FINANCIAL RESULTS
| All amounts in $000’s except per share amounts (on weighted average basis for period numbers) | Quarter Ended | Quarter Ended | Quarter Ended |
| Net Investment Income (“NII”) | |||
| NII per Common Share | |||
| Interest as % of Total Investment Income | 90.1% | 93.4% | 94.9% |
| Net Income (Loss) Applicable to Common Shareholders | |||
| Net Income (Loss) per Common Share | |||
| Distributions to Common Shareholders | |||
| Distributions per Common Share | |||
| Cumulative Paid and Declared Distributions to Common Shareholders(1) | |||
| Cumulative Paid and Declared Distributions per Common Share(1) | |||
| Total Assets | |||
| Total Liabilities | |||
| Perpetual Preferred Stock | |||
| Net Asset Value (“NAV”) to Common Shareholders | |||
| NAV per Common Share | |||
| Balance Sheet Cash + Undrawn Revolving Credit Facility Commitments | |||
| Net of Cash Debt to Total Assets | 28.6% | 27.0% | 30.4% |
| Net of Cash Debt to Total Equity Ratio(2) | 40.7% | 37.6% | 44.4% |
| Net of Cash Asset Coverage of Debt Ratio(2) | 345% | 366% | 325% |
| Interest Coverage(3) | 366% | 356% | 351% |
| Unsecured Debt + Perpetual Preferred Equity as % of Total Debt + Perpetual Preferred Equity | 83.7% | 88.0% | 77.1% |
| Unsecured and Non-Recourse Debt as % of Total Debt | 100.0% | 100.0% | 100.0% |
| (1) | Declared dividends are through the |
| (2) | Including our perpetual preferred stock as equity. |
| (3) | Calculated as (Net Investment Income + Interest Expense + Incentive Fees) / Interest Expense. |
CASH COMMON SHAREHOLDER DISTRIBUTION DECLARATION
Prospect is declaring distributions to common shareholders as follows:
| Monthly Cash Common Shareholder Distribution | Record Date | Payment Date | Amount ($ per share) |
Taking into account past distributions and our current share count for declared distributions, since inception through our
Since Prospect’s initial public offering in
Since Prospect's initial public offering in
In Prospect’s primary business of middle market lending since 2004, Prospect’s exited investments resulted in an investment level exited gross IRR of approximately 14.4% (based on total capital invested of approximately
| Middle-Market Lending | Overall | Exited |
| Investments | 365 | 293 |
| Total Capital Invested | ||
| Total Proceeds | ||
| Amount Remaining(1) | ||
| Total | ||
| Exited Gross IRR | 14.4% | |
| Credit Statistics | Reference(2) | PSEC Average |
| Middle-Market Net Leverage | 6.1x | 4.9x |
| Middle-Market Cash Interest Coverage | 160% | 223% |
| Annualized Net Realized Loss Rate | 1.0% | 0.2%(3) |
| (1) | Amount remaining represents the fair value of investments and any additional net interest receivable. |
| (2) | Reference Middle-Market Net Leverage and Middle-Market Cash Interest Coverage from KBRA Private Credit: Q2 2026 Middle Market Compendium. Such quarterly report includes median statistics for 2,785 unique global middle-market sponsored borrowers assessed over the last twelve months ended |
| (3) | PSEC annualized net realized loss rate defined as realized gains/(losses) on investments as a percentage of total invested capital since inception, divided by the number of years since inception for the respective investments. |
Drivers focused on optimizing our business include:
(1) rotation of assets into and increased focus on our core business of first lien senior secured middle market loans (with our first lien mix increasing 840 basis points to 72.5% (based on cost) from
(2) reduction in our second lien senior secured middle market loans (with our second lien mix decreasing 454 basis points to 11.9% (based on cost) from June 2024);
(3) exit of our subordinated structured notes portfolio (with our subordinated structured notes mix decreasing 837 basis points to 0.0% (based on cost) from June 2024);
(4) exit of targeted lower yielding equity linked assets, including real estate properties (with six additional properties sold in the fiscal year ended
(5) enhancement of portfolio company operating performance and profitability, including through adoption of AI and automation initiatives focused on enhancing revenues and producing cost efficiencies; and
(6) utilization of our cost effective floating rate revolver (which significantly matches our majority floating rate assets) while continuing to operate with one of the lowest debt leverage levels in the industry (28.6% net of cash debt to total assets as of
On
On
In our middle market lending strategy, which represented 85% of our investments at cost as of
As of
Our real estate property portfolio at
Our senior management team and employees own 26.7% of all common shares outstanding or approximately
PORTFOLIO UPDATE AND INVESTMENT ACTIVITY
| All amounts in $000’s except per unit amounts | As of | As of | As of |
| Total Investments (1) | |||
| Total Investments (2) | |||
| Number of Portfolio Companies | 91 | 89 | 97 |
| Number of Industries | 31 | 31 | 33 |
| First Lien Debt | 72.5% | 72.0% | 70.5% |
| Second Lien Debt | 11.9% | 12.4% | 14.4% |
| Total Senior and Secured Debt | 84.4% | 84.4% | 84.9% |
| Unsecured Debt | 0.1% | 0.1% | 0.1% |
| Subordinated Structured Notes | —% | —% | 0.6% |
| Equity Investments | 15.5% | 15.5% | 14.4% |
| Total Investments (1) | 100.0% | 100.0% | 100.0% |
| First Lien Debt | 67.6% | 66.9% | 66.9% |
| Second Lien Debt | 9.1% | 9.4% | 11.5% |
| Total Senior and Secured Debt | 76.7% | 76.3% | 78.4% |
| Unsecured Debt | 0.1% | 0.1% | 0.1% |
| Subordinated Structured Notes | —% | 0.1% | 0.5% |
| Equity Investments | 23.2% | 23.5% | 21.0% |
| Total Investments (2) | 100.0% | 100.0% | 100.0% |
| Non-Accrual Loans as % of Total Assets (2) | 0.7% | 0.7% | 0.3% |
| (1) | Calculated at cost. |
| (2) | Calculated at fair value. |
During the
| All amounts in $000’s | Quarter Ended | Quarter Ended |
| Total Originations | ||
| Middle-Market | 90.5% | 94.2% |
| Real Estate | 9.5% | 5.4% |
| Other | —% | 0.4% |
| Total Repayments and Sales | ||
| Originations, Net of Repayments and Sales | ||
For additional disclosure see “Primary Origination Strategies” at the end of this release.
ARTIFICIAL INTELLIGENCE AND AUTOMATION INITIATIVES
Prospect, together with affiliates, and including portfolio company executives and external advisors, has a broad and deep cross-functional team that includes software and information technology engineers, portfolio company operations professionals, and other individuals focused on bringing best practice artificial intelligence (“AI”) and automation initiatives to both Prospect’s operations and that of its portfolio companies, especially those companies where Prospect holds not just senior secured debt but also equity, whereby Prospect can capture economic upside from profit enhancements (including both revenue increase projects as well as cost efficiency projects) in such businesses. Examples of portfolio company use cases include:
First Tower using AI and machine learning to improve credit scoring and decisioning (further reducing loss rates and expanding approvals to additional creditworthy borrowers) and to target pre-qualified prospects (with cross-sell and re-borrow opportunities), in addition to various ongoing AI projects designed to deploy customer service agents, automate collections communications, and detect fraud;- Town & Country continuing to prioritize AI to optimize operations and support growth initiatives, including investing in a dedicated AI team and equipping all employees with AI tools. For example, the team has deployed an AI agent that generates design concepts based on retailer, brand, packaging, and product guidelines;
- InterDent executing on AI initiatives for diagnostic imaging patient treatment plans, clinician automatic credentialling, revenue cycle management collection improvement, recruiting (reducing time to fill), call center efficiency/effectiveness boosting, and other projects;
Pacific World using AI for consumer insight testing for new product development, optimizing accounts receivable collections review and dispute processes, and building an enterprise data warehouse unifying finance, marketing, and sales data that makes siloed data accessible to the entire organization;- Ubique utilizing AI to benchmark competitor products across competitor websites against its own product portfolio, informing each of product development and sales strategy;
- Mity hiring a new head of technology who is deploying AI to certain business processes, with an initial focus on sales-related activities, including lead generation, customer outreach, account executive handoffs, and data integration;
- Refuel deploying an AI-driven lead generation engine to identify, qualify, and convert sales opportunities;
National Property REIT Corp rolling out AI across its multifamily platform, including dynamic pricing and revenue management to maximize revenue per available unit; AI-driven applicant screening that evaluates credit, rental history, and employment for consistent and unbiased risk scoring; LLM-based leasing communication and call analytics to improve prospect-to-lease conversion, automated renewals pricing, and outreach to reduce tenant turnover; and AI-assisted preventative maintenance that flags equipment degradation and property risks; and- Prospect applying AI tools to specific processes within its own operations. First-pass review of investor due diligence questionnaires, which frequently run to several hundred questions, are drafted from the firm's own prior submissions rather than assembled manually. Portions of quarter-end reporting and reconciliation for Prospect's finance vehicles have been automated. These are process-level efficiencies in back-office and administrative work, while investment decisions continue to be made by Prospect's investment professionals and investment committee.
“Prospect is actively assessing and implementing the best use cases for artificial intelligence and automation within our critical business processes, including both within our investment processes as well as at the portfolio company operational level,” said
CAPITAL AND LIQUIDITY
Our multi-year, long-term laddered and diversified historical funding profile over our more than 22 year history has included our current
On
Our unfunded eligible commitments to portfolio companies aggregate approximately
| As of | As of | |
| All amounts in $000’s | ||
| Net of Cash Debt to Total Assets Ratio | 28.6% | 27.0% |
| Net of Cash Debt to Total Equity Ratio(1) | 40.7% | 37.6% |
| % of Interest-Bearing Assets at Floating Rates | 76.0% | 74.3% |
| Unsecured Debt + Perpetual Preferred Equity as % of Total Debt + Perpetual Preferred Equity | 83.7% | 88.0% |
| Balance Sheet Cash + Undrawn Revolving Credit Facility Commitments | ||
| Unencumbered Assets | ||
| % of Total Assets | 65.8% | 65.4% |
| (1) | Including our perpetual preferred stock as equity. |
We currently have three separate unsecured debt issuances aggregating approximately
At
We have raised significant capital from our existing perpetual preferred stock offering programs. The perpetual preferred stock provides Prospect with a diversified source of programmatic capital without creating scheduled amortization or maturity risk as we benefit from multiple perpetual preferred tranches.
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
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,
EARNINGS CONFERENCE CALL
Prospect will host an earnings call on
| PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share and per share data) | |||||||
| Assets | |||||||
| Investments at fair value: | |||||||
| Control investments (amortized cost of | $ | 3,644,274 | $ | 3,696,367 | |||
| Affiliate investments (amortized cost of | 30,447 | 27,057 | |||||
| Non-control/non-affiliate investments (amortized cost of | 2,667,837 | 2,950,092 | |||||
| Total investments at fair value (amortized cost of | 6,342,558 | 6,673,516 | |||||
| Cash and cash equivalents (restricted cash of | 43,572 | 50,788 | |||||
| Receivables for: | |||||||
| Interest, net | 17,350 | 25,144 | |||||
| Other | 9,228 | 1,642 | |||||
| Derivative Assets, at fair value | 18,900 | — | |||||
| Deferred financing costs on Revolving Credit Facility | 14,128 | 18,842 | |||||
| Prepaid expenses | 1,419 | 1,488 | |||||
| Due from | 1,351 | — | |||||
| Due from Affiliate | 61 | 125 | |||||
| Due from broker | 60 | 33,393 | |||||
| Total Assets | 6,448,627 | 6,804,938 | |||||
| Liabilities | |||||||
| Public Notes (less unamortized discount and debt issuance costs of | 690,841 | 593,444 | |||||
| Prospect Capital InterNotes® (less unamortized debt issuance costs of | 607,480 | 638,545 | |||||
| Revolving Credit Facility | 562,328 | 856,322 | |||||
| Due to | 38,946 | 41,757 | |||||
| Dividends payable | 18,252 | 28,836 | |||||
| Interest payable | 13,968 | 15,116 | |||||
| Due to broker | 9,156 | 5,639 | |||||
| Accrued expenses | 3,675 | 3,490 | |||||
| Due to | — | 2,602 | |||||
| Other liabilities | 685 | 515 | |||||
| Total Liabilities | 1,945,331 | 2,186,266 | |||||
| Commitments and Contingencies | |||||||
| Preferred Stock, par value | 1,574,450 | 1,629,900 | |||||
| Net Assets Applicable to Common Shares | $ | 2,928,846 | $ | 2,988,772 | |||
| Components of Net Assets Applicable to Common Shares and Net Assets, respectively | |||||||
| Common stock, par value | 513 | 456 | |||||
| Paid-in capital in excess of par | 4,310,026 | 4,182,453 | |||||
| Accumulated other comprehensive income (loss) | 5,801 | — | |||||
| Distributions in excess of earnings | (1,387,494 | ) | (1,194,137 | ) | |||
| Net Assets Applicable to Common Shares | $ | 2,928,846 | $ | 2,988,772 | |||
| Net Asset Value Per Common Share | $ | 5.71 | $ | 6.56 | |||
| PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Investment Income | |||||||||||||||
| Interest income (excluding payment-in-kind (“PIK”) interest income): | |||||||||||||||
| Control investments | $ | 56,932 | $ | 55,725 | $ | 230,683 | $ | 226,077 | |||||||
| Non-control/non-affiliate investments | 65,229 | 82,819 | 285,157 | 340,762 | |||||||||||
| Structured credit securities | — | 2,512 | — | 14,017 | |||||||||||
| Total interest income (excluding PIK interest income) | 122,161 | 141,056 | 515,840 | 580,856 | |||||||||||
| PIK interest income: | |||||||||||||||
| Control investments | 13,084 | 12,721 | 50,226 | 55,230 | |||||||||||
| Non-control/non-affiliate investments | 5,118 | 4,663 | 15,866 | 35,023 | |||||||||||
| Total PIK Interest Income | 18,202 | 17,384 | 66,092 | 90,253 | |||||||||||
| Total interest income | 140,363 | 158,440 | 581,932 | 671,109 | |||||||||||
| Dividend income: | |||||||||||||||
| Control investments | 8,239 | — | 32,503 | 8,774 | |||||||||||
| Affiliate investments | 627 | 540 | 1,612 | 681 | |||||||||||
| Non-control/non-affiliate investments | 2,450 | 1,714 | 12,852 | 9,923 | |||||||||||
| Total dividend income | 11,316 | 2,254 | 46,967 | 19,378 | |||||||||||
| Other income: | |||||||||||||||
| Control investments | 591 | 3,158 | 1,659 | 18,957 | |||||||||||
| Non-control/non-affiliate investments | 3,491 | 3,094 | 8,896 | 9,992 | |||||||||||
| Total other income | 4,082 | 6,252 | 10,555 | 28,949 | |||||||||||
| Total Investment Income | 155,761 | 166,946 | 639,454 | 719,436 | |||||||||||
| Operating Expenses | |||||||||||||||
| Base management fee | 32,081 | 34,503 | 130,934 | 145,756 | |||||||||||
| Income incentive fee | 6,939 | 7,253 | 26,508 | 40,772 | |||||||||||
| Interest and credit facility expenses | 31,872 | 34,385 | 129,885 | 148,275 | |||||||||||
| Allocation of overhead from | 5,525 | 5,523 | 22,095 | 22,257 | |||||||||||
| Audit, compliance and tax related fees | 543 | 1,754 | 1,701 | 4,137 | |||||||||||
| Directors’ fees | 150 | 150 | 600 | 600 | |||||||||||
| Other general and administrative expenses | 4,715 | 4,335 | 18,469 | 18,799 | |||||||||||
| Total Operating Expenses | 81,825 | 87,903 | 330,192 | 380,596 | |||||||||||
| Reimbursement of Administration Expenses | (3,756 | ) | — | (17,125 | ) | — | |||||||||
| Total Net Operating Expenses | 78,069 | 87,903 | 313,067 | 380,596 | |||||||||||
| Net Investment Income | 77,692 | 79,043 | 326,387 | 338,840 | |||||||||||
| Net Realized and Net Change in Unrealized Gains (Losses) from Investments | |||||||||||||||
| Net realized gains (losses) | |||||||||||||||
| Control investments | (1,615 | ) | 4 | (116,426 | ) | 6,378 | |||||||||
| Non-control/non-affiliate investments | 203 | (308,483 | ) | (107,293 | ) | (525,060 | ) | ||||||||
| Net realized gains (losses) | (1,412 | ) | (308,479 | ) | (223,719 | ) | (518,682 | ) | |||||||
| Net change in unrealized gains (losses) | |||||||||||||||
| Control investments | (91,822 | ) | (83,010 | ) | (3,466 | ) | (300,131 | ) | |||||||
| Affiliate investments | (5,990 | ) | 4,364 | 2,291 | 8,847 | ||||||||||
| Non-control/non-affiliate investments | 15,438 | 112,308 | 48,349 | 230 | |||||||||||
| Net change in unrealized gains (losses) | (82,374 | ) | 33,662 | 47,174 | (291,054 | ) | |||||||||
| Net Realized and Net Change in Unrealized Gains (Losses) from Investments | (83,786 | ) | (274,817 | ) | (176,545 | ) | (809,736 | ) | |||||||
| Net realized gains (losses) on extinguishment of debt | 1,486 | (156 | ) | 4,219 | 972 | ||||||||||
| Net realized gains (losses) from derivative instruments and foreign currency transactions | (344 | ) | — | (1,042 | ) | — | |||||||||
| Net change in unrealized gains (losses) from derivative instruments and foreign currency transactions | 435 | — | 643 | — | |||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | (4,517 | ) | (195,930 | ) | 153,662 | (469,924 | ) | ||||||||
| Preferred Stock dividends | (26,436 | ) | (26,739 | ) | (106,645 | ) | (106,822 | ) | |||||||
| Net gain (loss) on redemptions of Preferred Stock | (5,263 | ) | (1,749 | ) | (9,592 | ) | (1,937 | ) | |||||||
| Gain (loss) on Accretion to Redemption Value of Preferred Stock | (1,875 | ) | (1,951 | ) | (7,597 | ) | (15,079 | ) | |||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations applicable to Common Stockholders | $ | (38,091 | ) | $ | (226,369 | ) | $ | 29,828 | $ | (593,762 | ) | ||||
| PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES ROLLFORWARD OF NET ASSET VALUE PER COMMON SHARE (in actual dollars) | |||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Per Share Data(9) | |||||||||||||||||||
| Net asset value per common share at beginning of period | $ | 6.05 | $ | 7.25 | $ | 6.56 | $ | 8.74 | |||||||||||
| Net investment income | 0.15 | 0.17 | 0.68 | 0.77 | |||||||||||||||
| Net realized and change in unrealized gains (losses)(1) | (0.18 | ) | (0.62 | ) | (0.40 | ) | (1.87 | ) | |||||||||||
| Net increase (decrease) from operations | (0.02 | ) | (6) | (0.44 | ) | (6) | 0.28 | (1.11 | ) | (6) | |||||||||
| Distributions of net investment income to preferred stockholders | (0.05 | ) | (3) | (0.06 | ) | (0.22 | ) | (3) | (0.24 | ) | |||||||||
| Total distributions to preferred stockholders | (0.05 | ) | (0.06 | ) | (0.22 | ) | (0.24 | ) | |||||||||||
| Net increase (decrease) from operations applicable to common stockholders | (0.08 | ) | (0.50 | ) | 0.06 | (1.35 | ) | ||||||||||||
| Distributions of net investment income to common stockholders | (0.12 | ) | (3) | (0.14 | ) | (0.50 | ) | (3) | (0.44 | ) | (5) | ||||||||
| Return of capital to common stockholders | — | (3) | — | (0.02 | ) | (3) | (0.16 | ) | (5) | ||||||||||
| Total distributions to common stockholders | (0.12 | ) | (0.14 | ) | (0.52 | ) | (0.60 | ) | |||||||||||
| Effect of other comprehensive income(7) | 0.02 | — | 0.01 | — | |||||||||||||||
| Common stock transactions(2) | (0.17 | ) | (0.06 | ) | (0.41 | ) | (0.25 | ) | |||||||||||
| Net asset value per common share at end of period | $ | 5.71 | (6) | $ | 6.56 | (6) | $ | 5.71 | (6) | $ | 6.56 | (6) | |||||||
| (1) | Realized gains (losses) is inclusive of net realized losses (gains) on investments, net realized losses (gains) from extinguishment of debt, net realized gains (losses) on derivative instruments and foreign currency transactions, and net 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, common shares repurchased below net asset value pursuant to our Repurchase Program, and common shares issued pursuant to the Holder Optional Conversion of our 5.50% Preferred Stock and 6.50% Preferred Stock. |
| (3) | Tax character of distributions is not yet finalized for the respective fiscal period and will not be finalized until we file our tax return for our tax year ending |
| (4) | For all periods presented above, all shares of our issued and outstanding Convertible Preferred Stock had an anti-dilutive effect. |
| (5) | The amounts reflected for the respective fiscal periods were updated based on tax information received subsequent to our Form 10-K filing for |
| (6) | Does not foot due to rounding. |
| (7) | Effect of other comprehensive income is related to income/(loss) deemed attributable to instrument specific credit risk derived from changes in fair value associated with liabilities valued under the fair value option (ASC 825.) |
| (8) | Effect is less than |
| (9) | 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). |
INTERNAL RATE OF RETURN
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.
All track record data herein is as of 6/30/2026, unless otherwise noted. Middle-market lending track record segmentation by EBITDA represents EBITDA at the date of initial investment.
ANNUALIZED NET REALIZED LOSS RATE
Annualized net realized loss rate defined as realized gains/(losses) on investments as a percentage of total invested capital since inception, divided by the number of years since inception for the respective investments. Numbers may not add up to precise totals due to rounding.
PRIMARY ORIGINATION STRATEGIES
Our primary investment strategy is investing in private, middle-market companies in the
Our investments in senior and secured loans are generally senior debt instruments that rank ahead of unsecured debt and equity of a given portfolio company. These loans also have the benefit of security interests on assets of the applicable portfolio company, which often rank ahead of any other security interests. We also make equity and equity-linked investments with capital-appreciation potential (such as senior and secured convertible debt, preferred equity, common equity and warrants).
We also invest a lesser amount of our assets in senior and secured debt and controlling equity positions in real estate investment trusts (“REIT” or “REITs”). The real estate investments of
We may also invest in other strategies and opportunities from time to time that the Investment Adviser views as attractive. The Investment Adviser may continue to evaluate other origination strategies in the ordinary course of business with no specific top-down allocation to any single origination strategy.
We directly originate the significant majority of our investments through our long-term relationships with private equity funded and independent sponsors, financial intermediaries, and management teams, as well as other sources. We seek to maximize returns, including both current yield and capital-appreciation potential, and minimize risk for our investors by applying rigorous credit and other analyses and cash-flow and asset-based lending techniques to originate, close, and monitor our investments.
We are consistently pursuing multiple investment opportunities. There can be no assurance that we will successfully consummate any investment opportunity we pursue. If any of these opportunities are consummated, there can be no assurance that investors will share our view of valuation or that any assets acquired will not be subject to future write downs, each of which could have an adverse effect on our stock price.
MIDDLE MARKET LENDING PORTFOLIO COMPANY EBITDA, NET LEVERAGE AND CASH INTEREST COVERAGE
Middle-Market Lending Portfolio Company Net Leverage (“Middle-Market Portfolio Net Leverage”) and Middle-Market Lending Portfolio Company Cash Interest Coverage (“Middle-Market Portfolio Cash Interest Coverage”) 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. Investments in real estate, subordinated structured notes, and equity (for which principal repayment is not fixed) and for which EBITDA is not available, negative or de minimis are not included in the calculations.
Middle-Market Portfolio Net Leverage reflects the simple average net leverage of each of PSEC’s middle-market loan portfolio investments. The net leverage for each such investment is calculated based on PSEC’s loan investment in the capital structure of the portfolio company, with a maximum limit of 10.0x, and 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. 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 Cash Interest Coverage reflects the simple average cash interest coverage of each of PSEC’s middle-market loan portfolio investments. The cash interest coverage for each middle-market loan portfolio investment is calculated based on the portfolio company’s cash interest and adjusted EBITDA.
Middle-Market Portfolio Net Leverage and Middle-Market Portfolio Cash Interest Coverage generally indicates a portfolio company’s ability to make interest payments and repay principal. Adjusted EBITDA provides PSEC with insight into profitability and scale of the portfolio companies within PSEC's middle-market loan portfolio.
These calculations include addbacks and adjustments that are often 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 nonrecurring transaction expenses. Consumer finance companies are adjusted to treat third-party receivables financing as a cost of goods sold (rather than financing) because consumer finance companies typically rely on such financing to fund their lending activities.
Middle-Market Portfolio Net Leverage and Middle-Market Portfolio Cash Interest Coverage 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.
About Prospect Capital Corporation
Prospect is a business development company that primarily lends to and invests in middle market privately-held companies. Prospect’s investment objective is to generate both current income and long-term capital appreciation.
Prospect has elected to be treated as a business development company under the Investment Company Act of 1940. Prospect has 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
