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Prospect Capital Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 9, 2010 05:25PM

Prospect Capital Corp. (PSEC) filed Quarterly Report for the period ended 2010-09-30. Prospect Capital Corp. has a market cap of $823 million; its shares were traded at around $10.55 with a P/E ratio of 12.9 and P/S ratio of 7.2. The dividend yield of Prospect Capital Corp. stocks is 11.5%. Prospect Capital Corp. had an annual average earning growth of 18.4% over the past 5 years.

PSEC is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Compared to the end of last fiscal year (ended June 30, 2010), net assets increased by $91,400 or 12.8% during the quarter ended September 30, 2010, from $711,424 to $802,824. This increase resulted from the issuance of new shares of our common stock (less offering costs) in the amount of $86,127, dividend reinvestments of $2,531, and another $25,580 from operations. These increases, in turn, were offset by $22,838 in dividend distributions to our stockholders. The $25,580 increase in net assets resulting from operations is net of the following: net investment income of $20,995, net realized gain on investments of $527, and an increase in net assets due to changes in net unrealized appreciation of investments of $4,058.

During the three months ended September 30, 2010, we recognized $4,047 of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in this amount is $1,116 of accelerated accretion resulting from the repayment of Impact Products, LLC (“Impact”) and $1,612 resulting from the acceleration of purchase discounts from the recapitalizing of our loan to Northwestern Management Services, LLC (“Northwestern”). As of September 30, 2010, $27,083 of purchase discount from the Patriot acquisition remains to be accreted.

We also continue to generate liquidity through public and private stock offerings. On July 7, 2009, we completed a public stock offering for 5,175,000 shares of our common stock at $9.00 per share, raising $46,575 of gross proceeds. On August 20, 2009 and September 24, 2009, we issued 3,449,686 shares and 2,807,111 shares, respectively, of our common stock at $8.50 and $9.00 per share, respectively, in private stock offerings, raising $29,322, and $25,264 of gross proceeds, respectively. Concurrent with the sale of these shares, we entered into a registration rights agreement in which we granted the purchasers certain registration rights with respect to the shares. Under the terms and conditions of the registration rights agreement, we filed with the SEC a post-effective amendment to the registration statement on Form N-2 on November 6, 2009. Such amendment was declared effective by the SEC on November 9, 2009.

On July 30, 2010, we invested $52,420 of combined debt and equity in AIRMALL USA Inc. (“AIRMALL”), a leading developer and manager of airport retail operations. The $30,000 first lien note bears interest in cash at the greater of 12.0% or Libor plus 9.0% and has a final maturity on June 30, 2015. The $12,500 subordinated secured note bears interest in cash at 12.0% plus PIK interest of 6.0% and has a final maturity on December 31, 2015.

On September 9, 2010, we announced an increase in commitments to our credit facility of $30,000. As of September 30, 2010, the lenders have extended commitments of $240,000 under the credit facility. Our credit facility includes an accordion feature which allows the facility to be increased to up to $300,000 of commitments in the aggregate to the extent additional or existing lenders commit to increase the commitments. We will seek to add additional lenders in order to reach the maximum size; although no assurance can be given we will be able to do so.

During the period from October 1, 2010 to November 3, 2010, we issued 4,929,556 shares of our common stock at an average price of $9.86 per share, and raised $48,611 of gross proceeds, under our at-the-market program. Net proceeds were $47,639 after 2% commission to the broker-dealer on shares sold.

Read the The complete Report

Stocks Discussed: PSEC,
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