Prospect Capital Releases December 2020 Quarterly Results, Announces Net Investment Income of $0.21 per Common Share, Reports 7% Increase in Net Asset Value per Common Share, and Declares Stable Monthly Cash Common and Preferred Share Distributions

NEW YORK, Feb. 09, 2021 (GLOBE NEWSWIRE) — Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our fiscal quarter ended December 31, 2020.
FINANCIAL RESULTS⁽¹⁾   Including our Preferred Stock as equity.
CASH COMMON SHAREHOLDER DISTRIBUTION DECLARATIONProspect is declaring distributions to common shareholders as follows:These monthly cash distributions represent the 42^nd, 43^rd, and 44^th consecutive $0.06 per share distributions to common shareholders.Prospect expects to declare May, June, July, and August 2021 distributions to common shareholders in May 2021.Based on the declarations above, Prospect’s closing stock price of $6.72 at February 8, 2021 delivers to our common shareholders an annualized distribution yield of 10.7%.Taking into account past distributions and our current share count for declared distributions, and since inception through our April 2021 declared distribution, Prospect will have distributed $18.60 per share to original common shareholders, aggregating approximately $3.3 billion in cumulative distributions to all common shareholders.Since October 2017, our NII per common share has aggregated $2.55 while our common shareholder distributions per share have aggregated $2.34, resulting in our NII exceeding distributions during this period by $0.21 per common share.Initiatives focused on enhancing accretive NII per share growth include (1) our recently announced $1.25 billion targeted perpetual preferred equity programs, (2) a greater utilization of our cost efficient revolving credit facility (with an incremental cost of approximately 1.3% at today’s one month Libor), (3) retirement of higher cost liabilities (including multiple recent successful tender offers), (4) issuing lower cost notes (including recent five year senior unsecured notes issuances with coupons of approximately 3.0% to 3.7%), and (5) increased originations in senior secured debt and selected equity investments to deliver targeted risk-adjusted yields and total returns as we deploy available capital from our current underleveraged balance sheet.Our senior management team and employee insider ownership is currently over 27% of shares outstanding, representing over $950 million of our net asset value.CASH PREFERRED SHAREHOLDER DISTRIBUTION DECLARATIONProspect is declaring distributions to preferred shareholders based on an annual rate equal to 5.50% of the stated value of $25 per share, from the date of issuance or, if later, from the most recent dividend payment date, as follows:PORTFOLIO UPDATE AND INVESTMENT ACTIVITYAs of the quarter ended December 31, 2020, Prospect had a 4.97x middle-market loan portfolio company weighted average net debt leverage ratio.⁽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 2020 and September 2020 quarters, our investment origination and repayment activity was as follows:
Note: 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. At December 31, 2020 and September 30, 2020, our subordinated structured note portfolio at fair value consisted of the following:⁽¹⁾ Calculation based on fair value.
⁽²⁾ Excludes investments being redeemed.To date, including called investments being redeemed, 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, 27 of our subordinated structured note investments have completed multi-year extensions of their reinvestment periods (typically at reduced liability spreads and with increased weighted average life asset benefits). We believe further long-term optionality upside exists in our structured credit portfolio through additional refinancings and reinvestment period extensions.To date during the March 2021 quarter, we have completed new and follow-on investments as follows:Note: For additional disclosure see “Primary Origination Strategies” at the end of this release.CAPITAL AND LIQUIDITYOur multi-year, long-term laddered funding profile includes a revolving credit facility (with 30 lenders), program notes, listed baby bonds, institutional bonds, convertible bonds, and our newly launched preferred stock. We have retired upcoming maturities, including a recent retirement in April 2020, and as of today have zero debt maturing until July 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%.The combined amount of our balance sheet cash and undrawn revolving credit facility commitments currently stands at approximately $845 million. Our total unfunded eligible commitments to non-control portfolio companies totals approximately $21 million.⁽¹⁾ Including our Preferred Stock as equity.
The below table summarizes our December 2020 quarter term debt issuance and repurchase/repayment activity:$1.0775 billion of Facility commitments have closed to date with 30 lenders. 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 September 3, 2020, we commenced a tender offer to purchase for cash any and all of the 2022 Notes. On October 1, 2020, $6.035 million was validly tendered and accepted representing 2.64% of the outstanding notes. On October 19, 2020, we commenced a tender offer to purchase for cash any and all of the 2022 Notes. On November 16, 2020, $59.863 million was validly tendered and accepted representing 26.87% of the outstanding notes. On December 16, 2020, we commenced a tender offer to purchase for cash any and all of the 2022 Notes. On January 15, 2021, $26.694 million was validly tendered and accepted representing 16.38% of the notes.On November 17, 2020, we commenced a tender offer to purchase for cash up to $30 million of the 2023 Notes. On December 15, 2020, $36.644 million was validly tendered, of which $30 million, representing 9.38% of the notes, was validly accepted.On November 17, 2020, we commenced a tender offer to purchase for cash up to $10 million of the 6.375% 2024 Notes. On December 15, 2020, $11.848 million was validly tendered, of which $10 million, representing 10% of the notes, was validly accepted.On December 28, 2020, we commenced a tender offer to purchase for cash up to $20 million of the 2025 Notes. On January 27, 2021, $108.616 million was validly tendered, of which $20 million, representing 10% of the notes, was validly accepted.We currently have eight separate unsecured debt issuances aggregating $1.4 billion outstanding, not including our program notes, with laddered maturities extending to June 2029. At December 31, 2020, $759.0 million of program notes were outstanding with laddered maturities through October 2043.On January 14, 2021, we announced the issuance of $325 million of 3.706% senior unsecured notes that mature on January 22, 2026, (the “2026 Notes”).On August 3, 2020 and on October 30, 2020, we launched a $1 billion 5.50% perpetual preferred stock offering program and a $250 million 5.50% perpetual preferred stock offering program, respectively. Prospect expects to use the net proceeds from the offering programs to maintain and enhance balance sheet liquidity, including repaying our credit facility and purchasing high quality short-term debt instruments, and to make long-term investments in accordance with our investment objective. The preferred stock provides Prospect with a diversified source of accretive fixed-rate capital without creating maturity risk due to the perpetual term.In connection with the preferred stock offering programs, effective August 3, 2020 and as amended on October 30, 2020, we adopted and amended, respectively, a Preferred Stock Dividend Reinvestment Plan, pursuant to which holders of the preferred stock will have dividends on their preferred stock automatically reinvested in additional shares of such preferred stock at a price per share of $25.00, if they elect.Prospect holds recently reaffirmed investment grade company ratings from Standard & Poor’s (BBB-), Moody’s (Baa3), Kroll (BBB-), and Egan-Jones (BBB). Maintaining our investment grade ratings with prudent asset, liability, and risk management is an important objective for Prospect.DIVIDEND REINVESTMENT PLANWe have adopted a dividend reinvestment plan (also known as a “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 PLANShares held with a broker or financial institutionMany 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 agentIf 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, American Stock Transfer and Trust Company LLC by calling (888) 888-0313 or by mailing American Stock Transfer and Trust Company LLC, 6201 15^th Avenue, Brooklyn, New York 11219.EARNINGS CONFERENCE CALLProspect will host an earnings call on Wednesday, February 10, 2021 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to March 9, 2021 visit www.prospectstreet.com or call 877-344-7529 with passcode 10152214.PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)