Equity Values: Stockholders' equity as of March 31, 2007: $301.77 million Net asset value per share: $15.18 Third Fiscal Quarter Operating Results: Net investment income: $7.02 million Net investment income per share: $0.36 Net realized and unrealized depreciation: $(2.04) million Net increase in net assets resulting from operations: $4.98 million Dividends to shareholders per share: $0.3875 Portfolio: Number of new portfolio companies invested: 1 Number of portfolio companies exited: 1 Number of portfolio companies at end of period: 19PORTFOLIO AND INVESTMENT ACTIVITY March 31, 2007, marked our third fiscal quarter and eleventh full quarter since our initial public offering. Our portfolio on March 31, 2007, was invested approximately $211.3 million in 19 long-term investments, and the remainder in cash and short-term instruments. As of March 31, 2007, our portfolio generated a current yield of 17.0% across all our long-term debt and equity investments. This current yield includes interest from all our long-term investments as well as dividends from Gas Solutions Holdings, Inc. ("Gas Solutions") and net profits interest and royalties from other portfolio companies. Excluding such dividends and other income, our weighted average long-term debt yield as of March 31, 2007, was 15.2%. In the prior quarter, we completed one new investment in C&J Cladding LLC ("C&J"), as well as follow-on investments in the existing portfolio, totaling approximately $19.7 million in the prior quarter. Additionally, on March 5, 2007, Cypress Consulting Services, Inc. completely paid its loan with an additional prepayment penalty of $2.0 million for both the loan and the net profits interest. On March 30, 2007, the Company invested $6.0 million in C&J, a metal services company located in Houston, Texas. In the existing quarter, we have closed an additional investment of $12.3 million into ESA Environmental Specialists, Inc., located in Charlotte, North Carolina. We now have six energy-related transaction opportunities aggregating $120 million under signed letter of intent, as well as a robust pipeline of other potential investments. We are pleased with the volume, quality, and diversification of our transaction flow, both within the energy industry and in additional sectors. LIQUIDITY On December 13, 2006, we priced a public offering of 6 million shares of common stock at $17.70 per share, raising $106.2 million in gross proceeds. On January 11, 2007, the underwriters exercised their over-allotment option to purchase 810,000 shares, raising an additional $14.3 million in gross proceeds. We currently have a $50 million revolving credit facility, which we obtained on July 25, 2006. That facility is currently undrawn. We are currently in advanced stages of increasing the size of our credit facility to $200 million. We currently have approximately $72 million in available cash and short-term instruments. CONFERENCE CALL We will host a conference call Friday, May 11, 2007, at 11:00am Eastern Time. The conference call dial-in number is (877) 407-0782. A recording of the conference call will be available for approximately 7 days. To hear a replay, call (877) 660-6853 and use Playback Access Account code 286 and Playback Conference ID code 241103.
STATEMENTS OF NET ASSETS As of As of
(in thousands) March 31, June 30,
2007 2006
Assets
Cash and cash equivalents $ 99,584 $ 1,608
Investments in controlled entities at
fair value (cost - $101,094 and $39,759,
respectively) 110,268 49,585
Investments in affiliated entities at
fair value (cost - $14,751 and $25,329,
respectively) 14,751 25,329
Investments in non-controlled and
non-affiliated entities, at fair value
(cost - $89,883 and $58,505,
respectively) 86,234 59,055
Interest receivable 1,968 1,639
Dividends receivable 448 13
Loan Principal Receivable 504 385
Due from broker - 369
Other receivables 254 -
Due from Prospect Capital Management, LLC - 5
Due from Prospect Administration, LLC - 28
Prepaid expenses 163 77
Deferred financing fees 387 355
Deferred offering costs - 32
Total assets 314,561 138,480
Liabilities
Credit facility payable - 28,500
Bank overdraft 5,964 -
Payable for investments 1,666 -
Accrued expenses 846 843
Due to Prospect Administration, LLC 286 -
Due to Prospect Capital Management, LLC 3,468 745
Other current liabilities 564 122
Total liabilities 12,794 30,210
Net Assets $301,767 $108,270
Components of Net Assets
Common stock, par value $.001 per share,
(100,000,000 and 100,000,000 common
shares authorized, respectively;
18,975,388 and 7,069,873 issued and
outstanding, respectively) $ 20 $ 7
Paid-in capital in excess of par 298,659 97,266
Undistributed (distributions in excess
of) net investment income (4,688) 319
Realized gain 2,251 301
Net unrealized appreciation 5,525 10,377
Net Assets $301,767 $108,270
Net Asset Value Per Share $ 15.18 $ 15.31
STATEMENTS OF OPERATIONS Three months Three months
(in thousands) ended March 31, ended March 31,
2007 2006
Investment Income
Interest income, controlled entities (net
of foreign tax withholding of $67 and
$-, respectively) $ 3,845 $ 1,319
Interest income, affiliated entities (net
of foreign tax withholding of $35 and
$-, respectively) 800 70
Interest income, non controlled and
non-affiliated entities 3,025 1,586
Interest income, cash equivalents - 111
Total interest income 7,670 3,086
Dividend income, controlled entities 850 850
Dividend income, non-controlled and
non-affiliated entities - 10
Dividend income, money market funds 1,245 80
Total dividend income 2,095 940
Other income, controlled entities 8 -
Other income, non-controlled and
non-affiliated entities 2,296 -
Total other income 2,304 -
Total investment income 12,069 4,026
Operating Expenses
Investment advisory fees
Base management fee 1,531 521
Income incentive fee 1,754 533
Total investment advisory fees 3,285 1,054
Interest expense and credit facility
costs 353 12
Chief Compliance Officer and
Sub-administration fees 164 81
Legal fees 593 390
Valuation services 92 45
Other professional fees 47 85
Insurance expense 72 85
Directors fees 55 55
Other general and administrative expenses 393 93
Total operating expenses 5,054 1,900
Net investment income 7,015 2,126
Net realized gain (loss) (1) 1
Net unrealized appreciation
(depreciation) (2,038) 828
Net increase in net assets resulting from
operations $ 4,976 $ 2,955
Net increase in net assets per weighted
average shares of common stock resulting
from operations $ 0.25 $ 0.42
PER SHARE DATA Three months Three months
ended March 31, ended March 31,
2007 2006
Net asset value, beginning of period $ 15.24 $ 14.69
Costs related to the initial public
offering - -
Costs related to the secondary public
offering 0.01 -
Share issuances related to dividend
reinvestment - 0.02
Net investment income 0.36 0.30
Realized gain - -
Net unrealized appreciation
(depreciation) (0.10) 0.10
Net increase in net assets as a result of
secondary public offering 0.06 -
Dividend declared and paid (0.39) (0.30)
Net asset value at end of period $ 15.18 $ 14.81
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation (www.prospectstreet.com) is a closed-end
investment company that lends to and invests in private and microcap public
businesses. Prospect Capital's investment objective is to generate both
current income and long-term capital appreciation through debt and equity
investments.
Prospect Capital has elected to be treated as a business development
company under the Investment Company Act of 1940 ("1940 Act"). We are
required to comply with a series of 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. Failure to comply with any of the laws and
regulations that apply to Prospect Capital could have an adverse effect on
Prospect Capital and its shareholders.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. 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 the Company's control, and
that the Company 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 these estimates and projections of the future. Such
statements speak only as of the time when made, and the Company undertakes
no obligation to update any such statement now or in the future.
Contact Information: Please send investment proposals to: Grier Eliasek President and Chief Operating Officer grier@prospectstreet.com Telephone (212) 448-0702