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Prospect Capital Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 9, 2011 05:21PM

Prospect Capital Corp. (PSEC) filed Quarterly Report for the period ended 2010-12-31. Prospect Capital Corp. has a market cap of $963.2 million; its shares were traded at around $11.82 with a P/E ratio of 9.4 and P/S ratio of 8.5. The dividend yield of Prospect Capital Corp. stocks is 10.5%. Prospect Capital Corp. had an annual average earning growth of 18.4% over the past 5 years.

Hedge Fund Gurus that owns PSEC: Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

The aggregate value of our portfolio investments was $918,221 and $748,483 as of December 31, 2010 and June 30, 2010, respectively. During the six months ended December 31, 2010, our net cost of investments increased by $157,309, or 21.6%, primarily as a result of our investment in ten new and seven follow-on investments of $275,867, while we received full repayment on eight investments, sold three investments and received several partial prepayments and revolver paydowns of $135,553. Several new investments that we anticipated closing prior to December 31, 2010 were delayed by the borrowers when the expiring tax breaks were extended. The closing of these loans has increased the level of activity during the current quarter ending March 31, 2011 as detailed in the Recent Developments, which follows.

Compared to the end of last fiscal year (ended June 30, 2010), net assets increased by $191,766 or 27.0% during the six months ended December 31, 2010, from $711,424 to $903,190. This increase resulted from the issuance of new shares of our common stock (less offering costs) in the amount of $177,718, dividend reinvestments of $5,280, and another $57,520 from operations. These increases, in turn, were offset by $48,752 in dividend distributions to our stockholders. The $57,520 increase in net assets resulting from operations is net of the following: net investment income of $40,075, net realized gain on investments of $5,016, and an increase in net assets due to changes in net unrealized appreciation of investments of $12,429.

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 September 24, 2010, we established a third at-the-market program, as we had sold all the shares authorized in the preceding at-the-market programs, through which we may sell, from time to time and at our discretion, 6,000,000 shares of our common stock. We engaged three broker-dealers to act as potential agents and sell our common stock directly into the market over a period of time. We currently pay a 2% commission to the broker-dealer on shares sold. Through this program we issued 302,400 shares of our common stock at an average price of $9.87 per share, raising $2,986 of gross proceeds, from September 29, 2010 through September 30, 2010. During the period from October 1, 2010 to November 3, 2010, we continued this program and issued an additional 4,929,556 shares of our common stock at an average price of $9.86 per share, raising $48,611 of gross proceeds.

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.

On December 21, 2010, we issued $150,000 in aggregate principal amount of 6.25% Senior Convertible Notes due 2015. The Notes mature on December 15, 2015, unless previously converted in accordance with their terms. The Notes are general unsecured obligations, rank equally in right of payment with our existing and future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future. The Senior Convertible Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at December 31, 2010 of 88.0902 shares of Common Stock per $1,000 principal amount of Senior Convertible Notes, which is equivalent to a conversion price of approximately $11.352 per share of Common Stock, subject to adjustment in certain circumstances. The holders of the Notes may also put back the Notes to the Company under certain circumstances. The net proceeds from the offering of the Senior Convertible Notes were approximately $145,200, which will be used initially to maintain balance sheet liquidity, including repayment of debt under the Company’s credit facility, investments in high quality short-term debt instruments or a combination thereof, and thereafter to make long-term investments in accordance with the Company’s investment objective. We have analyzed the features of the Senior Convertible Notes to determine if bifurcation was necessary and have determined that it is not material.

Read the The complete Report

Stocks Discussed: PSEC,
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