EXHIBIT 99.1



The following press release was issued by Prospect Energy Corporation on
December 27, 2004.

Prospect Energy Corporation Announces Refinancing of Gas Solutions

NEW YORK - (Market Wire) - December 27, 2004 Prospect Energy Corporation
(NASDAQ: PSEC, the "Company") announced today that its portfolio investment Gas
Solutions II Ltd. ("Gas Solutions") has closed a senior secured loan of $12.5
million from First American Bank, SSB ("FAB"). The loan bears interest at LIBOR
plus 225 basis points, matures in 2010, begins straightline quarterly
amortization payments June 30, 2005 and benefits from standard covenant
protection for a loan of this type. The loan agreement and any other material
contracts will be filed with the Company's next 10-Q.

Gas Solutions used $9.3 million of the proceeds of the loan to repay debt owed
to the Company. The Company's investment in Gas Solutions now stands at $5.3
million of equity and $18.4 million of second-lien secured debt. In connection
with this refinancing, the Company has provided certain limited assurances to
FAB with respect to potential legal claims that might or could be asserted by
certain third parties; these assurances are backed by segregated funds in the
Company's custody account aggregating approximately $12.85 million. These funds
are to be released after the earlier of (1) dismissal of such claims, should any
be made, or (2) 91 days after the FAB loan is refinanced or otherwise repaid.

As previously disclosed, on December 6, 2004, Dallas Gas Partners, LP ("DGP")
served the Company with a complaint filed November 30, 2004 in the United States
District Court for the Southern District of Texas in Galveston. The Company
believes that the DGP complaint is frivolous and without merit. DGP alleges that
DGP was fraudulently induced to sign an agreement with the Company, that the
Company breached an alleged fiduciary duty to DGP, and that the Company
tortiously interfered with DGP's contract with Gas Solutions in connection with
the Company's agreement with DGP. DGP alleges it is the successor to MNW
Acquisition, LP ("MNW"), with whom the Company entered into two agreements. The
first agreement, a letter of intent dated September 3, 2004 under which Prospect
proposed to provide financing to MNW, was subject to Prospect's due diligence in
its sole discretion. Under the second agreement, on September 24, 2004, an
affiliate of the Company acquired MNW's rights to purchase Gas Solutions, the
Company paid DGP and affiliates more than $3 million, and each of the principals
of the predecessor general partner of DGP, constituting what we understand to be
all of the management and ownership interests in such predecessor, and all of
the limited partners of DGP, executed a release, forever discharging the Company
from any and all claims in connection with the Company's agreements with DGP. On
December 20, 2004, the Company filed a motion to dismiss, an answer, and
counterclaim to the DGP complaint denying all of DGP's material claims. The
Company intends to defend itself





against DGP's claims and prosecute the Company's counterclaims vigorously. While
the Company is confident of its defenses, the Company recognizes that the
results of litigation are inherently uncertain and unpredictable and, as a
result, the Company can offer no assurances with respect to any ultimate outcome
with respect to this matter.

Concluding a thorough screening process, the Company has identified a candidate
for chief financial officer and plans to announce an appointment within the next
two weeks. The Company's chief financial and compliance officer was placed on
administrative leave as of December 23, 2004. The company expects to engage an
outsourced compliance consulting firm to provide compliance-related services.

About Prospect Energy Corporation
---------------------------------
Prospect Energy Corporation is a financial services company that lends to and
invests in energy related businesses and assets. Prospect Energy's investment
objective is to generate both current income and long-term capital appreciation
through debt and equity investments.

This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties, including, but not limited to, statements as to
our future operating results; our business prospects and the prospects of our
portfolio companies; the impact of investments that we expect to make; the
dependence of our future success on the general economy and its impact on the
industries in which we invest; the ability of our portfolio companies to achieve
their objectives; our expected financings and investments; the adequacy of our
cash resources and working capital; and the timing of cash flows, if any, from
the operations of our portfolio companies.

We may use words such as "anticipates," "believes," "expects," "intends",
"will", "should," "may" and similar expressions to identify forward-looking
statements. Such statements are based on currently available operating,
financial and competitive information and are subject to various risks and
uncertainties that could cause actual results to differ materially from our
historical experience and our present expectations. Undue reliance should not be
placed on such forward-looking statements as such statements speak only as of
the date on which they are made. We do not undertake to update our
forward-looking statements unless required by law.

     Contact:
     Please send investment proposals to:
     Prospect Energy Corporation
     John Barry
     jbarry@prospectstreet.com
     212-448-0702

     Grier Eliasek
     grier@prospectstreet.com
     212-448-0702