NEW YORK, May 09, 2017 (GLOBE NEWSWIRE) -- Prospect Capital Corporation (NASDAQ:PSEC) (“Prospect”, “our”, or
“we”) today announced financial results for our third fiscal quarter ended March 31, 2017.
All amounts in $000’s except
per share amounts |
Quarter Ended |
Quarter Ended |
Quarter Ended |
|
March 31, 2017 |
December 31, 2016 |
March 31, 2016 |
| |
|
|
|
| Net
Investment Income (“NII”) |
$73,080 |
|
$84,405 |
|
$87,626 |
|
| Interest
as % of Total Investment Income |
|
94.6% |
|
|
95.3% |
|
|
94.5% |
|
| |
|
|
|
| NII per
Share |
$0.20 |
|
$0.24 |
|
$0.25 |
|
| |
|
|
|
| Net
Income (“NI”) |
$19,492 |
|
$100,880 |
|
$75,508 |
|
| NI per
Share |
$0.05 |
|
$0.28 |
|
$0.21 |
|
| |
|
|
|
|
Distributions to Shareholders |
$89,892 |
|
$89,668 |
|
$88,979 |
|
|
Distributions per Share |
$0.25 |
|
$0.25 |
|
$0.25 |
|
| |
|
|
|
| NAV per
Share at Period End |
$9.43 |
|
$9.62 |
|
$9.61 |
|
For the March 2017 quarter, we earned net investment income ("NII") of $73.1 million, or $0.20 per weighted
average share, down $0.04 per weighted average share from the December 2016 quarter. This decrease was primarily driven by a
decline in interest income due to lower prepayment fees, a lower coupon First Tower refinancing, and reduced yields from certain
structured credit investments close to expected call dates, partially offset by a decrease in management fees. For the March 2016
quarter, our NII was $87.6 million, or $0.25 per weighted average share. NII decreased year-over-year in the March 2017 quarter by
$0.05 per weighted average share.
For the March 2017 quarter, our net income (“NI”) was $19.5 million or $0.05 per weighted average share, a
decrease of $0.23 per weighted average share from the December 2016 quarter NI of $100.9 million, or $0.28 per weighted average
share, and a decrease of $0.16 per weighted average share from the March 2016 quarter NI of $75.5 million, or $0.21 per weighted
average share. NI decreased in the March 2017 quarter compared to each prior period primarily due to the factors above and
unrealized depreciation in the energy, financial, and structured credit sectors.
|
|
All amounts in $000’s except
per share amounts |
Nine Months Ended
March 31, 2017 |
Nine Months Ended
March 31, 2016 |
| |
|
|
|
| |
Net
Investment Income (“NII”) |
$236,404 |
$279,761 |
| |
NII per
Share |
$0.66 |
$0.79 |
| |
|
|
|
| |
Net
Income (“NI”) |
$201,738 |
$8,205 |
| |
NI per
Share |
$0.56 |
$0.02 |
| |
|
|
|
| |
Distributions to Shareholders |
$268,989 |
$266,920 |
| |
Distributions per Share |
$0.75 |
$0.75 |
PORTFOLIO AND INVESTMENT ACTIVITY
We continue to prioritize secured lending. As of March 31, 2017 and December 31, 2016, our portfolio
consisted of the following:
| |
All amounts in $000’s except
per unit amounts |
As
of |
As of |
| |
March 31, 2017 |
December 31, 2016 |
| |
|
|
|
| |
Total
Investments (at fair value) |
$6,024,766 |
$5,936,999 |
| |
Number
of Portfolio Companies |
|
125 |
|
123 |
| |
%
Controlled Investments (at fair value) |
|
31.4% |
|
31.5% |
| |
|
|
|
| |
Secured
First Lien |
|
48.8% |
|
45.9% |
| |
Secured
Second Lien |
|
20.5% |
|
23.6% |
| |
Structured Credit |
|
17.8% |
|
18.3% |
| |
Equity
Investments |
|
12.0% |
|
11.2% |
| |
Unsecured Debt |
|
0.7% |
|
0.8% |
| |
Small
Business Whole Loan |
|
0.2% |
|
0.2% |
| |
|
|
|
| |
Annualized Current Yield(1) |
|
12.3% |
|
13.2% |
| |
|
|
|
| |
Top
Industry Concentration(2) |
|
9.6% |
|
9.3% |
| |
|
|
|
| |
Energy
Industry Concentration(2) |
|
2.6% |
|
2.6% |
| |
|
|
|
| |
Non-Accrual Loans as % of Total Assets |
|
1.4% |
|
1.5% |
| |
Non-Accrual Loans as % of Total Assets, Energy Industry |
|
0.3% |
|
0.4% |
| |
|
|
|
| |
Weighted
Average Portfolio Net Leverage(3) |
4.15x |
4.21x |
| |
Weighted
Average Portfolio EBITDA |
$49,425 |
$51,564 |
| |
|
| (1) Across all performing interest bearing
investments. |
| (2) Excluding our underlying industry-diversified
structured credit portfolio. |
| (3) Through our investment in the portfolio company’s
capital structure. |
During the March 31, 2017 and December 31, 2016 quarters, our investment originations and repayment
activity is summarized as follows:
|
|
All amounts in $000’s
|
Quarter Ended |
Quarter Ended |
| |
March 31, 2017 |
December 31, 2016 |
| |
|
|
|
| |
Total
Originations |
$449,607 |
|
$469,537 |
|
| |
|
|
|
| |
Third-Party Sponsor Deals |
|
66% |
|
|
15% |
|
| |
Syndicated Debt |
|
12% |
|
|
54% |
|
| |
Real
Estate |
|
10% |
|
|
3% |
|
| |
Online
Lending |
|
6% |
|
|
15% |
|
| |
Operating Buyouts |
|
4% |
|
|
2% |
|
| |
Structured Credit |
|
2% |
|
|
7% |
|
| |
Aircraft
Leasing |
|
--% |
|
|
4% |
|
| |
|
|
|
| |
Total
Repayments |
$302,513 |
|
$644,995 |
|
| |
Originations, Net of Repayments |
$147,094 |
|
|
$(175,458) |
|
For a listing of transactions completed during the quarter, please see the section titled “Portfolio Investment
Activity” in our form 10-Q for the quarter ended March 31, 2017.
In addition to NPRC’s $2.06 billion of real estate assets at fair value, we and NPRC continued our investment in
the online lending industry with a focus on super-prime, prime, and near-prime consumer and small business borrowers. As of March
31, 2017, we and NPRC own $785.5 million of online loans at fair value directly and through securitization interests, across
multiple origination and underwriting platforms. Our online business currently yields more than a 12% return on our invested
capital (net of all incurred costs and expected losses). Four bank credit facilities currently support NPRC’s online business. A
NPRC subsidiary closed a consumer securitization during the December 2016 quarter.
We are invested in structured credit investments with individual standalone financings non-recourse to Prospect
and with our risk capped at our net investment amount. As of March 31, 2017 and December 31, 2016, our structured credit
portfolio at fair value consisted of the following:
|
|
All amounts in $000’s except
per unit amounts |
As
of |
As of |
| |
March 31, 2017 |
December 31, 2016 |
| |
|
|
|
| |
Total
Structured Credit Investments |
$1,072,517 |
|
$1,089,032 |
|
| |
|
|
|
| |
# of
Investments |
|
41 |
|
|
41 |
|
| |
|
|
|
| |
TTM
Average Cash Yield (1) |
|
22.6% |
|
|
24.4% |
|
| |
Annualized Cash Yield |
|
17.9% |
|
|
21.5% |
|
| |
Annualized GAAP Yield |
|
13.6% |
|
|
14.8% |
|
| |
|
|
|
| |
Cumulative Cash Distributions |
$857,111 |
|
$812,918 |
|
| |
% of
Original Investment |
|
64.9% |
|
|
61.9% |
|
| |
|
|
|
| |
# of
Underlying Collateral Loans |
|
2,568 |
|
|
2,807 |
|
| |
Total
Asset Base of Underlying Portfolio |
$19,867,965 |
|
$20,016,382 |
|
| |
|
|
|
| |
TTM
Default Rate |
|
1.05% |
|
|
1.16% |
|
| |
Broadly
Syndicated Market TTM Default Rate |
|
1.49% |
|
|
1.58% |
|
| |
| (1) Calculation based on fair value. |
To date, we have exited seven structured credit investments totaling $153.6 million with an average realized IRR
of 16.8% and cash on cash multiple of 1.42 times.
Since August 29, 2016 (the date of our June 2016 earnings release), 17 of our structured credit investments
completed refinancings to reduce the cost of liabilities (three of which occurred after March 2017) and three additional structured
credit investments completed multi-year extensions of the reinvestment period of such investments. We are working on identifying
for our independent management teams further structured credit investment refinancings and extensions in the portfolio to enhance
value.
To date during the June 2017 quarter, we have completed new and follow-on investments as follows:
|
|
All amounts in $000’s
|
Quarter Ended |
| |
June 30, 2017 |
| |
|
|
| |
Total
Originations |
$109,005 |
| |
|
|
| |
Third-Party Sponsor Deals |
|
60% |
| |
Structured Credit |
|
18% |
| |
Syndicated Debt |
|
16% |
| |
Online
Lending |
|
4% |
| |
Real
Estate |
|
2% |
| |
|
|
| |
Total
Repayments |
$75,083 |
| |
Originations, Net of Repayments |
$33,922 |
LIQUIDITY AND FINANCIAL RESULTS
The following table summarizes key leverage statistics as of March 31, 2017 and December 31, 2016.
|
|
All amounts in $000’s
|
As of
March 31, 2017 |
As of
December 31, 2016 |
| |
|
|
|
| |
Debt to
Equity Ratio |
|
78.9% |
|
76.2% |
| |
% of
Assets at Floating Rates |
|
90.7% |
|
90.4% |
| |
% of
Liabilities at Fixed Rates |
|
99.9% |
|
99.9% |
| |
|
|
|
| |
Unencumbered Assets |
$4,611,293 |
$4,803,861 |
| |
% of
Total Assets |
|
74.9% |
|
77.8% |
We repaid our $167.5 million August 2016 convertible note issue at maturity. In the current June 2017 quarter,
we refinanced (or provided notice to call) a majority of our debt maturing in less than one year as follows:
| |
All amounts in
$000’s |
Principal |
Rate |
Maturity |
| |
|
|
|
|
| |
Debt
Issuances |
|
|
|
| |
2022 Notes |
$225,000 |
4.95% |
July 2022 |
| |
Repurchases |
|
|
|
| |
2017 Notes |
$78,766 |
5.375% |
October 2017 |
| |
2018 Notes |
$114,581 |
5.75% |
March 2018 |
| |
Prospect Capital InterNotes® |
$20,657 |
5.00% |
November
2018 |
For the remainder of calendar year 2017, we have liability maturities of $67.2 million.
On August 29, 2014, we renegotiated and closed an expanded five and a half year revolving credit facility (the
“Facility”), summarized as follows:
|
|
All amounts in $000’s
|
As of
March 31, 2017 |
| |
|
|
| |
Total
Extended Commitments |
$885,000 |
| |
Total
Commitments with Accordion Feature |
$1,500,000 |
| |
Interest
Rate on Borrowings |
1M
LIBOR + 225 bps (no LIBOR floor) |
| |
Moody’s
Rating |
Aa3 |
We have diversified our counterparty risk. As of March 31, 2017, 21 institutional lenders committed to the
Facility compared to five lenders at June 30, 2010, one of the most diversified bank groups in our industry. The revolving period
of the Facility extends through March 2019, with an additional one-year amortization period to March 2020, with distributions
allowed after the completion of the revolving period. We currently have no borrowings drawn under our Facility.
We have eight separate unsecured debt issuances aggregating $1.7 billion outstanding, not including our program
notes, with maturities ranging from October 2017 to June 2024. As of March 31, 2017, $1.006 billion of program notes were
outstanding with staggered maturities through October 2043.
TAXABLE INCOME
As a tax-efficient regulated investment company, our 90% minimum shareholder dividend payout requirement is
based on taxable income rather than GAAP NII. Taxable income can decouple significantly from NII, especially relating to income
generated from our structured credit investments. Refinancing liabilities, resetting maturities, and tax-loss-creating portfolio
turnover of the loans inside our structured credit investments, as well as other factors, make estimation of taxable income a
challenging exercise. Taxable income is only disclosed to us by each structured credit collateral manager on an annual basis.
We expect to disclose taxable income after such information becomes available to us.
EARNINGS CONFERENCE CALL
Prospect will host an earnings call on Wednesday, May 10, 2017 at 11:00
am. Eastern Time. Dial 888-338-7333. For a replay prior to June 9, 2017, call 877-344-7529
passcode 10105743. The call will be available prior to June 9, 2017 on Prospect’s website, www.prospectstreet.com. For copies of our corporate presentation, our recent shareholder letter,
and our performance data please see http://shareholder.prospectstreet.com.
| PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES |
| (in thousands, except share and per share
data) |
| |
| |
March 31,
2017 |
|
June 30,
2016 |
| |
|
| |
(Unaudited) |
|
(Audited) |
| Assets |
|
|
|
| Investments at fair value: |
|
|
|
| Control investments (amortized cost of $1,939,427 and $1,768,220,
respectively) |
$ |
1,892,719 |
|
|
$ |
1,752,449 |
|
| Affiliate investments (amortized cost of $8,530 and $10,758,
respectively) |
7,239 |
|
|
11,320 |
|
| Non-control/non-affiliate investments (amortized cost of $4,305,472
and $4,312,122, respectively) |
4,124,808 |
|
|
4,133,939 |
|
| Total investments at fair value (amortized cost of $6,253,429
and $6,091,100, respectively) |
6,024,766 |
|
|
5,897,708 |
|
| Cash |
111,804 |
|
|
317,798 |
|
| Receivables for: |
|
|
|
| Interest, net |
10,255 |
|
|
12,127 |
|
| Other |
100 |
|
|
168 |
|
| Prepaid expenses |
716 |
|
|
855 |
|
| Deferred financing costs on Revolving Credit Facility |
5,463 |
|
|
7,525 |
|
| Total Assets |
6,153,104 |
|
|
6,236,181 |
|
| |
|
|
|
| Liabilities |
|
|
|
| Revolving Credit Facility |
— |
|
|
— |
|
| Prospect Capital InterNotes® |
991,345 |
|
|
893,210 |
|
| Convertible Notes |
910,782 |
|
|
1,074,361 |
|
| Public Notes |
737,802 |
|
|
699,368 |
|
| Due to Prospect Capital Management |
49,098 |
|
|
54,149 |
|
| Interest payable |
33,763 |
|
|
40,804 |
|
| Dividends payable |
29,989 |
|
|
29,758 |
|
| Due to Prospect Administration |
1,847 |
|
|
1,765 |
|
| Accrued expenses |
4,292 |
|
|
2,259 |
|
| Other liabilities |
2,018 |
|
|
3,633 |
|
| Due to broker |
— |
|
|
957 |
|
| Total Liabilities |
2,760,936 |
|
|
2,800,264 |
|
| Commitments and Contingencies |
— |
|
|
— |
|
| Net Assets |
$ |
3,392,168 |
|
|
$ |
3,435,917 |
|
| |
|
|
|
| Components of Net Assets |
|
|
|
| Common stock, par value $0.001 per share (1,000,000,000 common shares authorized;
359,885,703 and 357,107,231 issued and outstanding, respectively) |
$ |
360 |
|
|
$ |
357 |
|
| Paid-in capital in excess of par |
3,989,703 |
|
|
3,967,397 |
|
| Accumulated overdistributed net investment income |
(33,719 |
) |
|
(3,623 |
) |
| Accumulated net realized loss |
(335,513 |
) |
|
(334,822 |
) |
| Net unrealized loss |
(228,663 |
) |
|
(193,392 |
) |
| Net Assets |
$ |
3,392,168 |
|
|
$ |
3,435,917 |
|
| |
|
|
|
| Net Asset Value Per Share |
$ |
9.43 |
|
|
$ |
9.62 |
|
| PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF
OPERATIONS |
| (in thousands, except share and per share
data) |
| (Unaudited) |
| |
| |
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| Investment Income |
|
|
|
|
|
|
|
| Interest income: |
|
|
|
|
|
|
|
| Control investments |
$ |
41,353 |
|
|
$ |
50,762 |
|
|
$ |
135,543 |
|
|
$ |
154,135 |
|
| Affiliate investments |
— |
|
|
— |
|
|
— |
|
|
896 |
|
| Non-control/non-affiliate investments |
83,794 |
|
|
83,986 |
|
|
257,919 |
|
|
265,855 |
|
| Structured credit securities |
36,564 |
|
|
44,244 |
|
|
114,690 |
|
|
135,912 |
|
| Total interest income |
161,711 |
|
|
178,992 |
|
|
508,152 |
|
|
556,798 |
|
| Dividend income: |
|
|
|
|
|
|
|
| Control investments |
728 |
|
|
8,288 |
|
|
4,250 |
|
|
25,046 |
|
| Non-control/non-affiliate investments |
89 |
|
|
13 |
|
|
330 |
|
|
16 |
|
| Total dividend income |
817 |
|
|
8,301 |
|
|
4,580 |
|
|
25,062 |
|
| Other income: |
|
|
|
|
|
|
|
| Control investments |
2,953 |
|
|
1,758 |
|
|
9,749 |
|
|
7,436 |
|
| Non-control/non-affiliate investments |
5,551 |
|
|
442 |
|
|
11,863 |
|
|
9,639 |
|
| Total other income |
8,504 |
|
|
2,200 |
|
|
21,612 |
|
|
17,075 |
|
| Total Investment Income |
171,032 |
|
|
189,493 |
|
|
534,344 |
|
|
598,935 |
|
| Operating Expenses |
|
|
|
|
|
|
|
| Base management fee |
30,549 |
|
|
30,977 |
|
|
92,227 |
|
|
95,712 |
|
| Income incentive fee |
18,270 |
|
|
21,906 |
|
|
59,101 |
|
|
69,940 |
|
| Interest and credit facility expenses |
41,464 |
|
|
41,719 |
|
|
123,981 |
|
|
125,881 |
|
| Allocation of overhead from Prospect Administration |
3,581 |
|
|
2,936 |
|
|
9,771 |
|
|
9,114 |
|
| Audit, compliance and tax related fees |
1,223 |
|
|
1,596 |
|
|
3,676 |
|
|
4,665 |
|
| Directors’ fees |
113 |
|
|
94 |
|
|
338 |
|
|
282 |
|
| Excise Tax |
— |
|
|
400 |
|
|
(1,100 |
) |
|
1,700 |
|
| Other general and administrative expenses |
2,752 |
|
|
2,239 |
|
|
9,946 |
|
|
11,880 |
|
| Total Operating Expenses |
97,952 |
|
|
101,867 |
|
|
297,940 |
|
|
319,174 |
|
| Net Investment Income |
73,080 |
|
|
87,626 |
|
|
236,404 |
|
|
279,761 |
|
| Net Realized and Change in Unrealized Gains (Losses) from
Investments |
|
|
|
|
|
|
|
| Net realized gains (losses) |
|
|
|
|
|
|
|
| Control investments |
1 |
|
|
16 |
|
|
184 |
|
|
7 |
|
| Affiliate investments |
— |
|
|
(14,194 |
) |
|
137 |
|
|
(14,194 |
) |
| Non-control/non-affiliate investments |
177 |
|
|
3,394 |
|
|
489 |
|
|
(4,050 |
) |
| Net realized gains (losses) |
178 |
|
|
(10,784 |
) |
|
810 |
|
|
(18,237 |
) |
| Net change in unrealized (losses) gains |
|
|
|
|
|
|
|
| Control investments |
(33,235 |
) |
|
36,508 |
|
|
(30,937 |
) |
|
(40,779 |
) |
| Affiliate investments |
(581 |
) |
|
189 |
|
|
(1,854 |
) |
|
535 |
|
| Non-control/non-affiliate investments |
(19,930 |
) |
|
(38,008 |
) |
|
(2,480 |
) |
|
(212,989 |
) |
| Net change in unrealized losses |
(53,746 |
) |
|
(1,311 |
) |
|
(35,271 |
) |
|
(253,233 |
) |
| Net Realized and Change in Unrealized Losses from
Investments |
(53,568 |
) |
|
(12,095 |
) |
|
(34,461 |
) |
|
(271,470 |
) |
| Net realized losses on extinguishment of debt |
(20 |
) |
|
(23 |
) |
|
(205 |
) |
|
(86 |
) |
| Net Increase in Net Assets Resulting from
Operations |
$ |
19,492 |
|
|
$ |
75,508 |
|
|
$ |
201,738 |
|
|
$ |
8,205 |
|
| Net increase in net assets resulting from operations per share |
$ |
0.05 |
|
|
$ |
0.21 |
|
|
$ |
0.56 |
|
|
$ |
0.02 |
|
| Dividends declared per share |
$ |
(0.25 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.75 |
) |
|
$ |
(0.75 |
) |
| PROSPECT CAPITAL CORPORATION AND
SUBSIDIARIES |
| ROLLFORWARD OF NET ASSET VALUE PER
SHARE |
| (in actual dollars) |
| (Unaudited) |
| |
| |
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| Per Share Data |
|
|
|
|
|
|
|
| Net asset value at beginning of period |
$ |
9.62 |
|
|
$ |
9.65 |
|
|
$ |
9.62 |
|
|
$ |
10.31 |
|
| Net investment income(1) |
0.20 |
|
|
0.25 |
|
|
0.66 |
|
|
0.79 |
|
| Net realized and change in unrealized losses(1) |
(0.15 |
) |
|
(0.04 |
) |
|
(0.10 |
) |
|
(0.77 |
) |
| Distributions of net investment income |
(0.25 |
) |
|
(0.25 |
) |
|
(0.75 |
) |
|
(0.75 |
) |
| Common stock transactions(2) |
0.01 |
|
|
— |
|
(3) |
|
— |
|
(3) |
|
0.03 |
|
| Net asset value at end of period |
$ |
9.43 |
|
|
$ |
9.61 |
|
|
$ |
9.43 |
|
|
$ |
9.61 |
|
| |
| (1) Per share data amount is based on the weighted average
number of common shares outstanding for the year/period presented (except for dividends to shareholders which is based on
actual rate per share). |
| (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 dividend
reinvestment plan, shares issued to acquire investments and shares repurchased below net asset value pursuant to our Repurchase
Program. |
| (3) Amount is less than $0.01. |
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 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.
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 Officer grier@prospectstreet.com Telephone (212) 448-0702
