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Prospect Capital Announces Financial Results for Fiscal September 2024 Quarter

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Prospect Capital announced financial results for Q3 2024, highlighting a strategic shift in its investment focus. The company is rotating from structured credit CLO equity and real estate investments toward first lien senior secured middle market loans, which now comprise 65% of total investments. Interest income reached 94% of total income, an increase of over 800 basis points year-over-year. Net Investment Income was $89,877,000 ($0.21 per share), and the company declared monthly distributions of $0.0450 per share for November 2024 through January 2025.

Prospect Capital ha annunciato i risultati finanziari per il terzo trimestre del 2024, evidenziando un cambiamento strategico nel suo focus sugli investimenti. L'azienda sta ruotando da investimenti in crediti strutturati CLO equity e immobiliari verso prestiti senior garantiti di primo grado nel mercato medio, che ora costituiscono il 65% degli investimenti totali. Il reddito da interessi ha raggiunto il 94% del reddito totale, con un aumento di oltre 800 punti base rispetto all'anno precedente. Il Reddito Netto da Investimenti è stato di $89,877,000 ($0,21 per azione), e l'azienda ha dichiarato distribuzioni mensili di $0,0450 per azione per il periodo da novembre 2024 a gennaio 2025.

Prospect Capital anunció los resultados financieros para el tercer trimestre de 2024, destacando un cambio estratégico en su enfoque de inversión. La empresa está rotando de inversiones en crédito estructurado CLO y bienes raíces hacia préstamos asegurados de primer grado en el mercado medio, que ahora comprenden el 65% de las inversiones totales. Los ingresos por intereses alcanzaron el 94% de los ingresos totales, un aumento de más de 800 puntos básicos con respecto al año anterior. El Ingreso Neto por Inversiones fue de $89,877,000 ($0.21 por acción), y la empresa declaró distribuciones mensuales de $0.0450 por acción para noviembre de 2024 hasta enero de 2025.

프론스펙트 캐피탈이 2024년 3분기 재무 결과를 발표하며 투자 초점의 전략적 전환을 강조했습니다. 이 회사는 구조화된 신용 CLO 주식 및 부동산 투자에서 중형 시장의 1순위 담보 대출로 전환하고 있으며, 현재 이는 총 투자 Portfolio의 65%를 차지하고 있습니다. 이자 수익은 총 수익의 94%에 도달하여, 전년 대비 800베이시스 포인트 이상 증가했습니다. 순 투자 수익은 $89,877,000($0.21 주당)였으며, 회사는 2024년 11월부터 2025년 1월까지 주당 $0.0450의 월 배당금을 선언했습니다.

Prospect Capital a annoncé les résultats financiers pour le troisième trimestre 2024, soulignant un changement stratégique dans son focus d'investissement. L'entreprise passe d'investissements en crédit structuré, en actions CLO et dans l'immobilier à des prêts garantis de premier rang sur le marché intermédiaire, qui représentent désormais 65 % des investissements totaux. Les revenus d'intérêts ont atteint 94 % des revenus totaux, soit une augmentation de plus de 800 points de base par rapport à l'année précédente. Le Revenu Net d'Investissement s'est élevé à 89 877 000 $ (0,21 $ par action), et l'entreprise a déclaré des distributions mensuelles de 0,0450 $ par action pour la période de novembre 2024 à janvier 2025.

Prospect Capital hat die finanziellen Ergebnisse für das 3. Quartal 2024 bekannt gegeben und dabei einen strategischen Wandel in seinem Investitionsfokus hervorgehoben. Das Unternehmen wechselt von strukturierten Kredit-CLO-Eigenkapital- und Immobilieninvestitionen hin zu ersten Pfandrechten auf besicherte Senior-Darlehen im mittleren Markt, die jetzt 65% der Gesamtinvestitionen ausmachen. Die Zinserträge erreichten 94% der Gesamteinnahmen, was einem Anstieg von über 800 Basispunkten im Jahresvergleich entspricht. Das Nettoeinkommen aus Investitionen betrug 89.877.000 $ (0,21 $ pro Aktie), und das Unternehmen erklärte monatliche Ausschüttungen von 0,0450 $ pro Aktie für den Zeitraum von November 2024 bis Januar 2025.

Positive
  • Interest income as percentage of total income increased to 94%, up 800 basis points year-over-year
  • First lien loans increased to 65% of total investments, up 700 basis points year-over-year
  • Strong liquidity position with $1.63 billion in cash and undrawn credit facility commitments
  • Non-accrual loans remain low at 0.5% of total assets
Negative
  • Net Investment Income decreased to $0.21 per share from $0.31 year-over-year
  • Net loss of $165,069,000 ($0.38 per share) for the quarter
  • NAV per share declined to $8.10 from $9.25 year-over-year
  • Monthly distribution reduced to $0.0450 per share from previous levels

Insights

The Q3 2024 results reveal significant strategic shifts and challenges. Net Investment Income dropped to $89.9 million ($0.21 per share) from $125.6 million year-over-year. The company is executing a major portfolio rotation, moving away from CLO equity and real estate investments toward first lien senior secured middle-market loans, which now comprise 65% of the portfolio.

Key metrics show both strengths and concerns: Interest income reached 94% of total income, indicating more stable recurring revenue. However, the NAV per share declined to $8.10 from $9.25 year-over-year. The monthly distribution was reduced to $0.045 per share from $0.06, reflecting lower expected returns in a declining interest rate environment.

The balance sheet remains solid with $1.63 billion in available liquidity and a conservative net debt-to-equity ratio of 43.7%. Non-accrual loans remain low at 0.5% of total assets.

The portfolio transformation signals a more conservative approach but comes with trade-offs. The shift to first-lien loans provides better downside protection and financing efficiency through the revolving credit facility. Middle-market loans offer higher spreads and interest rate floors (250-400 basis points) compared to larger company loans (0-100 basis points).

However, the exit from higher-yielding CLO equity positions (historically generating 12% IRR) and real estate investments (24% IRR for exited properties) may impact total returns. The weighted average portfolio yield decreased to 9.7% from 10.3% year-over-year, reflecting this trade-off between yield and risk.

NEW YORK, Nov. 08, 2024 (GLOBE NEWSWIRE) -- Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our fiscal quarter ended September 30, 2024.

"We are rightsizing our common shareholder distribution rate as we continue to execute our long-term income and total return strategy by rotating structured credit CLO equity and real estate investments into our core business of first lien senior secured middle market loans, including sometimes with selected equity co-investments," said John Barry, Chairman and Chief Executive Officer of Prospect.

"Our preferred shareholder cash distributions continue at the contractual rates of such distributions," said Mr. Barry.

"CLO equity and real estate investments have generated solid unlevered investment-level gross cash IRRs (12% for CLO equity and 24% for real estate property exited investments since inception of such strategies in 2011 and 2012, respectively), but with more variability compared to our core business," said Mr. Barry. "As we rotate into lower variability middle-market corporate investments, our recurring income as shown by interest income as a percent of total income has reached 94%, an increase of over 800 basis points for the year-over-year quarterly period."

"We still perceive CLO equity and real estate investments as attractive risk-adjusted strategies," said Mr. Barry. "We expect another fund managed by an affiliate of Prospect Capital Management L.P. to continue to focus on new CLO equity investments, with less targeted Prospect Capital Corporation balance sheet investment in this strategy going forward."

"CLO equity has decreased to 6% of our assets (versus 18% as of September 30, 2017) as we execute on our rotation strategy to emphasize first lien senior secured lending, with such mix growing significantly for us," said Mr. Barry. "CLO equity typically generates attractive cash-on-cash yields, but such yields tend to be higher in the initial years while lower in the later years, thereby resulting in variability that we seek to dampen by focusing more on our core business at Prospect Capital Corporation."

"Real estate investing is a total return strategy that has been a solid fit for Prospect Capital Corporation during periods of low short-term and medium-term interest rates," said Mr. Barry.

"We have exited dozens of our value-add properties in the past several years after achieving strong rent and net operating income performance," said Mr. Barry. "We have also generated substantial exit-related income from real estate property sales over the years, with such exit-related income decreasing recently. While we expect to monetize further real estate property investments with attractive returns, we are cautious about future exit-related income."

"Over the last seven weeks, the Fed has reversed 75 basis points of prior short term interest rate increases, with market expectations for more reductions going forward, which may lower future shareholder distribution rates across the BDC and related credit industries," said Mr. Barry. "We have already factored in the declining forward curve for short term interest rates for our common shareholder distribution declaration today."

"Over the past two decades, Prospect Capital Corporation has invested $11.4 billion in over 300 exited investments that have earned a 13% unlevered investment-level gross cash IRR to Prospect Capital Corporation," said Grier Eliasek, President and Chief Operating Officer of Prospect. “This two-decade time period includes the GFC and has been dominated in general by low reference interest rates. The majority of peer BDCs have not been battle tested by such general economic downturn and other headwinds."

"Our core business of directly-originated, non-syndicated first lien senior secured loans to U.S. middle-market companies, sometimes with selected equity co-investments, offers multiple compelling attributes," said Mr. Eliasek. "First lien loans as a percentage of total investments have now reached 65%, an increase of over 700 basis points for the year-over-year quarterly period."

"Such core business with proprietary opportunity flow offers higher spreads than lending to much larger companies, which loans are experiencing significant spread compression for other lenders focused on that more competitive and commoditized larger end of the market," said Mr. Eliasek.

"Middle-market loans, by comparison, offer higher interest rate floors (often 250 to 400 basis points) versus loans to larger companies (which often have only 0 to 100 basis point floors), thereby providing better protection for yield and income when short-term interest rates decline," said Mr. Eliasek. "Such higher floors benefited Prospect Capital Corporation greatly when the Fed last sharply reduced such rates during the GFC."

"First lien senior secured middle-market loans, different from CLO equity and real estate investments, also are eligible for favorable financing with our efficient-cost revolving credit facility, helping to further enhance our net investment income," said Mr. Eliasek.

"With such core business middle-market investments, we also sometimes have an opportunity to structure investments with equity upside, including through warrants, convertible debt, and 2x liquidation preferences, with an objective to maximize current yields and total returns in a prudent and risk-adjusted fashion," said Mr. Eliasek.

"Many such investments that we are currently underwriting have targeted unlevered double-digit current yields and unlevered total returns of 12-15%+, with such yields and total returns further enhanced by our credit facility to lift targeted levered returns to 18-20%+," said Mr. Eliasek.

"Recent investments like RK Logistics, Discovery Point, and Druid City illustrate such non-syndicated middle-market focus where we also capture equity upside," said Mr. Eliasek.

"Our middle-market portfolio companies also have the potential to drive substantial synergistic value creation with add-on acquisitions, with examples including Valley purchasing Comet and R-V Industries making multiple acquisitions," said Mr. Eliasek.

"With such middle-market investments, we have a greater ability to add value to management teams that benefit from our experienced Prospect team of over 130 professionals in areas like board supervision, operational assistance, strategic planning, executive recruiting, add-on acquisition sourcing, and other important areas," said Mr. Eliasek.

"Our pipeline continues to build with additional non-syndicated first lien senior secured middle-market loans with selected equity co-investments, which we expect to deliver substantial benefits to Prospect Capital Corporation and its shareholders going forward," said Mr. Eliasek.

FINANCIAL RESULTS

All amounts in $000’s except
per share amounts (on weighted average
basis for period numbers)
Quarter EndedQuarter EndedQuarter Ended
September 30,
2024
June 30,
2024
September 30,
2023
    
Net Investment Income (“NII”)$89,877$102,922$125,612
NII per Common Share$0.21$0.25$0.31
Interest as % of Total Investment Income94.0%89.2%85.7%
    
Net Income (Loss) Applicable to Common Shareholders$(165,069)$(9,050)$94,011
Net Income (Loss) per Common Share$(0.38)$(0.02)$0.23
    
Distributions to Common Shareholders$77,358$75,640$73,252
Distributions per Common Share$0.18$0.18$0.18
Cumulative Paid and Declared Distributions to Common Shareholders(1)$4,384,924$4,325,055$4,088,041
Cumulative Paid and Declared Distributions per Common Share(1)$21.25$21.12$20.58
Multiple of Net Asset Value (“NAV”) per Common Share2.6x2.4x2.2x
    
Total Assets$7,592,705$7,857,092$7,853,828
Total Liabilities$2,469,590$2,559,171$2,602,715
Preferred Stock$1,612,302$1,586,188$1,470,247
Net Asset Value (“NAV”) to Common Shareholders$3,510,813$3,711,733$3,780,866
NAV per Common Share$8.10$8.74$9.25
    
Balance Sheet Cash + Undrawn Revolving Credit Facility Commitments$1,631,291$1,357,577$1,108,386
    
Net of Cash Debt to Total Assets29.7%30.5%31.4%
Net of Cash Debt to Equity Ratio(2)43.7%44.7%46.5%
Net of Cash Asset Coverage of Debt Ratio(2)329%323%314%
    
Unsecured Debt + Preferred Equity as % of Total Debt + Preferred Equity86.0%80.3%77.0%
Unsecured and Non-Recourse Debt as % of Total Debt100.0%100.0%100.0%

(1) Declared dividends are through the January 2025 distribution. November through January 2025 distributions are estimated based on shares outstanding as of 10/29/2024.
(2) Including our preferred stock as equity.

CASH COMMON SHAREHOLDER DISTRIBUTION DECLARATION

Prospect is declaring distributions to common shareholders as follows:

Monthly Cash Common Shareholder DistributionRecord DatePayment DateAmount ($ per share)
November 202411/26/202412/19/2024$0.0450
December 202412/27/20241/22/2025$0.0450
January 20251/29/20252/19/2025$0.0450


Prospect expects to declare February 2025, March 2025, and April 2025 distributions to common shareholders in February 2025.

Taking into account past distributions and our current share count for declared distributions, since inception through our January 2025 declared distribution, Prospect will have distributed $21.25 per share to original common shareholders, representing 2.6 times September 2024 common NAV per share and 4.1 times the closing stock price on November 6, 2024, aggregating approximately $4.4 billion in cumulative distributions to all common shareholders.

Since Prospect’s initial public offering in July 2004 through September 30, 2024, Prospect has invested over $21 billion across over 400 investments, exiting over 300 of these investments.

Drivers focused on growing NII and NAV include (1) our $2.25 billion targeted Floating Rate perpetual preferred stock offering, (2) greater utilization of our cost efficient revolving floating rate credit facility, (3) elevated short-term SOFR rates which boost asset yields, (4) optimization of portfolio company performance, and (5) increased primary and secondary originations of senior secured debt and selected equity investments targeting attractive risk-adjusted yields and total returns as we deploy dry powder from our underleveraged balance sheet.

Our senior management team and employees own over 27% of all common shares outstanding or $0.9 billion of our common equity as measured at NAV.

PORTFOLIO UPDATE AND INVESTMENT ACTIVITY

All amounts in $000’s except
per unit amounts
As ofAs ofAs of
September 30,
2024
June 30,
2024
September 30,
2023
    
Total Investments (at fair value)$7,476,641$7,718,243$7,736,817
Number of Portfolio Companies117117128
    
First Lien Debt64.9%60.3%57.3%
Second Lien Debt11.1%13.6%15.9%
Subordinated Structured Notes6.2%6.9%8.1%
Unsecured Debt0.1%0.1%0.1%
Equity Investments17.7%19.1%18.6%
Mix of Investments with Underlying Collateral Security82.2%80.8%81.3%
    
Annualized Current Yield – All Investments9.7%9.8%10.3%
Annualized Current Yield – Performing Interest Bearing Investments11.8%12.1%12.7%
    
Top Industry Concentration(1)19.0%19.1%18.2%
Retail Industry Concentration(1)0.1%0.3%0.3%
Energy Industry Concentration(1)1.5%1.6%1.6%
Hotels, Restaurants & Leisure Concentration(1)0.3%0.3%0.3%
    
Non-Accrual Loans as % of Total Assets (2)0.5%0.3%0.2%
    
Middle-Market Loan Portfolio Company Weighted Average EBITDA(3)$104,682$107,328$111,026
Middle-Market Loan Portfolio Company Weighted Average Net Leverage Ratio(3)5.7x5.5x5.3x


From September 30, 2023 to September 30, 2024, the Second Lien Debt percentage declined from 15.9% to 11.1% and the Subordinated Structured Notes percentage declined from 8.1% to 6.2%.

(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 December 2024 (to date), September 2024, and June 2024 quarters, investment originations and repayments were as follows:

All amounts in $000’s
Quarter EndedQuarter EndedQuarter Ended
December 31, 2024
(to date)
September 30,
2024
June 30,
2024
    
Total Originations$42,349$290,639$242,140
    
Middle-Market Lending66.9%85.8%62.9%
Real Estate33.1%7.8%27.0%
Structured Notes—%—%—%
Middle-Market Lending / Buyouts—%6.1%10.1%
    
Total Repayments and Sales$162,556$282,328$244,743
    
Originations, Net of Repayments and Sales$(120,207)$8,311$(2,603)
    


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. We expect to continue to amortize our subordinated structured notes portfolio and to reinvest into middle market senior secured debt and selected equity investments. At September 30, 2024 and June 30, 2024, our subordinated structured note portfolio at fair value consisted of the following:

All amounts in $000’s except
per unit amounts
As ofAs of
September 30, 2024June 30, 2024
   
Total Subordinated Structured Notes$473,792$531,690
Subordinated Structured Notes as % of Portfolio6.2%6.9%
   
# of Investments(2)3333
   
TTM Average Cash Yield(1)(2)23.2%22.3%
Annualized GAAP Yield on Fair Value(1)(2)3.5%4.1%
   
Cumulative Cash Distributions$2,134,170$2,108,430
% of Original Investment127.3%125.8%
   
# of Underlying Collateral Loans(2)1,4291,576

(1) Calculation based on fair value.
(2) Excludes investments being redeemed.

To date we have exited 15 subordinated structured note investments that have earned an unlevered investment-level gross cash IRR of 12.0% and cash on cash multiple of 1.3 times.

CAPITAL AND LIQUIDITY

Our multi-year, long-term laddered and diversified historical funding profile has included a $2.1 billion revolving credit facility (aggregate commitments with 48 current lenders), program notes, institutional bonds, convertible bonds, listed preferred stock, and program preferred stock. We have retired multiple upcoming maturities and, as of today, have no debt maturing during calendar year 2024. The combined amount of our balance sheet cash and undrawn revolving credit facility commitments is approximately at $1.5 billion as of November 6, 2024.

On June 28, 2024, we completed an extension and upsizing of our Revolving Credit Facility (the "Revolving Credit Facility"), which extended the term of the Facility five years and the revolving period to four years from such date. The credit facility has $2.1 billion of commitments from 48 commercial banks. The Facility includes a revolving period that extends through June 28, 2028, followed by an additional one-year amortization period. The interest rate for amounts drawn under the Facility remained unchanged from prior to the extension and upsizing and is one-month SOFR plus 2.05%.

Our total unfunded eligible commitments to portfolio companies totals approximately $48 million, or 0.6% of our total assets as of September 30, 2024.

 As ofAs of
All amounts in $000’sSeptember 30, 2024June 30, 2024
Net of Cash Debt to Total Assets Ratio29.7%30.5%
Net of Cash Debt to Equity Ratio(1)43.7%44.7%
% of Interest-Bearing Assets at Floating Rates81.0%82.1%
Unsecured Debt + Preferred Equity as % of Total Debt + Preferred Equity86.0%80.3%
   
Balance Sheet Cash + Undrawn Revolving Credit Facility Commitments$1,631,291$1,357,577
   
Unencumbered Assets$4,852,971$4,978,490
% of Total Assets63.9%63.4%

(1) Including our preferred stock as equity.

The below table summarizes our September 2024 quarter term debt issuance and repurchase/repayment activity:

All amounts in $000’sPrincipalCouponMaturity
Debt Issuances   
Prospect Capital InterNotes®$101,7346.50% - 7.50%July 2027 – October 2034
Total Debt Issuances$101,734  
    
Debt Repurchases/Repayments   
Prospect Capital InterNotes®$2,5002.25% - 5.50%February 2026 – January 2052
2026 Notes$12,2853.706%January 2026
Total Debt Repurchases/Repayments$14,785  
    
Net Debt Repurchases/Repayments$86,949  


We currently have four separate unsecured debt issuances aggregating approximately $1.1 billion outstanding, not including our program notes, with laddered maturities extending through October 2028. At September 30, 2024, $603 million of program notes were outstanding with laddered maturities through March 2052.

At September 30, 2024 our weighted average cost of unsecured debt financing was 4.42%, an increase of 0.17% from June 30, 2024, and an increase of 0.34% from September 30, 2023.

We have raised significant capital from our existing $2.25 billion 5.50%, 6.50% and Floating Rate perpetual preferred stock offering programs. As of November 6, 2024 we are no longer offering the Series 5.50% and 6.50% fixed rate preferred stock. The preferred stock provides Prospect with a diversified source of programmatic capital without creating scheduled maturity risk due to the perpetual term of multiple preferred tranches.

In connection with our 5.50%, 6.50% and Floating Rate perpetual preferred stock offering programs we have adopted and amended a Preferred Stock Dividend Reinvestment Plan, pursuant to which (i) holders of the Floating Rate preferred stock will have dividends on their preferred stock reinvested in additional shares of such preferred stock at a price per share of $25.00 and (ii) holders of the 5.50% and 6.50% preferred stock will have dividends on their preferred stock reinvested in additional shares of such preferred stock at a 5% discount to the stated value per share of $25.00, if they elect.

Prospect holds recently reaffirmed or assigned investment grade company ratings 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, Equiniti Trust Company, LLC by calling (888) 888-0313 or by mailing Equiniti Trust Company LLC, PO Box 10027, Newark, New Jersey 07101.

EARNINGS CONFERENCE CALL

Prospect will host an earnings call on Friday November 8, 2024 at 9:00 a.m. Eastern Time. Dial 888-338-7333. For a replay prior to November 8, 2024 visit www.prospectstreet.com or call 877-344-7529 with passcode 2929037.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
 
 September 30, 2024
  June 30, 2024
 
    
 (Unaudited)  (Audited) 
Assets     
Investments at fair value:     
Control investments (amortized cost of $3,326,598 and $3,280,415, respectively)$3,744,510  $3,872,575 
Affiliate investments (amortized cost of $11,735 and $11,594, respectively)21,658  18,069 
Non-control/non-affiliate investments (amortized cost of $3,991,005 and $4,155,165, respectively)3,710,473  3,827,599 
Total investments at fair value (amortized cost of $7,329,338 and $7,447,174, respectively)7,476,641  7,718,243 
Cash and cash equivalents (restricted cash of $2,736 and $3,974, respectively)57,022  85,872 
Receivables for:     
Interest, net27,486  26,936 
Other943  1,091 
Deferred financing costs on Revolving Credit Facility22,368  22,975 
Prepaid expenses872  1,162 
Due from broker7,197  734 
Due from Affiliate176  79 
Total Assets7,592,705  7,857,092 
Liabilities     
Revolving Credit Facility547,231  794,796 
Public Notes (less unamortized discount and debt issuance costs of $11,211 and $12,433, respectively)976,504  987,567 
Prospect Capital InterNotes® (less unamortized debt issuance costs of $9,040 and $7,999, respectively)594,222  496,029 
Convertible Notes (less unamortized debt issuance costs of $409 and $649, respectively)155,759  155,519 
Due to broker84,643  10,272 
Due to Prospect Capital Management54,286  58,624 
Dividends payable26,346  25,804 
Interest payable21,714  21,294 
Due to Prospect Administration4,579  5,433 
Accrued expenses4,037  3,591 
Due to Affiliate   
Other liabilities269  242 
Total Liabilities2,469,590  2,559,171 
Commitments and Contingencies     
Preferred Stock, par value $0.001 per share (647,900,000 and 647,900,000 shares of preferred stock authorized, with 80,000,000 and 80,000,000 as Series A1, 80,000,000 and 80,000,000 as Series M1, 80,000,000 and 80,000,000 as Series M2, 20,000,000 and 20,000,000 as Series AA1, 20,000,000 and 20,000,000 as Series MM1, 1,000,000 and 1,000,000 as Series A2, 6,900,000 and 6,900,000 as Series A, 80,000,000 and 80,000,000 as Series A3, 80,000,000 and 80,000,000 as Series M3, 80,000,000 and 80,000,000 as Series A4, 80,000,000 and 80,000,000 as Series M4, 20,000,000 and 20,000,000 as Series AA2, and 20,000,000 and 20,000,000 as Series MM2, each as of September 30, 2024 and June 30, 2024; 28,266,559 and 28,932,457 Series A1 shares issued and outstanding, 1,409,007 and 1,788,851 Series M1 shares issued and outstanding, 0 and 0 Series M2 shares issued and outstanding, 0 and 0 Series AA1 shares issued and outstanding, 0 and 0 Series MM1 shares issued and outstanding, 164,000 and 164,000 Series A2 shares issued and outstanding, 5,251,157 and 5,251,157 Series A shares issued and outstanding, 24,608,472 and 24,810,648 Series A3 shares issued and outstanding, 3,025,020 and 3,351,101 Series M3 shares issued and outstanding, 1,847,915 and 1,401,747 Series M4 shares issued and outstanding, 5,801,035 and 3,766,166 Series A4 issued and outstanding, 0 and 0 Series AA2 shares issued and outstanding, and 0 and 0 Series MM2 shares issued and outstanding as of September 30, 2024 and June 30, 2024, respectively) at carrying value plus cumulative accrued and unpaid dividends (Note 9)1,612,302  1,586,188 
Net Assets Applicable to Common Shares$3,510,813  $3,711,733 
Components of Net Assets Applicable to Common Shares and Net Assets, respectively     
Common stock, par value $0.001 per share (1,352,100,000 and 1,352,100,000 common shares authorized; 433,560,728 and 424,846,963 issued and outstanding, respectively) (Note 9)434  425 
Paid-in capital in excess of par4,250,105  4,208,607 
Total distributable (loss)(739,726) (497,299)
Net Assets Applicable to Common Shares$3,510,813  $3,711,733 
Net Asset Value Per Common Share$8.10  $8.74 


PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
 Three Months Ended September 30,
 2024  2023 
Investment Income     
Interest income (excluding payment-in-kind (“PIK”) interest income):     
Control investments$52,382  $49,126 
Affiliate investments   
Non-control/non-affiliate investments94,910  106,356 
Structured credit securities4,179  16,687 
Total interest income (excluding PIK interest income)151,471  172,169 
PIK interest income:     
Control investments19,710  24,117 
Affiliate investments   
Non-control/non-affiliate investments13,434  6,161 
Total PIK Interest Income33,144  30,278 
Total interest income184,615  202,447 
Dividend income:     
Control investments  227 
Affiliate investments141  1,307 
Non-control/non-affiliate investments2,269  1,525 
Total dividend income2,410  3,059 
Other income:     
Control investments6,967  29,745 
Affiliate investments   
Non-control/non-affiliate investments2,316  994 
Total other income9,283  30,739 
Total Investment Income196,308  236,245 
Operating Expenses     
Base management fee38,606  39,289 
Income incentive fee15,680  25,617 
Interest and credit facility expenses39,760  40,593 
Allocation of overhead from Prospect Administration5,708  2,113 
Audit, compliance and tax related fees1,720  1,017 
Directors’ fees150  135 
Other general and administrative expenses4,807  1,869 
Total Operating Expenses106,431  110,633 
Net Investment Income89,877  125,612 
Net Realized and Net Change in Unrealized Gains (Losses) from Investments     
Net realized gains (losses)     
Control investments6,367) (147)
Affiliate investments   
Non-control/non-affiliate investments(106,737) (207,34))
Net realized gains (losses)(100,370) (207,489)
Net change in unrealized gains (losses)     
Control investments(174,248) (17,794) 
Affiliate investments3,448  837 
Non-control/non-affiliate investments47,033  215,586 
Net change in unrealized gains (losses)(123,767) 198,629 
Net Realized and Net Change in Unrealized Gains (Losses) from Investments(224,137) (8,860)
Net realized gains (losses) on extinguishment of debt248  (91)
Net Increase (Decrease) in Net Assets Resulting from Operations(134,012) 116,661 
Preferred Stock dividends(27,157) (23,151)
Net gain (loss) on redemptions of Preferred Stock2,304  501 
Gain (loss) on Accretion to Redemption Value of Preferred Stock(6,204)  
Net Increase (Decrease) in Net Assets Resulting from Operations applicable to Common Stockholders$(165,069) $94,011 


PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
ROLLFORWARD OF NET ASSET VALUE PER COMMON SHARE
(in actual dollars)
 
 Three Months Ended September 30, 
 2024 2023
Per Share Data   
Net asset value per common share at beginning of period$8.74  $9.24 
Net investment income(1)0.21  0.31 
Net realized and net change in unrealized gains (losses)(1)(0.53) (0.02)
Net increase (decrease) from operations(0.32) 0.29 
Distributions of net investment income to preferred stockholders(0.06)(3)(0.06)
Distributions of capital gains to preferred stockholders (3) 
Total distributions to preferred stockholders(0.06) (0.06)
Net increase (decrease) from operations applicable to common stockholders(4)(0.38) 0.23 
Distributions of net investment income to common stockholders(0.18)(3)(0.16)
Return of capital to common stockholders  (0.02)
Total distributions to common stockholders(0.18) (0.18)
Common stock transactions(2)(0.08) (0.04)
Net asset value per common share at end of period$8.10  $9.25 

(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 from extinguishment of debt and realized gains (losses) from the repurchases and redemptions 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 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% and 6.50% Preferred Stock.

(3) Tax character of distributions is not yet finalized for the respective fiscal period.

(4) Diluted net decrease from operations applicable to common stockholders was $0.38 for the three months ended September 30, 2024. Diluted net increase from operations applicable to common stockholders was $0.18 for the three months ended September 30, 2023.

MIDDLE-MARKET LOAN PORTFOLIO COMPANY WEIGHTED AVERAGE EBITDA, NET LEVERAGE AND INTERNAL RATE OF RETURN

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 such 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, rated secured structured notes, 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 middle-market loan 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 PSEC's middle-market loan portfolio.

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 underlying portfolio company debt investments, but to supplement such analysis.

Internal Rate of Return (“IRR”) is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. IRR is gross of general expenses not related to specific investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized. Prospect’s gross IRR calculations are unaudited. Information regarding internal rates of return are historical results relating to Prospect’s past performance and are not necessarily indicative of future results, the achievement of which cannot be assured.

PRIMARY ORIGINATION STRATEGIES

Lending to Companies - 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.

Lending to Companies and Purchasing Controlling Equity Positions in Such Companies - 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 on in their current roles. These investments are often structured in tax-efficient partnerships, enhancing returns.

Purchasing Controlling Equity Positions and Lending to Real Estate Companies - 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 senior living. NPRC seeks to identify properties that have historically significant occupancy rates and recurring cash flow generation. NPRC generally co-invests with established and experienced property management teams that manage such properties after acquisition. Additionally, NPRC makes investments in rated secured structured notes (primarily debt of structured credit). NPRC also purchases loans originated by certain consumer loan facilitators. It purchases each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers, and the loans are typically serviced by the facilitators of the loans.

Investing in Structured Credit - We make investments in structured credit, often taking a significant position in subordinated structured notes (equity). 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.

About Prospect Capital Corporation

Prospect is a business development company lending to and investing in private businesses. Prospect’s investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Prospect has elected to be treated as a business development company under the Investment Company Act of 1940. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986.

Caution Concerning Forward-Looking Statements

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, and 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


FAQ

What was PSEC's Net Investment Income per share for Q3 2024?

Prospect Capital reported Net Investment Income of $0.21 per share for the fiscal quarter ended September 30, 2024.

How much are PSEC's monthly distributions for November 2024 through January 2025?

PSEC declared monthly distributions of $0.0450 per share for November 2024, December 2024, and January 2025.

What percentage of PSEC's investments are first lien loans as of September 2024?

First lien loans comprise 64.9% of PSEC's total investments as of September 30, 2024, an increase of over 700 basis points year-over-year.

What was PSEC's NAV per share as of September 30, 2024?

PSEC's Net Asset Value (NAV) per share was $8.10 as of September 30, 2024.

Prospect Capital Corporation

NASDAQ:PSEC

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1.88B
417.76M
26.77%
9.49%
4.39%
Asset Management
Financial Services
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United States of America
NEW YORK