10-Q 1 a12-8887_110q.htm 10-Q

 

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, 2012

 

 

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). oYes    o No

 

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, 2012 was 122,008,994.

 


 



 

PROSPECT CAPITAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2012
TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

Item 1.

FINANCIAL STATEMENTS

3

 

Consolidated Statements of Assets and Liabilities – March 31, 2012 (Unaudited) and
June 30, 2011 (Audited)

3

 

Consolidated Statements of Operations (Unaudited) - For the Three and Nine Months Ended
March 31, 2012 and 2011

4

 

Consolidated Statements of Changes in Net Assets (Unaudited) - For the Nine Months Ended
March 31, 2012 and 2011

5

 

Consolidated Statements of Cash Flows (Unaudited) - For the Nine Months Ended
March 31, 2012 and 2011

6

 

Consolidated Schedule of Investments – March 31, 2012 (Unaudited) and
June 30, 2011 (Audited)

7

 

Notes to Consolidated Financial Statements (Unaudited)

31

Item 2.

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

52

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

81

Item 4.

Controls and Procedures

81

 

 

 

PART II.

OTHER INFORMATION

81

Item 1.

Legal Proceedings

81

Item 1A.

Risk Factors

82

Item 2.

Unregistered Sales in Equity Securities and Use of Proceeds

83

Item 3.

Defaults Upon Senior Securities

83

Item 4.

Submission of Matters to a Vote of Security Holders

84

Item 5.

Other Information

84

Item 6.

Exhibits

84

 

Signatures

86

 

2



 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2012 and June 30, 2011

(in thousands, except share and per share data)

 

 

 

March 31,
2012

 

June 30,
2011

 

 

(Unaudited)

 

(Audited)

Assets (Note 4)

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

Control investments (net cost of $232,459 and $262,301, respectively)

 

$

323,786

 

 

$

310,072

 

Affiliate investments (net cost of $59,606 and $56,833, respectively)

 

67,581

 

 

72,337

 

Non-control/Non-affiliate investments (net cost of $1,363,798 and $1,116,600, respectively)

 

1,300,213

 

 

1,080,601

 

Total investments at fair value (net cost of $1,655,863 and $1,435,734, respectively, Note 3)

 

1,691,580

 

 

1,463,010

 

 

 

 

 

 

 

 

Investments in money market funds

 

58,025

 

 

59,903

 

Cash

 

34,978

 

 

1,492

 

Receivables for:

 

 

 

 

 

 

Interest, net

 

12,407

 

 

9,269

 

Other

 

1,686

 

 

267

 

Prepaid expenses

 

154

 

 

101

 

Deferred financing costs

 

17,179

 

 

15,275

 

Total Assets

 

1,816,009

 

 

1,549,317

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Credit facility payable (Note 4)

 

121,000

 

 

84,200

 

Senior Convertible Notes (Note 5)

 

317,500

 

 

322,500

 

Prospect Capital InterNotes® (Note 6)

 

5,465

 

 

 

Dividends payable

 

12,372

 

 

10,895

 

Due to Broker

 

26,569

 

 

 

Due to Prospect Administration (Note 10)

 

362

 

 

212

 

Due to Prospect Capital Management (Note 10)

 

4,315

 

 

7,706

 

Accrued expenses

 

6,166

 

 

5,876

 

Other liabilities

 

3,454

 

 

3,571

 

Total Liabilities

 

497,203

 

 

434,960

 

Net Assets

 

$

1,318,806

 

 

$

1,114,357

 

 

 

 

 

 

 

 

Components of Net Assets

 

 

 

 

 

 

Common stock, par value $0.001 per share (200,000,000 common shares authorized; 121,923,931 and 107,606,690 issued and outstanding, respectively) (Note 7)

 

$

122

 

 

$

108

 

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

 

1,348,996

 

 

1,196,741

 

Distributions in excess of net investment income

 

(1,602

)

 

(21,638

)

Accumulated net realized losses on investments

 

(64,427

)

 

(88,130

)

Net unrealized appreciation on investments

 

35,717

 

 

27,276

 

Net Assets

 

$

1,318,806

 

 

$

1,114,357

 

 

 

 

 

 

 

 

Net Asset Value Per Share

 

$

10.82

 

 

$

10.36

 

 

See notes to consolidated financial statements.

 

3


 


 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three and Nine Months Ended March 31, 2012 and 2011
(in thousands, except share and per share data)
(Unaudited)

 

 

 

For The Three Months Ended

 

 

For The Nine Months Ended

 

 

March 31,

 

 

March 31,

 

 

2012

 

 

2011

 

 

2012

 

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income

 

 

 

 

 

 

 

 

 

 

 

Interest Income: (Note 3)

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

$

32,966

 

 

$

5,180

 

 

$

45,546

 

 

$

15,798

Affiliate investments

 

2,378

 

 

3,049

 

 

7,179

 

 

9,523

Non-control/Non-affiliate investments

 

37,602

 

 

26,275

 

 

107,636

 

 

65,466

Total interest income

 

72,946

 

 

34,504

 

 

160,361

 

 

90,787

 

 

 

 

 

 

 

 

 

 

 

 

Dividend income:

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

5,474

 

 

2,760

 

 

29,819

 

 

6,810

Non-control/Non-affiliate investments

 

2,002

 

 

 

 

4,843

 

 

1,508

Money market funds

 

1

 

 

3

 

 

2

 

 

10

Total dividend income

 

7,477

 

 

2,763

 

 

34,664

 

 

8,328

 

 

 

 

 

 

 

 

 

 

 

 

Other income: (Note 8)

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

13,768

 

 

2

 

 

14,386

 

 

1,787

Affiliate investments

 

11

 

 

22

 

 

85

 

 

176

Non-control/Non-affiliate investments

 

1,421

 

 

7,282

 

 

8,732

 

 

12,007

Total other income

 

15,200

 

 

7,306

 

 

23,203

 

 

13,970

Total Investment Income

 

95,623

 

 

44,573

 

 

218,228

 

 

113,085

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Investment advisory fees:

 

 

 

 

 

 

 

 

 

 

 

Base management fee (Note 10)

 

8,949

 

 

6,037

 

 

25,985

 

 

15,216

Income incentive fee (Note 10)

 

14,518

 

 

5,997

 

 

30,614

 

 

16,015

Total investment advisory fees

 

23,467

 

 

12,034

 

 

56,599

 

 

31,231

 

 

 

 

 

 

 

 

 

 

 

 

Interest and credit facility expenses

 

9,655

 

 

5,660

 

 

28,374

 

 

10,182

Legal fees

 

256

 

 

283

 

 

1,198

 

 

763

Valuation services

 

308

 

 

262

 

 

916

 

 

711

Audit, compliance and tax related fees

 

276

 

 

168

 

 

1,141

 

 

649

Allocation of overhead from Prospect Administration (Note 10)

 

2,910

 

 

1,669

 

 

5,143

 

 

3,309

Insurance expense

 

69

 

 

74

 

 

168

 

 

217

Directors’ fees

 

68

 

 

64

 

 

195

 

 

191

Other general and administrative expenses

 

542

 

 

403

 

 

2,037

 

 

1,801

Total Operating Expenses

 

37,551

 

 

20,617

 

 

95,771

 

 

49,054

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

58,072

 

 

23,956

 

 

122,457

 

 

64,031

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain on investments (Note 3)

 

24,812

 

 

2,078

 

 

23,703

 

 

7,094

Net change in unrealized appreciation /depreciation on investments (Note 3)

 

(32,675)

 

 

7,725

 

 

8,441

 

 

20,154

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Resulting from Operations

 

$

50,209

 

 

$

33,759

 

 

$

154,601

 

 

$

91,279

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.44

 

 

$

0.38

 

 

$

1.39

 

 

$

1.11

Dividends declared per share

 

$

0.30

 

 

$

0.30

 

 

$

0.91

 

 

$

0.91

 

See notes to consolidated financial statements.

 

4



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For The Nine Months Ended March 31, 2012 and 2011
(in thousands, except share data)
(Unaudited)

 

 

 

For The Nine Months Ended March 31,

 

 

2012

 

 

2011

 

Increase in Net Assets from Operations: 

 

 

 

 

 

 

Net investment income

 

$

122,457

 

 

$

64,031

 

Net realized gain on investments

 

23,703

 

 

7,094

 

Net change in unrealized appreciation on investments

 

8,441

 

 

20,154

 

Net Increase in Net Assets Resulting from Operations

 

154,601

 

 

91,279

 

 

 

 

 

 

 

 

Dividends to Shareholders

 

(102,421)

 

 

(75,541)

 

 

 

 

 

 

 

 

Capital Share Transactions: 

 

 

 

 

 

 

Proceeds from capital shares sold, net of underwriting costs

 

144,900

 

 

178,317

 

Less: Offering costs of public share offerings

 

(524)

 

 

(724)

 

Reinvestment of dividends

 

7,893

 

 

8,166

 

Net Increase in Net Assets Resulting from Capital Share Transactions 

 

152,269

 

 

185,759

 

 

 

 

 

 

 

 

Total Increase in Net Assets 

 

204,449

 

 

201,497

 

Net assets at beginning of period

 

1,114,357

 

 

711,424

 

Net Assets at End of Period 

 

$

1,318,806

 

 

$

912,921

 

 

 

 

 

 

 

 

Capital Share Activity: 

 

 

 

 

 

 

Shares sold

 

13,500,000

 

 

18,494,476

 

Shares issued through reinvestment of dividends

 

817,241

 

 

777,473

 

Net increase in capital share activity

 

14,317,241

 

 

19,271,949

 

Shares outstanding at beginning of period

 

107,606,690

 

 

69,086,862

 

 

 

 

 

 

 

 

Shares Outstanding at End of Period 

 

121,923,931

 

 

88,358,811

 

 

See notes to consolidated financial statements.

 

5



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended March 31, 2012 and 2011
(in thousands, except share data)
(Unaudited)

 

 

 

For The Nine Months Ended March 31,

 

 

 

 

2012

 

 

 

2011

 

Cash Flows from Operating Activities: 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

154,601

 

 

$

91,279

 

Net realized gain on investments

 

(23,703

)

 

(7,094

)

Net change in unrealized appreciation on investments

 

(8,441

)

 

(20,154

)

Accretion of purchase discount on investments

 

(3,741

)

 

(10,874

)

Amortization of deferred financing costs

 

7,174

 

 

3,628

 

 

 

 

 

 

 

 

Change in operating assets and liabilities 

 

 

 

 

 

 

Payments for purchases of investments

 

(542,846

)

 

(632,526

)

Proceeds from sale of investments and collection of investment principal

 

354,660

 

 

214,124

 

Net decrease (increase) of investments in money market funds

 

1,878

 

 

(26,048

)

Increase in interest receivable

 

(7,637

)

 

(13,882

)

Increase in dividends receivable

 

(75

)

 

(59

)

Increase in other receivables

 

(1,344

)

 

(142

)

Increase in prepaid expenses

 

(53

)

 

(125

)

Decrease in other assets

 

 

 

534

 

Increase in due to broker

 

26,569

 

 

 

Increase in due to Prospect Administration

 

150

 

 

1,162

 

Decrease in due to Prospect Capital Management

 

(3,391

)

 

(2,653

)

Increase in payable for securities purchased

 

 

 

31,984

 

Increase in accrued expenses

 

290

 

 

1,262

 

(Decrease) increase in other liabilities

 

(117

)

 

1,184

 

Net Cash Used In Operating Activities 

 

(46,026

)

 

(368,400

)

 

 

 

 

 

 

 

Cash Flows from Financing Activities: 

 

 

 

 

 

 

Borrowings under Senior Convertible Notes (Note 5)

 

 

 

322,500

 

Repurchases under Senior Convertible Notes (Note 5)

 

(5,000

)

 

 

Borrowings under credit facility (Note 4)

 

615,800

 

 

259,100

 

Principal payments under credit facility (Note 4)

 

(579,000

)

 

(311,900

)

Borrowings under Prospect Capital InterNotes® (Note 6)

 

5,465

 

 

 

Financing costs paid and deferred

 

(9,078

)

 

(12,235

)

Proceeds from issuance of common stock, net of underwriting costs

 

144,900

 

 

178,317

 

Offering costs from issuance of common stock

 

(524

)

 

(724

)

Dividends paid

 

(93,051

)

 

(65,344

)

Net Cash Provided By Financing Activities

 

79,512

 

 

369,714

 

 

 

 

 

 

 

 

Total Increase in Cash 

 

33,486

 

 

1,314

 

Cash balance at beginning of period

 

1,492

 

 

1,081

 

Cash Balance at End of Period 

 

$

34,978

 

 

$

2,395

 

 

 

 

 

 

 

 

Cash Paid For Interest 

 

$

19,607

 

 

$

1,377

 

 

 

 

 

 

 

 

Non-Cash Financing Activity: 

 

 

 

 

 

 

Payment-in-kind interest

 

$

4,499

 

 

$

8,510

 

Amount of shares issued in connection with dividend reinvestment plan

 

$

7,893

 

 

$

8,166

 

 

See notes to consolidated financial statements.

 

6



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2012 and June 30, 2011

(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

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. (27)

 

Pennsylvania / Property Management

 

Senior Secured Term Loan (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor), due 6/30/2015)(3), (4)

 

$  29,500

 

$  29,500

 

$  29,500

 

2.2%

 

 

 

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

 

12,500

 

12,500

 

12,500

 

1.0%

 

 

 

Convertible Preferred Stock (9,919.684 shares)

 

 

 

9,920

 

5,803

 

0.4%

 

 

 

Common Stock (100 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

51,920

 

47,803

 

3.6%

 

Ajax Rolled Ring & Machine, Inc.

 

South Carolina / Manufacturing

 

Senior Secured Note — Tranche A (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 4/01/2013)(3), (4)

 

20,277

 

20,277

 

20,277

 

1.5%

 

 

 

Subordinated Secured Note — Tranche B (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor) plus 6.00% PIK, due 4/01/2013)(3), (4)

 

15,035

 

15,035

 

15,035

 

1.1%

 

 

 

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

 

 

 

6,057

 

11,212

 

0.9%

 

 

 

Unrestricted Common Stock (6 shares)

 

 

 

 

11

 

0.0%

 

 

 

 

 

 

 

 

 

41,369

 

46,535

 

3.5%

 

AWCNC, LLC(19)

 

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% (PRIME + 1.75%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4), (25)

 

1,000

 

945

 

936

 

0.1%

 

 

Senior Secured Term Loan B (8.50% (PRIME + 5.25%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4)

 

1,612

 

1,500

 

 

0.0%

 

 

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)

 

9,259

 

707

 

 

0.0%

 

 

Common Stock (100 shares)(21)

 

 

 

 

 

0.0%

 

 

Warrants (33,750 warrants)(21)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

3,152

 

936

 

0.1%

 

C&J Cladding LLC

 

Texas / Metal Services and Minerals

 

Membership Interest (400 units)(22)

 

 

 

580

 

5,231

 

0.4%

 

 

 

 

 

 

 

 

 

580

 

5,231

 

0.4%

 

 

See notes to consolidated financial statements.

 

 

7


 

 


 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy Solutions Holdings, Inc.(8)

 

Texas / Gas Gathering and Processing

 

Senior Secured Note (18.00%, due 12/11/2016) (3)

 

$   25,000

 

$  25,000

 

$  25,000

 

1.8%

 

 

Junior Secured Note (18.00%, due 12/12/2016) (3)

 

12,000

 

12,000

 

12,000

 

0.9%

 

 

Senior Secured Note to Vessel Holdings LLC (18.00%, due 12/12/2016)

 

3,500

 

3,500

 

3,500

 

0.3%

 

 

Subordinated Secured Note to Freedom Marine Holdings, LLC (12.00% (LIBOR + 6.11% with 5.89% LIBOR floor) plus 4.00% PIK, in non-accrual status effective 10/1/2010, due 12/31/2011)

 

13,219

 

12,504

 

3,549

 

0.3%

 

 

Senior Secured Debt to Yatesville Coal Holdings, Inc. (Non-accrual status effective 1/01/2009, past due)

 

1,035

 

1,035

 

 

0.0%

 

 

Junior Secured Debt to Yatesville Coal Holdings, Inc. (Non-accrual status effective 1/01/2009, past due)

 

414

 

414

 

 

0.0%

 

 

 

 

 

Common Stock (100 shares)(3)

 

 

 

8,792

 

122,211

 

8.7%

 

 

 

 

 

 

 

 

 

63,245

 

166,260

 

12.6%

 

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 – 12/31/2013) (10)

 

2,581

 

2,580

 

1,106

 

0.1%

 

 

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

 

1,170

 

1,170

 

 

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)

 

300

 

 

 

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)

 

11,520

 

11,520

 

 

0.0%

 

 

Preferred Stock — Series A (10 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

Common Stock (49 shares)

 

 

 

679

 

 

0.0%

 

 

 

 

 

 

 

 

 

15,949

 

1,106

 

0.1%

 

Manx Energy, Inc. (“Manx”)(12)

 

Kansas / Oil & Gas Production

 

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

 

2,388

 

2,000

 

 

0.0%

 

 

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

 

7,165

 

5,991

 

 

0.0%

 

 

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

 

3,550

 

3,550

 

 

0.0%

 

 

Manx — Preferred Stock (6,635 shares)

 

 

 

6,307

 

 

0.0%

 

 

Manx — Common Stock (17,082 shares)

 

 

 

1,170

 

 

0.0%

 

 

 

 

 

 

 

 

 

19,018

 

 

0.0%

 

NMMB Holdings, Inc. (24)

New York / Media

 

Senior Term Loan (14.00%, due 5/6/2016)

 

21,700

 

21,700

 

21,700

 

1.6%

 

 

Senior Subordinated Term Loan (15.00%, due 5/6/2016)

 

2,800

 

2,800

 

2,800

 

0.2%

 

 

Series A Preferred Stock (4,400 shares)

 

 

 

4,400

 

947

 

0.1%

 

 

 

 

 

 

 

 

 

28,900

 

25,447

 

1.9%

 

NRG Manufacturing, Inc.

 

Texas / Manufacturing

 

Escrow Receivable

 

11,492

 

 

6,302

 

0.5%

 

 

 

 

 

 

 

 

 

 

6,302

 

0.5%

 

 

 

8


 

 


 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nupla Corporation

 

California / Home & Office Furnishings, Housewares & Durable

 

Revolving Line of Credit — $2,000 Commitment (7.25% (PRIME + 4.00%), plus 2.00% default interest, due 9/04/2012)(4), (25)

 

$  1,093

 

$ 1,063

 

$ 1,093

 

0.1%

 

 

 

Senior Secured Term Loan A (8.00% (PRIME + 4.75%) plus 2.00% default interest, due 9/04/2012)(4)

 

4,130

 

494

 

4,130

 

0.3%

 

 

 

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

 

4,373

 

 

500

 

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%

 

 

 

 

 

 

 

 

 

1,557

 

5,723

 

0.4%

 

R-V Industries, Inc.

 

Pennsylvania / Manufacturing

 

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

 

 

 

1,682

 

4,950

 

0.4%

 

 

 

Common Stock (545,107 shares)

 

 

 

5,087

 

13,493

 

1.0%

 

 

 

 

 

 

 

 

 

6,769

 

18,443

 

1.4%

 

 

 

 

 

Total Control Investments

 

232,459

 

323,786

 

24.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate Investments (5.00% to 24.99% voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BNN Holdings Corp., (f/k/a Biotronic NeuroNetwork)

 

Michigan / Healthcare

 

Senior Secured Note (11.50% (LIBOR + 7.00% with 4.50% LIBOR floor) plus 1.00% PIK, due 2/21/2013)(3), (4)

 

26,227

 

26,227

 

26,227

 

2.0%

 

 

 

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

 

 

 

2,300

 

315

 

0.0%

 

 

 

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

 

 

 

579

 

79

 

0.0%

 

 

 

 

 

 

 

 

 

29,106

 

26,621

 

2.0%

 

Boxercraft

Incorporated

 

Georgia / Textiles & Leather

 

Senior Secured Term Loan A (9.50% (LIBOR + 6.50% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)

 

1,919

 

1,770

 

1,919

 

0.1%

 

 

 

Senior Secured Term Loan B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)

 

4,712

 

4,200

 

4,712

 

0.4%

 

 

 

Senior Secured Term Loan C (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)

 

2,283

 

2,283

 

2,283

 

0.2%

 

 

 

Subordinated Secured Term Loan (12.00% plus 3.00% PIK, due 3/16/2014)(3)

 

7,906

 

6,895

 

7,906

 

0.6%

 

 

 

Preferred Stock (1,000,000 shares)

 

 

 

 

1,112

 

0.1%

 

 

 

Common Stock (10,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

15,148

 

17,932

 

1.4%

 

Smart, LLC(14)

 

New York / Diversified / Conglomerate Service

 

Membership Interest

 

 

 

 

35

 

0.0%

 

 

 

 

 

 

 

 

 

 

35

 

0.0%

 

 

See notes to consolidated financial statements.

 

 

9


 

 


 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)

March 31, 2012 and June 30, 2011

(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

 

Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of
Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate Investments (5.00% to 24.99% voting control)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sport Helmets Holdings, LLC(14)

 

New York / Personal & Nondurable Consumer Products

 

Revolving Line of Credit — $3,000 Commitment (4.08% (LIBOR + 3.50%), due 12/14/2013) (4), (25), (26)

 

$      —

 

$      —

 

$      —

 

0.0%

 

 

 

Senior Secured Term Loan A (4.08% (LIBOR + 3.50%), due 12/14/2013)(3), (4)

 

1,394

 

968

 

1,376

 

0.1%

 

 

 

Senior Secured Term Loan B (4.58%, (LIBOR + 4.00%) due 12/14/2013)(3), (4)

 

7,256

 

6,015

 

7,124

 

0.5%

 

 

 

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

 

7,724

 

6,719

 

7,724

 

0.6%

 

 

 

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

 

1,482

 

1,191

 

1,482

 

0.1%

 

 

 

Common Stock (20,974 shares)

 

 

 

459

 

5,287

 

0.4%

 

 

 

 

 

 

 

 

 

15,352

 

22,993

 

1.7%

 

 

 

 

 

Total Affiliate Investments

 

59,606

 

67,581

 

5.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADAPCO, Inc.

 

Florida / Ecological

 

Common Stock (5,000 shares)

 

 

 

141

 

216

 

0.0%

 

 

 

 

 

 

 

 

 

141

 

216

 

0.0%

 

Aircraft Fasteners International, LLC

 

California / Machinery

 

Convertible Preferred Stock (32,500 units)

 

 

 

396

 

465

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

396

 

465

 

0.0%

 

American Gilsonite Company

 

Utah / Specialty Minerals

 

Senior Subordinated Note (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/10/2016)(3), (4)

 

30,232

 

30,232

 

30,232

 

2.3%

 

 

 

Senior Subordinated Note (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/10/2016)(4)

 

7,500

 

7,500

 

7,500

 

0.6%

 

 

 

Membership Interest in AGC/PEP, LLC (99.9999%)(15)

 

 

 

 

5,059

 

0.4%

 

 

 

 

 

 

 

 

 

37,732

 

42,791

 

3.3%

 

Apidos CLO VIII, Ltd

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

 

18,543

 

20,042

 

1.5%

 

 

 

 

 

 

 

 

 

18,543

 

20,042

 

1.5%

 

Babson CLO Ltd 2011-I

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

 

32,116

 

32,331

 

2.5%

 

 

 

 

 

 

 

 

 

32,116

 

32,331

 

2.5%

 

Babson CLO Ltd 2012-IA

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

 

26,569

 

26,569

 

2.0%

 

 

 

 

 

 

 

 

 

26,569

 

26,569

 

2.0%

 

Blue Coat Systems, Inc. (4)

Massachusetts / Software & Computer Services

 

Second Lien Term Loan (11.50% (LIBOR + 10.00% with 1.50% LIBOR floor), due 8/15/2018)

 

25,000

 

24,260

 

24,873

 

1.9%

 

 

 

 

 

 

 

 

24,260

 

24,873

 

1.9%

 

 

See notes to consolidated financial statements.

 

 

10


 

 


 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Byrider Systems Acquisition Corp.

 

Indiana / Auto Finance

 

Senior Subordinated Notes (12.00% plus 2.00% PIK, due 11/3/2016) (3)

 

$    25,424

 

$ 25,424

 

$  22,843

 

1.7%

 

 

 

 

 

 

 

 

 

25,424

 

22,843

 

1.7%

 

Caleel + Hayden, LLC (14)

 

Colorado / Personal & Nondurable Consumer Products

 

Membership Units (7,500 shares)

 

 

 

351

 

925

 

0.1%

 

 

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

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

351

 

925

 

0.1%

 

Capstone Logistics, LLC (4)

 

Georgia / Commercial Services

 

Senior Secured Term Loan A (7.50% (LIBOR + 5.50% with 2.00% LIBOR floor), due 9/16/2016)

 

33,942

 

33,942

 

33,942

 

2.6%

 

 

Senior Secured Term Loan B (13.50% (LIBOR + 11.50% with 2.00% LIBOR floor), due 9/16/2016)(3)

 

41,625

 

41,625

 

41,625

 

3.2%

 

 

 

 

 

 

 

 

 

75,567

 

75,567

 

5.8%

 

Cargo Airport Services USA, LLC

 

New York / Transportation

 

Senior Secured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 3/31/2016) (3), (4)

 

49,552

 

49,522

 

49,522

 

3.8%

 

 

Common Equity (1.5 units)

 

 

 

1,639

 

2,055

 

0.2%

 

 

 

 

 

 

 

 

 

51,161

 

51,577

 

4.0%

 

CIFC Funding 2011-I, Ltd. (4)

 

Cayman Islands / Diversified Financial Services

 

Secured Class D Notes (5.79% (LIBOR + 5.00%), due 1/19/2023)

 

19,000

 

14,720

 

16,995

 

1.3%

 

 

Unsecured Class E Notes (7.79% (LIBOR + 7.00%), due 1/19/2023)

 

15,400

 

12,444

 

13,667

 

1.0%

 

 

 

 

 

 

 

 

 

27,164

 

30,662

 

2.3%

 

Clearwater Seafoods LP

 

Canada / Food Products

 

Second Lien Term Loan (12.00%, due 2/4/2016) (3)

 

54,500

 

54,500

 

54,500

 

4.1%

 

 

 

 

 

 

 

 

 

54,500

 

54,500

 

4.1%

 

The Copernicus Group, Inc.

 

North Carolina / Healthcare

 

Revolving Line of Credit — $1,000 Commitment (7.50% (LIBOR + 4.50% with 3.00% LIBOR floor), due 2/9/2016)(4), (25)

 

 

 

0.0%

 

 

Senior Secured Term Loan A (7.50% (LIBOR + 4.50% with 3.00% LIBOR floor), due 2/9/2016)(3), (4)

 

10,125

 

10,125

 

10,125

 

0.8%

 

 

Senior Secured Term Loan B (13.50% (LIBOR + 10.50% with 3.00% LIBOR floor), due 2/9/2016) (3), (4)

 

11,250

 

11,250

 

11,250

 

0.9%

 

 

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

 

 

 

67

 

1,533

 

0.1%

 

 

Preferred Stock — Series C (212,121 shares)

 

 

 

212

 

1,038

 

0.1%

 

 

 

 

 

 

 

 

 

21,654

 

23,946

 

1.9%

 

CRT MIDCO, LLC

 

Wisconsin / Media

 

Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 6/30/2017)(3), (4)

 

73,875

 

73,875

 

71,921

 

5.5%

 

 

 

 

 

 

 

 

 

73,875

 

71,921

 

5.5%

 

Diamondback Operating, LP

 

Oklahoma / Oil & Gas Production

 

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

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

0.0%

 

Empire Today, LLC(16)

 

Illinois / Durable Consumer Products

 

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

 

15,700

 

15,236

 

15,700

 

1.2%

 

 

 

 

 

 

 

 

 

15,236

 

15,700

 

1.2%

 

Fairchild Industrial Products, Co.

 

North Carolina / Electronics

 

Escrow Receivable

 

177

 

 

142

 

0.0%

 

 

 

 

 

 

 

 

 

 

142

 

0.0%

 

 

See notes to consolidated financial statements.

 

 

11



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

March 31, 2012 (Unaudited)

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fischbein, LLC

 

North Carolina / Machinery

 

Senior Subordinated Debt (12.00% plus 2.00% PIK, due 10/31/2016)

 

 $   3,396

 

$   3,396

 

$   3,396

 

0.3%

 

 

 

 

 

Escrow ReceivableEscrowEscrow

 

141

 

 

1,151

 

0.1%

 

 

 

 

 

Membership Class A (875,000 units)

 

 

 

875

 

1,823

 

0.1%

 

 

 

 

 

 

 

 

 

4,271

 

6,370

 

0.5%

 

Focus Brands, Inc. (4)

 

Georgia / Consumer Services

 

Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018)

 

15,000

 

14,703

 

14,703

 

1.1%

 

 

 

 

 

 

 

 

 

14,703

 

14,703

 

1.1%

 

H&M Oil & Gas, LLC

 

Texas / Oil & Gas Production

 

Senior Secured Note (13.00% (LIBOR + 7.50% with 5.50% LIBOR floor) plus 3.00% PIK, plus 2.00% default interest, in non-accrual status effective 01/01/2011, past due)(4)

 

    62,340

 

  60,018

 

  30,271

 

2.3%

 

 

 

 

 

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

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

60,018

 

30,271

 

2.3%

 

Hi-Tech Testing Service, Inc. and Wilson Inspection X-Ray Services, Inc.

 

Texas / O