Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or
“we”) today announced financial results for our fiscal quarter and
year ended June 30, 2022.
FINANCIAL RESULTS
All amounts in $000’s except per share amounts (on weighted
average basis for period numbers) |
Quarter Ended |
Quarter Ended |
Quarter Ended |
June 30, 2022 |
March 31, 2022 |
June 30, 2021 |
|
|
|
|
Net Investment Income (“NII”) |
$89,969 |
$87,005 |
$73,229 |
Basic NII per Common Share(1) |
$0.21 |
$0.20 |
$0.19 |
Interest as % of Total Investment Income |
83.3% |
78.5% |
87.5% |
|
|
|
|
Net (Loss) Income Applicable to Common Stockholders |
$(56,643) |
$157,157 |
$242,421 |
Basic Net (Loss) Income per Common Share(2) |
$(0.14) |
$0.40 |
$0.62 |
|
|
|
|
Distributions to Common Shareholders |
$70,672 |
$70,439 |
$69,857 |
Distributions per Common Share |
$0.18 |
$0.18 |
$0.18 |
|
|
|
|
Since Oct 2017 Basic NII per Common Share(1) |
$3.75 |
$3.54 |
$2.93 |
Since Oct 2017 Distributions per Common Share |
$3.42 |
$3.24 |
$2.70 |
Since Oct 2017 Basic NII Less Distributions per Common Share |
$0.33 |
$0.30 |
$0.23 |
|
|
|
|
Net Asset Value (“NAV”) to Common Shareholders |
$4,119,123 |
$4,236,011 |
$3,808,477 |
NAV per Common Share |
$10.48 |
$10.81 |
$9.81 |
|
|
|
|
Net of Cash Debt to Equity Ratio(3) |
56.8% |
53.9% |
55.9% |
Net of Cash Asset Coverage of Debt Ratio(3) |
275% |
284% |
277% |
|
|
|
|
Unsecured Debt as % of Total Debt |
69.7% |
73.3% |
84.3% |
Unsecured and Non-Recourse Debt as % of Total Debt |
100.0% |
100.0% |
100.0% |
(1) Basic NII is calculated by
dividing NII, less preferred dividends, by the weighted average
number of common shares outstanding.(2) Basic Net
(Loss) Income is calculated by dividing Net (Loss) Income by the
weighted average number of common shares
outstanding.(3) Including our preferred stock as
equity.
All amounts in $000's except per share amounts |
Year Ended |
Year Ended |
|
June 30, 2022 |
June 30, 2021 |
|
|
|
|
|
Net Investment Income ("NII") |
$343,900 |
$285,737 |
|
Basic NII per Common Share(1) |
$0.81 |
$0.74 |
|
|
|
|
|
Net Income applicable to Common Stockholders |
$556,649 |
$962,096 |
|
Basic Net Income per Common Share |
$1.43 |
$2.51 |
|
|
|
|
|
Distributions to Common Shareholders |
$281,394 |
$276,145 |
|
Distributions per Common Share |
$0.72 |
$0.72 |
|
(1) Basic NII is calculated by dividing NII, less
preferred dividends, by the weighted average number of common
shares outstanding.
CASH COMMON SHAREHOLDER DISTRIBUTION
DECLARATION
Prospect is declaring distributions to common
shareholders as follows:
Monthly Cash Common Shareholder Distribution |
Record Date |
Payment Date |
Amount (per share) |
September 2022 |
9/28/2022 |
10/20/2022 |
$0.06 |
October 2022 |
10/27/2022 |
11/17/2022 |
$0.06 |
These monthly cash distributions are the 61st
and 62nd consecutive $0.06 per share distributions to common
shareholders.
Prospect expects to declare November 2022,
December 2022, and January 2023 distributions to common
shareholders in November 2022.
Based on the declarations above, Prospect’s
closing stock price of $7.80 at August 26, 2022 delivers to our
common shareholders an annualized distribution yield of 9.2%.
Taking into account past distributions and our
current share count for declared distributions, and since inception
through our October 2022 declared distribution, Prospect will have
distributed $19.68 per share to original common shareholders,
aggregating over $3.7 billion in cumulative distributions to all
common shareholders.
Since inception in 2004, Prospect has invested
$19.1 billion across 399 investments, exiting 271 of these
investments.
Over the nine quarters from the pre-pandemic
December 2019 quarter to the March 2022 quarter, Prospect has
delivered the highest growth in the business development company
industry in net asset value per common share, with NAV per common
share increasing by 25% over that time period.
Since October 2017, our NII per common share has
aggregated $3.75 while our common shareholder and preferred
shareholder distributions per common share have aggregated $3.42,
causing our NII to exceed common and preferred distributions during
this period by $0.33 per common share.
Initiatives focused on enhancing accretive NII
per share growth include (1) our $1.75 billion targeted 5.50%
perpetual preferred stock offerings (which could potentially be
increased in capacity in an accretive fashion), (2) greater
utilization of our cost efficient revolving credit facility (with
an incremental cost of approximately 4.14% at today’s one month
Libor), (3) issuing low cost notes (including recent 5 year senior
unsecured notes with a 4.50% coupon), (4) increase of short-term
Libor rates based on Fed tightening to exceed floors and boost
asset yields, and (5) increased originations of senior secured debt
and selected equity investments targeting risk-adjusted yields and
total returns as we deploy dry powder from our underleveraged
balance sheet.
Our senior management team and employees own
approximately 28% of all common shares outstanding, over $1.1
billion of our common equity as measured at NAV.
CASH PREFERRED SHAREHOLDER DISTRIBUTION
DECLARATION
Prospect is declaring monthly distributions to
5.50% preferred shareholders at an annual rate of 5.50% of the
stated value of $25.00 per share, from the date of issuance or, if
later, from the most recent dividend payment date, as follows:
Monthly Cash 5.50% Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Monthly Amount (per share), before pro ration for partial
periods |
September 2022 |
9/21/2022 |
10/3/2022 |
$0.114583 |
October 2022 |
10/19/2022 |
11/1/2022 |
$0.114583 |
November 2022 |
11/16/2022 |
12/1/2022 |
$0.114583 |
Prospect is declaring our second quarterly
distribution to Series A preferred shareholders at an annual rate
of 5.35% of the stated value of $25.00 per share, from the date of
issuance or, if later, from the most recent dividend payment date,
as follows:
Quarterly Cash 5.35% Preferred Shareholder
Distribution |
Record Date |
Payment Date |
Amount (per share) |
August 2022 - October 2022 |
10/19/2022 |
11/1/2022 |
$0.334375 |
PORTFOLIO UPDATE AND INVESTMENT
ACTIVITY
All amounts in $000’s except per unit amounts |
As of |
As of |
As of |
June 30, 2022 |
March 31, 2022 |
June 30, 2021 |
|
|
|
|
Total Investments (at fair value) |
$7,602,510 |
$7,429,931 |
$6,201,778 |
Number of Portfolio Companies |
129 |
127 |
124 |
|
|
|
|
First Lien Debt |
49.9% |
48.4% |
50.8% |
1.5 Lien Debt |
0.0% |
0.0% |
0.3% |
Second Lien Debt |
19.4% |
18.5% |
15.5% |
Third Lien Debt |
0.0% |
0.0% |
0.1% |
Subordinated Structured Notes |
9.4% |
9.8% |
12.2% |
Unsecured Debt |
0.1% |
0.1% |
0.1% |
Equity Investments |
21.2% |
23.2% |
21.0% |
Mix of Investments with Underlying Collateral Security |
78.7% |
76.7% |
78.9% |
|
|
|
|
Annualized Current Yield – All Investments |
8.7% |
8.1% |
9.2% |
Annualized Current Yield – Performing Interest Bearing
Investments |
11.1% |
10.6% |
11.7% |
|
|
|
|
Top Industry Concentration(1) |
18.3% |
18.2% |
17.7% |
Retail Industry Concentration(1) |
0.1% |
0.0% |
0.0% |
Energy Industry Concentration(1) |
1.7% |
1.8% |
1.3% |
Hotels, Restaurants & Leisure Concentration(1) |
0.3% |
0.3% |
0.4% |
|
|
|
|
Non-Accrual Loans as % of Total Assets (2) |
0.4% |
0.4% |
0.6% |
|
|
|
|
Middle-Market Loan Portfolio Company Weighted Average
EBITDA(3) |
$110,764 |
$101,065 |
$89,116 |
As of the quarter ended June 30, 2022, our
middle-market loan portfolio company weighted average net debt
leverage ratio was 5.30x.(3)
(1) Excluding our underlying
industry-diversified structured credit portfolio.(2)
Calculated at fair value.(3) For additional
disclosure see “Middle-Market Loan Portfolio Company Weighted
Average EBITDA and Net Leverage” at the end of this release.
During the September 2022 (to date), June 2022,
and March 2022 quarters, investment originations and repayments
were as follows:
All amounts in $000’s |
Quarter Ended |
Quarter Ended |
Quarter Ended |
September 30, 2022(to date) |
June 30, 2022 |
March 31, 2022 |
|
|
|
|
Total Originations |
$159,348 |
$477,420 |
$564,828 |
|
|
|
|
Middle-Market Lending |
83.4% |
68.7% |
56.3% |
Structured Notes |
9.4% |
9.6% |
5.7% |
Real Estate |
7.2% |
17.7% |
19.5% |
Middle-Market Lending / Buyout |
—% |
3.8% |
14.5% |
Other |
—% |
0.2% |
4.0% |
|
|
|
|
Total Repayments |
$32,080 |
$151,085 |
$184,561 |
|
|
|
|
Originations, Net of Repayments |
$127,268 |
$326,335 |
$380,267 |
|
|
|
|
For additional disclosure see “Primary
Origination Strategies” at the end of this release.
We have invested in subordinated structured
notes benefiting from individual standalone financings non-recourse
to Prospect, with our risk limited in each case to our net
investment. At June 30, 2022 and March 31, 2022, our
subordinated structured note portfolio at fair value consisted of
the following:
All amounts in $000’s except per unit amounts |
As of |
As of |
|
June 30, 2022 |
March 31, 2022 |
|
|
|
|
|
Total Subordinated Structured Notes |
$711,429 |
$728,833 |
|
Subordinated Structured Notes as % of Portfolio |
9.4% |
9.8% |
|
|
|
|
|
# of Investments(2) |
37 |
37 |
|
|
|
|
|
TTM Average Cash Yield(1)(2) |
21.1% |
20.4% |
|
Annualized Cash Yield(1)(2) |
21.0% |
20.7% |
|
Annualized GAAP Yield on Fair Value(1)(2) |
10.6% |
9.7% |
|
Annualized GAAP Yield on Amortized Cost(2) |
7.5% |
6.9% |
|
|
|
|
|
Cumulative Cash Distributions |
$1,453,674 |
$1,415,996 |
|
% of Original Investment |
104.4% |
101.7% |
|
|
|
|
|
# of Underlying Collateral Loans |
1,706 |
1,737 |
|
Total Asset Base of Underlying Portfolio |
$15,536,327 |
$15,618,664 |
|
|
|
|
|
Prospect Weighted Average TTM Default Rate |
0.25% |
0.10% |
|
Broadly Syndicated Market TTM Default Rate |
0.28% |
0.19% |
|
Prospect Default Rate Outperformance vs. Market |
0.03% |
0.09% |
|
(1) Calculation based on fair value.(2)
Excludes investments being redeemed.
To date, including called investments being
redeemed, we have realized 39 subordinated structured notes
totaling $1.489 billion with an expected pooled average realized
IRR of 13.6% and cash on cash multiple of 1.59 times.
Since December 31, 2017 through today, 32 of our
subordinated structured note investments have completed multi-year
extensions of their reinvestment periods (typically at reduced
liability spreads and increased weighted average life asset
benefits). We believe further long-term optionality upside exists
in our structured credit portfolio through additional refinancings
and reinvestment period extensions.
CAPITAL AND LIQUIDITY
Our multi-year, long-term laddered and
diversified historical funding profile has included a $1.5 billion
revolving credit facility (with 43 lenders, an increase of 13
lenders including our prior April 2021 extension and related
upsizing), program notes, listed baby bonds, institutional bonds,
convertible bonds, listed preferred stock, and program preferred
stock. We have retired multiple upcoming maturities and as of today
we have no debt maturing in calendar year 2022.
On April 28, 2021, we completed an amendment and
upsizing of our existing revolving credit facility (the “Facility”)
for Prospect Capital Funding, extending the term 5.0 years. The
Facility includes a revolving period that extends through April 27,
2025, followed by an additional one-year amortization period.
Pricing for amounts drawn under the Facility is one-month Libor
plus 2.05%, a decrease of 0.15%. Undrawn pricing was reduced (1)
0.30% for above 35% to 60% utilization and (2) 0.10% for above 60%
utilization. Our extended facility also has improved borrowing base
benefits due to a change in concentration baskets, which we
estimate increased our borrowing base by approximately $150
million.
The combined amount of our balance sheet cash
and undrawn revolving credit facility commitments is currently
approximately $655 million. Our total unfunded eligible commitments
to non-control portfolio companies total, approximately $44
million, approximately 0.6% of our total assets as of June 30,
2022.
|
As of |
As of |
As of |
All amounts in $000’s |
June 30, 2022 |
March 31, 2022 |
June 30, 2021 |
Net of Cash Debt to Equity Ratio(1) |
56.8% |
53.9% |
55.9% |
% of Interest-Bearing Assets at Floating Rates |
87.8% |
87.2% |
86.1% |
% of Liabilities at Fixed Rates |
69.7% |
73.3% |
84.3% |
|
|
|
|
% of Floating Loans with Libor Floors |
94.1% |
93.9% |
92.5% |
Weighted Average Libor Floor |
1.29% |
1.34% |
1.61% |
|
|
|
|
Unencumbered Assets |
$4,989,046 |
$4,922,468 |
$4,482,615 |
% of Total Assets |
65.1% |
65.7% |
71.1% |
(1) Including our preferred stock as equity.
The below table summarizes our June 2022 quarter
term debt issuance and repurchase/repayment activity:
All amounts in $000’s |
Principal |
Coupon |
Maturity |
Debt Issuances |
|
|
|
Prospect Capital InterNotes® |
$7,127 |
4.25% – 4.50% |
April 2027 – May 2032 |
Total Debt Issuances |
$7,127 |
|
|
|
|
|
|
Debt Repurchases/Repayments |
|
|
|
Prospect Capital InterNotes® |
$337 |
3.00% - 6.50% |
June 2027 – May 2043 |
Total Debt Repurchases/Repayments |
$337 |
|
|
|
|
|
|
Net Debt Repurchases/Repayments |
$6,790 |
|
|
We currently have six separate unsecured debt
issuances aggregating approximately $1.5 billion outstanding, not
including our program notes, with laddered maturities extending
through October 2028. At June 30, 2022, $347.6 million of
program notes were outstanding with laddered maturities through
March 2052.
At June 30, 2022, our weighted average cost
of unsecured debt financing was 4.35%, remaining constant from
March 31, 2022, and a decrease of 0.51% from June 30,
2021. Including usage of our revolving credit facility, at
June 30, 2022, our weighted average cost of all debt financing
was 3.69%, a decrease of 0.08% from March 31, 2022, and a
decrease of 0.74% from June 30, 2021.
On August 3, 2020 and October 3, 2020, we
launched our $1.75 billion 5.50% perpetual preferred stock offering
programs. Prospect expects to use the net proceeds from the
offering programs to maintain and enhance balance sheet liquidity,
including repaying our credit facility and purchasing high quality
short-term debt instruments, and to make long-term investments in
accordance with our investment objective. The preferred stock
provides Prospect with a diversified source of accretive fixed-rate
capital without creating maturity risk due to the perpetual term.
To date we have issued over $970 million of our 5.50% perpetual
preferred stock programs (including $142 million in the June 2022
quarter and $232 million to date in the current September 2022
quarter), with the ability potentially to upsize such programs
based on significant balance sheet capacity.
On July 19, 2021, we closed a $150 million
listed 5.35% perpetual preferred stock offering. Prospect used the
net proceeds from the offering to maintain and enhance balance
sheet liquidity, including repaying our credit facility and
redeeming higher cost program notes.
In connection with the 5.50% perpetual preferred
stock offering program, effective August 3, 2020 and as amended on
June 9, 2022, we adopted and amended, respectively, a Preferred
Stock Dividend Reinvestment Plan, pursuant to which holders of the
preferred stock will have dividends on their preferred stock
automatically reinvested in additional shares of such preferred
stock at a price per share of $25.00, if they elect.
We currently have over $965 million in preferred
stock outstanding.
Prospect holds recently reaffirmed or initiated
investment grade company ratings, all with a stable outlook, from
Standard & Poor’s (BBB-), Moody’s (Baa3), Kroll (BBB-),
Egan-Jones (BBB), and DBRS (BBB (low)). Maintaining our investment
grade ratings with prudent asset, liability, and risk management is
an important objective for Prospect.
DIVIDEND REINVESTMENT PLAN
We have adopted a dividend reinvestment plan
(also known as our “DRIP”) that provides for reinvestment of our
distributions on behalf of our shareholders, unless a shareholder
elects to receive cash. On April 17, 2020, our board of directors
approved amendments to the Company’s DRIP, effective May 21, 2020.
These amendments principally provide for the number of newly-issued
shares pursuant to the DRIP to be determined by dividing (i) the
total dollar amount of the distribution payable by (ii) 95% of the
closing market price per share of our stock on the valuation date
of the distribution (providing a 5% discount to the market price of
our common stock), a benefit to shareholders who participate.
HOW TO PARTICIPATE IN OUR DIVIDEND
REINVESTMENT PLAN
Shares held with a broker or financial
institution
Many shareholders have been automatically “opted
out” of our DRIP by their brokers. Even if you have elected to
automatically reinvest your PSEC stock with your broker, your
broker may have “opted out” of our DRIP (which utilizes DTC’s
dividend reinvestment service), and you may therefore not be
receiving the 5% pricing discount. Shareholders interested in
participating in our DRIP to receive the 5% discount should contact
their brokers to make sure each such DRIP participation election
has been made through DTC. In making such DRIP election, each
shareholder should specify to one’s broker the desire to
participate in the "Prospect Capital Corporation DRIP through DTC"
that issues shares based on 95% of the market price (a 5% discount
to the market price) and not the broker's own "synthetic DRIP” plan
(if any) that offers no such discount. Each shareholder should not
assume one’s broker will automatically place such shareholder in
our DRIP through DTC. Each shareholder will need to make this
election proactively with one’s broker or risk not receiving the 5%
discount. Each shareholder may also consult with a representative
of such shareholder’s broker to request that the number of shares
the shareholder wishes to enroll in our DRIP be re-registered by
the broker in the shareholder’s own name as record owner in order
to participate directly in our DRIP.
Shares registered directly with our transfer
agent
If a shareholder holds shares registered in the
shareholder’s own name with our transfer agent (less than 0.1% of
our shareholders hold shares this way) and wants to make a change
to how the shareholder receives dividends, please contact our plan
administrator, American Stock Transfer and Trust Company LLC by
calling (888) 888-0313 or by mailing American Stock Transfer and
Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219.
EARNINGS CONFERENCE CALL
Prospect will host an earnings call on Tuesday
August 30, 2022 at 11:00 a.m.
Eastern Time. Dial 888-338-7333. For a replay
prior to September 6, 2022 visit www.prospectstreet.com or call
877-344-7529 with passcode 8638717.
PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES(in thousands, except share and per
share data)
|
June 30, 2022 |
|
June 30, 2021 |
|
(Audited) |
|
(Audited) |
Assets |
|
|
|
Investments at fair value: |
|
|
|
Control investments (amortized cost of $2,732,906 and $2,482,431,
respectively) |
$ |
3,438,317 |
|
|
$ |
2,919,717 |
|
Affiliate investments (amortized cost of $242,101 and $202,943,
respectively) |
|
393,264 |
|
|
|
356,734 |
|
Non-control/non-affiliate investments (amortized cost of $4,221,824
and $3,372,750, respectively) |
|
3,770,929 |
|
|
|
2,925,327 |
|
Total investments at fair value (amortized cost of $7,196,831
and $6,058,124, respectively) |
|
7,602,510 |
|
|
|
6,201,778 |
|
Cash |
|
35,364 |
|
|
|
63,610 |
|
Receivables for: |
|
|
|
Interest, net |
|
12,925 |
|
|
|
12,575 |
|
Other |
|
745 |
|
|
|
365 |
|
Prepaid expenses |
|
1,078 |
|
|
|
1,072 |
|
Due from broker |
|
— |
|
|
|
12,551 |
|
Deferred financing costs on Revolving Credit Facility |
|
10,801 |
|
|
|
11,141 |
|
Total Assets |
|
7,663,423 |
|
|
|
6,303,092 |
|
Liabilities |
|
|
|
Revolving Credit Facility |
|
839,464 |
|
|
|
356,937 |
|
Convertible Notes (less unamortized discount and debt issuance
costs of $2,477 and $4,123, respectively) |
|
214,192 |
|
|
|
263,100 |
|
Public Notes (less unamortized discount and debt issuance costs of
$22,281 and $20,061, respectively) |
|
1,343,178 |
|
|
|
1,114,717 |
|
Prospect Capital InterNotes® (less unamortized debt issuance costs
of $7,122 and $10,496, respectively) |
|
340,442 |
|
|
|
498,215 |
|
Due to Prospect Capital Management |
|
58,100 |
|
|
|
48,612 |
|
Interest payable |
|
26,669 |
|
|
|
27,359 |
|
Dividends payable |
|
23,657 |
|
|
|
23,313 |
|
Due to broker |
|
— |
|
|
|
14,854 |
|
Accrued expenses |
|
3,309 |
|
|
|
5,151 |
|
Due to Prospect Administration |
|
2,281 |
|
|
|
4,835 |
|
Other liabilities |
|
932 |
|
|
|
482 |
|
Total Liabilities |
|
2,852,224 |
|
|
|
2,357,575 |
|
Commitments and Contingencies |
|
|
|
Preferred Stock, par value $0.001 per share (227,900,000 shares
authorized, with 60,000,000 shares of preferred stock authorized
for each of Series A1, Series M1, and Series M2, and 20,000,000
shares of preferred stock authorized for each of Series AA1 and
Series MM1, and 1,000,000 shares of preferred stock authorized for
Series A2, and 6,900,000 shares of preferred stock authorized for
Series A; 20,794,645 Series A1 shares issued and outstanding;
2,626,238 Series M1 shares issued and outstanding; 0 Series M2
shares issued and outstanding; 0 Series AA1 shares issued and
outstanding; 0 Series MM1 shares issued and outstanding; 187,000
Series A2 shares issued and outstanding; and 6,000,000 Series A
shares issued and outstanding as of June 30, 2022) at carrying
value plus cumulative accrued and unpaid dividends |
|
692,076 |
|
|
|
— |
|
Net Assets |
$ |
4,119,123 |
|
|
$ |
3,945,517 |
|
Components of Net Assets |
|
|
|
Preferred Stock, par value $0.001 per share (141,000,000 shares
authorized, with 40,000,000 shares of preferred stock authorized
for each of the Series A1, Series M1, and Series M2 and 20,000,000
shares of preferred stock authorized for the Series AA1 and
1,000,000 shares of preferred stock authorized for the Series A2;
5,163,926 Series A1 shares issued and outstanding; 130,666 Series
M1 shares issued and outstanding; 0 Series M2 shares issued and
outstanding; 0 Series AA1 shares issued and outstanding; and
187,000 Series A2 shares issued and outstanding as of June 30,
2021) |
|
— |
|
|
|
137,040 |
|
Common stock, par value $0.001 per share (1,772,100,000 and
1,859,000,000 common shares authorized; 393,164,437 and 388,419,573
issued and outstanding, respectively) |
|
393 |
|
|
|
388 |
|
Paid-in capital in excess of par |
|
4,050,370 |
|
|
|
4,018,659 |
|
Total distributable earnings (loss) |
|
68,360 |
|
|
|
(210,570 |
) |
Net Assets |
$ |
4,119,123 |
|
|
$ |
3,945,517 |
|
Net Asset Value Per Common Share |
$ |
10.48 |
|
|
$ |
9.81 |
|
PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS
OF OPERATIONS (in thousands, except share
and per share data)
|
Three Months Ended June 30, |
|
Year Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Investment Income |
|
|
|
|
|
|
|
|
|
|
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
Control investments |
$ |
59,458 |
|
|
$ |
50,567 |
|
|
$ |
225,494 |
|
|
$ |
201,983 |
|
Affiliate investments |
6,852 |
|
|
6,638 |
|
|
30,349 |
|
|
30,971 |
|
Non-control/non-affiliate investments |
68,648 |
|
|
53,556 |
|
|
251,346 |
|
|
209,681 |
|
Structured credit securities |
18,794 |
|
|
26,893 |
|
|
77,496 |
|
|
111,628 |
|
Total interest income |
153,752 |
|
|
137,654 |
|
|
584,685 |
|
|
554,263 |
|
Dividend income: |
|
|
|
|
|
|
|
|
|
|
|
Control investments |
2,515 |
|
|
997 |
|
|
14,649 |
|
|
4,642 |
|
Affiliate investments |
161 |
|
|
378 |
|
|
256 |
|
|
378 |
|
Non-control/non-affiliate investments |
72 |
|
|
19 |
|
|
120 |
|
|
81 |
|
Total dividend income |
2,748 |
|
|
1,394 |
|
|
15,025 |
|
|
5,101 |
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
Control investments |
24,476 |
|
|
16,674 |
|
|
79,782 |
|
|
62,167 |
|
Affiliate investments |
71 |
|
|
7 |
|
|
4,032 |
|
|
109 |
|
Non-control/non-affiliate investments |
3,576 |
|
|
1,610 |
|
|
27,380 |
|
|
10,327 |
|
Total other income |
28,123 |
|
|
18,291 |
|
|
111,194 |
|
|
72,603 |
|
Total Investment Income |
184,623 |
|
|
157,339 |
|
|
710,904 |
|
|
631,967 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
Base management fee |
37,898 |
|
|
30,756 |
|
|
140,370 |
|
|
114,622 |
|
Income incentive fee |
20,195 |
|
|
17,873 |
|
|
79,491 |
|
|
71,227 |
|
Interest and credit facility expenses |
30,464 |
|
|
30,069 |
|
|
117,416 |
|
|
130,618 |
|
Allocation of overhead from Prospect Administration |
2,906 |
|
|
3,494 |
|
|
13,797 |
|
|
14,262 |
|
Audit, compliance and tax related fees |
1,167 |
|
|
1,594 |
|
|
3,107 |
|
|
3,861 |
|
Directors’ fees |
131 |
|
|
113 |
|
|
491 |
|
|
450 |
|
Other general and administrative expenses |
1,893 |
|
|
211 |
|
|
12,332 |
|
|
11,190 |
|
Total Operating Expenses |
94,654 |
|
|
84,110 |
|
|
367,004 |
|
|
346,230 |
|
Net Investment Income |
89,969 |
|
|
73,229 |
|
|
343,900 |
|
|
285,737 |
|
Net Realized and Net Change in Unrealized (Losses) Gains
from Investments |
|
|
|
|
|
|
|
|
|
|
|
Net realized (losses) gains |
|
|
|
|
|
|
|
|
|
|
|
Control investments |
(1,346 |
) |
|
2 |
|
|
3,958 |
|
|
2,955 |
|
Affiliate investments |
— |
|
|
— |
|
|
— |
|
|
4,469 |
|
Non-control/non-affiliate investments |
244 |
|
|
84 |
|
|
(17,142 |
) |
|
113 |
|
Net realized (losses) gains |
(1,102 |
) |
|
86 |
|
|
(13,184 |
) |
|
7,537 |
|
Net change in unrealized (losses) gains |
|
|
|
|
|
|
|
|
|
|
|
Control investments |
(84,432 |
) |
|
140,753 |
|
|
268,126 |
|
|
464,719 |
|
Affiliate investments |
(28,645 |
) |
|
18,697 |
|
|
(2,629 |
) |
|
129,738 |
|
Non-control/non-affiliate investments |
(23,238 |
) |
|
16,017 |
|
|
(3,472 |
) |
|
99,587 |
|
Net change in unrealized (losses) gains |
(136,315 |
) |
|
175,467 |
|
|
262,025 |
|
|
694,044 |
|
Net Realized and Net Change in Unrealized (Losses) Gains
from Investments |
(137,417 |
) |
|
175,553 |
|
|
248,841 |
|
|
701,581 |
|
Net realized losses on extinguishment of debt |
(8 |
) |
|
(5,096 |
) |
|
(10,157 |
) |
|
(23,511 |
) |
Net (Decrease) Increase in Net Assets Resulting from
Operations |
(47,456 |
) |
|
243,686 |
|
|
582,584 |
|
|
963,807 |
|
Preferred stock dividend |
(9,187 |
) |
|
(1,265 |
) |
|
(25,935 |
) |
|
(1,711 |
) |
Net (Decrease) Increase in Net Assets Resulting from
Operations applicable to Common Stockholders |
$ |
(56,643 |
) |
|
$ |
242,421 |
|
|
$ |
556,649 |
|
|
$ |
962,096 |
|
PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIESROLLFORWARD OF NET ASSET VALUE PER
COMMON SHARE(in actual dollars)
|
Three Months Ended June 30, |
|
Year Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
Per Share Data |
|
|
|
|
|
|
|
|
Net asset value per common share at beginning of period |
$ |
10.81 |
|
|
$ |
9.38 |
|
|
$ |
9.81 |
|
|
$ |
8.18 |
|
|
Net investment income(1) |
|
0.23 |
|
|
|
0.19 |
|
|
|
0.88 |
|
|
|
0.75 |
|
|
Net realized and change in unrealized (losses) gains(1) |
|
(0.35 |
) |
|
|
0.43 |
|
|
|
0.61 |
|
|
|
1.77 |
|
|
Net (decrease) increase from operations |
|
(0.12 |
) |
|
|
0.62 |
|
|
|
1.49 |
|
|
|
2.51 |
|
|
Distributions of net investment income to preferred
stockholders |
|
(0.02 |
) |
|
|
— |
|
(3) |
|
(0.06 |
) |
|
|
— |
|
(3) |
Net (decrease) increase from operations applicable to common
stockholders(8) |
|
(0.14 |
) |
|
|
0.62 |
|
|
|
1.43 |
|
|
|
2.51 |
|
|
Distributions of net investment income to common stockholders |
|
(0.18 |
) |
(5) |
|
(0.18 |
) |
(7) |
|
(0.71 |
) |
(5) |
|
(0.63 |
) |
(7) |
Return of Capital to common stockholders |
|
— |
|
(5) |
|
— |
|
(7) |
|
(0.01 |
) |
(5) |
|
(0.09 |
) |
(7) |
Common stock transactions(2) |
|
(0.02 |
) |
|
|
— |
|
|
|
(0.05 |
) |
|
|
(0.11 |
) |
|
Offering costs from issuance of preferred stock |
|
— |
|
|
|
(0.02 |
) |
|
|
(0.03 |
) |
|
|
(0.04 |
) |
|
Reclassification of preferred stock issuance costs(6) |
|
— |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
Net asset value per common share at end of period |
$ |
10.48 |
|
(4) |
$ |
9.81 |
|
(4) |
$ |
10.48 |
|
|
$ |
9.81 |
|
(4) |
(1) |
|
Per share data amount is based on the weighted average number of
common shares outstanding for the period presented (except for
dividends to stockholders which is based on actual rate per
share). |
(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 and
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. |
(3) |
|
Amount is less than $0.01. |
(4) |
|
Does not foot due to rounding. |
(5) |
|
Not finalized for the respective fiscal period. |
(6) |
|
Preferred stock issuance costs include offering costs and
underwriting costs related to the issuance of preferred stock.
During the three months ended December 31, 2021, we have
reclassified all preferred stock issuance costs related to
preferred stock issued as temporary equity following our
reclassification of preferred stock during the three months ended
September 30, 2021. |
(7) |
|
The amounts reflected for the respective fiscal periods were
updated based on tax information received subsequent to our Form
10-K filing for the year ended June 30, 2021 and our Form 10-Q
filing for December 31, 2021. Certain reclassifications have been
made in the presentation of prior period amounts. |
(8) |
|
Diluted net (decrease) increase from operations applicable to
common stockholders was $(0.14) and $1.34 for the three and twelve
months ended June 30, 2022. Diluted net increase from operations
applicable to common stockholders was $0.61 and $2.50 for the three
and twelve months ended June 30, 2021. |
|
|
|
MIDDLE-MARKET LOAN PORTFOLIO COMPANY WEIGHTED AVERAGE
EBITDA AND NET LEVERAGE
Middle-Market Loan Portfolio Company Weighted
Average Net Leverage (“Middle-Market Portfolio Net Leverage”) and
Middle-Market Loan Portfolio Company Weighted Average EBITDA
(“Middle-Market Portfolio EBITDA”) provide clarity into the
underlying capital structure of PSEC’s middle-market loan portfolio
investments and the likelihood that PSEC’s overall portfolio will
make interest payments and repay principal.
Middle-Market Portfolio Net Leverage reflects
the net leverage of each of PSEC’s middle-market loan portfolio
company debt investments, weighted based on the current fair market
value of such debt investments. The net leverage for each
middle-market loan portfolio company is calculated based on PSEC’s
investment in the capital structure of such portfolio company, with
a maximum limit of 10.0x adjusted EBITDA. This calculation excludes
debt subordinate to PSEC’s position within the capital structure
because PSEC’s exposure to interest payment and principal repayment
risk is limited beyond that point. Additionally, subordinated
structured notes, other structured credit, real estate investments,
investments for which EBITDA is not available, and equity
investments, for which principal repayment is not fixed, are also
not included in the calculation. The calculation does not exceed
10.0x adjusted EBITDA for any individual investment because 10.0x
captures the highest level of risk to PSEC. Middle-Market Portfolio
Net Leverage provides PSEC with some guidance as to PSEC’s exposure
to the interest payment and principal repayment risk of PSEC’s
overall debt portfolio. PSEC monitors its Middle-Market Portfolio
Net Leverage on a quarterly basis.
Middle-Market Portfolio EBITDA is used by PSEC
to supplement Middle-Market Portfolio Net Leverage and generally
indicates a portfolio company’s ability to make interest payments
and repay principal. Middle-Market Portfolio EBITDA is calculated
using the EBITDA of each of PSEC’s middle-market loan portfolio
companies, weighted based on the current fair market value of the
related investments. The calculation provides PSEC with insight
into profitability and scale of the portfolio companies within our
overall debt investments.
These calculations include addbacks that are
typically negotiated and documented in the applicable investment
documents, including but not limited to transaction costs,
share-based compensation, management fees, foreign currency
translation adjustments and other nonrecurring transaction
expenses.
Together, Middle-Market Portfolio Net Leverage
and Middle-Market Portfolio EBITDA assist PSEC in assessing the
likelihood that PSEC will timely receive interest and principal
payments. However, these calculations are not meant to substitute
for an analysis of PSEC’s our underlying portfolio company debt
investments, but to supplement such analysis.
PRIMARY ORIGINATION
STRATEGIES
Middle-Market Lending - We make
directly-originated, agented loans to companies, including
companies which are controlled by private equity sponsors and
companies that are not controlled by private equity sponsors (such
as companies that are controlled by the management team, the
founder, a family or public shareholders). This debt can take the
form of first lien, second lien, unitranche or unsecured loans.
These loans typically have equity subordinate to our loan position.
We may also purchase selected equity co-investments in such
companies. In addition to directly-originated, agented loans, we
also invest in senior and secured loans, syndicated loans and high
yield bonds that have been sold to a club or syndicate of buyers,
both in the primary and secondary markets. These investments are
often purchased with a long term, buy-and-hold outlook, and we
often look to provide significant input to the transaction by
providing anchoring orders.
Middle-Market Lending / Buyout - This strategy
involves purchasing senior and secured yield-producing debt and
controlling equity positions in operating companies across various
industries. We believe this strategy provides enhanced certainty of
closing to sellers, and the opportunity for management to continue
in their current roles. These investments are often structured in
tax-efficient partnerships, enhancing returns.
Real Estate - We purchase debt and controlling
equity positions in tax-efficient real estate investment trusts
(“REIT” or “REITs”). The real estate investments of National
Property REIT Corp. (“NPRC”) are in various classes of developed
and occupied real estate properties that generate current yields,
including multi-family properties, student housing, and
self-storage. NPRC seeks to identify properties that have
historically attractive occupancy rates and recurring cash flow
generation. NPRC generally co-invests with established and
experienced property management teams that manage such properties
after acquisition.
Subordinated Structured Notes - We make
investments in structured credit, often taking a significant
position in subordinated structured notes (equity) and rated
secured structured notes (debt). The underlying portfolio of each
structured credit investment is diversified across approximately
100 to 200 broadly syndicated loans and does not have direct
exposure to real estate, mortgages, or consumer-based credit
assets. The structured credit portfolios in which we invest are
managed by established collateral management teams with many years
of experience in the industry.
FORM 10-K
We are unable to file our Annual Report on Form
10-K for the fiscal year ended June 30, 2022 (the “2022 Form 10-K”)
within the prescribed time period without unreasonable effort or
expense primarily because we require additional time to complete
our assessment of the effectiveness of our internal control over
financial reporting and our independent registered accounting firm
requires additional time to complete its audit of our internal
control over financial reporting.
Management is in the process of performing an
assessment of the effectiveness of our internal control over
financial reporting as of June 30, 2022, based upon criteria in
Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Although the assessment is not yet complete, we expect to
report a material weakness in our internal control over financial
reporting relating to the operation of management review controls
over the valuation of collateralized loan obligations (“CLOs”),
including management’s review procedures over the completeness and
accuracy of the underlying data used in performing those review
procedures. Additionally, we expect to report a material weakness
relating to our control environment and monitoring activities;
specifically, with respect to evaluating internal control
deficiencies in a timely manner.
As a result of the foregoing, we need additional
time to finalize our financial statements and related disclosures
to be filed as part of the 2022 Form 10-K. We expect to file our
2022 Form 10-K within the extension period of 15 calendar days as
provided by Rule 12b-25 under the Securities Exchange Act of 1934,
as amended.
We anticipate that the material weaknesses
described above will not require a fourth quarter 2022 adjustment
or materially impact our consolidated financial statements for any
prior annual or interim periods.
ABOUT PROSPECT CAPITAL
CORPORATION
Prospect Capital Corporation
(www.prospectstreet.com) is a business development company that
focuses on lending to and investing in private businesses. Our
investment objective is to generate both current income and
long-term capital appreciation through debt and equity
investments.
We have elected to be treated as a business
development company under the Investment Company Act of 1940 (“1940
Act”). We are required to comply with regulatory requirements under
the 1940 Act as well as applicable NASDAQ, federal and state rules
and regulations. We have elected to be treated as a regulated
investment company under the Internal Revenue Code of 1986.
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, whose safe harbor for forward-looking
statements does not apply to business development companies. Any
such statements, other than statements of historical fact, are
highly likely to be affected by other unknowable future events and
conditions, including elements of the future that are or are not
under our control, and that we may or may not have considered;
accordingly, such statements cannot be guarantees or assurances of
any aspect of future performance. Actual developments and results
are highly likely to vary materially from any forward-looking
statements. Such statements speak only as of the time when made. We
undertake no obligation to update any such statement now or in the
future.
For additional information, contact:
Grier Eliasek, President and Chief Operating
Officer grier@prospectcap.com Telephone (212) 448-0702
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