AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Prospect Capital Reports September 2019 Quarterly Results and Declares Additional Monthly Distributions

November 6, 2019 GMT

NEW YORK, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our fiscal quarter ended September 30, 2019.

Quarter Ended Quarter Ended Quarter Ended All amounts in $000’s except per share amounts (on weighted average September 30, 2019 June 30, 2019 September 30, 2018 basis for period numbers) ---------------------------------------- ------------------ ------------- ------------------ Net Investment Income (“NII”) $71,060 $69,627 $85,159 ---------------------------------------- ------------------ ------------- ------------------ Interest as % of Total Investment Income 90.2% 92.2% 88.4% ---------------------------------------- ------------------ ------------- ------------------ NII per Share $0.19 $0.19 $0.23 ---------------------------------------- ------------------ ------------- ------------------ Net Income $18,065 $38,886 $83,795 ---------------------------------------- ------------------ ------------- ------------------ Net Income per Share $0.05 $0.11 $0.23 ---------------------------------------- ------------------ ------------- ------------------ Distributions to Shareholders $66,111 $66,069 $65,693 ---------------------------------------- ------------------ ------------- ------------------ Distributions per Share $0.18 $0.18 $0.18 ---------------------------------------- ------------------ ------------- ------------------ NII / Distributions to Shareholders 107% 105% 130% ---------------------------------------- ------------------ ------------- ------------------ NAV per Share at Period End $8.87 $9.01 $9.39 ---------------------------------------- ------------------ ------------- ------------------ Net of Cash Debt to Equity Ratio 66.3% 70.0% 75.1% ---------------------------------------- ------------------ ------------- ------------------

For the September 2019 quarter, we earned net investment income (“NII”) of $71.1 million, or $0.19 per weighted average share, consistent with the June 2019 quarter, and exceeding our current quarterly dividend rate of $0.18 per share by $0.01 per share. Our ratio of NII to distributions was 107% in the September 2019 quarter.

In the September 2019 quarter, our net of cash debt to equity ratio was 66.3%, down 8.8% from September 2018.

For the September 2019 quarter, our net income was $18.1 million, or $0.05 per weighted average share.

Our net asset value (“NAV”) per share decreased by $0.14 to $8.87 during the September 2019 quarter.

DISTRIBUTION DECLARATION

Prospect is declaring distributions as follows:

-- $0.06 per share for November 2019 to November 29, 2019 record holders with December 19, 2019 payment date; -- $0.06 per share for December 2019 to January 2, 2020 record holders with January 23, 2020 payment date; and -- $0.06 per share for January 2020 to January 31, 2020 record holders with February 20, 2020 payment date.

These distributions are Prospect’s 136th, 137th, and 138th consecutive cash distributions to shareholders.

Based on the declarations above, Prospect’s closing stock price of $6.41 at November 5, 2019 delivers to shareholders a distribution yield of 11.2%.

Based on past distributions and our current share count for declared distributions, Prospect since inception through our January 2020 distribution will have distributed $17.70 per share to original shareholders, aggregating approximately $3 billion in cumulative distributions to all shareholders.

Prospect expects to declare February 2020, March 2020, and April 2020 distributions in February 2020.

PORTFOLIO AND INVESTMENT ACTIVITY

All amounts in $000’s except As of As of per unit amounts September 30, 2019 June 30, 2019 ------------------------------------------------------------------ ------------------ ------------- Total Investments (at fair value) $5,450,560 $5,653,553 ------------------------------------------------------------------ ------------------ ------------- Number of Portfolio Companies 125 135 ------------------------------------------------------------------ ------------------ ------------- % Controlled Investments (at fair value) 44.0% 43.8% ------------------------------------------------------------------ ------------------ ------------- Secured First Lien 43.3% 43.9% ------------------------------------------------------------------ ------------------ ------------- Secured Second Lien 23.1% 23.5% ------------------------------------------------------------------ ------------------ ------------- Subordinated Structured Notes 15.0% 15.1% ------------------------------------------------------------------ ------------------ ------------- Rated Secured Structured Notes (1) 1.0% 0.8% ------------------------------------------------------------------ ------------------ ------------- Unsecured Debt 0.8% 0.6% ------------------------------------------------------------------ ------------------ ------------- Equity Investments 16.8% 16.1% ------------------------------------------------------------------ ------------------ ------------- Annualized Current Yield – All Investments 10.2% 10.6% ------------------------------------------------------------------ ------------------ ------------- Annualized Current Yield – Performing Interest Bearing Investments 12.7% 13.1% ------------------------------------------------------------------ ------------------ ------------- Top Industry Concentration(2) 15.7% 14.6% ------------------------------------------------------------------ ------------------ ------------- Energy Industry Concentration(2) 2.7% 2.7% ------------------------------------------------------------------ ------------------ ------------- Non-Accrual Loans as % of Total Assets (3) 2.4% 2.9% ------------------------------------------------------------------ ------------------ ------------- Weighted Average Portfolio Net Leverage(4) 4.69x 4.67x ------------------------------------------------------------------ ------------------ ------------- Weighted Average Portfolio EBITDA(4) $62,006 $60,669 ------------------------------------------------------------------ ------------------ -------------

(1) Our Rated Secured Structured Notes are considered non-agented debt where applicable herein.(2) Excluding our underlying industry-diversified structured credit portfolio. (3) Calculated at fair value.(4) For additional disclosure see “Weighted Average Portfolio EBITDA and Net Leverage” at the end of this release.

During the September 30, 2019 and June 30, 2019 quarters, our investment origination and repayment activity was as follows:

Quarter Ended Quarter Ended All amounts in $000’s September 30, 2019 June 30, 2019 ------------------------------- ------------------ ------------- Total Originations $94,540 $187,938 ------------------------------- ------------------ ------------- Non-Agented Debt 79.0% 79.3% ------------------------------- ------------------ ------------- Corporate Yield Buyouts 7.7% 1.7% ------------------------------- ------------------ ------------- Rated Secured Structured Notes 7.0% — ------------------------------- ------------------ ------------- Agented Sponsor Debt 6.3% 19.0% ------------------------------- ------------------ ------------- Total Repayments $245,173 $212,813 ------------------------------- ------------------ ------------- Originations, Net of Repayments $(150,633) $(24,875) ------------------------------- ------------------ -------------

We have invested in structured credit investments benefiting from individual standalone financings non-recourse to Prospect and with our risk limited in each case to our net investment amount. At September 30, 2019 and June 30, 2019, our subordinated structured note portfolio at fair value consisted of the following:

All amounts in $000’s except As of As of per unit amounts September 30, 2019 June 30, 2019 ----------------------------------------------- ------------------ ------------- Total Subordinated Structured Notes $818,268 $850,694 ----------------------------------------------- ------------------ ------------- # of Investments 39 43 ----------------------------------------------- ------------------ ------------- TTM Average Cash Yield(1)(2) 17.6% 16.0% ----------------------------------------------- ------------------ ------------- Annualized Cash Yield(1)(2) 17.4% 13.4% ----------------------------------------------- ------------------ ------------- Annualized GAAP Yield on Fair Value(1)(2) 15.5% 15.6% ----------------------------------------------- ------------------ ------------- Annualized GAAP Yield on Amortized Cost(2)(3) 11.6% 12.0% ----------------------------------------------- ------------------ ------------- Cumulative Cash Distributions(4) $1,123,631 $1,088,122 ----------------------------------------------- ------------------ ------------- % of Original Investment 80.5% 78.0% ----------------------------------------------- ------------------ ------------- # of Underlying Collateral Loans 1,738 1,792 ----------------------------------------------- ------------------ ------------- Total Asset Base of Underlying Portfolio $18,133,692 $18,296,239 ----------------------------------------------- ------------------ ------------- Prospect TTM Default Rate 0.40% 0.39% ----------------------------------------------- ------------------ ------------- Broadly Syndicated Market TTM Default Rate 1.29% 1.34% ----------------------------------------------- ------------------ ------------- Prospect Default Rate Outperformance vs. Market 0.89% 0.95% ----------------------------------------------- ------------------ -------------

(1) Calculation based on fair value.(2) Excludes deals being redeemed.(3) Calculation based on amortized cost.(4) The June 30, 2019 Cumulative Cash Distributions and % of Original Investment figures have been updated to exclude four deals that were written off during the quarter ending September 30, 2019.

To date, including called deals being liquidated, we have exited nine subordinated structured notes totaling $263.4 million with an expected pooled average realized IRR of 16.7% and cash on cash multiple of 1.48 times.

Since December 31, 2017 through today, 26 of our structured credit investments have completed multi-year extensions of their reinvestment periods (typically at reduced liability spreads). We believe further optionality upside exists in our structured credit portfolio through additional refinancings and reinvestment period extensions.

To date during the December 2019 quarter, we have completed new and follow-on investments as follows:

Quarter Ended All amounts in $000’s December 31, 2019 ------------------------------- ----------------- Total Originations $18,697 ------------------------------- ----------------- Real Estate 52.8% ------------------------------- ----------------- Non-Agented Debt 25.3% ------------------------------- ----------------- Agented Sponsor Debt 21.9% ------------------------------- ----------------- Total Repayments $23,099 ------------------------------- ----------------- Originations, Net of Repayments $(4,402) ------------------------------- -----------------

LIQUIDITY AND FINANCIAL RESULTS

All amounts in $000’s As of As of September 30, 2019 June 30, 2019 -------------------------------- ------------------ ------------- Net of Cash Debt to Equity Ratio 66.3% 70.0% -------------------------------- ------------------ ------------- % of Assets at Floating Rates 86.9% 87.4% -------------------------------- ------------------ ------------- % of Liabilities at Fixed Rates 95.2% 93.0% -------------------------------- ------------------ ------------- Unencumbered Assets $4,019,805 $4,121,775 -------------------------------- ------------------ ------------- % of Total Assets 72.0% 71.1% -------------------------------- ------------------ -------------

The below table summarizes our September 2019 quarter issuance and repurchase activity:

All amounts in $000’s Principal Rate Maturity ---------------------------- --------- ------------- ------------------------ Debt Issuances ---------------------------- --------- ------------- ------------------------ Prospect Capital InterNotes® $95,135 3.75% -5.50% July 2024-October 2029 ---------------------------- --------- ------------- ------------------------ Repurchases ---------------------------- --------- ------------- ------------------------ 2020 Notes $46,545 4.75% April 2020 ---------------------------- --------- ------------- ------------------------ Prospect Capital InterNotes® $143,980 4.00% - 7.00% January 2020- March 2022 ---------------------------- --------- ------------- ------------------------

On September 9, 2019, we completed an amendment of our existing revolving credit facility (the “Facility”) for Prospect Capital Funding, extending the term 5.0 years from such date. Pricing for amounts drawn under the Facility is one-month Libor plus 2.20%.

$1.0775 billion of Facility commitments have closed to date with 30 institutional lenders (representing one of the largest and most diversified bank groups in our industry). An accordion feature allows the Facility, at Prospect’s discretion, to accept up to $1.5 billion of commitments. The Facility matures September 9, 2024. The Facility includes a revolving period that extends through September 9, 2023, followed by an additional one-year amortization period, with distributions allowed to Prospect after the completion of the revolving period.

On June 28, 2019, we commenced a tender offer to purchase $224.1 million of our convertible notes that mature in April 2020 (“2020 Notes”). On July 27, 2019, $32.9 million was validly tendered and accepted, representing 14.7% of the outstanding notes. On August 12, 2019, we commenced a tender offer to purchase up to $60.0 million of the 2020 Notes. On September 10, 2019, $13.6 million was validly tendered and accepted, representing 7.1% of the outstanding notes. On September 24, 2019, we commenced a tender offer to purchase up to $40 million of 2020 Notes. On October 25, 2019, $2.1 million were validly tendered and accepted, representing 1.2% of the outstanding notes.

We currently have eight separate unsecured debt issuances aggregating $1.5 billion outstanding, not including our program notes, with laddered maturities extending to June 2029. At September 30, 2019, $657.4 million of program notes were outstanding with laddered maturities through October 2043.

EARNINGS CONFERENCE CALL

Prospect will host an earnings call on Thursday November 7, 2019 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to December 6, 2019 visit www.prospectstreet.com or call 877-344-7529 with passcode 10136706.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share and per share data) September 30, June 30, 2019 2019 ------------- ------------- (Unaudited) (Audited) Assets Investments at fair value: Control investments (amortized cost of $2,346,633 and $2,385,806, respectively) $ 2,397,730 $ 2,475,924 Affiliate investments (amortized cost of $156,177 and $177,616, respectively) 73,263 76,682 Non-control/non-affiliate investments (amortized cost of $3,274,957 and 2,979,567 3,100,947 $3,368,880, respectively) ----------- - ----------- - Total investments at fair value (amortized cost of $5,777,767 and $5,932,302, 5,450,560 5,653,553 respectively) Cash 106,174 107,098 Receivables for: Interest, net 12,526 26,504 Other 200 3,326 Deferred financing costs on Revolving Credit Facility 10,745 8,529 Due from broker 4,121 — Prepaid expenses 772 1,053 ----------- - ----------- - Total Assets 5,585,098 5,800,063 ----------- - ----------- - Liabilities Revolving Credit Facility 108,000 167,000 Public Notes (less unamortized discount and debt issuance costs of $13,373 and 781,001 780,548 $13,826, respectively) Convertible Notes (less unamortized debt issuance costs of $12,618 and $13,867, 694,701 739,997 respectively) Prospect Capital InterNotes® (less unamortized debt issuance costs of $12,561 and 644,814 695,350 $12,349, respectively) Due to Prospect Capital Management 46,228 46,525 Interest payable 22,364 34,104 Dividends payable 22,042 22,028 Accrued expenses 4,688 5,414 Due to Prospect Administration 511 1,885 Other liabilities 976 937 Total Liabilities 2,325,325 2,493,788 ----------- - ----------- - Commitments and Contingencies Net Assets $ 3,259,773 $ 3,306,275 - --------- - - --------- - Components of Net Assets Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; $ 367 $ 367 367,363,872 and 367,131,025 issued and outstanding, respectively) Paid-in capital in excess of par 4,041,338 4,039,872 Total distributable earnings (loss) (781,932 ) (733,964 ) ----------- - Net Assets $ 3,259,773 $ 3,306,275 - --------- - - --------- - Net Asset Value Per Share $ 8.87 $ 9.01 - --------- - - --------- -

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Three Months Ended September 30, ---------------------- 2019 2018 ---------- ---------- Investment Income Interest income: Control investments $ 50,866 $ 56,454 Affiliate investments 239 227 Non-control/non-affiliate investments 61,950 68,609 Structured credit securities 32,901 34,152 -------- - -------- - Total interest income 145,956 159,442 -------- - -------- - Dividend income: Control investments 3,800 14,665 Non-control/non-affiliate investments 454 262 Total dividend income 4,254 14,927 -------- - -------- - Other income: Control investments 11,383 2,791 Non-control/non-affiliate investments 290 3,262 -------- - -------- - Total other income 11,673 6,053 -------- - -------- - Total Investment Income 161,883 180,422 -------- - -------- - Operating Expenses Base management fee 28,463 29,957 Income incentive fee 17,765 21,290 Interest and credit facility expenses 38,898 37,908 Allocation of overhead from Prospect Administration 3,494 3,365 Audit, compliance and tax related fees 375 393 Directors’ fees 113 79 Other general and administrative expenses 1,715 2,271 -------- - -------- - Total Operating Expenses 90,823 95,263 -------- - -------- - Net Investment Income 71,060 85,159 -------- - -------- - Net Realized and Net Change in Unrealized (Losses) Gains from Investments Net realized (losses) gains Control investments — 1 Non-control/non-affiliate investments (2,198 ) 1,040 Net realized (losses) gains (2,198 ) 1,041 -------- - -------- - Net change in unrealized (losses) gains Control investments (39,021 ) 51,918 Affiliate investments 18,020 (13,755 ) Non-control/non-affiliate investments (27,458 ) (37,114 ) Net change in unrealized (losses) gains (48,459 ) 1,049 -------- - -------- - Net Realized and Net Change in Unrealized (Losses) Gaines from Investments (50,657 ) 2,090 -------- - -------- - Net realized losses on extinguishment of debt (2,338 ) (3,454 ) Net Increase in Net Assets Resulting from Operations $ 18,065 $ 83,795 - ------ - - ------ - Net increase in net assets resulting from operations per share $ 0.05 $ 0.23 - ------ - - ------ - Dividends declared per share $ (0.18 ) $ (0.18 ) - ------ - - ------ -

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES ROLLFORWARD OF NET ASSET VALUE PER SHARE (in actual dollars) Three Months Ended September 30, ------------------ 2019 2018 -------- -------- Per Share Data Net asset value at beginning of period $ 9.01 $ 9.35 Net investment income(1) 0.19 0.23 Net realized and change in unrealized (losses) gains(1) (0.14 ) — (3) Distributions of net investment income (0.18 ) (0.18 ) Common stock transactions(2)(3) (0.01 ) (0.01 ) ------ - ------ - Net asset value at end of period $ 8.87 $ 9.39 - ---- - - ---- -

(1) Per share data amount is based on the weighted average number of common shares outstanding for the period presented (except for dividends to shareholders which is based on actual rate per share).

(2) Common stock transactions include the effect of issuances and repurchases of common stock, if any.

(3) Amount is less than $0.01.

WEIGHTED AVERAGE PORTFOLIO EBITDA AND NET LEVERAGE

Weighted Average Portfolio Net Leverage (“Portfolio Net Leverage”) and Weighted Average Portfolio EBITDA (“Portfolio EBITDA”) provide clarity into the underlying capital structure of our portfolio debt investments and the likelihood that our overall portfolio will make interest payments and repay principal.

Portfolio Net Leverage reflects the net leverage of each of our portfolio company debt investments, weighted based on the current debt principal outstanding of such investments. The net leverage for each portfolio company is calculated based on our investment in the capital structure of such portfolio company, with a maximum limit of 10.0x adjusted EBITDA. This calculation excludes debt subordinate to our position within the capital structure because our exposure to interest payment and principal repayment risk is limited beyond that point. Additionally, structured credit residual interests 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 us. Portfolio Net Leverage provides us with some guidance as to our exposure to the interest payment and principal repayment risk of our overall debt portfolio. We monitor our Portfolio Net Leverage on a quarterly basis.

Portfolio EBITDA is used by Prospect to supplement Portfolio Net Leverage and generally indicates a portfolio company’s ability to make interest payments and repay principal. Portfolio EBITDA is calculated using the weighted average dollar amount EBITDA of each of our portfolio company debt investments. The calculation provides us 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, Portfolio Net Leverage and Portfolio EBITDA assist us in assessing the likelihood that we will timely receive interest and principal payments. However, these calculations are not meant to substitute for an analysis of our underlying portfolio company debt investments, but to supplement such analysis.

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 Officergrier@prospectstreet.comTelephone (212) 448-0702