10-Q 1 a11-11910_110q.htm 10-Q

Table of Contents

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended March 31, 2011

 

o               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 814-00659

 

PROSPECT CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Maryland

 

43-2048643

 

 

 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

10 East 40th Street

 

 

44th Floor

 

 

New York, New York

 

10016

 

 

 

(Address of principal executive offices)

 

(Zip Code)

 

(212) 448-0702

 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes    o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer x  Accelerated Filer  o  Non-Accelerated Filer o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes   x No

 

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of May 10, 2011 was 97,435,188.

 

 



Table of Contents

 

PROSPECT CAPITAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

Item 1.

FINANCIAL STATEMENTS

3

 

Consolidated Statements of Assets and Liabilities – March 31, 2011 (Unaudited) and
June 30, 2010 (Audited)

3

 

Consolidated Statements of Operations (Unaudited) - For the Three and Nine Months Ended
March 31, 2011 and 2010

4

 

Consolidated Statements of Changes in Net Assets (Unaudited) - For the Nine Months Ended
March 31, 2011 and 2010

5

 

Consolidated Statements of Cash Flows (Unaudited) - For the Nine Months Ended
March 31, 2011 and 2010

6

 

Consolidated Schedule of Investments – March 31, 2011 (Unaudited) and
June 30, 2010 (Audited)

7

 

Notes to Consolidated Financial Statements (Unaudited)

26

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

50

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

80

Item 4.

Controls and Procedures

80

 

 

 

PART II.

OTHER INFORMATION

81

Item 1.

Legal Proceedings

81

Item 1A.

Risk Factors

81

Item 2.

Unregistered Sales in Equity Securities and Use of Proceeds

81

Item 3.

Defaults Upon Senior Securities

82

Item 4.

Submission of Matters to a Vote of Security Holders

82

Item 5.

Other Information

82

Item 6.

Exhibits

82

 

Signatures

85

 

2



Table of Contents

 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2011 and June 30, 2010

(in thousands, except share and per share data)

 

 

 

March 31, 2011
(Unaudited)

 

June 30, 2010
(Audited)

Assets (Note 5)

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

     Control investments (cost of $235,879 and $185,720, respectively)

 

$

275,349

 

 

$

195,958

 

     Affiliate investments (cost of $56,594 and $65,082, respectively)

 

70,754

 

 

73,740

 

     Non-control/Non-affiliate investments (cost of $881,166 and $477,957, respectively)

 

867,414

 

 

478,785

 

          Total investments at fair value (cost of $1,173,639 and $728,759, respectively, Note 4)

 

1,213,517

 

 

748,483

 

 

 

 

 

 

 

 

Investments in money market funds

 

94,919

 

 

68,871

 

Cash

 

2,395

 

 

1,081

 

Receivables for:

 

 

 

 

 

 

     Interest, net

 

10,728

 

 

5,356

 

     Dividends

 

60

 

 

1

 

     Other

 

561

 

 

419

 

Prepaid expenses

 

496

 

 

371

 

Deferred financing costs, net

 

16,186

 

 

7,579

 

Other assets

 

 

 

534

 

          Total Assets 

 

1,338,862

 

 

832,695

 

 

 

 

 

 

 

 

Liabilities 

 

 

 

 

 

 

Credit facility payable (Note 5)

 

47,500

 

 

100,300

 

Senior convertible notes (Note 6)

 

322,500

 

 

 

Payable for securities purchased

 

31,984

 

 

 

Dividends payable

 

8,940

 

 

6,909

 

Due to Prospect Administration (Note 10)

 

1,456

 

 

294

 

Due to Prospect Capital Management (Note 10)

 

6,353

 

 

9,006

 

Accrued expenses

 

5,319

 

 

4,057

 

Other liabilities

 

1,889

 

 

705

 

          Total Liabilities 

 

425,941

 

 

121,271

 

 

 

 

 

 

 

 

Net Assets 

 

$

912,921

 

 

$

711,424

 

 

 

 

 

 

 

 

Components of Net Assets 

 

 

 

 

 

 

Common stock, par value $0.001 per share (200,000,000 and 100,000,000

 

 

 

 

 

 

common shares authorized, respectively; 88,358,811 and 69,086,862 issued
and outstanding, respectively) (Note 7)

 

$

88

 

 

$

69

 

Paid-in capital in excess of par (Note 7)

 

991,658

 

 

805,918

 

Distributions in excess of net investment income

 

(21,202

)

 

(9,692

)

Accumulated realized losses on investments

 

(97,501

)

 

(104,595

)

Unrealized appreciation on investments

 

39,878

 

 

19,724

 

Net Assets 

 

$

912,921

 

 

$

711,424

 

 

 

 

 

 

 

 

Net Asset Value Per Share 

 

$

10.33

 

 

$

10.30

 

 

See notes to consolidated financial statements.

 

3



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

For The Three and Nine Months Ended March 31, 2011 and 2010

(in thousands, except share and per share data)

(Unaudited)

 

 

 

For The Three Months Ended

 

For The Nine Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

 

 

 

 

 

 

 

 

Interest Income: (Note 4)

 

 

 

 

 

 

 

 

 

Control investments (Net of foreign withholding tax of
$0, $0, $0, and ($19), respectively)

 

$

5,180

 

$

4,494

 

$

15,798

 

$

14,137

 

Affiliate investments

 

3,049

 

2,731

 

9,523

 

5,119

 

Non-control/Non-affiliate investments

 

26,275

 

20,722

 

65,466

 

42,065

 

Total interest income

 

34,504

 

27,947

 

90,787

 

61,321

 

 

 

 

 

 

 

 

 

 

 

Dividend income:

 

 

 

 

 

 

 

 

 

Control investments

 

2,760

 

2,300

 

6,810

 

12,660

 

Non-control/Non-affiliate investments

 

 

 

1,508

 

 

Money market funds

 

3

 

1

 

10

 

29

 

Total dividend income

 

2,763

 

2,301

 

8,328

 

12,689

 

 

 

 

 

 

 

 

 

 

 

Other income: (Note 8)

 

 

 

 

 

 

 

 

 

Control investments

 

2

 

235

 

1,787

 

243

 

Affiliate investments

 

22

 

6

 

176

 

73

 

Non-control/Non-affiliate investments

 

7,282

 

1,516

 

12,007

 

2,365

 

Gain on Patriot acquisition (Note 3)

 

 

 

 

8,632

 

Total other income

 

7,306

 

1,757

 

13,970

 

11,313

 

Total Investment Income

 

44,573

 

32,005

 

113,085

 

85,323

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Investment advisory fees:

 

 

 

 

 

 

 

 

 

Base management fee (Note 10)

 

6,037

 

3,576

 

15,216

 

9,961

 

Income incentive fee (Note 10)

 

5,997

 

4,744

 

16,015

 

12,640

 

Total investment advisory fees

 

12,034

 

8,320

 

31,231

 

22,601

 

 

 

 

 

 

 

 

 

 

 

Interest and credit facility expenses

 

5,660

 

2,111

 

10,182

 

5,480

 

Legal fees

 

283

 

146

 

763

 

536

 

Valuation services

 

262

 

231

 

711

 

504

 

Audit, compliance and tax related fees

 

168

 

181

 

649

 

682

 

Allocation of overhead from Prospect Administration (Note 10)

 

1,669

 

840

 

3,309

 

2,520

 

Insurance expense

 

74

 

64

 

217

 

190

 

Directors’ fees

 

64

 

64

 

191

 

192

 

Potential merger expenses (Note 11)

 

 

925

 

 

925

 

Other general and administrative expenses

 

403

 

149

 

1,801

 

1,143

 

Total Operating Expenses

 

20,617

 

13,031

 

49,054

 

34,773

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

23,956

 

18,974

 

64,031

 

50,550

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investments (Note 4)

 

2,078

 

(2)

 

7,094

 

(51,231)

 

Net change in unrealized appreciation (depreciation) on
investments (Note 4)

 

7,725

 

6,968

 

20,154

 

5,723

 

 

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Resulting from Operations

 

$

33,759

 

$

25,940

 

$

91,279

 

$

5,042

 

 

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations per share:
(Note 9 and Note 14)

 

$

0.38

 

$

0.41

 

$

1.11

 

$

0.09

 

Dividends declared per share

 

$

0.30

 

$

0.41

 

$

0.91

 

$

1.23

 

 

See notes to consolidated financial statements.

 

4



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

For The Nine Months Ended March 31, 2011 and 2010
(in thousands, except share data)
(Unaudited)

 

 

 

 

For The Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

March 31, 2010

 

 

 

 

 

Increase in Net Assets from Operations: 

 

 

 

 

 

 

 

 

Net investment income

 

$

64,031

 

 

$

50,550

 

Net realized gain (loss) on investments

 

 

7,094

 

 

 

(51,231

)

Net change in unrealized appreciation (depreciation) on investments

 

 

20,154

 

 

 

5,723

 

Net Increase in Net Assets Resulting from Operations 

 

 

91,279

 

 

 

5,042

 

 

 

 

 

 

 

 

 

 

Dividends to Shareholders 

 

 

(75,541)

 

 

 

(94,125

)

 

 

 

 

 

 

 

 

 

Capital Share Transactions: 

 

 

 

 

 

 

 

 

Net proceeds from capital shares sold

 

 

178,317

 

 

 

108,858

 

Less: Offering costs of public share offerings

 

 

(724)

 

 

 

(1,606

)

Fair value of equity issued in conjunction with Patriot acquisition

 

 

 

 

 

92,800

 

Reinvestment of dividends

 

 

8,166

 

 

 

8,254

 

Net Increase in Net Assets Resulting from Capital Share Transactions

 

 

185,759

 

 

 

208,306

 

 

 

 

 

 

 

 

 

 

Total Increase in Net Assets 

 

 

201,497

 

 

 

119,223

 

Net assets at beginning of period

 

 

711,424

 

 

 

532,596

 

Net Assets at End of Period 

 

$

912,921

 

 

$

651,819

 

 

 

 

 

 

 

 

 

 

Capital Share Activity: 

 

 

 

 

 

 

 

 

Shares sold

 

 

18,494,476

 

 

 

12,243,297

 

Shares issued for Patriot acquisition

 

 

 

 

 

8,444,068

 

Shares issued through reinvestment of dividends/distributions

 

 

777,473

 

 

 

767,782

 

Net increase in capital share activity

 

 

19,271,949

 

 

 

21,455,147

 

Shares outstanding at beginning of period

 

 

69,086,862

 

 

 

42,943,084

 

 

 

 

 

 

 

 

 

 

Shares Outstanding at End of Period 

 

 

88,358,811

 

 

 

64,398,231

 

 

See notes to consolidated financial statements.

 

5



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Nine Months Ended March 31, 2011 and 2010
(in thousands, except share data)
(Unaudited)

 

 

 

For The Nine Months Ended March 31,

 

 

 

 

 

 

2011

 

 

 

2010

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities: 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

  91,279

 

 

$

  5,042

 

Net realized (gain) loss on investments

 

 

(7,094)

 

 

 

51,231

 

Net change in unrealized appreciation on investments

 

 

(20,154)

 

 

 

(5,723

)

Accretion of purchase discount on investments

 

 

(10,874)

 

 

 

(15,865

)

Amortization of deferred financing costs

 

 

3,628

 

 

 

3,427

 

Gain on Patriot acquisition

 

 

 

 

 

(8,632

)

 

 

 

 

 

 

 

 

 

Change in operating assets and liabilities: 

 

 

 

 

 

 

 

 

Payments for purchases of investments

 

 

(632,526)

 

 

 

(64,390

)

Payment-in-kind interest

 

 

(8,510)

 

 

 

(4,299

)

Proceeds from sale of investments and collection of investment principal

 

 

214,124

 

 

 

96,338

 

Purchases of cash equivalents

 

 

 

 

 

(199,997

)

Sales of cash equivalents

 

 

 

 

 

199,997

 

Net (increase) decrease investments in money market funds

 

 

(26,048)

 

 

 

75,724

 

(Increase) decrease in interest receivable

 

 

(5,372)

 

 

 

2,653

 

(Increase) decrease in dividends receivable

 

 

(59)

 

 

 

27

 

(Increase) decrease in other receivables

 

 

(142)

 

 

 

167

 

Increase in prepaid expenses

 

 

(125)

 

 

 

(43)

 

Decrease in due from Prospect Administration

 

 

 

 

 

1,500

 

Decrease (increase) in other assets

 

 

534

 

 

 

(534)

 

Increase (decrease) in due to Prospect Administration

 

 

1,162

 

 

 

(599)

 

(Decrease) increase in due to Prospect Capital Management

 

 

(2,653)

 

 

 

3,960

 

Increase in payable for securities purchased

 

 

31,984

 

 

 

1,743

 

Increase (decrease) in accrued expenses

 

 

1,262

 

 

 

(626)

 

Increase in other liabilities

 

 

1,184

 

 

 

1,031

 

Net Cash (Used In) Provided By Operating Activities 

 

 

(368,400)

 

 

 

142,132

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of Patriot, net of cash acquired (Note 3)

 

 

 

 

 

(106,586

)

Net Cash Used In Investing Activities 

 

 

 

 

 

(106,586

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities: 

 

 

 

 

 

 

 

 

Issuance of Senior Convertible Notes (Note 6)

 

 

322,500

 

 

 

 

Borrowings under credit facility

 

 

259,100

 

 

 

115,000

 

Payments under credit facility

 

 

(311,900)

 

 

 

(185,600

)

Financing costs paid and deferred

 

 

(12,235)

 

 

 

(1,424)

 

Net proceeds from issuance of common stock

 

 

178,317

 

 

 

108,858

 

Offering costs from issuance of common stock

 

 

(724)

 

 

 

(1,606

)

Dividends paid

 

 

(65,344)

 

 

 

(59,467

)

Net Cash Provided By Financing Activities 

 

 

369,714

 

 

 

(24,239

)

 

 

 

 

 

 

 

 

 

Total Increase in Cash 

 

 

1,314

 

 

 

11,307

 

Cash balance at beginning of period

 

 

1,081

 

 

 

9,942

 

Cash Balance at End of Period 

 

$

  2,395

 

 

$

  21,249

 

 

 

 

 

 

 

 

 

 

Cash Paid For Interest 

 

$

  1,377

 

 

$

  865

 

Non-Cash Financing Activity: 

 

 

 

 

 

 

 

 

Amount of shares issued in connection with Patriot acquisition

 

$

 —

 

 

$

 92,800

 

Amount of shares issued in connection with dividend reinvestment plan

 

$

 8,166

 

 

$

 8,254

 

 

See notes to consolidated financial statements.

 

6



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2011 and June 30, 2010
(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (25.00% or greater of voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AIRMALL USA, Inc (28)

 

Pennsylvania / Property Management

 

Senior Secured Term Loan (12.00%, due 6/30/2015)(3), (4)

 

$

30,000

 

$

30,000

 

$

30,000

 

3.3%

 

Senior Subordinated Term Loan (12.00% plus 6.00% PIK, due 12/31/2015)

 

12,500

 

12,500

 

12,500

 

1.4%

 

Convertible Preferred Stock (9,919.684 shares)

 

 

 

9,920

 

9,226

 

1.0%

 

Common Stock (100 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

52,420

 

51,726

 

5.7%

 

Ajax Rolled Ring & Machine, Inc.

 

South Carolina / Manufacturing

 

Senior Secured Note — Tranche A (10.50%, due 4/01/2013)(3), (4)

 

20,717

 

20,717

 

20,717

 

2.3%

 

Subordinated Secured Note — Tranche B (11.50% plus 6.00% PIK, due 4/01/2013)(3), (4)

 

15,035

 

15,035

 

10,783

 

1.2%

 

Convertible Preferred Stock — Series A (6,142.6 shares)

 

 

 

6,057

 

 

0.0%

 

Unrestricted Common Stock (6 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

41,809

 

31,500

 

3.5%

 

AWCNC, LLC(20)

 

North Carolina / Machinery

 

Members Units — Class A (1,800,000 units)

 

 

 

 

 

0.0%

 

Members Units — Class B-1 (1 unit)

 

 

 

 

 

0.0%

 

Members Units — Class B-2 (7,999,999 units)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

0.0%

 

Borga, Inc.

 

California / Manufacturing

 

Revolving Line of Credit — $1,000 Commitment (5.00% plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4), (26)

 

1,000

 

945

 

850

 

0.1%

 

Senior Secured Term Loan B (8.50% plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4)

 

1,612

 

1,500

 

956

 

0.1%

 

Senior Secured Term Loan C (12.00% plus 4.00% PIK plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)

 

8,890

 

707

 

 

0.0%

 

Common Stock (100 shares)(22)

 

 

 

 

 

0.0%

 

Warrants (33,750 warrants)(22)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

3,152

 

1,806

 

0.2%

 

C&J Cladding LLC

 

Texas / Metal Services and Minerals

 

Membership Interest (400 units)(23)

 

 

 

580

 

5,456

 

0.6%

 

 

 

 

 

 

 

 

 

580

 

5,456

 

0.6%

 

Change Clean Energy Holdings, Inc. (“CCEHI” or “Biomass”)(5)

 

Maine / Biomass Power

 

Common Stock (1,000 shares)

 

 

 

2,540

 

 

0.0%

 

 

 

 

 

 

 

 

 

2,540

 

 

0.0%

 

Fischbein, LLC

 

North Carolina / Machinery

 

Senior Subordinated Debt (13.00% plus 3.50% PIK, due 5/01/2013)

 

2,133

 

1,988

 

2,133

 

0.2%

 

Membership Interest(25)

 

 

 

1,899

 

11,842

 

1.3%

 

 

 

 

 

 

 

 

 

3,887

 

13,975

 

1.5%

 

Freedom Marine Services LLC(21)

 

Louisiana / Shipping Vessels

 

Subordinated Secured Note (12.00% plus 4.00% PIK, in non-accrual status effective 10/1/2010, due 12/31/2011)(4)

 

11,093

 

10,838

 

3,783

 

0.4%

 

Net Profits Interest (22.50% payable on equity distributions)(7)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

10,838

 

3,783

 

0.4%

 

See notes to consolidated financial statements.

 

7



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2011 and June 30, 2010
(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (25.00% or greater of voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Solutions Holdings, Inc.(8), (3)

 

Texas / Gas Gathering and Processing

 

Senior Secured Note (18.00%, due 12/11/2016)

 

$

25,000

 

$

25,000

 

$

25,000

 

2.8%

 

Junior Secured Note (18.00%, due 12/12/2016)

 

12,000

 

12,000

 

12,000

 

1.3%

 

Common Stock (100 shares)

 

 

 

5,003

 

60,596

 

6.7%

 

 

 

 

 

 

 

 

 

42,003

 

97,596

 

10.8%

 

Integrated Contract Services, Inc.(9)

 

North Carolina / Contracting

 

Secured Promissory Notes (15.00%, in non-accrual status effective 12/22/2010, due 3/21/2012 — 1/02/2013) (10)

 

1,363

 

1,361

 

1,363

 

0.1%

 

Senior Demand Note (15.00%, in non-accrual status effective 11/1/2010, past due)(10)

 

1,170

 

1,170

 

317

 

0.0%

 

Senior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)

 

960

 

660

 

 

0.0%

 

Junior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)

 

14,003

 

14,003

 

 

0.0%

 

Preferred Stock — Series A (10 shares)

 

 

 

 

 

0.0%

 

Common Stock (49 shares)

 

 

 

679

 

 

0.0%

 

 

 

 

 

 

 

 

 

17,873

 

1,680

 

0.1%

 

Iron Horse Coiled Tubing, Inc.(24)

 

Alberta, Canada / Production Services

 

Senior Secured Tranche 2 (Zero Coupon, due 12/31/2016)

 

2,338

 

2,338

 

2,142

 

0.2%

 

Senior Secured Tranche 3 (2.00%, due 12/31/2016)

 

14,000

 

13,781

 

13,231

 

1.4%

 

Common Stock (3,821 shares)

 

 

 

268

 

1,590

 

0.2%

 

 

 

 

 

 

 

 

 

16,387

 

16,963

 

1.8%

 

Manx Energy, Inc. (“Manx”)(12)

 

Kansas / Oil & Gas Production

 

Appalachian Energy Holdings, LLC (“AEH”) — Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)

 

2,203

 

2,000

 

345

 

0.0%

 

Coalbed, LLC — Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)(6)

 

6,608

 

5,991

 

1,034

 

0.1%

 

Manx — Senior Secured Note (13.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)

 

3,300

 

3,300

 

3,300

 

0.4%

 

Manx — Preferred Stock (6,635 shares)

 

 

 

6,307

 

 

0.0%

 

Manx — Common Stock (3,416,335 shares)

 

 

 

1,171

 

 

0.0%

 

 

 

 

 

 

 

 

 

18,769

 

4,679

 

0.5%

 

NRG Manufacturing, Inc.

 

Texas / Manufacturing

 

Senior Secured Note (16.50%, due 8/31/2011)(3), (4)

 

13,080

 

13,080

 

13,080

 

1.4%

 

Common Stock (800 shares)

 

 

 

2,317

 

19,826

 

2.2%

 

 

 

 

 

 

 

 

 

15,397

 

32,906

 

3.6%

 

Nupla Corporation

 

California / Home & Office Furnishings, Housewares & Durable

 

Revolving Line of Credit — $2,000 Commitment (7.25% plus 2.00% default interest, due 9/04/2012)(4), (26)

 

1,093

 

999

 

1,093

 

0.1%

 

Senior Secured Term Loan A (8.00% plus 2.00% default interest, due 9/04/2012)(4)

 

4,658

 

1,022

 

4,658

 

0.5%

 

Senior Subordinated Debt (15.00% PIK, in non-accrual status effective 4/01/2009, due 3/04/2013)

 

3,767

 

 

334

 

0.0%

 

Preferred Stock — Class A (2,850 shares)

 

 

 

 

 

0.0%

 

Preferred Stock — Class B (1,330 shares)

 

 

 

 

 

0.0%

 

Common Stock (2,360,743 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

2,021

 

6,085

 

0.6%

 

See notes to consolidated financial statements.

 

8



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2011 and June 30, 2010
(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (25.00% or greater of voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R-V Industries, Inc.

 

Pennsylvania / Manufacturing

 

Warrants (200,000 warrants, expiring 6/30/2017)

 

 

 

$

1,682

 

$

1,931

 

0.2%

 

Common Stock (545,107 shares)

 

 

 

5,086

 

5,263

 

0.6%

 

 

 

 

 

 

 

 

 

6,768

 

7,194

 

0.8%

 

Yatesville Coal Holdings, Inc.(11)

 

Kentucky / Mining, Steel, Iron and Non-Precious Metals and Coal Production

 

Senior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)(4)

 

$

1,035

 

1,035

 

 

0.0%

 

Junior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)(4)

 

400

 

400

 

 

0.0%

 

Common Stock (1,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

1,435

 

 

0.0%

 

 

 

 

 

Total Control Investments

 

235,879

 

275,349

 

30.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate Investments (5.00% to 24.99% voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotronic NeuroNetwork

 

Michigan / Healthcare

 

Senior Secured Note (11.50% plus 1.00% PIK, due 2/21/2013)(3), (4)

 

26,227

 

26,227

 

27,014

 

3.0%

 

Preferred Stock Series A (9,925.455 shares)(13)

 

 

 

2,300

 

5,401

 

0.6%

 

Preferred Stock Series B (1,753.64 shares)(13)

 

 

 

579

 

1,360

 

0.1%

 

 

 

 

 

 

 

 

 

29,106

 

33,775

 

3.7%

 

Boxercraft Incorporated

 

Georgia / Textiles & Leather

 

Senior Secured Term Loan A (9.50%, due 9/16/2013)(3), (4)

 

2,950

 

2,611

 

2,884

 

0.3%

 

Senior Secured Term Loan B (10.00%, due 9/16/2013)(3), (4)

 

4,767

 

3,973

 

4,637

 

0.5%

 

Subordinated Secured Term Loan (12.00% plus 6.50% PIK, due 3/16/2014)(3)

 

7,601

 

6,295

 

7,520

 

0.8%

 

Preferred Stock (1,000,000 shares)

 

 

 

 

408

 

0.0%

 

Common Stock (10,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

12,879

 

15,449

 

1.6%

 

Smart, LLC(15)

 

New York / Diversified / Conglomerate Service

 

Membership Interest — Class B (1,218 units)

 

 

 

 

 

0.0%

 

Membership Interest — Class D (1 unit)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

0.0%

 

Sport Helmets Holdings, LLC(15)

 

New York / Personal & Nondurable Consumer Products

 

Revolving Line of Credit — $3,000 Commitment (5.75%, due 12/14/2013) (4), (26), (27)

 

 

 

 

0.0%

 

Senior Secured Term Loan A (4.06%, due 12/14/2013)(3), (4)

 

2,350

 

1,416

 

2,335

 

0.3%

 

Senior Secured Term Loan B (4.56%, due 12/14/2013)(3), (4)

 

7,331

 

5,495

 

7,331

 

0.8%

 

Senior Subordinated Debt — Series A (12.00% plus 3.00% PIK, due 6/14/2014)(3)

 

7,493

 

6,196

 

7,493

 

0.8%

 

Senior Subordinated Debt — Series B (10.00% plus 5.00% PIK, due 6/14/2014)(3)

 

1,409

 

1,044

 

1,409

 

0.2%

 

Common Stock (20,554 shares)

 

 

 

458

 

2,962

 

0.3%

 

 

 

 

 

 

 

 

 

14,609

 

21,530

 

2.4%

 

 

 

 

 

Total Affiliate Investments

 

56,594

 

70,754

 

7.8%

 

See notes to consolidated financial statements.

 

9



Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2011 and June 30, 2010
(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliate Investments (less than 5.00% of voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADAPCO, Inc.

 

Florida / Ecological

 

Common Stock (5,000 shares)

 

 

 

$

141

 

$

245

 

0.0%

 

 

 

 

 

 

 

 

 

141

 

245

 

0.0%

 

Aircraft Fasteners International, LLC

 

California / Machinery

 

Revolving Line of Credit — $500 Commitment (9.50%, due 11/01/2012)(4) , (26), (27)

 

$

 

 

 

0.0%

 

Senior Secured Term Loan (9.50%, due 11/01/2012)(3), (4)

 

3,799

 

3,799

 

3,799

 

0.4%

 

 

 

 

 

Junior Secured Term Loan (12.00% plus 6.00% PIK, due 5/01/2013)(3)

 

4,829

 

4,829

 

4,829

 

0.5%

 

 

 

 

 

Convertible Preferred Stock (32,500 units)

 

 

 

396

 

226

 

0.0%

 

 

 

 

 

 

 

 

 

9,024

 

8,854

 

0.9%

 

American Gilsonite Company

 

Utah / Specialty Minerals

 

Senior Subordinated Note (12.00% plus 2.50% PIK, due 12/10/2016) (4)

 

30,169

 

30,169

 

30,169

 

3.3%

 

Membership Interest in AGC/PEP, LLC (99.9999%)(16)

 

 

 

 

3,689

 

0.4%

 

 

 

 

 

 

 

 

 

30,169

 

33,858

 

3.7%

 

Arrowhead General Insurance Agency, Inc.(17)

 

California / Insurance

 

Junior Secured Term Loan (11.25%, due 9/30/2017) (4)

 

27,000

 

27,000

 

27,000

 

3.0%

 

 

 

 

 

 

 

 

 

27,000

 

27,000

 

3.0%

 

Caleel + Hayden, LLC (15)

 

Colorado / Personal & Nondurable Consumer Products

 

Membership Units (7,500 shares)

 

 

 

351

 

883

 

0.1%

 

Options in Mineral Fusion Natural Brands, LLC (11,662 options)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

351

 

883

 

0.1%

 

Cargo Airport Services USA, LLC

 

New York / Transportation

 

Revolving Line of Credit — $5,000 Commitment (11.50%, due 3/31/2012)(4) ,(26)

 

1,435

 

1,435

 

1,435

 

0.2%

 

Senior Secured Term Loan A (11.50%, due 3/31/2016) (4)

 

20,000

 

20,000

 

20,000

 

2.2%

 

Senior Secured Term Loan B (11.50%, due 3/31/2016) (4)

 

33,000

 

33,000

 

33,000

 

3.6%

 

Common Equity (1.5 units)

 

 

 

1,500

 

1,500

 

0.2%

 

 

 

 

 

 

 

 

 

55,935

 

55,935

 

6.2%

 

Clearwater Seafoods LP

 

Canada / Food Products

 

Second Lien Term Loan (12.00%, due 2/4/2016)

 

45,000

 

45,000 

 

45,000

 

4.9%

 

 

 

 

 

 

 

 

 

45,000

 

45,000

 

4.9%

 

The Copernicus Group, Inc.

 

North Carolina / Healthcare

 

Revolving Line of Credit — $1,000 Commitment (8.00%, due 2/9/2016)(4), (26)

 

 

 

 

0.0%

 

Senior Secured Term Loan A (8.00%, due 2/9/2016)(3), (4)

 

11,250

 

11,250

 

11,250

 

1.2%

 

Senior Secured Term Loan B (14.00%, due 2/9/2016) (4)

 

11,250

 

11,250

 

11,250

 

1.2%

 

Preferred Stock — Series A (1,000,000 shares)

 

 

 

67

 

853

 

0.1%

 

Preferred Stock — Series C (212,121 shares)

 

 

 

212

 

297

 

0.0%

 

 

 

 

 

 

 

 

 

22,779

 

23,650

 

2.5%

 

Deb Shops, Inc.(17)

 

Pennsylvania / Retail

 

Second Lien Debt (14.00% PIK, in non-accrual status effective 2/24/2009, due 10/23/2014)

 

19,501

 

14,606

 

1,372

 

0.2%

 

 

 

 

 

 

 

 

 

14,606

 

1,372

 

0.2%

 

Diamondback Operating, LP

 

Oklahoma / Oil & Gas Production

 

Net Profits Interest (15.00% payable on Equity distributions)(7)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

0.0%

 

See notes to consolidated financial statements.

 

10


 


Table of Contents

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2011 and June 30, 2010
(in thousands, except share data)

 

 

 

 

 

 

 

 

March 31, 2011

 

 

 Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliate Investments (less than 5.00% of voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Empire Today, LLC(17)

 

Illinois / Durable Consumer Products

 

Senior Secured Note (11.375%, due 2/1/2017)

 

$      7,500

 

$   7,422

 

$   7,500

 

0.8%

 

 

 

 

 

 

 

 

 

 

7,422

 

7,500

 

0.8%

 

 

Fairchild Industrial Products, Co.

 

North Carolina / Electronics

 

Preferred Stock — Class A (285.1 shares)

 

 

 

377

 

726

 

0.1%

 

 

 

Common Stock — Class B (28 shares)

 

 

 

211

 

445

 

0.0%

 

 

 

 

 

 

 

 

 

 

588

 

1,171

 

0.1%

 

 

H&M Oil & Gas, LLC

 

Texas / Oil & Gas Production

 

Senior Secured Note (13.00% plus 3.00% PIK, past due)(4)

 

60,470

 

60,470

 

42,825

 

4.7%

 

 

 

 

 

 

Net Profits Interest (8.00% payable on Equity distributions)(7)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

60,470

 

42,825

 

4.7%

 

 

Hoffmaster Group, Inc.

 

Wisconsin / Durable Consumer Products

 

Second Lien Term Loan (13.50%, due 6/2/2017)(3)

 

20,000

 

20,000

 

20,400

 

2.2%

 

 

 

 

 

 

 

 

 

 

20,000

 

20,400

 

2.2%

 

 

Hudson Products Holdings, Inc.(17)

 

Texas / Manufacturing

 

Senior Secured Term Loan (8.50%, due 8/24/2015)(3), (4)

 

6,365

 

5,809

 

5,453

 

0.6%

 

 

 

 

 

 

 

 

 

 

5,809

 

5,453

 

0.6%

 

 

ICON Health & Fitness, Inc(17)

 

Utah / Durable Consumer Products

 

Senior Secured Note (11.875%, due 10/15/2016) (3)

 

32,500

 

32,337

 

32,500

 

3.6%

 

 

 

 

 

 

 

 

 

 

32,337

 

32,500

 

3.6%

 

 

IEC Systems LP (“IEC”) /Advanced Rig Services LLC (“ARS”)

 

Texas / Oilfield Fabrication

 

IEC Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)(3), (4)

 

16,196

 

16,196

 

16,520

 

1.8%

 

 

 

 

 

ARS Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)(3), (4)

 

8,504

 

8,504

 

8,674

 

1.0%

 

 

 

 

 

 

 

 

 

 

24,700

 

25,194

 

2.8%

 

 

Jordan Healthcare Holdings, Inc.

 

Texas / Healthcare

 

Senior Subordinated Debt (12.00% plus 2.50% PIK, due 6/23/2016) (4)

 

15,372

 

15,372

 

15,372

 

1.7%

 

 

 

 

 

 

 

 

 

 

15,372

 

15,372

 

1.7%

 

 

Label Corp Holdings, Inc.(17)

 

Nebraska / Printing & Publishing

 

Senior Secured Term Loan (8.50%, due 8/08/2014)(3), (4)

 

5,749

 

5,272

 

5,651