3/1/2023 |
| Dividend threshold amount (per share)(4) | | | | $ | 0.060000 | |
(1)Conversion rates denominated in shares of common stock per $1 principal amount of the Convertible Notes converted.
(2)Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.
(3)The conversion price will increase only if the current monthly dividends (per share) exceed the dividend threshold amount (per share).
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
(4)The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment. Current dividend rates are at or below the minimum dividend threshold amount for further conversion rate adjustments for all bonds.
Interest accrues from the date of the original issuance of the Convertible Notes or from the most recent date to which interest has been paid or duly provided. Upon conversion, the holder will receive a separate cash payment with respect to the notes surrendered for conversion representing accrued and unpaid interest to, but not including, the conversion date. Any such payment will be made on the settlement date applicable to the relevant conversion on the Convertible Notes. If a holder converts the Convertible Notes after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive shares of our common stock based on the conversion formula described above, a cash payment representing accrued and unpaid interest through the record date in the normal course and a separate cash payment representing accrued and unpaid interest from the record date to the conversion date.
No holder of Convertible Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a beneficial owner (within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time. The 5.0% limitation shall no longer apply following the effective date of any fundamental change. We will not issue any shares in connection with the conversion or redemption of the Convertible Notes which would equal or exceed 20% of the shares outstanding at the time of the transaction in accordance with NASDAQ rules.
Subject to certain exceptions, holders may require us to repurchase, for cash, all or part of their Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. In addition, upon a fundamental change that constitutes a non-stock change of control we will also pay holders an amount in cash equal to the present value of all remaining interest payments (without duplication of the foregoing amounts) on such Convertible Notes through and including the maturity date.
In connection with the issuance of the Convertible Notes, we recorded a discount of $3,369 and debt issuance costs of $2,090 which are being amortized over the terms of the Convertible Notes. As of September 30, 2023 and June 30, 2023, $825 and $964 of the original issue discount and $525 and $613, respectively, of the debt issuance costs remain to be amortized and is included as a reduction within Convertible Notes on the Consolidated Statement of Assets and Liabilities.
During the three months ended September 30, 2023 and September 30, 2022, we recorded $2,717 and $2,848, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Note 6. Public Notes
2023 Notes
On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Original 2023 Notes”). The Original 2023 Notes bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2013. Total proceeds from the issuance of the Original 2023 Notes, net of underwriting discounts and offering costs, were $243,641. On June 20, 2018, we issued an additional $70,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Additional 2023 Notes”, and together with the Original 2023 Notes, the “2023 Notes”). The Additional 2023 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2023 Notes and bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2018. Total proceeds from the issuance of the Additional 2023 Notes, net of underwriting discounts, were $69,403.
During the three months ended September 30, 2022, we commenced a tender offer to purchase for cash any and all of the $284,219 then outstanding aggregate principal amount of the 2023 Notes at a price of 98.00%, plus accrued and unpaid interest. As a result, $347 aggregate principal amount of the 2023 Notes were validly tendered and accepted, and we recognized a realized loss of $6 from the extinguishment of debt in the amount of the difference between the reacquisition price and the net carrying amount of the 2023 Notes, net of the proportionate amount of unamortized debt issuance costs.
As of September 30, 2022, the outstanding aggregate principal amount of the 2023 Notes was $283,872. On March 15, 2023 we repaid the remaining outstanding principal amount of $282,115 of the 2023 Notes, plus interest, at maturity. Following the maturity of the 2023 Notes, none of the 2023 Notes remained outstanding.
6.375% 2024 Notes
On October 1, 2018, we issued $100,000 aggregate principal amount of unsecured notes that mature on January 15, 2024 (the “6.375% 2024 Notes”). The 6.375% 2024 Notes bear interest at a rate of 6.375% per year, payable semi-annually on January 15 and July 15 of each year, beginning January 15, 2019. Total proceeds from the issuance of the 6.375% 2024 Notes, net of underwriting discounts and offering costs, were $98,985.
As of September 30, 2023 and June 30, 2023, the outstanding aggregate principal amount of the 6.375% 2024 Notes were $81,240 and $81,240, respectively.
2026 Notes
On January 22, 2021, we issued $325,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Original 2026 Notes”). The Original 2026 Notes bear interest at a rate of 3.706% per year, payable semi-annually on July 22, and January 22 of each year, beginning on July 22, 2021. Total proceeds from the issuance of the 2026 Notes, net of underwriting discounts and offering costs, were $317,720. On February 19, 2021, we issued an additional $75,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Additional 2026 Notes”, and together with the Original 2026 Notes, the “2026 Notes”). The Additional 2026 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2026 Notes and bear interest at a rate of 3.706% per year, payable semi-annually on July 22 and January 22 of each year, beginning July 22, 2021. Total proceeds from the issuance of the Additional 2026 Notes, net of underwriting discounts and offering costs, were $74,061. As of September 30, 2023 and June 30, 2023, the outstanding aggregate principal amount of the 2026 Notes were $400,000 and $400,000, respectively.
3.364% 2026 Notes
On May 27, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on November 15, 2026 (the “3.364% 2026 Notes”). The 3.364% 2026 Notes bear interest at a rate of 3.364% per year, payable semi-annually on November 15, and May 15 of each year, beginning on November 15, 2021. Total proceeds from the issuance of the 3.364% 2026 Notes, net of underwriting discounts and offering costs, were $293,283. As of September 30, 2023 and June 30, 2023, the outstanding aggregate principal amount of the 3.364% 2026 Notes were $300,000 and $300,000, respectively.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
3.437% 2028 Notes
On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”). The 3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2022. Total proceeds from the issuance of the 3.437% 2028 Notes, net of underwriting discounts and offering costs, were $291,798. As of September 30, 2023 and June 30, 2023, the outstanding aggregate principal amount of the 3.437% 2028 Notes were $300,000 and $300,000, respectively.
The 2023 Notes, the 6.375% 2024 Notes, the 2026 Notes, the 3.364% 2026 Notes, and the 3.437% 2028 Notes (collectively, the “Public Notes”) are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding.
In connection with the issuance of the Public Notes we recorded a discount of $13,417 and debt issuance costs of $13,491, which are being amortized over the term of the notes. As of September 30, 2023 and June 30, 2023, $8,194 and $8,770 of the original issue discount and $7,735 and $8,333, respectively, of the debt issuance costs remain to be amortized and are included as a reduction within Public Notes on the Consolidated Statement of Assets and Liabilities.
During the three months ended September 30, 2023, and September 30, 2022, we recorded $11,274 and $15,613, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.
Note 7. Prospect Capital InterNotes®
On February 13, 2020, we entered into a selling agent agreement with InspereX LLC (formerly known as “Incapital LLC”) (the “Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes® (collectively with previously authorized selling agent agreements, the “InterNotes® Offerings”). On February 8, 2023, our Board of Directors reauthorized $1,000,000 of Prospect Capital InterNotes® for sale under the Selling Agent Agreement. Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement. We have, from time to time, repurchased certain notes issued through the InterNotes® Offerings and, therefore, as of September 30, 2023, $358,834 aggregate principal amount of Prospect Capital InterNotes® were outstanding.
These notes are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding. Each series of notes will be issued by a separate trust. These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.
During the three months ended September 30, 2023, we issued $3,976 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $3,892. These notes were issued with stated interest rates ranging from 5.75% to 6.50% with a weighted average interest rate of 6.17%. These notes will mature between July 15, 2026 and September 15, 2043. The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Tenor at Origination (in years) | | Principal Amount | | Interest Rate Range | | Weighted Average Interest Rate | | Maturity Date Range |
| 3 | | $ | 1,019 | | | 5.75% | | 5.75% | | July 15, 2026 – September 15, 2026 |
| 6 | | 734 | | | 6.00% | | 6.00% | | July 15, 2029 – September 15, 2029 |
| 10 | | 678 | | | 6.25% | | 6.25% | | July 15, 2033 – September 15, 2033 |
| 20 | | 1,545 | | | 6.50% | | 6.50% | | July 15, 2043 – September 15, 2043 |
| | $ | 3,976 | | | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
During the three months ended September 30, 2022, we issued $2,624 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $2,591. These notes were issued with a stated interest rate of 4.50% with a weighted average interest rate of 4.50%. These notes will mature between July 15, 2027 and September 15, 2027. The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Tenor at Origination (in years) | | Principal Amount | | Interest Rate Range | | Weighted Average Interest Rate | | Maturity Date Range |
| | | | | | | | |
| 5 | | 2,624 | | | 4.50% | | 4.50% | | July 15, 2027 – September 15, 2027 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | $ | 2,624 | | | | | | | |
During the three months ended September 30, 2023, we repaid $3,247 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option of the InterNotes®. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2023 was $91.
The following table summarizes the Prospect Capital InterNotes® outstanding as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Tenor at Origination (in years) | | Principal Amount | | Interest Rate Range | | Weighted Average Interest Rate | | Maturity Date Range |
| 3 | | $ | 12,034 | | | 1.50% – 5.75% | | 4.95% | | January 15, 2024 – September 15, 2026 |
| 5 | | 96,789 | | | 2.25% – 5.50% | | 3.30% | | January 15, 2026 – October 15, 2027 |
| 6 | | 18,135 | | | 3.00% – 6.00% | | 3.52% | | June 15, 2027 – September 15, 2029 |
| 7 | | 28,510 | | | 2.75% – 4.25% | | 3.17% | | January 15, 2028 – February 15, 2029 |
| 8 | | 3,236 | | | 3.40% – 3.50% | | 3.45% | | June 15, 2029 – July 15, 2029 |
| 10 | | 80,196 | | | 3.15% – 6.25% | | 3.99% | | August 15, 2029 – September 15, 2033 |
| 12 | | 14,043 | | | 3.70% – 4.00% | | 3.95% | | June 15, 2033 – July 15, 2033 |
| 15 | | 14,334 | | | 3.50% – 4.50% | | 3.84% | | July 15, 2036 – February 15, 2037 |
| 18 | | 2,959 | | | 4.50% – 5.50% | | 4.82% | | January 15, 2031 – April 15, 2031 |
| 20 | | 3,503 | | | 5.75% – 6.50% | | 6.16% | | November 15, 2032 – September 15, 2043 |
| 25 | | 7,800 | | | 6.25% – 6.50% | | 6.37% | | November 15, 2038 – May 15, 2039 |
| 30 | | 77,295 | | | 4.00% – 6.63% | | 5.33% | | November 15, 2042 – March 15, 2052 |
| Principal Outstanding | | $ | 358,834 | | | | | | | |
| Less Discounts | | | | | | | | |
| Unamortized Debt Issuance | | (6,510) | | | | | | | |
| Carrying Amount | | $ | 352,324 | | | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
During the three months ended September 30, 2022, we repaid $1,144 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. In order to replace short maturity debt with longer-term debt, we redeemed $322,623 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.45%. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the year ended June 30, 2022 was $6,411.
The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Tenor at Origination (in years) | | Principal Amount | | Interest Rate Range | | Weighted Average Interest Rate | | Maturity Date Range |
| 3 | | $ | 11,015 | | | 1.50% - 5.75% | | 4.88% | | January 15, 2024 – June 15, 2026 |
| 5 | | 96,914 | | | 2.25% - 5.50% | | 3.30% | | January 15, 2026 – October 15, 2027 |
| 6 | | 17,401 | | | 3.00% - 6.00% | | 3.41% | | June 15, 2027 – June 15, 2029 |
| 7 | | 28,887 | | | 2.75% - 4.25% | | 3.17% | | January 15, 2028 – February 15, 2029 |
| 8 | | 3,236 | | | 3.40% - 3.50% | | 3.45% | | June 15, 2029 – July 15, 2029 |
| 10 | | 79,944 | | | 3.15% - 6.25% | | 3.97% | | August 15, 2029 – June 15, 2033 |
| 12 | | 14,241 | | | 3.70% - 4.00% | | 3.95% | | June 15, 2033 – July 15, 2033 |
| 15 | | 14,647 | | | 3.50% - 4.50% | | 3.84% | | July 15, 2036 – February 15, 2037 |
| 18 | | 3,020 | | | 4.50% - 5.00% | | 4.73% | | January 15, 2031 – April 15, 2031 |
| 20 | | 1,958 | | | 5.75% - 6.50% | | 5.89% | | November 15, 2032 – June 15, 2043 |
| 25 | | 7,800 | | | 6.25% - 6.50% | | 6.37% | | November 15, 2038 – May 15, 2039 |
| 30 | | 79,042 | | | 4.00% - 6.63% | | 5.31% | | November 15, 2042 – March 15, 2052 |
| Principal Outstanding | | $ | 358,105 | | | | | | | |
| Less Discounts | | | | | | | | |
| Unamortized debt issuance | | (6,688) | | | | | | | |
| Carrying Amount | | $ | 351,417 | | | | | | | |
During the three months ended September 30, 2023 and September 30, 2022 we recorded $3,902 and $3,683 respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.
Note 8. Fair Value and Maturity of Debt Outstanding
As of September 30, 2023, our asset coverage ratio stood at 308.7% based on the outstanding principal amount of our senior securities representing indebtedness of $2,511,263 and our asset coverage ratio on our senior securities that are stock was 188.0%. As of June 30, 2023, our asset coverage ratio stood at 297.0% based on the outstanding principal amount of our senior securities representing indebtedness of $2,610,216 and our asset coverage ratio on our senior securities that are stock was 186.2%. Refer to Note 9, Equity Offerings, Offering Expenses and Distributions for additional discussion on our senior securities that are stock.
Information about our senior securities is shown in the following table as of the end of each of the last ten fiscal years and as of September 30, 2023 (All figures in this item are in thousands except per unit data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Amount Outstanding(1) | | Asset Coverage per Unit(2) | | Involuntary Liquidating Preference per Unit | | Average Market Value per Unit(3) |
| Credit Facility | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 915,021 | | | $ | 8,473 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 1,014,703 | | | 7,639 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 839,464 | | | 9,015 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 356,937 | | | 17,408 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 237,536 | | | 22,000 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 167,000 | | | 34,298 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 37,000 | | | 155,503 | | | — | | | — | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal 2017 (as of June 30, 2017) | | — | | | — | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | — | | | — | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 368,700 | | | 18,136 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 92,000 | | | 69,470 | | | — | | | — | |
| | | | | | | | |
| 2015 Notes(4) | | | | | | | | |
| Fiscal 2015 (as of June 30, 2015) | | $ | 150,000 | | | $ | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 150,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2016 Notes(5) | | | | | | | | |
| Fiscal 2016 (as of June 30, 2016) | | $ | 167,500 | | | $ | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 167,500 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 167,500 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2017 Notes(6) | | | | | | | | |
| Fiscal 2017 (as of June 30, 2017) | | $ | 50,734 | | | $ | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 129,500 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 130,000 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 130,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2018 Notes(7) | | | | | | | | |
| Fiscal 2017 (as of June 30, 2017) | | $ | 85,419 | | | $ | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 200,000 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 200,000 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 200,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2019 Notes(9) | | | | | | | | |
| Fiscal 2018 (as of June 30, 2018) | | $ | 101,647 | | | $ | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 200,000 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 200,000 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 200,000 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 200,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
5.00% 2019 Notes(10) | | | | | | | | |
| Fiscal 2018 (as of June 30, 2018) | | $ | 153,536 | | | $ | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 300,000 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 300,000 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 300,000 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 300,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2020 Notes(13) | | | | | | | | |
| Fiscal 2019 (as of June 30, 2019) | | $ | 224,114 | | | $ | 2,365 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 392,000 | | | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 392,000 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 392,000 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 392,000 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 400,000 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
6.95% 2022 Notes(8) | | | | | | | | |
| Fiscal 2014 (as of June 30, 2014) | | $ | 100,000 | | | $ | 2,305 | | | — | | | $ | 1,038 | |
| | | | | | | | |
| 2022 Notes | | | | | | | | |
| Fiscal 2022 (as of June 30, 2022) | | $ | 60,501 | | | $ | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 111,055 | | | 2,740 | | | — | | | — | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal 2020 (as of June 30, 2020) | | 258,240 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 328,500 | | | 2,365 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 328,500 | | | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 225,000 | | | 2,251 | | | — | | | — | |
| | | | | | | | |
| 2023 Notes(11)(18) | | | | | | | | |
| Fiscal 2022 (as of June 30, 2022) | | $ | 284,219 | | | $ | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 284,219 | | | 2,740 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 319,145 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 318,863 | | | 2,365 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 318,675 | | | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 248,507 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 248,293 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 248,094 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 247,881 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 2024 Notes(14) | | | | | | | | |
| Fiscal 2020 (as of June 30, 2020) | | $ | 233,788 | | | $ | 2,408 | | | — | | | $ | 959 | |
| Fiscal 2019 (as of June 30, 2019) | | 234,443 | | | 2,365 | | | — | | | 1,002 | |
| Fiscal 2018 (as of June 30, 2018) | | 199,281 | | | 2,452 | | | — | | | 1,029 | |
| Fiscal 2017 (as of June 30, 2017) | | 199,281 | | | 2,251 | | | — | | | 1,027 | |
| Fiscal 2016 (as of June 30, 2016) | | 161,364 | | | 2,269 | | | — | | | 951 | |
| | | | | | | | |
6.375% 2024 Notes(11) | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 81,240 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 81,240 | | | 2,970 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 81,240 | | | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 81,389 | | | 2,740 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 99,780 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 99,726 | | | 2,365 | | | — | | | — | |
| | | | | | | | |
| 2025 Notes | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 156,168 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 156,168 | | | 2,970 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 156,168 | | | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 156,168 | | | 2,740 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 201,250 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 201,250 | | | 2,365 | | | — | | | — | |
| | | | | | | | |
| 2026 Notes | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 400,000 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 400,000 | | | 2,970 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 400,000 | | | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 400,000 | | | 2,740 | | | — | | | — | |
| | | | | | | | |
3.364% 2026 Notes | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 300,000 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 300,000 | | | 2,970 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 300,000 | | | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 300,000 | | | 2,740 | | | — | | | — | |
| | | | | | | | |
3.437% 2028 Notes | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 300,000 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 300,000 | | | 2,970 | | | — | | | — | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal 2022 (as of June 30, 2022) | | 300,000 | | | 2,733 | | | — | | | — | |
| | | | | | | | |
| 2028 Notes(15) | | | | | | | | |
| Fiscal 2020 (as of June 30, 2020) | | $ | 70,761 | | | $ | 2,408 | | | — | | | $ | 950 | |
| Fiscal 2019 (as of June 30, 2019) | | 70,761 | | | 2,365 | | | — | | | 984 | |
| Fiscal 2018 (as of June 30, 2018) | | 55,000 | | | 2,452 | | | — | | | 1,004 | |
| | | | | | | | |
| 2029 Notes(16) | | | | | | | | |
| Fiscal 2021 (as of June 30, 2021) | | $ | 69,170 | | | $ | 2,740 | | | — | | | $ | 1,028 | |
| Fiscal 2020 (as of June 30, 2020) | | 69,170 | | | 2,408 | | | — | | | 970 | |
| Fiscal 2019 (as of June 30, 2019) | | 69,170 | | | 2,365 | | | — | | | 983 | |
| | | | | | | | |
| Prospect Capital InterNotes® | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 358,834 | | | $ | 3,087 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 358,105 | | | 2,970 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 347,564 | | | 2,733 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 508,711 | | | 2,740 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 680,229 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 707,699 | | | 2,365 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 760,924 | | | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 980,494 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 908,808 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 827,442 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 785,670 | | | 2,305 | | | — | | | — | |
| | | | | | | | |
| 6.50% Preferred Stock | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 612,322 | | | $ | 47 | | | $ | 25 | | | $ | — | |
| Fiscal 2023 (as of June 30, 2023) | | 533,216 | | | 47 | | | 25 | | | — | |
| | | | | | | | |
| 5.50% Preferred Stock | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 852,486 | | | $ | 47 | | | $ | 25 | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 870,268 | | | 47 | | | 25 | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 590,197 | | | 54 | | | 25 | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 137,040 | | | 65 | | | 25 | | | — | |
| | | | | | | | |
| 5.35% Preferred Stock | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 147,509 | | | $ | 47 | | | $ | 25 | | | $ | 15.59 | |
| Fiscal 2023 (as of June 30, 2023) | | 149,066 | | | 47 | | | $ | 25 | | | 15.98 | |
| Fiscal 2022 (as of June 30, 2022) | | 150,000 | | | 54 | | | $ | 25 | | | 21.08 | |
| | | | | | | | |
| All Senior Securities(11)(12) | | | | | | | | |
| Fiscal 2024 (as of September 30, 2023) | | $ | 4,123,580 | | | $ | 1,880 | | | — | | | — | |
| Fiscal 2023 (as of June 30, 2023) | | 4,162,766 | | | 1,862 | | | — | | | — | |
| Fiscal 2022 (as of June 30, 2022) | | 3,509,353 | | | 2,156 | | | — | | | — | |
| Fiscal 2021 (as of June 30, 2021) | | 2,404,689 | | | 2,584 | | | — | | | — | |
| Fiscal 2020 (as of June 30, 2020) | | 2,169,899 | | | 2,408 | | | — | | | — | |
| Fiscal 2019 (as of June 30, 2019) | | 2,421,526 | | | 2,365 | | | — | | | — | |
| Fiscal 2018 (as of June 30, 2018) | | 2,346,563 | | | 2,452 | | | — | | | — | |
| Fiscal 2017 (as of June 30, 2017) | | 2,681,435 | | | 2,251 | | | — | | | — | |
| Fiscal 2016 (as of June 30, 2016) | | 2,707,465 | | | 2,269 | | | — | | | — | |
| Fiscal 2015 (as of June 30, 2015) | | 2,983,736 | | | 2,241 | | | — | | | — | |
| Fiscal 2014 (as of June 30, 2014) | | 2,773,051 | | | 2,305 | | | — | | | — | |
(1) Except as noted, the total amount of each class of senior securities outstanding at the end of the year/period presented (in 000’s).
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
(2)The asset coverage ratio for a class of secured senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by secured senior securities representing indebtedness. The asset coverage ratio for a class of unsecured senior securities representing indebtedness is inclusive of all senior securities representing indebtedness. With respect to the senior securities represented by indebtedness, this asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit. The asset coverage ratio for a class of senior securities representing preferred stock is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the sum of all senior securities representing indebtedness and the involuntary liquidation preference of senior securities representing preferred stock (the “Total Asset Coverage Ratio”). With respect to the Preferred Stock, the Asset Coverage Per Unit figure is expressed in terms of a dollar amount per share of outstanding Preferred Stock (based on a per share liquidation preference of $25). The rows reflecting “All Senior Securities” reflect the Total Asset Coverage Ratio as the asset coverage ratio, and express Asset Coverage Per Unit as per $1,000 of indebtedness or per $1,000 of Preferred Stock liquidation preference.
(3)This column is inapplicable, except for the 6.95% 2022 Notes, the 2024 Notes, the 2028 Notes, the 2029 Notes, and the 5.35% Preferred Stock. The average market value per unit is calculated as an average of quarter-end prices. With respect to the senior securities represented by indebtedness, the market value is shown per $1,000 of indebtedness.
(4)We repaid the outstanding principal amount of the 2015 Notes on December 15, 2015.
(5)We repaid the outstanding principal amount of the 2016 Notes on August 15, 2016.
(6)We repaid the outstanding principal amount of the 2017 Notes on October 15, 2017.
(7)We repaid the outstanding principal amount of the 2018 Notes on March 15, 2018.
(8)We redeemed the 6.95% 2022 Notes on May 15, 2015.
(9)We repaid the outstanding principal amount of the 2019 Notes on January 15, 2019.
(10)We redeemed the 5.00% 2019 Notes on September 26, 2018.
(11)For the fiscal years ended June 30, 2020 or prior, the 2023 Notes and 6.375% 2024 Notes are presented net of unamortized discount.
(12)While we do not consider commitments to fund under revolving arrangements to be Senior Securities, if we were to elect to treat such unfunded commitments, which were $27,316 as of September 30, 2023 as Senior Securities for purposes of Section 18 of the 1940 Act, our asset coverage per unit would be $1,868.
(13)We repaid the outstanding principal amount of the 2020 Notes on April 15, 2020.
(14)We redeemed the 2024 Notes on February 16, 2021.
(15)We redeemed the 2028 Notes on June 15, 2021.
(16)We redeemed the 2029 Notes on December 30, 2021.
(17)We redeemed the 2022 Notes on July 15, 2022.
(18)We redeemed the 2023 Notes on March 15, 2023.
The following table shows our outstanding debt as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Principal Outstanding | | Unamortized Discount & Debt Issuance Costs | | Net Carrying Value | | Fair Value | | Effective Interest Rate | |
| Revolving Credit Facility | $ | 915,021 | | | $ | 14,906 | | | $ | 915,021 | | (1) | $ | 915,021 | | (2) | 1M SOFR + | 2.05% | (5) |
| | | | | | | | | | | | |
| 2025 Notes | 156,168 | | | 1,350 | | | 154,818 | | | 155,620 | | (3) | 6.63 | % | (6) | |
| Convertible Notes | 156,168 | | | | | 154,818 | | | 155,620 | | | | | |
| | | | | | | | | | | | |
| 6.375% | 2024 Notes | 81,240 | | | 59 | | | 81,181 | | | 80,966 | | (3) | 6.57 | % | (6) | |
| 2026 Notes | 400,000 | | | 4,756 | | | 395,244 | | | 361,988 | | (3) | 3.98 | % | (6) | |
| 3.364% | 2026 Notes | 300,000 | | | 4,399 | | | 295,601 | | | 259,665 | | (3) | 3.60 | % | (6) | |
| 3.437% | 2028 Notes | 300,000 | | | 6,715 | | | 293,285 | | | 235,203 | | (3) | 3.64 | % | (6) | |
| Public Notes | 1,081,240 | | | | | 1,065,311 | | | 937,822 | | | | | |
| | | | | | | | | | | | |
| Prospect Capital InterNotes® | 358,834 | | | 6,510 | | | 352,324 | | | 299,739 | | (4) | 5.80 | % | (7) | |
| Total | | $ | 2,511,263 | | | | | $ | 2,487,474 | | | $ | 2,308,202 | | | | | |
(1)Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.
(2)The fair value of the Revolving Credit Facility is equal to its carrying value because the revolver is a floating rate facility that reprices to a market rate frequently. The fair value is categorized as Level 2 under ASC 820.
(3)We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes. The fair value of these debt obligations are categorized as Level 1 under ASC 820.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
(4)The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates plus spread based on observable market inputs. The fair value of these debt obligations are categorized as Level 2 under ASC 820.
(5)Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are amortized on a straight-line method over the stated life of the obligation.
(6)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs.
(7)For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate. Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.
The following table shows our outstanding debt as of June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Principal Outstanding | | Unamortized Discount & Debt Issuance Costs | | Net Carrying Value | | Fair Value | | Effective Interest Rate | |
| Revolving Credit Facility | $ | 1,014,703 | | | $ | 15,569 | | | $ | 1,014,703 | | (1) | $ | 1,014,703 | | (2) | 1M SOFR + | 2.05 | % | (5) |
| | | | | | | | | | | | |
| 2025 Notes | 156,168 | | | 1,577 | | | 154,591 | | | 154,107 | | (3) | 6.63 | % | (6) |
| Convertible Notes | 156,168 | | | | | 154,591 | | | 154,107 | | | | | |
| | | | | | | | | | | | |
| 6.375% | 2024 Notes | 81,240 | | | 108 | | | 81,132 | | | 80,818 | | (3) | 6.57 | % | (6) |
| 2026 Notes | 400,000 | | | 5,244 | | | 394,756 | | | 354,896 | | (3) | 3.98 | % | (6) |
| 3.364% | 2026 Notes | 300,000 | | | 4,730 | | | 295,270 | | | 252,282 | | (3) | 3.60 | % | (6) |
| 3.437% | 2028 Notes | 300,000 | | | 7,021 | | | 292,979 | | | 230,472 | | (3) | 3.64 | % | (6) |
| Public Notes | 1,081,240 | | | | | 1,064,137 | | | 918,468 | | | | | |
| | | | | | | | | | | | |
Prospect Capital InterNotes® | 358,105 | | | 6,688 | | | 351,417 | | | 313,538 | | (4) | 5.77 | % | (7) |
| Total | $ | 2,610,216 | | | | | $ | 2,584,848 | | | $ | 2,400,816 | | | | | |
(1)Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.
(2)The fair value of the Revolving Credit Facility is equal to its carrying value because the revolver is a floating rate facility that reprices to a market rate frequently. The fair value is categorized as Level 2 under ASC 820.
(3)We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes. The fair value of these debt obligations are categorized as Level 1 under ASC 820.
(4)The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates plus spread based on observable market inputs. The fair value of these debt obligations are categorized as Level 2 under ASC 820.
(5)Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are amortized on a straight-line method over the stated life of the obligation.
(6)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs.
(7)For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate. Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The following table shows the contractual maturities by fiscal year of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Fiscal Year ending June 30, |
| Total | | Remainder of 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | After 5 Years |
| Revolving Credit Facility | $ | 915,021 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 915,021 | | | $ | — | |
| Convertible Notes | 156,168 | | | — | | | 156,168 | | | — | | | — | | | — | | | — | |
| Public Notes | 1,081,240 | | | 81,240 | | | — | | | 400,000 | | | 300,000 | | | — | | | 300,000 | |
| Prospect Capital InterNotes® | 358,834 | | | 662 | | | 1,499 | | | 38,847 | | | 75,465 | | | 15,400 | | | 226,961 | |
| Total Contractual Obligations | $ | 2,511,263 | | | $ | 81,902 | | | $ | 157,667 | | | $ | 438,847 | | | $ | 375,465 | | | $ | 930,421 | | | $ | 526,961 | |
| | | | | | | | | | | | | |
We may from time to time seek to cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. The amounts involved may be material. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including secured debt, unsecured debt and/or debt securities convertible into common stock. Any such purchases or exchanges of outstanding debt would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.
Note 9. Equity Offerings, Offering Expenses, and Distributions
On February 10, 2023, we filed a registration statement on Form N-2 (File No. 333-269714) that was effective upon filing pursuant to Rule 462(e) under the Securities Act, and which replaced our previously effective registration statement on Form N-2 that had been filed on February 13, 2020 and which was also effective upon filing pursuant to Rule 462(e) under the Securities Act. The registration statement permits us to issue, through one or more transactions, an indeterminate amount of securities, consisting of common stock, preferred stock, debt securities, subscription rights to purchase our securities, warrants representing rights to purchase our securities or separately tradable units combining two or more of our securities.
Preferred Stock
On August 3, 2020, we entered into a Dealer Manager Agreement with Preferred Capital Securities, LLC (“PCS”), as amended on June 9, 2022, October 7, 2022 and February 10, 2023, pursuant to which PCS has agreed to serve as the Company’s agent, principal distributor and dealer manager for the Company’s offering of up to 72,000,000 shares, par value $0.001 per share, of preferred stock, with a liquidation preference of $25.00 per share. Such preferred stock will initially be issued in multiple series, including the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 6.50% Series A3 Preferred Stock (“Series A3 Preferred Stock”), and the 6.50% Series M3 Preferred Stock (“Series M3 Preferred Stock”). In connection with such offering, on August 3, 2020, June 9, 2022, October 11, 2022 and February 10, 2023 we filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland (“SDAT”), reclassifying and designating 120,000,000, 60,000,000, 120,000,000, and 60,000,000 shares, respectively, of the Company’s authorized and unissued shares of common stock into shares of preferred stock as “Convertible Preferred Stock.”
On October 30, 2020, and as amended on February 18, 2022, October 7, 2022 and February 10, 2023, we entered into a Dealer Manager Agreement with InspereX LLC, pursuant to which InspereX LLC has agreed to serve as the Company’s agent and dealer manager for the Company’s offering of up to 10,000,000 shares, par value $0.001 per share, of preferred stock, with a liquidation preference of $25.00 per share. Such preferred stock will initially be issued in multiple series, including the 5.50% Series AA1 Preferred Stock (the “Series AA1 Preferred Stock”), the 5.50% Series MM1 Preferred Stock (the “Series MM1 Preferred Stock”), the 6.50% Series AA2 Preferred Stock (the “Series AA2 Preferred Stock”), and the 6.50% Series MM2 Preferred Stock (the “Series MM2 Preferred Stock” and together with the Series M1 Preferred Stock, the Series M2 Preferred Stock, the Series M3 Preferred Stock, and the Series MM1 Preferred Stock, the “Series M Preferred Stock”, and the Series MM2 Preferred Stock, together with the Series AA2 Preferred Stock, the Series A3 Preferred Stock and the Series M3 Preferred Stock, the “6.50% Preferred Stock”). In connection with such offering, on October 30, 2020, February 17, 2022, and October 11, 2022, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 80,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock. On May 19, 2021, we entered into an Underwriting Agreement with UBS Securities LLC, relating to the offer and sale of 187,000 shares, par value $0.001 per share, of 5.50% Series A2 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series A2 Preferred Stock”, and together with the Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock, Series AA1 Preferred Stock, and Series MM1 Preferred Stock, the “5.50% Preferred Stock”). The issuance of the Series
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
A2 Preferred Stock settled on May 26, 2021. In connection with such offering, on May 19, 2021, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 1,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock.
In connection with the offerings of the 5.50% Preferred Stock and the 6.50% Preferred Stock, we adopted and amended, respectively, a preferred stock dividend reinvestment plan (the “Preferred Stock Plan” or the “Preferred Stock DRIP”), pursuant to which holders of the 5.50% Preferred Stock and the 6.50% Preferred Stock will have dividends on their 5.50% Preferred Stock and 6.50% Preferred Stock automatically reinvested in additional shares of such 5.50% Preferred Stock and 6.50% Preferred Stock at a price per share of $23.75, if they elect.
Each series of 5.50% Preferred Stock and 6.50% Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.
At any time prior to the listing of the 5.50% Preferred Stock and the 6.50% Preferred Stock on a national securities exchange, shares of the 5.50% Preferred Stock and the 6.50% Preferred Stock are convertible, at the option of the holder of the 5.50% Preferred Stock and the 6.50% Preferred Stock (the “Holder Optional Conversion”). We will settle any Holder Optional Conversion by paying or delivering, as the case may be, (A) any portion of the Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the Settlement Amount, minus (b) any portion of the Settlement Amount that we elect to pay in cash, divided by (2) the arithmetic average of the daily volume weighted average price of shares of our common stock over each of the five consecutive trading days ending on the Holder Conversion Exercise Date (such arithmetic average, the “5-day VWAP”). For the Series A1 Preferred Stock, the Series A3 Preferred Stock, the Series AA1 Preferred Stock, the Series AA2 Preferred Stock and the Series A2 Preferred Stock, “Settlement Amount” means (A) $25.00 per share (the “Stated Value”), plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable Holder Optional Conversion Fee for the respective Holder Conversion Deadline. For the Series M Preferred Stock, “Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable Series M Clawback, if any. “Series M Clawback”, if applicable, means an amount equal to the aggregate amount of all dividends, whether paid or accrued, on such share of Series M Stock in the three full months prior to the Holder Conversion Exercise Date. Subject to certain limited exceptions, we will not pay any portion of the Settlement Amount in cash (other than cash in lieu of fractional shares of our common stock) until the five year anniversary of the date on which a share of 5.50% Preferred Stock or 6.50% Preferred Stock has been issued. Beginning on the five year anniversary of the date on which a share of 5.50% Preferred Stock or 6.50% Preferred Stock is issued, we may elect to settle all or a portion of any Holder Optional Conversion in cash without limitation or restriction. The right of holders to convert a share of 5.50% Preferred Stock or 6.50% Preferred Stock will terminate upon the listing of such share on a national securities exchange.
Subject to certain limited exceptions allowing earlier redemption, beginning on the earlier of the five year anniversary of the date on which a share of 5.50% Preferred Stock or 6.50% Preferred Stock has been issued, or, for listed shares of 5.50% Preferred Stock or 6.50% Preferred Stock, five years from the earliest date on which any series that has been listed was first issued (the earlier of such dates, the “Redemption Eligibility Date”), such share of 5.50% Preferred Stock or 6.50% Preferred Stock may be redeemed at any time or from time to time at our option (the “Issuer Optional Redemption”), at a redemption price of 100% of the Stated Value of the shares of 5.50% Preferred Stock or 6.50% Preferred Stock to be redeemed plus unpaid dividends accrued to, but not including, the date fixed for redemption.
Subject to certain limitations, each share of 5.50% Preferred Stock or 6.50% Preferred Stock may be converted at our option (the “Issuer Optional Conversion”). We will settle any Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the 5-day VWAP, subject to our ability to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value if the 5-day VWAP represents a discount to our net asset value per share of common stock. For the 5.50% Preferred Stock and 6.50% Preferred Stock, “IOC Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the date fixed for conversion. In connection with an Issuer Optional Conversion, we will use commercially reasonable efforts to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value. If we do not have or obtain any required stockholder approval under the 1940 Act to sell our common stock below net asset value and the 5-day VWAP is at a discount to our net asset value per share of common stock, we will settle any conversions in connection with an Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount that we elect to pay in cash and (B) a number of shares of our common stock
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the NAV per share of common stock at the close of business on the business day immediately preceding the date of conversion. We will not pay any portion of the IOC Settlement Amount from an Issuer Optional Conversion in cash (other than cash in lieu of fractional shares of our common stock) until the Redemption Eligibility Date. Beginning on the Redemption Eligibility Date, we may elect to settle any Issuer Optional Conversion in cash without limitation or restriction. In the event that we exercise an Issuer Optional Conversion with respect to any shares of 5.50% Preferred Stock or 6.50% Preferred Stock, the holder of such 5.50% Preferred Stock or 6.50% Preferred Stock may instead elect a Holder Optional Conversion with respect to such 5.50% Preferred Stock or 6.50% Preferred Stock provided that the date of conversion for such Holder Optional Conversion would occur prior to the date of conversion for an Issuer Optional Conversion.
On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters, relating to the offer and sale of 6,000,000 shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock” or “5.35% Preferred Stock”), at a public offering price of $25.00 per share. Pursuant to the Underwriting Agreement, we also granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of Series A Preferred Stock solely to cover over-allotments. The offer settled on July 19, 2021, and no additional shares of the Series A Preferred Stock were issued pursuant to the option. In connection with such offering, on July 15, 2021, we filed Articles Supplementary with SDAT, reclassifying and designating 6,900,000 shares of the Company’s authorized and unissued shares of Common Stock into shares of Series A Preferred Stock.
The Series A Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.
We may from time to time seek to cancel or purchase our outstanding preferred stock through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. The amounts involved may be material. Any such purchases or exchanges of preferred stock would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. Our Board of Directors authorized us to repurchase our Series A Preferred Stock. The manner, price, volume and timing of preferred share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. During the three months ended September 30, 2023, the Company repurchased 62,309 shares of Series A Preferred Stock for a total cost of approximately $1,001, including fees and commissions paid to the broker, representing an average repurchase price of $15.88 per share. The difference in the consideration transferred and the net carrying value of the Series A Preferred Stock repurchased, which was $1,469, resulted in a gain applicable to common stock holders of approximately $501 during the three months ended September 30, 2023. The repurchased shares reverted to authorized but unissued shares of Series A Preferred Stock and thus the Company holds no treasury stock.
Subject to certain limited exceptions allowing earlier redemption, at any time after the close of business on July 19, 2026 (any such date, an “Optional Redemption Date”), at our sole option, we may redeem the Series A Preferred Stock in whole or, from time to time, in part, out of funds legally available for such redemption, at a price per share equal to the liquidation preference of $25.00 per share, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for redemption. We may also redeem the Series A Preferred Stock at any time, in whole or, from time to time, in part, including prior to the Optional Redemption Date, pro rata, based on liquidation preference, with all other series of our then outstanding preferred stock, in the event that our Board determines to redeem any series of our preferred stock, in whole or, from time to time, in part, because such redemption is deemed necessary by the Board to comply with the asset coverage requirements of the 1940 Act or for us to maintain RIC status.
In the event of a Change of Control Triggering Event (as defined below), we may, at our option, exercise our special optional redemption right to redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control Triggering Event has occurred by paying the liquidation preference, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for such redemption. To the extent that we exercise our optional redemption right or our special optional redemption right relating to the Series A Preferred Stock, the holders of Series A Preferred Stock will not be permitted to exercise the conversion right described below in respect of their shares called for redemption.
Except to the extent that we have elected to exercise our optional redemption right or our special optional redemption right by providing notice of redemption prior to the Change of Control Conversion Date (as defined below), upon the occurrence of a Change of Control Triggering Event, each holder of Series A Preferred Stock will have the right to convert some or all of the
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of our shares of common stock per Series A Preferred Stock to be converted equal to the lesser of:
•the quotient obtained by dividing (i) the sum of the Liquidation Preference per share plus an amount equal to all unpaid dividends thereon (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Record Date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Stock Price (as defined below); and
•6.03865, subject to certain adjustments,
subject, in each case, to provisions for the receipt of alternative consideration upon conversion as described in the applicable prospectus supplement.
If we have provided or provide a redemption notice with respect to some or all of the Series A Preferred Stock, holders of any Series A Preferred Stock that we have called for redemption will not be permitted to exercise their Change of Control Conversion Right in respect of any of their Series A Preferred Stock that have been called for redemption, and any Series A Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date.
For purposes of the foregoing discussion of a redemption upon the occurrence of a Change of Control Triggering Event, the following definitions are applicable:
“Change of Control Triggering Event” means the occurrence of any of the following:
•the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation and other than an Excluded Transaction) in one or a series of related transactions, of all or substantially all of the assets of the Company and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than to any Permitted Holders); provided that, for the avoidance of doubt, a pledge of assets pursuant to any of our secured debt instruments or the secured debt instruments of our Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition; or
•the consummation of any transaction (including, without limitation, any merger or consolidation and other than an Excluded Transaction) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of our outstanding Voting Stock, measured by voting power rather than number of shares.
Notwithstanding the foregoing, the consummation of any of the transactions referred to in the bullet points above will not be deemed a Change of Control Triggering Event if we or the acquiring or surviving consolidated entity has or continues to have a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ, or is otherwise listed or quoted on a national securities exchange.
The “Change of Control Conversion Date” is the date the shares of Series A Preferred Stock are to be converted, which will be a business day selected by us that is no fewer than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series A Preferred Stock.
The “Common Stock Price” will be (i) if the consideration to be received in the Change of Control Triggering Event by the holders of our common stock is solely cash, the amount of cash consideration per share of our common stock or (ii) if the consideration to be received in the Change of Control Triggering Event by holders of our common stock is other than solely cash (x) the average of the closing sale prices per share of our common stock (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event, if our common stock is not then listed for trading on a U.S. securities exchange.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
“Controlled Subsidiary” means any of our subsidiaries, 50% or more of the outstanding equity interests of which are owned by us and our direct or indirect subsidiaries and of which we possess, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.
“Excluded Transaction” means (i) any transaction that does not result in any reclassification, conversion, exchange or cancellation of all or substantially all of the outstanding shares of our Voting Stock; (ii) any changes resulting from a subdivision or combination or a change solely in par value; (iii) any transaction where the shares of our Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) or any direct or indirect parent company of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) immediately after giving effect to such transaction; (iv) any transaction if (A) we become a direct or indirect wholly-owned subsidiary of a holding company and (B)(1) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of our Voting Stock immediately prior to that transaction or (2) immediately following that transaction no “person” (as that term is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company; or (v) any transaction primarily for the purpose of changing our jurisdiction of incorporation or form of organization.
“Permitted Holders” means (i) us, (ii) one or more of our Controlled Subsidiaries and (iii) Prospect Capital Management or any affiliate of Prospect Capital Management that is organized under the laws of a jurisdiction located in the United States of America and in the business of managing or advising clients.
“Voting Stocks” as applied to stock of any person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such person having ordinary voting power for the election of the directors (or the equivalent) of such person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
Except as provided above in connection with a Change of Control Triggering Event, the Series A Preferred Stock is not convertible into or exchangeable for any other securities or property.
For so long as the Series A Preferred Stock is outstanding, we will not exercise any option we have to convert any other series of our outstanding preferred stock to common stock, including the Issuer Optional Conversion, or any other security ranking junior to such preferred stock. As a result, if dividends on the Preferred Stock have accumulated and been unpaid for a period of two years, a possibility of redemption outside of the Company’s control exists and, in accordance with ASC 480, we have presented our 5.50% Preferred Stock, 6.50% Preferred Stock, and Series A Preferred Stock within temporary equity on our Consolidated Statement of Assets and Liabilities as of September 30, 2023 and June 30, 2023.
Shares of the 5.50% Preferred Stock and 6.50% Preferred Stock will pay a monthly dividend, when and if declared by the Board, at a fixed annual rate of 5.50% and 6.50%, respectively, per annum of the Stated Value of $25.00 per share (computed on the basis of a 360-day year consisting of twelve 30-day months), payable in cash or through the issuance of additional 5.50% Preferred Stock and 6.50% Preferred Stock through the 5.50% Preferred Stock DRIP and 6.50% Preferred Stock DRIP, respectively.
Shares of the Series A Preferred Stock will pay a quarterly dividend, when and if declared by the Board, at a fixed annual rate of 5.35% per annum of the Stated Value of $25.00 per share (computed on the bases of a 360-day year consisting of twelve 30-day months), payable in cash.
During the three months ended September 30, 2023 and September 30, 2022, we distributed approximately $11,836 and $10,753, respectively, to our 5.50% Preferred Stock holders. During the three months ended September 30, 2023, we distributed approximately $9,368 to our 6.50% Preferred Stock holders. During the three months ended September 30, 2023 and September 30, 2022, we distributed approximately $1,983 and $2,006 to our 5.35% Series A Preferred Stock holders.
Our distributions to our 5.50% Preferred Stock holders, 6.50% Preferred Stock holders, and 5.35% Series A Preferred Stock holders for the three months ended September 30, 2023 and September 30, 2022, are summarized in the following table:
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Amount ($ per share), before pro ration for partial periods | | Amount Distributed | | | | |
5.50% Preferred Stock holders | | | | | | | | |
| 5/9/2023 | | 7/19/2023 | | 8/1/2023 | | $ | 0.114583 | | | $ | 3,968 | | | | | |
| 5/9/2023 | | 8/16/2023 | | 9/1/2023 | | 0.114583 | | | 3,961 | | | | | |
| 9/8/2023 | | 9/20/2023 | | 10/2/2023 | | 0.114583 | | | 3,907 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Distributions for the three months ended September 30, 2023 | | $ | 11,836 | | | | | |
| | | | | | | | | | | | |
| 5/6/2022 | | 7/20/2022 | | 8/1/2022 | | $ | 0.114583 | | | $ | 3,104 | | | | | |
| 5/6/2022 | | 8/17/2022 | | 9/1/2022 | | 0.114583 | | | 3,721 | | | | | |
| 8/23/2022 | | 9/21/2022 | | 10/3/2022 | | 0.114583 | | | 3,928 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Distributions for the three months ended September 30, 2022 | | $ | 10,753 | | | | | |
| | | | | | | | | | | | |
6.50% Preferred Stock holders | | | | | | | | |
| 5/9/2023 | | 7/19/2023 | | 8/1/2023 | | $ | 0.135417 | | | $ | 2,978 | | | | | |
| 5/9/2023 | | 8/16/2023 | | 9/1/2023 | | 0.135417 | | | 3,111 | | | | | |
| 9/8/2023 | | 9/20/2023 | | 10/2/2023 | | 0.135417 | | | 3,279 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Distributions for the three months ended September 30, 2023 | | $ | 9,368 | | | | | |
| | | | | | | | | | | | |
5.35% Preferred Stock holders | | | | | | | | |
| 5/9/2023 | | 7/19/2023 | | 8/1/2023 | | $ | 0.334375 | | | $ | 1,983 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Distributions for the three months ended September 30, 2023 | | $ | 1,983 | | | | | |
| | | | | | | | | | | | |
| 5/6/2022 | | 7/20/2022 | | 8/1/2022 | | $ | 0.334375 | | | $ | 2,006 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Distributions for the three months ended September 30, 2022 | | $ | 2,006 | | | | | |
The above table includes dividends paid during the three months ended September 30, 2023. It does not include distributions previously declared to the 5.50% Preferred Stock holders, 6.50% Preferred Stock holders, and 5.35% Series A Preferred Stock holders of record for any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be recorded and paid subsequent to September 30, 2023:
•$0.114583 per share (before pro ration for partial period holders of record) for 5.50% Preferred Stock holders of record on October 18, 2023 with a payment date of November 1, 2023.
•$0.114583 per share (before pro ration for partial period holders of record) for 5.50% Preferred Stock holders of record on November 15, 2023 with a payment date of December 1, 2023.
•$0.135417 per share (before pro ration for partial period holders of record) for 6.50% Preferred Stock holders of record on October 18, 2023 with a payment date of November 1, 2023.
•$0.135417 per share (before pro ration for partial period holders of record) for 6.50% Preferred Stock holders of record on November 15, 2023 with a payment date of December 1, 2023.
•$0.334375 per share (before pro ration for partial period holders of record) for 5.35% Series A Preferred Stock holders of record on October 18, 2023 with a payment date of November 1, 2023.
As of September 30, 2023, we have accrued approximately $6 and $1,293 in dividends that have not yet been paid for our 6.50% Preferred Stock holders and 5.35% Series A Preferred Stock holders, respectively.
The following table shows our outstanding Preferred Stock as of September 30, 2023:
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series | | Maximum Offering Size (Shares) | | Maximum Aggregate Liquidation Preference of Offering | | Inception to Date Preferred Shares Issued via Offering | | Inception to Date Liquidation Preference of Shares Issued via Offering | | Preferred Stock Shares Outstanding | | Liquidation Preference of Shares Outstanding | |
| Series A1 | | 72,000,000 | | (1) | $ | 1,800,000 | | (1) | 31,448,021 | | | $ | 786,201 | | | 30,780,669 | | (4) | $ | 769,517 | | |
| Series M1 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 4,110,318 | | | 102,758 | | | 3,155,352 | | (4) | 78,884 | | |
| Series M2 | | 72,000,000 | | (1) | 1,800,000 | | (1) | — | | | — | | | — | | | — | | |
| Series A3 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 21,656,854 | | | 541,421 | | | 21,611,105 | | (4) | 540,278 | | |
| Series M3 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 2,911,115 | | | 72,778 | | | 2,882,254 | | (4) | 72,056 | | |
| Series AA1 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | | |
| Series MM1 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | | |
| Series AA2 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | | |
| Series MM2 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | | |
| Series A2 | | 187,000 | | | 4,675 | | | 187,000 | | | 4,675 | | | 164,000 | | | 4,100 | | |
| Series A | | 6,000,000 | | | 150,000 | | | 6,000,000 | | | 150,000 | | | 5,900,345 | | (5) | 147,509 | | |
| Total | | 88,187,000 | | (3) | $ | 2,204,675 | | (3) | 66,313,308 | | | $ | 1,657,833 | | | 64,493,725 | | | $ | 1,612,343 | | (6) |
(1) The maximum offering of 72,000,000 shares and $1,800,000 aggregate liquidation preference is for any combination of Series A1, Series M1, Series M2, Series A3, and Series M3 shares.
(2) The maximum offering of 10,000,000 shares and $250,000 aggregate liquidation preference is for any combinations of Series AA1, Series MM1, Series AA2, and Series MM2.
(3) The authorized maximum offering size of Preferred Stock as of September 30, 2023 is 88,187,000 shares, par value $0.001 per share, with an aggregate liquidation preference of $2,204,675, a liquidation preference of $25.00 per share. The totals referenced in the above table are in light of the combined maximum offering amounts for the various series of shares identified in footnote 1 and footnote 2 and the table columns are not intended to foot.
(4) Preferred Stock shares outstanding is calculated as shares issued under the respective offering program, net of additional shares issued through the Preferred Stock DRIP and net of Preferred Stock conversions to common stock through the Holder Optional Redemption and Optional Redemption Upon Death of Holder. Refer to subsequent tables for respective fiscal year activity.
(5) Preferred Stock shares outstanding is calculated as shares issued under the respective offering program net of shares repurchased via open market purchases. Refer to subsequent tables for respective fiscal year activity.
(6) Does not foot due to rounding.
The following table shows our outstanding Preferred Stock as of June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series | | Maximum Offering Size (Shares) | | Maximum Aggregate Liquidation Preference of Offering | | Inception to Date Preferred Shares Issued via Offering | | Inception to Date Liquidation Preference of Shares Issued | | Preferred Stock Shares Outstanding | | Liquidation Preference of Shares Outstanding |
| Series A1 | | 72,000,000 | | (1) | $ | 1,800,000 | | (1) | 31,448,021 | | | $ | 786,201 | | | 30,965,138 | | (4) | $ | 774,128 | |
| Series M1 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 4,110,318 | | | 102,758 | | | 3,681,591 | | (4) | 92,040 | |
| Series M2 | | 72,000,000 | | (1) | 1,800,000 | | (1) | — | | | — | | | — | | | — | |
| Series A3 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 18,855,269 | | | 471,382 | | | 18,829,837 | | (4) | 470,746 | |
| Series M3 | | 72,000,000 | | (1) | 1,800,000 | | (1) | 2,514,615 | | | 62,865 | | | 2,498,788 | | (4) | 62,470 | |
| Series AA1 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | |
| Series MM1 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | |
| Series AA2 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | |
| Series MM2 | | 10,000,000 | | (2) | 250,000 | | (2) | — | | | — | | | — | | | — | |
| Series A2 | | 187,000 | | | 4,675 | | | 187,000 | | | 4,675 | | | 164,000 | | | 4,100 | |
| Series A | | 6,000,000 | | | 150,000 | | | 6,000,000 | | | 150,000 | | | 5,962,654 | | (5) | 149,066 | |
| Total | | 88,187,000 | | (3) | $ | 2,204,675 | | (3) | 63,115,223 | | | $ | 1,577,881 | | | 62,102,009 | | (6) | $ | 1,552,550 | |
(1) The maximum offering of 72,000,000 shares and $1,800,000 aggregate liquidation preference is for any combinations of Series A1, Series M1, Series M2, Series A3, and Series M3 shares.
(2) The maximum offering of 10,000,000 shares and $250,000 aggregate liquidation preference is for any combinations of Series AA1, Series MM1, Series AA2, and Series MM2.
(3) The authorized maximum offering size of Preferred Stock as of June 30, 2023 is 88,187,000 shares, par value $0.001 per share, with an aggregate liquidation preference of $2,204,675, a liquidation preference of $25.00 per share. The totals referenced in the above table are in light of the combined maximum offering amounts for the various series of shares identified in footnote 1 and footnote 2 and the table columns are not intended to foot.
(4) Preferred Stock shares outstanding is calculated as shares issued under the respective offering program, net of additional shares issued through the Preferred Stock DRIP and Preferred Stock converted to common stock through the Holder Optional Redemption and Optional Redemption Upon Death of Holder. Refer to subsequent tables for respective fiscal year activity.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
(5) Preferred Stock shares outstanding is calculated as shares issued under the respective offering program net of shares repurchased via open market purchases. Refer to subsequent tables for respective fiscal year activity.
(6) Does not foot due to rounding.
Preferred Stock issued prior to the issuance of our 5.35% Series A Preferred Stock has a carrying value equal to liquidation value per share on our Consolidated Statements of Assets and Liabilities. Subsequent issuances of our Preferred Stock classified as temporary equity are recorded net of issuance costs. The carrying value is inclusive of cumulative accrued and unpaid dividends as of September 30, 2023.
Series A1, Series M1, Series A3, and Series M3 shares outstanding are net of dividend reinvestments paid and conversions to common stock in accordance with their liquidation features. Series A shares outstanding are net of shares repurchased via the authorized repurchase of Series A Preferred Stock. The following tables show such activity during the three months ended September 30, 2023:
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| Series | | June 30, 2023 Shares Outstanding | | Shares Issued | | Shares issued through Preferred Stock DRIP | | Shares Converted to Common/Repurchased(1) | | September 30, 2023 Shares Outstanding |
| Series A1 | | 30,965,138 | | | — | | | 15,617 | | | (200,086) | | | 30,780,669 | | |
| Series M1 | | 3,681,591 | | | — | | | 649 | | | (526,888) | | | 3,155,352 | | |
| Series A3 | | 18,829,837 | | | 2,801,585 | | | 12,040 | | | (32,358) | | | 21,611,105 | | (2) |
| Series M3 | | 2,498,788 | | | 396,500 | | | 1,107 | | | (14,141) | | | 2,882,254 | | |
| Series A2 | | 164,000 | | | — | | | — | | | — | | | 164,000 | | |
| Series A | | 5,962,654 | | | — | | | — | | | (62,309) | | | 5,900,345 | | |
| Total | | 62,102,009 | | (2) | 3,198,085 | | (3) | 29,413 | | | (835,782) | | | 64,493,725 | | |
(1)During the three months ended September 30, 2023, 773,473 shares of the 5.50% Preferred Stock and 6.50% Preferred Stock were converted to common shares via Holder Optional Redemptions and Optional Redemptions Upon Death of Holder and 62,309 of the 5.35% Series A Preferred Stock were repurchased via open market purchases.
(2)Does not foot or crossfoot due to fractional share rounding.
(3)During the three months ended September 30, 2023, we issued 3,198,085 shares of Preferred Stock for net proceeds of $748,223 with a liquidation value of $79,952.
The following tables show such activity during the three months ended September 30, 2022:
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| Series | | June 30, 2022 Shares Outstanding | | Shares Issued | | Shares issued through Preferred Stock DRIP | | Shares Converted to Common(1) | | September 30, 2022 Shares Outstanding |
| Series A1 | | 20,794,645 | | | 10,157,297 | | | 9,183 | | | (209,163) | | | 30,751,961 | | (3) |
| Series M1 | | 2,626,238 | | | 1,364,362 | | | 212 | | | (65,481) | | | 3,925,331 | | |
| Series A2 | | 187,000 | | | — | | | — | | | — | | | 187,000 | | |
| Series A | | 6,000,000 | | | — | | | — | | | — | | | 6,000,000 | | |
| Total | | 29,607,882 | | (3) | 11,521,659 | | (2) | 9,395 | | | (274,644) | | | 40,864,292 | | |
(1)Convert to common shares via Holder Optional Redemptions and Optional Redemption Upon Death of Holder.
(2)During the three months ended September 30, 2022, we issued 11,521,659 shares of Preferred Stock for net proceeds of $257,272 with a liquidation value of $288,041.
(3)Does not foot or crossfoot due to fractional share rounding.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Common Stock
Our common stockholders’ equity accounts as of September 30, 2023 and June 30, 2023 reflect cumulative shares issued, net of shares previously repurchased, as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our common stock dividend reinvestment plan in connection with the acquisition of certain controlled portfolio companies and in connection with our 5.50% and 6.50% Preferred Stock Holder Optional Conversion and Optional Redemptions Following Death of a Holder. When our common stock is issued, the related offering expenses have been charged against paid-in capital in excess of par. All underwriting fees and offering expenses were borne by us.
On August 24, 2011, our Board of Directors approved a share repurchase plan (the “Repurchase Program”) under which we may repurchase up to $100,000 of our common stock at prices below our net asset value per share. Prior to any repurchase, we are required to notify stockholders of our intention to purchase our common stock.
We did not repurchase any shares of our common stock under the Repurchase Program for the three months ended September 30, 2023 and September 30, 2022. As of September 30, 2023, the approximate dollar value of shares that may yet be purchased under the Repurchase Program is $65,860.
Excluding common stock dividend reinvestments and shares issued in connection with the 5.50% and 6.50% Preferred Stock Holder Optional Conversion and Optional Redemption Upon Death of Holder, during the three months ended September 30, 2023 and September 30, 2022, we did not issue any shares of our common stock.
On February 9, 2016, we amended our common stock dividend reinvestment plan that provided for reinvestment of our dividends or distributions on behalf of our stockholders, unless a stockholder elects to receive cash, to add the ability of stockholders to purchase additional common shares by making optional cash investments. Under the revised dividend reinvestment and direct common stock repurchase plan, stockholders may elect to purchase additional common shares through our transfer agent in the open market or in negotiated transactions.
On April 17, 2020, our Board of Directors approved further amendments to our common stock dividend reinvestment plan, effective May 21, 2020, that principally provide for the number of newly-issued shares of our common stock to be credited to a stockholder’s account shall be determined by dividing the total dollar amount of the distribution payable to such common stockholder by 95% of the market price per share of our common stock at the close of regular trading on the Nasdaq Global Select Market on the date fixed by the Board of Directors for such distribution (which shall be the last business day before the payment date).
On June 9, 2023, at a special meeting of stockholders, our stockholders authorized us to sell shares of our common stock (during the next 12 months) at a price or prices below our net asset value per share at the time of sale in one or more offerings, subject to certain conditions as set forth in the proxy statement relating to the special meeting (including that the number of shares sold on any given date does not exceed 25% of its outstanding common stock immediately prior to such sale).
During the three months ended September 30, 2023 and September 30, 2022, we distributed approximately $73,252 and $287,241, respectively, to our common stockholders. The following table summarizes our distributions to common stockholders declared and payable for the three months ended September 30, 2023 and September 30, 2022:
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Amount Per Share | | Amount Distributed (in thousands) |
| 5/9/2023 | | 7/27/2023 | | 8/22/2023 | | $ | 0.06 | | | $ | 24,317 | |
| 5/9/2023 | | 8/29/2023 | | 9/20/2023 | | 0.06 | | | 24,418 | |
| 9/8/2023 | | 9/27/2023 | | 10/19/2023 | | 0.06 | | | 24,517 | |
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| Total declared and payable for the three months ended September 30, 2023 | | $ | 73,252 | |
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| 5/6/2022 | | 7/27/2022 | | 8/18/2022 | | $ | 0.06 | | | $ | 23,635 | |
| 5/6/2022 | | 8/29/2022 | | 9/21/2022 | | 0.06 | | | 23,670 | |
| 8/23/2022 | | 9/28/2022 | | 10/20/2022 | | 0.06 | | | 23,767 | |
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| Total declared and payable for the three months ended September 30, 2022 | | $ | 71,072 | |
Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during three months ended September 30, 2023 and September 30, 2022. It does not include distributions previously declared to common stockholders of record on any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be recorded and payable subsequent to September 30, 2023:
•$0.06 per share for October 2023 holders of record on October 27, 2023 with a payment date of November 20, 2023.
During the three months ended September 30, 2023 and September 30, 2022, we issued 1,538,258 and 2,154,958 shares of our common stock, respectively, in connection with the common stock dividend reinvestment plan.
During the three months ended September 30, 2023, Prospect officers and directors purchased 224,971 shares of our common stock, or 0.06% of total outstanding shares as of September 30, 2023, both through the open market transactions and shares issued in connection with our common stock dividend reinvestment plan.
As of September 30, 2023, we have reserved 17,294,357 shares of our common stock for issuance upon conversion of the Convertible Notes (see Note 5) and 1,000,000,000 shares of our common stock for issuance upon conversion of the 5.50% Preferred Stock and the 6.50% Preferred Stock.
Note 10. Other Income
Other income consists of structuring fees, amendment fees, overriding royalty interests, receipts related to net profit and revenue interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts. The following table shows income from such sources during the three months ended September 30, 2023 and September 30, 2022:
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| 2023 | | 2022 | | |
| Structuring and amendment fees (refer to Note 3) | $ | 16,391 | | | $ | 4,627 | | | |
| Royalty, net profit and revenue interests | 14,167 | | | 20,678 | | | |
| Administrative agent fees | 181 | | | 150 | | | |
| Total other income | $ | 30,739 | | | $ | 25,455 | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Note 11. Net Increase (Decrease) in Net Assets per Common Share
Basic earnings (loss) per share is calculated by dividing the net increase (decrease) in net assets resulting from operations, less preferred dividends plus gain on repurchase of preferred stock, by the weighted average number of common shares outstanding for that period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding using the if-converted method for the 5.50% Preferred Stock, the 6.50% Preferred Stock (Refer to Note 9) and, beginning on July 1, 2022, for the 2025 Notes (Refer to Note 5).
Diluted earnings per share excludes all dilutive potential common shares if their effect is anti-dilutive.
During the three months ended September 30, 2022, conversion of our convertible instruments had an anti-dilutive effect and therefore, conversion is not assumed.
The following information sets forth the computation of basic and diluted earnings per common share during the three months ended September 30, 2023 and September 30, 2022:
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| | | | For the Three Months Ended September 30, |
| | | | | 2023 | | 2022 | | |
| Net increase (decrease) in net assets resulting from operations - basic | | | | $ | 94,011 | | | $ | (105,199) | | | |
| Adjustment for dividends on Convertible Preferred Stock | | | | 21,210 | | | — | | | |
| Adjustment for interest on Convertible Notes | | | | 2,717 | | | — | | | |
| Adjustment for Incentive Fee on Convertible Instruments | | | | (4,785) | | | — | | | |
| Net increase (decrease) in net assets resulting from operations - diluted | | | | $ | 113,153 | | | $ | (105,199) | | | |
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| Weighted average common shares outstanding - basic | | | | 406,350,619 | | 394,337,440 | | |
| Weighted average common shares from assumed conversion of Convertible Preferred Stock | | | | 211,945,352 | | — | | |
| Weighted average common shares from assumed conversion of Convertible Notes | | | | 17,294,357 | | | — | | |
| Weighted average shares of common stock outstanding - diluted | | | | 635,590,328 | | 394,337,440 | | |
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| Earnings (loss) per share - basic | | | | $ | 0.23 | | | $ | (0.27) | | | |
| Earnings (loss) per share - diluted | | | | $ | 0.18 | | | $ | (0.27) | | | |
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Note 12. Income Taxes
While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is August 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified.
The determination of tax character of distributions was not determinable at the end of the fiscal year end. Final determination of tax character of distributions will not be final until we file our return for the tax year. For income tax purposes, dividends paid and distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to common stockholders during the tax years ended August 31, 2023, 2022, and 2021 were as follows:
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| | | Tax Year Ended August 31, |
| | | 2023 | | 2022 | | 2021 |
| Ordinary income | | $ | 227,400 | | | $ | 231,984 | | | $ | 251,171 | |
| Capital gain | | — | | | 49,719 | | | — | |
| Return of capital | | 60,523 | | | — | | | 25,784 | |
| Total distributions paid to common stockholders | | $ | 287,923 | | | $ | 281,703 | | | $ | 276,955 | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The Company began issuing shares of Preferred Stock and declaring dividends on shares Preferred Stock outstanding during the tax year ended August 31, 2021. The tax character of dividends paid to preferred stockholders during the tax years ended August 31, 2023, 2022, and 2021 were as follows:
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| | | Tax Year Ended August 31, | |
| | | 2023 | | 2022 | | 2021 | |
| Ordinary income | | $ | 74,975 | | | $ | 22,551 | | | $ | 2,391 | | |
| Capital gain | | — | | | 6,476 | | | | |
| Return of capital | | — | | | — | | | | |
| Total distributions paid to preferred stockholders | | $ | 74,975 | | | $ | 29,027 | | | $ | 2,391 | | |
For the tax year ending August 31, 2023, the tax character of distributions paid to stockholders through August 31, 2023 is expected to be ordinary income and return of capital. However, due to the difference between our fiscal and tax year ends, the final determination of the tax character of distributions between ordinary income and return of capital will not be made until we file our tax return for the tax year ending August 31, 2023.
Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. The following reconciles the net increase in net assets resulting from operations to taxable income for the tax years ended August 31, 2023, 2022, and 2021:
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| | | Tax Year Ended August 31, |
| | | 2023 | | 2022 | | 2021 |
| Net increase (decrease) in net assets resulting from operations | | $ | (88,043) | | | $ | 735,337 | | | $ | 428,106 | |
| Net realized losses on investments | | 40,794 | | | 22,375 | | | 16,173 | |
| Net unrealized (gains) losses on investments | | 480,916 | | | (405,414) | | | (143,654) | |
Other temporary book-to-tax differences(1) | | (162,878) | | | (66,363) | | | (47,330) | |
| Permanent differences | | 27 | | | 30 | | | (20) | |
Taxable income before deductions for distributions | | $ | 270,816 | | (1) | $ | 285,965 | | | $ | 253,275 | |
(1) Temporary book-to-tax differences include timing recognition of CLO income, flow-through investment income/loss, and dividend income from portfolio companies
As of our most recent tax year ended August 31, 2023, we had no undistributed ordinary income in excess of cumulative distributions and no capital gain in excess of cumulative distributions.
Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. As of our most recent tax year ended August 31, 2023, we had a capital loss carryforward of $106,659 available for use in later tax years.
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| | | Tax Year Ended August 31, 2023 |
| Undistributed ordinary income | | $ | — | |
| Undistributed long-term capital gains | | — | |
| Capital loss carryforwards | | $ | 106,659 | |
As of September 30, 2023, the cost basis of investments for tax purposes was $7,684,181 resulting in an estimated net unrealized gain of $52,636. As of June 30, 2023, the cost basis of investments for tax purposes was $8,028,254 resulting in an estimated net unrealized loss of $303,323. As of September 30, 2023, the gross unrealized gains and losses were $1,333,996 and $1,281,360, respectively. As of June 30, 2023, the gross unrealized gains and losses were $1,334,168 and $1,637,491, respectively. Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of September 30, 2023 and June 30, 2023 was calculated based on the book cost of investments as of September 30, 2023 and June 30, 2023, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2023 and 2022, respectively.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | |
| | | September 30, 2023 | | June 30, 2023 | | | |
| Tax cost of Investments | | $ | 7,684,181 | | | $ | 8,028,254 | | | | |
| | | | | | | |
| Tax unrealized appreciation | | 1,333,996 | | | 1,334,168 | | | | |
| Tax unrealized depreciation | | 1,281,360 | | | 1,637,491 | | | | |
| Net unrealized appreciation(depreciation) | | $ | 52,636 | | | $ | (303,323) | | | | |
In general, we may make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal excise taxes, among other items. During the tax year ended August 31, 2023, we increased total distributable earnings by $27, increased accumulated realized losses by $622, and increased capital in excess of par value by $595. During the tax year ended August 31, 2022, we increased total distributable earnings by $30 and decreased capital in excess of par value by $30. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2023, once finalized, will be recorded in the fiscal year ending June 30, 2024 and the reclassifications for the taxable year ended August 31, 2022 were recorded in the fiscal year ended June 30, 2023.
Note 13. Related Party Agreements and Transactions
Investment Advisory Agreement
We have entered into an investment advisory and management agreement with the Investment Adviser (the “Investment Advisory Agreement”) under which the Investment Adviser, subject to the overall supervision of our Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, the Investment Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies), and (iii) closes and monitors investments we make.
The Investment Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services the Investment Adviser receives a fee from us, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% on our total assets. For services currently rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. The total gross base management fee incurred to the favor of the Investment Adviser was $39,289 and $38,314 during the three months ended September 30, 2023 and September 30, 2022, respectively.
The incentive fee has two parts. The first part, the income incentive fee, is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees and other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement described below, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a “hurdle rate” of 1.75% per quarter (7.00% annualized).
The net investment income used to calculate this part of the incentive fee is also included in the amount of the gross assets used to calculate the 2.00% base management fee. We pay the Investment Adviser an income incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:
•No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
•100.00% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate); and
•20.00% of the amount of our pre-incentive fee net investment income, if any, that exceeds 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate).
These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.
The second part of the incentive fee, the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year. In determining the capital gains incentive fee payable to the Investment Adviser, we calculate the aggregate realized capital gains, aggregate realized capital losses and aggregate unrealized capital depreciation, as applicable, with respect to each investment that has been in our portfolio. For the purpose of this calculation, an “investment” is defined as the total of all rights and claims which may be asserted against a portfolio company arising from our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equal the sum of the differences between the aggregate net sales price of each investment and the aggregate amortized cost basis of such investment when sold or otherwise disposed. Aggregate realized capital losses equal the sum of the amounts by which the aggregate net sales price of each investment is less than the aggregate amortized cost basis of such investment when sold or otherwise disposed. Aggregate unrealized capital depreciation equals the sum of the differences, if negative, between the aggregate valuation of each investment and the aggregate amortized cost basis of such investment as of the applicable calendar year-end. At the end of the applicable calendar year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee involves netting aggregate realized capital gains against aggregate realized capital losses on a since-inception basis and then reducing this amount by the aggregate unrealized capital depreciation. If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees paid since inception.
The total income incentive fee incurred was $25,617 and $21,626 during the three months ended September 30, 2023 and three months ended September 30, 2022, respectively. No capital gains incentive fee was incurred during the three months ended September 30, 2023 and September 30, 2022.
Administration Agreement
We have also entered into an administration agreement (the “Administration Agreement”) with Prospect Administration under which Prospect Administration, among other things, provides (or arranges for the provision of) administrative services and facilities for us. For providing these services, we reimburse Prospect Administration for our allocable portion of overhead incurred by Prospect Administration in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer and Chief Compliance Officer and her staff, including the internal legal staff. Under this agreement, Prospect Administration furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Prospect Administration also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Prospect Administration assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Under the Administration Agreement, Prospect Administration also provides on our behalf managerial assistance to certain portfolio companies (see Managerial Assistance section below). The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Prospect Administration is a wholly-owned subsidiary of the Investment Adviser.
The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Prospect Administration and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Prospect Administration’s services under the Administration Agreement or otherwise as administrator for us. Our payments to Prospect Administration are reviewed quarterly by our Board of Directors.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
The allocation of net overhead expense from Prospect Administration was $2,113 and $3,099 for the three months ended September 30, 2023 and September 30, 2022, respectively. Prospect Administration received estimated payments of $3,468 and $1,554 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax, and other administrative services during the three months ended September 30, 2023 and September 30, 2022, respectively. In addition, we were given a credit in the amount of $1,212 for legal expense incurred on behalf of our portfolio companies that were remitted to Prospect Administration during the three months ended September 30, 2022. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by this amount.
Managerial Assistance
As a BDC, we are obligated under the 1940 Act to make available to certain of our portfolio companies significant managerial assistance. “Making available significant managerial assistance” refers to any arrangement whereby we provide significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company. We are also deemed to be providing managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. The nature and extent of significant managerial assistance provided by us to controlled and non-controlled portfolio companies will vary according to the particular needs of each portfolio company. Examples of such activities include (i) advice on recruiting, hiring, management and termination of employees, officers and directors, succession planning and other human resource matters; (ii) advice on capital raising, capital budgeting, and capital expenditures; (iii) advice on advertising, marketing, and sales; (iv) advice on fulfillment, operations, and execution; (v) advice on managing relationships with unions and other personnel organizations, financing sources, vendors, customers, lessors, lessees, lawyers, accountants, regulators and other important counterparties; (vi) evaluating acquisition and divestiture opportunities, plant expansions and closings, and market expansions; (vii) participating in audit committee, nominating committee, board and management meetings; (viii) consulting with and advising board members and officers of portfolio companies (on overall strategy and other matters); and (ix) providing other organizational, operational, managerial and financial guidance.
Prospect Administration arranges for the provision of such managerial assistance on our behalf. When doing so, Prospect Administration utilizes personnel of our Investment Adviser. We, on behalf of Prospect Administration, may invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its cost of providing such services, including the charges deemed appropriate by our Investment Adviser for providing such managerial assistance. No income is recognized by Prospect.
During the three months ended September 30, 2023 and September 30, 2022, we received payments of $2,284, and $1,760, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration.
Co-Investments
On January 13, 2020 (amended on August 2, 2022), we received an exemptive order from the SEC (the “Order”), which superseded a prior co-investment exemptive order granted on February 10, 2014, that gave us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by the Investment Adviser or certain affiliates, including Priority Income Fund, Inc. and Prospect Floating Rate and Alternative Income Fund, Inc. (f/k/a Prospect Sustainable Income Fund, Inc.), where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions included therein.
Under the terms of the relief permitting us to co-invest with other funds managed by our Investment Adviser or its affiliates, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. In certain situations where a co-investment with one or more funds managed by the Investment Adviser or its affiliates is not covered by the Order, such as when there is an opportunity to invest in different securities of the same issuer, the personnel of the Investment Adviser or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations. Moreover, except in certain circumstances, when
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
relying on the Order, we will be unable to invest in any issuer in which one or more funds managed by the Investment Adviser or its affiliates has previously invested.
We reimburse CLO investment valuation services fees initially incurred by Priority Income Fund, Inc. During the three months ended September 30, 2023 and September 30, 2022, we recognized expenses that were reimbursed for valuation services of $19 and $21, respectively. Conversely, Priority Income Fund, Inc. and Prospect Floating Rate and Alternative Income Fund, Inc. (f/k/a Prospect Sustainable Income Fund, Inc.) reimburse us for software fees, expenses which were initially incurred by Prospect. During the three months ended September 30, 2023 the amount due for the software fees was $17. No such fees were incurred during the three months ended September 30, 2022.
Note 14. Transactions with Controlled Companies
The descriptions below detail the transactions which Prospect Capital Corporation (“Prospect”) has entered into with each of our controlled companies. Certain of the controlled entities discussed below were consolidated effective July 1, 2014 (see Note 1). As such, transactions with these Consolidated Holding Companies are presented on a consolidated basis.
CP Energy Services Inc.
Prospect owns 100% of the equity of CP Holdings of Delaware LLC (“CP Holdings”), a Consolidated Holding Company. CP Holdings owns 99.8% of the equity of CP Energy Services, Inc. (“CP Energy”), and the remaining equity is owned by CP Energy management. CP Energy owns directly or indirectly 100% of each of CP Well; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries. In June 2019, CP Energy purchased a controlling interest in the common equity of Spartan Energy Holdings, Inc. (“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”) a portfolio company of Prospect with $32,021 in first lien term loans (the “Spartan Term Loans”) due to us as of September 30, 2023. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loans are presented as control investments under CP Energy beginning June 30, 2019. Spartan remains the direct borrow and guarantor to Prospect for the Spartan Term Loans.
In December 2019, Wolf Energy Holdings, Inc. (“Wolf Energy Holdings”), our Consolidated Holding Company that previously owned 100% of Appalachian Energy LLC (“AEH”); Wolf Energy Services Company, LLC (“Wolf Energy Services”); and Wolf Energy, LLC (collectively our previously controlled membership interest and net profit interest investments in “Wolf Energy”), merged with and into CP Energy, with CP Energy continuing as the surviving entity. CP Energy acquired 100% of our equity investment in Wolf Energy, which is reflected in our valuation of the CP Energy common stock beginning December 31, 2019.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | | | | | | | | | |
Interest Income from CP Energy | $ | 2,727 | | | $ | 1,521 | | | | | | | |
Interest Income from Spartan | 1,134 | | | 700 | | | | | | | |
| Total Interest Income | $ | 3,861 | | | $ | 2,221 | | | | | | | |
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Reimbursement of Legal, Tax, etc. (1) | — | | | 21 | | | | | | | |
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1) Paid from CP Energy to Prospect Administration LLC (“PA”) as reimbursement for legal, tax, and portfolio level accounting services provided directly to CP Energy (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Additions | $ | 2,900 | | | $ | — | | | | | | | |
| Interest Income Capitalized as PIK | | | | | | | | | |
| CP Energy | $ | — | | | $ | 1,521 | | | | | | | |
| Spartan | 762 | | | 699 | | | | | | | |
| Total Interest Income Capitalized as PIK | $ | 762 | | | $ | 2,220 | | | | | | | |
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PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (2) | $ | 3,140 | | | $ | 41 | |
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Other Receivables (3) | 304 | | | 297 | |
(2) Interest income recognized but not yet paid.
(3) Represents amounts due from CP Energy and Spartan to Prospect for reimbursement of expenses paid by Prospect on behalf of CP Energy and Spartan.
Credit Central Loan Company, LLC
Prospect owns 100% of the equity of Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a Consolidated Holding Company. Credit Central Delaware owns 99.8% of the equity of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC) (“Credit Central”), with entities owned by Credit Central management owning the remaining equity. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC. Credit Central is a branch-based provider of installment loans.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 2,004 | | | $ | 1,859 | | | | | | | |
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Managerial Assistance (1) | 175 | | | 175 | | | | | | | |
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(1) No income recognized by Prospect. Managerial Assistance (“MA”) payments were paid from Credit Central to Prospect and subsequently remitted to PA.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Accreted Original Issue Discount | $ | 250 | | | $ | 185 | | | | | | | |
| Interest Income Capitalized as PIK | 1,345 | | | 1,697 | | | | | | | |
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (2) | $ | 681 | | | $ | 22 | |
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Other Receivables (3) | 1 | | | 40 | |
(2) Interest income recognized but not yet paid.
(3) Represents amounts due from Credit Central to Prospect for reimbursement of expenses paid by Prospect on behalf of Credit Central.
Echelon Transportation LLC (f/k/a Echelon Aviation LLC)
Prospect owns 100% of the membership interests of Echelon Transportation LLC (“Echelon”). Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 781 | | | $ | 869 | | | | | | | |
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Managerial Assistance (1) | 63 | | | 63 | | | | | | | |
Reimbursement of Legal, Tax, etc.(2) | 3 | | | 2 | | | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
(1) No income recognized by Prospect. MA payments were paid from Echelon to Prospect and subsequently remitted to PA.
(2) Paid from Echelon to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to Echelon (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Interest Income Capitalized as PIK | $ | — | | | $ | 1,587 | | | | | | | |
| Repayment of loan receivable | 1,862 | | | — | | | | | | | |
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 377 | | | $ | 2,035 | |
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Other Receivables (4) | 2 | | | 10 | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from Echelon to Prospect for reimbursement of expenses paid by Prospect on behalf of Echelon.
Energy Solutions Holdings Inc.
Prospect owns 100% of the equity of Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings Inc.) (“Energy Solutions”), a Consolidated Holding Company. Energy Solutions owns 100% of each of Change Clean Energy Company, LLC (f/k/a Change Clean Energy Holdings, LLC) (“Change Clean”); Freedom Marine Solutions, LLC (f/k/a Freedom Marine Services Holdings, LLC) (“Freedom Marine”); and Yatesville Coal Company, LLC (f/k/a Yatesville Coal Holdings, LLC) (“Yatesville”). Change Clean owns 100% of each of Change Clean Energy, LLC and Down East Power Company, LLC, and 50.1% of BioChips LLC. Freedom Marine owns 100% of each of Vessel Company, LLC (f/k/a Vessel Holdings, LLC) (“Vessel”); Vessel Company II, LLC (f/k/a Vessel Holdings II, LLC) (“Vessel II”); and Vessel Company III, LLC (f/k/a Vessel Holdings III, LLC) (“Vessel III”). Yatesville owns 100% of North Fork Collieries, LLC.
Energy Solutions owns interests in companies operating in the energy sector. These include companies operating offshore supply vessels, ownership of a non-operating biomass electrical generation plant and several coal mines. Energy Solutions subsidiaries formerly owned interests in gathering and processing business in east Texas.
Transactions between Prospect and Freedom Marine are separately discussed below under “Freedom Marine Solutions, LLC.”
First Tower Finance Company LLC
Prospect owns 100% of the equity of First Tower Holdings of Delaware LLC (“First Tower Delaware”), a Consolidated Holding Company. First Tower Delaware holds 80.10% of the voting interest of First Tower Finance Company LLC (“First Tower Finance”), resulting in a 78.06% ownership of First Tower Finance. First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 15,308 | | | $ | 20,235 | | | | | | | |
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Managerial Assistance (1) | 600 | | | — | | | | | | | |
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(1) No income recognized by Prospect. MA payments were paid from First Tower to Prospect and subsequently remitted to PA.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Interest Income Capitalized as PIK | $ | 5,588 | | | $ | 9,576 | | | | | | | |
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PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (2) | $ | 3,862 | | | $ | 165 | |
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Other Receivables (3) | — | | | 1 | |
(2) Interest income recognized but not yet paid.
(3) Represents amounts due from First Tower to Prospect for reimbursement of expenses paid by Prospect on behalf of First Tower.
Freedom Marine Solutions, LLC
As discussed above, Prospect owns 100% of the equity of Energy Solutions, a Consolidated Holding Company. Energy Solutions owns 100% of Freedom Marine. Freedom Marine owns 100% of each of Vessel, Vessel II, and Vessel III.
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| As of |
| September 30, 2023 | | June 30, 2023 |
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| Other Receivables | $ | 6 | | | $ | 6 | |
InterDent, Inc.
During the year ended June 30, 2018, Prospect exercised its rights and remedies under its loan documents to exercise the shareholder voting rights in respect of the stock of InterDent, Inc. (“InterDent”) and to appoint a new Board of Directors of InterDent, all the members of which are our Investment Adviser’s professionals. As a result, Prospect’s investment in InterDent is classified as a control investment.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 9,009 | | | $ | 7,508 | | | | | | | |
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Managerial Assistance (1) | 366 | | | 365 | | | | | | | |
Reimbursement of Legal, Tax, etc.(2) | 5 | | | — | | | | | | | |
(1) No income recognized by Prospect. MA payments were paid from InterDent to Prospect and subsequently remitted to PA.
(2) Paid from InterDent to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to InterDent (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Interest Income Capitalized as PIK | $ | 5,554 | | | $ | 4,981 | | | | | | | |
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 200 | | | $ | 97 | |
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Other Receivables (4) | — | | | 3 | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from InterDent to Prospect for reimbursement of expenses paid by Prospect on behalf of InterDent.
Kickapoo Ranch Pet Resort
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Prospect owns 100% of the membership interest of Kickapoo Ranch Pet Resort (“Kickapoo”). Kickapoo is a luxury pet boarding facility.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Dividend Income | $ | 80 | | | $ | 50 | | | | | | | |
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| September 30, 2023 | | June 30, 2023 |
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Other Receivables (1) | $ | 13 | | | $ | 13 | |
(1) Represents amounts due from Kickapoo to Prospect for reimbursement of expenses paid by Prospect on behalf of Kickapoo
MITY, Inc.
Prospect owns 100% of the equity of MITY Holdings of Delaware Inc. (“MITY Delaware”), a Consolidated Holding Company.
MITY Delaware owns 100% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”). MITY owns 100% of each of MITY-Lite, Inc. (“MITY-Lite”); Broda USA, Inc. (f/k/a Broda Enterprises USA, Inc.) (“Broda USA”); and Broda Enterprises ULC (“Broda Canada”). MITY is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products.
During the three months ended December 31, 2016, Prospect formed a separate legal entity, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 100% of the equity. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distributes it to its shareholder. We recognize such commission, if any, as other income.
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 2,205 | | | $ | 1,897 | | | | | | | |
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Managerial Assistance (1) | 75 | | | 75 | | | | | | | |
Reimbursement of Legal, Tax, etc.(2) | 6 | | | — | | | | | | | |
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(1) No income recognized by Prospect. MA payments were paid from MITY to Prospect and subsequently remitted to PA.
(2) Paid from Mity to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to Mity (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
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| Repayment of Loan Receivable | $ | — | | | $ | 573 | | | | | | | |
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| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 50 | | | $ | 24 | |
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Other Receivables (4) | 38 | | | 33 | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from MITY to Prospect for reimbursement of expenses paid by Prospect on behalf of MITY.
National Property REIT Corp.
Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”), a consolidated holding company. NPH owns 100% of the common equity of National Property REIT Corp. (“NPRC”).
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, NPRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of NPRC.
NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”). Additionally, through its wholly owned subsidiaries, NPRC invests in online consumer loans and rated secured structured notes (“RSSN”).
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| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 29,239 | | | $ | 20,272 | | | | | | | |
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| Other Income | | | | | | | | | |
Structuring Fee | $ | 15,476 | | | $ | — | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Royalty, net profit and revenue interests | 13,996 | | | 20,665 | | | | | | | |
| | | | | | | | | |
| Total Other Income | $ | 29,472 | | | $ | 20,665 | | | | | | | |
Managerial Assistance (1) | $ | 525 | | | $ | 525 | | | | | | | |
Reimbursement of Legal, Tax, etc.(2) | 3 | | | 506 | | | | | | | |
(1) No income recognized by Prospect. MA payments were paid from NPRC to Prospect and subsequently remitted to PA.
(2) Paid from NPRC to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to NPRC (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Additions | $ | 63,305 | | | $ | 77,600 | | | | | | | |
| Interest Income Capitalized as PIK | 241 | | | — | | | | | | | |
| Repayment of Loan Receivable | 13,450 | | | 48,500 | | | | | | | |
| Return of Capital | — | | | 4,000 | | | | | | | |
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 543 | | | $ | 3 | |
| | | |
Other Receivables (4) | 102 | | | 100 | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from NPRC to Prospect for reimbursement of expenses paid by Prospect on behalf of NPRC.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Nationwide Loan Company LLC
Prospect owns 100% of the membership interests of Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a Consolidated Holding Company. Nationwide Holdings owns 94.48% of the equity of Nationwide Loan Company LLC (“Nationwide”), with members of Nationwide management owning the remaining 5.52% of the equity.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 1,175 | | | $ | 1,045 | | | | | | | |
Dividend Income (1) | — | | | 3 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Managerial Assistance (2) | — | | | 100 | | | | | | | |
| | | | | | | | | |
(1) All dividends were paid from earnings and profits of Nationwide.
(2) No income recognized by Prospect. MA payments were paid from Nationwide to Prospect and subsequently remitted to PA.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| | | | | | | | | |
| Interest Income Capitalized as PIK | $ | 785 | | | $ | 522 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 403 | | | $ | 13 | |
| | | |
Other Receivables (4) | — | | | — | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from Nationwide to Prospect for reimbursement of expenses paid by Prospect on behalf of Nationwide.
NMMB, Inc.
Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”), a Consolidated Holding Company. NMMB Holdings owns 92.77% and 90.42% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of September 30, 2023 and June 30, 2023, respectively, with NMMB management owning the remaining equity. NMMB owns 100% of Refuel Agency, Inc. (“Refuel Agency”). Refuel Agency owns 100% of Armed Forces Communications, Inc. (“Armed Forces”). NMMB is an advertising media buying business.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Interest Income | $ | 1,064 | | | $ | 818 | | | | | | | |
| | | | | | | | | |
Dividend Income (1) | 147 | | | 1,093 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Managerial Assistance (2) | 100 | | | 100 | | | | | | | |
| Realized Loss | (147) | | | (1,093) | | | | | | | |
| | | | | | | | | |
(1) All dividends were paid from earnings and profits of NMMB.
(2) No income recognized by Prospect. MA payments were paid from NMMB to Prospect and subsequently remitted to PA.
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 23 | | | $ | 11 | |
| | | |
Other Receivables (4) | 1 | | | — | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from NMMB to Prospect for reimbursement of expenses paid by Prospect on behalf of NMMB.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Pacific World Corporation
Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% ownership interest of Pacific World as of September 30, 2023 and June 30, 2023, respectively. As a result, Prospect’s investment in Pacific World is classified as a control investment.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 2,646 | | | $ | 1,508 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Additions | $ | — | | | $ | 500 | | | | | | | |
| Interest Income Capitalized as PIK | 2,327 | | | 1,504 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (1) | $ | 62 | | | $ | 30 | |
| | | |
Other Receivables (2) | 166 | | | 153 | |
(1) Interest income recognized but not yet paid.
(2) Represents amounts due from Pacific World to Prospect for reimbursement of expenses paid by Prospect on behalf of Pacific World.
R-V Industries, Inc.
Prospect owns 87.75% of the fully-diluted equity of R-V Industries, Inc. (“R-V”), with R-V management owning the remaining 12.25% of the equity. On December 15, 2020 we restructured our $28,622 Senior Subordinated Note with R-V into a $28,622 First Lien Note. No realized gain or loss was recorded as a result of the transaction.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 1,252 | | | $ | 985 | | | | | | | |
| | | | | | | | | |
| Other Income | | | | | | | | | |
| | | | | | | | | |
Advisory Fee | $ | 106 | | | $ | — | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Total Other Income | $ | 106 | | | $ | — | | | | | | | |
Managerial Assistance (1) | $ | 45 | | | $ | 45 | | | | | | | |
Reimbursement of Legal, Tax, etc.(2) | 17 | | | — | | | | | | | |
(1) No income recognized by Prospect. MA payments were paid from R-V to Prospect and subsequently remitted to PA.
(2) Paid from R-V to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to R-V (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Additions | $ | 3,700 | | | $ | — | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 30 | | | $ | 13 | |
| | | |
Other Receivables (4) | 6 | | | 5 | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from R-V to Prospect for reimbursement of expenses paid by Prospect on behalf of R-V.
Universal Turbine Parts, LLC
On December 10, 2018, UTP Holdings Group, Inc. (“UTP Holdings”) purchased all of the voting stock of Universal Turbine Parts, LLC (“UTP”) and appointed a new Board of Directors to UTP Holdings, consisting of three employees of the Investment Advisor. At the time UTP Holdings acquired UTP, UTP Holdings (f/k/a Harbortouch Holdings of Delaware) was a wholly-owned holding company controlled by Prospect and therefore Prospect’s investment in UTP is classified as a control investment.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 956 | | | $ | 688 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Managerial Assistance (1) | 3 | | | 3 | | | | | | | |
| | | | | | | | | |
Reimbursement of Legal, Tax, etc. (2) | 3,333 | | | — | | | | | | | |
(1) No income recognized by Prospect. MA payments were paid from UTP to Prospect and subsequently remitted to PA.
(2) Paid from UTP to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to UTP (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Repayment of Loan Receivable | $ | 8 | | | $ | 8 | | | | | | | |
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 21 | | | $ | 10 | |
| | | |
Other Receivables (4) | 1 | | | — | |
| | | |
(3) Interest income recognized but not yet paid.
(4) Represents amounts due from UTP to Prospect for reimbursement of expenses paid by Prospect on behalf of UTP.
USES Corp.
On June 15, 2016, we provided additional $1,300 debt financing to USES Corp. (“United States Environmental Services” or “USES”) and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 99,900 shares of its common stock. On June 29, 2016, we provided additional $2,200 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 169,062 shares of its common stock. As a result of such debt financing and recapitalization, as of June 29, 2016, we held 268,962 shares of USES common stock representing a 99.96% common equity ownership interest in USES. As such, USES became a controlled company on June 30, 2016.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | $ | 473 | | | $ | 173 | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Additions | $ | — | | | $ | 6,000 | | | | | | | |
| Interest Income Capitalized as PIK | 268 | | | 114 | | | | | | | |
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (1) | $ | 135 | | | $ | 5 | |
| | | |
Other Receivables (2) | 87 | | | 87 | |
(1) Interest income recognized but not yet paid.
(2) Represents amounts due from USES to Prospect for reimbursement of expenses paid by Prospect on behalf of USES.
Valley Electric Company, Inc.
Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc. (“Valley Holdings I”), a Consolidated Holding Company. Valley Holdings I owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), a Consolidated Holding Company. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”), with Valley Electric management owning the remaining 5.01% of the equity. Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”), a leading provider of specialty electrical services in the state of Washington and among the top 50 electrical contractors in the United States.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| Interest Income | | | | | | | | | |
Interest Income from Valley | $ | 371 | | | $ | 558 | | | | | | | |
Interest Income from Valley Electric | 2,649 | | | 1,627 | | | | | | | |
| Total Interest Income | $ | 3,020 | | | $ | 2,185 | | | | | | | |
Dividend Income (1) | $ | — | | | $ | 44 | | | | | | | |
| Other Income | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Royalty, net profit and revenue interests | $ | 167 | | | $ | — | | | | | | | |
| | | | | | | | | |
| Total Other Income | $ | 167 | | | $ | — | | | | | | | |
Managerial Assistance (2) | $ | 150 | | | $ | 150 | | | | | | | |
| | | | | | | | | |
(1) All dividends were paid from earnings and profits.
(2) No income recognized by Prospect. MA payments were paid from Valley Electric to Prospect and subsequently remitted to PA.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| September 30, 2023 | | September 30, 2022 | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Repayment of loan receivable | $ | — | | | $ | (44) | | | | | | | |
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | |
| As of |
| September 30, 2023 | | June 30, 2023 |
Interest Receivable (3) | $ | 1,612 | | | $ | 33 | |
| | | |
| | | |
(3) Interest income recognized but not yet paid.
Note 15. Litigation
From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of such matters as may arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources.
We are not aware of any material legal proceedings as of September 30, 2023 and June 30, 2023.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Note 16. Financial Highlights
The following is a schedule of financial highlights for the three months ended September 30, 2023 and September 30, 2022:
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | |
| | 2023 | | 2022 | | | | |
| Per Share Data | | | | | | | |
| Net asset value per common share at beginning of period | $ | 9.24 | | | $ | 10.48 | | | | | |
Net investment income(1) | 0.31 | | | 0.25 | | | | | |
Net realized and change in unrealized (losses) gains(1) | (0.02) | | | (0.48) | | | | | |
| Net increase (decrease) from operations | 0.29 | | | (0.23) | | | | | |
| Distributions of net investment income to preferred stockholders | (0.06) | | (5) | (0.03) | | (4) | | | |
| Distributions of capital gains to preferred stockholders | — | | (5) | — | | (4) | | | |
| Total distributions to preferred stockholders | (0.06) | | | (0.03) | | | | | |
| Net increase (decrease) from operations applicable to common stockholders | 0.23 | | | (0.26) | | | | | |
| Distributions of net investment income to common stockholders | (0.18) | | (5) | (0.16) | | (4) | | | |
| Distributions of capital gains to common stockholders | — | | (5) | (0.02) | | (4) | | | |
| | | | | | | |
| Total distributions to common stockholders | (0.18) | | | (0.18) | | | | | |
Common stock transactions(2) | (0.04) | | | (0.03) | | | | | |
| | | | | | | |
| | | | | | | |
| Net asset value per common share at end of period | $ | 9.25 | | | $ | 10.01 | | | | | |
| | | | | | | |
| Per common share market value at end of period | $ | 6.05 | | | $ | 6.20 | | | | | |
Total return based on market value(3) | 0.56 | % | | (9.06 | %) | | | | |
Total return based on net asset value(3) | 3.17 | % | | (2.07 | %) | | | | |
| Shares of common stock outstanding at end of period | 408,618,704 | | | 396,179,053 | | | | | |
| Weighted average shares of common stock outstanding | 406,350,619 | | | 394,337,440 | | | | | |
| | | | | | | |
| Ratios/Supplemental Data | | | | | | | |
| Net assets at end of period | $ | 3,780,866 | | | $ | 3,964,422 | | | | | |
| Portfolio turnover rate | 1.70 | % | | 1.98 | % | | | | |
Annualized ratio of operating expenses to average net assets applicable to common shares(6) | 11.78 | % | | 10.23 | % | | | | |
Annualized ratio of net investment income to average net assets applicable to common shares(6) | 13.37 | % | | 9.82 | % | | | | |
| | | | | | | |
(1)Per share data amount is based on the basic weighted average number of common shares outstanding for the year/period presented (except for dividends to stockholders which is based on actual rate per share). Realized gains (losses) is inclusive of net realized losses (gains) on investments, realized losses (gains) from extinguishment of debt and realized gains from the repurchase of preferred stock.
(2)Common stock transactions include the effect of our issuance of common stock in public offerings (net of underwriting and offering costs), shares issued in connection with our common stock dividend reinvestment plan, common shares issued to acquire investments, common shares repurchased below net asset value pursuant to our Repurchase Program, and common shares issued pursuant to the Holder Optional Conversion of our 5.50% Preferred Stock and 6.50% Preferred Stock.
(3)Total return based on market value is based on the change in market price per common share between the opening and ending market prices per share in each period and assumes that common stock dividends are reinvested in accordance with our common stock dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per common share between the opening and ending net asset values per common share in each period and assumes that dividends are reinvested in accordance with our common stock dividend reinvestment plan. For periods less than a year, total return is not annualized.
(4)Tax character of distributions is not yet finalized for the respective fiscal period and will not be finalized until we file our tax return for our tax year ending August 31, 2023. Refer to Note 12.
(5)Tax character of distributions is not yet finalized for the respective fiscal period and will not be finalized until we file our tax return for our tax year ending August 31, 2024. Refer to Note 12.
(6)The amounts reflected for the respective fiscal periods do not reflect the effect of dividend payments to preferred shareholders.
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
Note 17. Selected Quarterly Financial Data (Unaudited)
The following table sets forth selected financial data for each quarter within the three years ended June 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investment Income | | Net Investment Income | | Net Realized and Unrealized (Losses) Gains | | Net Increase (Decrease) in Net Assets from Operations Applicable to Common Stockholders |
| Quarter Ended | | Total | | Per Share (1) | | Total | | Per Share (1) | | Total | | Per Share (1) | | Total | | Per Share (1) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| September 30, 2021 | | $ | 169,474 | | | $ | 0.44 | | | $ | 81,369 | | | $ | 0.21 | | | $ | 130,762 | | | $ | 0.34 | | | $ | 209,724 | | | $ | 0.54 | |
| December 31, 2021 | | 175,376 | | | 0.45 | | | 85,557 | | | 0.22 | | | 168,056 | | | 0.43 | | | 246,411 | | | 0.63 | |
| March 31, 2022 | | 181,431 | | | 0.46 | | | 87,005 | | | 0.22 | | | 77,291 | | | 0.20 | | | 157,157 | | | 0.40 | |
| June 30, 2022 | | 184,623 | | | 0.47 | | | 89,969 | | | 0.23 | | | (137,425) | | | (0.35) | | | (56,643) | | | (0.14) | |
| | | | | | | | | | | | | | | | |
| September 30, 2022 | | $ | 202,674 | | | $ | 0.51 | | | $ | 99,266 | | | $ | 0.25 | | | $ | (191,705) | | | $ | (0.49) | | | $ | (105,199) | | | $ | (0.27) | |
| December 31, 2022 | | 212,916 | | | 0.54 | | | 106,704 | | | 0.27 | | | (34,427) | | | (0.09) | | | 55,623 | | | 0.14 | |
| March 31, 2023 | | 215,120 | | | 0.54 | | | 102,180 | | | 0.26 | | | (191,194) | | | (0.48) | | | (108,947) | | | (0.27) | |
| June 30, 2023 | | 221,503 | | | 0.55 | | | 112,779 | | | 0.28 | | | (104,923) | | | (0.26) | | | (13,950) | | | (0.03) | |
| | | | | | | | | | | | | | | | |
| September 30, 2023 | | $ | 236,245 | | | $ | 0.58 | | | $ | 125,612 | | | $ | 0.31 | | | $ | (8,450) | | | $ | (0.02) | | | $ | 94,011 | | | $ | 0.23 | |
(1)Per share amounts are calculated using the basic weighted average number of common shares outstanding for the period presented and does not reflect the assumed conversion of dilutive securities (basic earnings per common share). The sum of the quarterly per share amounts above will not necessarily equal the per share amounts for the fiscal year.
Note 18. Subsequent Events
Management has evaluated subsequent events through the date of issuance of these consolidated financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the consolidated financial statements other than those disclosed below.
On November 8, 2023, we announced the declaration of monthly dividends for our 5.50% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.50% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date (the first business day of the month, with no additional dividend accruing in January as a result), as follows:
| | | | | | | | | | | |
Monthly Cash 5.50% Preferred Shareholder Distribution | Record Date | Payment Date | Monthly Amount ($ per share), before pro ration for partial periods |
| December 2023 | 12/20/2023 | 1/2/2024 | $0.114583 |
| January 2024 | 1/17/2024 | 2/1/2024 | $0.114583 |
| February 2024 | 2/21/2024 | 3/1/2024 | $0.114583 |
On November 8, 2023, we announced the declaration of monthly dividends for our 6.50% Preferred Stock for holders of record on the following dates based on an annual rate equal to 6.50% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date (the first business day of the month, with no additional dividend accruing in January as a result), as follows:
| | | | | | | | | | | |
Monthly Cash 6.50% Preferred Shareholder Distribution | Record Date | Payment Date | Monthly Amount ($ per share), before pro ration for partial periods |
| December 2023 | 12/20/2023 | 1/2/2024 | $0.135417 |
| January 2024 | 1/17/2024 | 2/1/2024 | $0.135417 |
| February 2024 | 2/21/2024 | 3/1/2024 | $0.135417 |
On November 8, 2023, we announced the declaration of quarterly dividends for our 5.35% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.35% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the 5.35% Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date, as follows:
PROSPECT CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(in thousands, except share and per share data)
| | | | | | | | | | | |
Quarterly Cash 5.35% Preferred Shareholder Distribution | Record Date | Payment Date | Amount ($ per share) |
| November 2023 - January 2024 | 1/17/2024 | 2/1/2024 | $0.334375 |
On November 8, 2023, we announced the declaration of monthly dividends on our common stock as follows:
| | | | | | | | | | | |
| Monthly Cash Common Shareholder Distribution | Record Date | Payment Date | Amount ($ per share) |
| November 2023 | 11/28/2023 | 12/19/2023 | $0.0600 |
| December 2023 | 12/27/2023 | 1/18/2024 | $0.0600 |
| January 2024 | 1/29/2024 | 2/20/2024 | $0.0600 |
| | | |
On October 30, 2023, we initiated an offer to repurchase all of our 5,882,351 outstanding shares of 5.35% Series A Fixed Rate. Cumulative Perpetual Preferred Stock, for cash in an amount equal to $15.877396 per share, plus accrued dividends, if any, commencing on October 30, 2023. The tender offer will expire at 5:00 p.m., New York City time, on November 29, 2023, or any other date and time to which the Company extends the Tender Offer, unless earlier terminated.