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 September 30, 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. xYes    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 November 9, 2011 was 109,506,161.

 

 



 

PROSPECT CAPITAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2011
TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

PART I.

FINANCIAL INFORMATION

 

3

Item 1.

FINANCIAL STATEMENTS

 

3

 

Consolidated Statements of Assets and Liabilities – September 30, 2011 (Unaudited) and June 30, 2011 (Audited)

 

3

 

Consolidated Statements of Operations (Unaudited) - For the Three Months Ended September 30, 2011 and 2010

 

4

 

Consolidated Statements of Changes in Net Assets (Unaudited) - For the Three Months Ended September 30, 2011 and 2010

 

5

 

Consolidated Statements of Cash Flows (Unaudited) - For the Three Months Ended September 30, 2011 and 2010

 

6

 

Consolidated Schedule of Investments – September 30, 2011 (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

 

51

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

73

Item 4.

Controls and Procedures

 

73

 

 

 

 

PART II.

OTHER INFORMATION

 

74

Item 1.

Legal Proceedings

 

74

Item 1A.

Risk Factors

 

74

Item 2.

Unregistered Sales in Equity Securities and Use of Proceeds

 

74

Item 3.

Defaults Upon Senior Securities

 

74

Item 4.

Submission of Matters to a Vote of Security Holders

 

75

Item 5.

Other Information

 

75

Item 6.

Exhibits

 

75

 

Signatures

 

76

 

2



 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

September 30, 2011 and June 30, 2011

(in thousands, except share and per share data)

 

 

 

September 30,
2011

 

June 30,
2011

 

 

(Unaudited)

 

(Audited)

Assets (Note 4)

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

Control investments (net cost of $259,272 and $262,301, respectively)

 

  $

329,536

 

 

  $

310,072

 

Affiliate investments (net cost of $59,321 and $56,833, respectively)

 

72,410

 

 

72,337

 

Non-control/Non-affiliate investments (net cost of $1,279,983 and $1,116,600, respectively)

 

1,250,535

 

 

1,080,601

 

Total investments at fair value (net cost of $1,598,576 and $1,435,734, respectively, Note 3)

 

1,652,481

 

 

1,463,010

 

 

 

 

 

 

 

 

Investments in money market funds

 

48,218

 

 

59,903

 

Cash

 

1,975

 

 

1,492

 

Receivables for:

 

 

 

 

 

 

Interest, net

 

10,099

 

 

9,269

 

Other

 

38

 

 

267

 

Prepaid expenses

 

118

 

 

101

 

Deferred financing costs

 

14,618

 

 

15,275

 

Total Assets

 

1,727,547

 

 

1,549,317

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Credit facility payable (Note 4)

 

233,500

 

 

84,200

 

Senior convertible notes (Note 5)

 

322,500

 

 

322,500

 

Dividends payable

 

11,087

 

 

10,895

 

Due to Prospect Administration (Note 9)

 

228

 

 

212

 

Due to Prospect Capital Management (Note 9)

 

12,109

 

 

7,706

 

Accrued expenses

 

6,853

 

 

5,876

 

Other liabilities

 

2,494

 

 

3,571

 

Total Liabilities

 

588,771

 

 

434,960

 

Net Assets

 

  $

1,138,776

 

 

  $

1,114,357

 

 

 

 

 

 

 

 

Components of Net Assets

 

 

 

 

 

 

Common stock, par value $0.001 per share (200,000,000 and 100,000,000 common shares authorized, respectively; 109,417,083 and 107,606,690 issued and outstanding, respectively) (Note 6)

 

  $

109

 

 

  $

108

 

Paid-in capital in excess of par (Note 6)

 

1,214,480

 

 

1,196,741

 

Distributions in excess of net investment income

 

(26,982

)

 

(21,638

)

Accumulated realized losses on investments

 

(102,737

)

 

(88,130

)

Unrealized appreciation on investments

 

53,906

 

 

27,276

 

Net Assets

 

  $

1,138,776

 

 

  $

1,114,357

 

 

 

 

 

 

 

 

Net Asset Value Per Share

 

  $

10.41

 

 

  $

10.36

 

 

See notes to consolidated financial statements.

 

3



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended September 30, 2011 and 2010
(in thousands, except share and per share data)
(Unaudited)

 

 

 

For Three Months Ended September 30,

 

 

 

 

 

2011

 

2010

 

 

 

 

 

Investment Income

 

 

 

 

 

 

Interest income: (Note 3)

 

 

 

 

 

 

Control investments

 

$

6,165

 

 

$

5,189

 

Affiliate investments

 

2,402

 

 

2,950

 

Non-control/Non-affiliate investments

 

33,320

 

 

20,782

 

Total interest income

 

41,887

 

 

28,921

 

 

 

 

 

 

 

 

Dividend income:

 

 

 

 

 

 

Control investments

 

6,700

 

 

1,750

 

Non-control/Non-affiliate investments

 

849

 

 

440

 

Money market funds

 

1

 

 

4

 

Total dividend income

 

7,550

 

 

2,194

 

 

 

 

 

 

 

 

Other income: (Note 7)

 

 

 

 

 

 

Control/affiliate investments

 

6

 

 

1,771

 

Affiliate investments

 

61

 

 

147

 

Non-control/Non-affiliate investments

 

5,838

 

 

2,179

 

Total other income

 

5,905

 

 

4,097

 

Total Investment Income

 

55,342

 

 

35,212

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

Investment advisory fees:

 

 

 

 

 

 

Base management fee (Note 9)

 

8,211

 

 

4,276

 

Income incentive fee (Note 9)

 

6,969

 

 

5,249

 

Total investment advisory fees

 

15,180

 

 

9,525

 

 

 

 

 

 

 

 

Interest and credit facility expenses

 

8,960

 

 

2,261

 

Legal fees

 

432

 

 

310

 

Valuation services

 

302

 

 

217

 

Audit, compliance and tax related fees

 

340

 

 

216

 

Allocation of overhead from Prospect Administration (Note 9)

 

1,116

 

 

800

 

Insurance expense

 

79

 

 

71

 

Directors’ fees

 

64

 

 

64

 

Other general and administrative expenses

 

992

 

 

753

 

Total Operating Expenses

 

27,465

 

 

14,217

 

 

 

 

 

 

 

 

Net Investment Income

 

27,877

 

 

20,995

 

 

 

 

 

 

 

 

Net realized (loss) gain on investments (Note 3)

 

(14,607

)

 

527

 

Net change in unrealized appreciation on investments (Note 3)

 

26,630

 

 

4,058

 

Net Increase in Net Assets Resulting from Operations

 

$

39,900

 

 

$

25,580

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations per share

 

 

 

 

 

 

(Note 8 and Note 12)

 

$

0.37

 

 

$

0.34

 

Dividends declared per share

 

$

0.30

 

 

$

0.30

 

 

See notes to consolidated financial statements.

 

4



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For The Three Months Ended September 30, 2011 and 2010
(in thousands, except share data)
(Unaudited)

 

 

 

For The Three Months Ended September 30,

 

 

 

 

2011

 

 

 

2010

 

Increase in Net Assets from Operations:

 

 

 

 

 

 

Net investment income

 

$

27,877

 

 

$

20,995

 

Net realized (loss) gain on investments

 

(14,607

)

 

527

 

Net change in unrealized appreciation on investments

 

26,630

 

 

4,058

 

Net Increase in Net Assets Resulting from Operations

 

39,900

 

 

25,580

 

 

 

 

 

 

 

 

Dividends to Shareholders

 

(33,221

)

 

(22,838

)

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

Proceeds from capital shares sold, net of underwriting costs

 

15,060

 

 

86,435

 

Less: Offering costs of public share offerings

 

(137

)

 

(308

)

Reinvestment of dividends

 

2,817

 

 

2,531

 

Net Increase in Net Assets Resulting from Capital Share Transactions

 

17,740

 

 

88,658

 

 

 

 

 

 

 

 

Total Increase in Net Assets

 

24,419

 

 

91,400

 

Net assets at beginning of period

 

1,114,357

 

 

711,424

 

Net Assets at End of Period

 

$

1,138,776

 

 

$

802,824

 

 

 

 

 

 

 

 

Capital Share Activity:

 

 

 

 

 

 

Shares sold

 

1,500,000

 

 

9,051,000

 

Shares issued through reinvestment of dividends

 

310,393

 

 

263,501

 

Net increase in capital share activity

 

1,810,393

 

 

9,314,501

 

Shares outstanding at beginning of period

 

107,606,690

 

 

69,086,862

 

 

 

 

 

 

 

 

Shares Outstanding at End of Period

 

109,417,083

 

 

78,401,363

 

 

See notes to consolidated financial statements.

 

5



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended September 30, 2011 and 2010
(in thousands, except share data)
(Unaudited)

 

 

 

For The Three Months Ended September 30,

 

 

 

 

2011

 

 

 

2010

 

Cash Flows from Operating Activities: 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

39,900

 

 

$

25,580

 

Net realized loss (gain) on investments

 

14,607

 

 

(527

)

Net change in unrealized appreciation on investments

 

(26,630

)

 

(4,058

)

Accretion of purchase discount on investments

 

(928

)

 

(4,305

)

Amortization of deferred financing costs

 

2,088

 

 

990

 

 

 

 

 

 

 

 

Change in operating assets and liabilities 

 

 

 

 

 

 

Payments for purchases of investments

 

(221,002

)

 

(137,797

)

Payment-in-kind interest

 

(1,573

)

 

(3,154

)

Proceeds from sale of investments and collection of investment principal

 

46,055

 

 

68,148

 

Net investments in money market funds

 

11,685

 

 

47,831

 

Increase in interest receivable

 

(830

)

 

(542

)

Increase in dividends receivable

 

 

 

(1,750

)

Decrease (increase) in other receivables

 

229

 

 

(260

)

Decrease (increase) in prepaid expenses

 

(17

)

 

74

 

Increase in due from broker

 

 

 

(1,803

)

Increase in due to broker

 

 

 

1,980

 

Increase in due to Prospect Administration

 

16

 

 

113

 

Increase (decrease) in due to Prospect Capital Management

 

4,403

 

 

(2,188

)

Increase (decrease) in accrued expenses

 

977

 

 

(1,013

)

(Decrease) increase in other liabilities

 

(1,077

)

 

333

 

Net Cash Used In Operating Activities 

 

(132,097

)

 

(12,348

)

 

 

 

 

 

 

 

Cash Flows from Financing Activities: 

 

 

 

 

 

 

Borrowings under credit facility

 

284,300

 

 

93,200

 

Principal payments under credit facility

 

(135,000

)

 

(146,900

)

Financing costs paid and deferred

 

(1,431

)

 

(770

)

Proceeds from issuance of common stock, net of underwriting costs

 

15,060

 

 

86,435

 

Offering costs from issuance of common stock

 

(137

)

 

(308

)

Dividends paid

 

(30,212

)

 

(19,328

)

Net Cash Provided By Financing Activities

 

132,580

 

 

12,329

 

 

 

 

 

 

 

 

Total Increase (Decrease) in Cash 

 

483

 

 

(19

)

Cash balance at beginning of period

 

1,492

 

 

1,081

 

Cash Balance at End of Period 

 

$

1,975

 

 

$

1,062

 

 

 

 

 

 

 

 

Cash Paid For Interest 

 

$

5,659

 

 

$

982

 

 

 

 

 

 

 

 

Non-Cash Financing Activity: 

 

 

 

 

 

 

Amount of shares issued in connection with dividend reinvestment plan

 

$

2,817

 

 

$

2,531

 

 

See notes to consolidated financial statements.

 

6



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS
September 30, 2011 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

September 30, 2011 (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)

 

$

29,800

 

$

29,800

 

$

29,800

 

2.6%

 

 

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

 

12,500

 

12,500

 

12,500

 

1.1%

 

 

Convertible Preferred Stock (9,919.684 shares)

 

 

 

9,920

 

9,226

 

0.8%

 

 

Common Stock (100 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

52,220

 

51,526

 

4.5%

 

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)

 

20,497

 

20,497

 

20,497

 

1.8%

 

 

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

 

1.3%

 

 

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

 

 

 

6,057

 

3,583

 

0.3%

 

 

Unrestricted Common Stock (6 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

41,589

 

39,115

 

3.4%

 

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 + 4.75%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4), (25)

 

1,000

 

945

 

1,000

 

0.1%

 

 

Senior Secured Term Loan B (8.50% (PRIME + 8.25%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4)

 

1,612

 

1,500

 

315

 

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)

 

9,072

 

706

 

 

0.0%

 

 

Common Stock (100 shares)(21)

 

 

 

 

 

0.0%

 

 

Warrants (33,750 warrants)(21)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

3,151

 

1,315

 

0.1%

 

C&J Cladding LLC

 

Texas / Metal Services and Minerals

 

Membership Interest (400 units)(22)

 

 

 

580

 

4,804

 

0.4%

 

 

 

 

 

 

 

 

 

580

 

4,804

 

0.4%

 

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%

 

Freedom Marine Services LLC(20)

 

Louisiana / Shipping Vessels

 

Subordinated Secured Note (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)(4)

 

12,360

 

11,866

 

2,946

 

0.3%

 

 

 

 

 

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

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

11,866

 

2,946

 

0.3%

 

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

 

2.2%

 

 

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

 

12,000

 

12,000

 

12,000

 

1.1%

 

 

Common Stock (100 shares)

 

 

 

5,003

 

68,634

 

6.0%

 

 

 

 

 

 

 

 

 

42,003

 

105,634

 

9.3%

 

 

See notes to consolidated financial statements.

 

7



 

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

 

 

 

 

 

 

 

September 30, 2011 (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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 – 7/24/2013) (10)

 

$

2,080

 

$

2,079

 

$

1,701

 

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)

 

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%

 

 

 

 

 

 

 

 

 

18,591

 

1,701

 

0.1%

 

Iron Horse Coiled Tubing, Inc. (23)

 

Alberta, Canada / Production Services

 

Senior Secured Tranche 2 (Zero Coupon, due 12/31/2015)

 

2,338

 

2,338

 

2,306

 

0.2%

 

 

Senior Secured Tranche 3 (2.00%, due 12/31/2015)

 

9,000

 

8,781

 

8,925

 

0.8%

 

 

Common Stock (3,821 shares)

 

 

 

268

 

1,957

 

0.2%

 

 

 

 

 

 

 

 

 

11,387

 

13,188

 

1.2%

 

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)

 

2,294

 

2,000

 

 

0.0%

 

 

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

 

6,882

 

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

 

1,650

 

0.1%

 

 

Manx — Preferred Stock (6,635 shares)

 

 

 

6,307

 

 

0.0%

 

 

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

 

 

 

1,171

 

 

0.0%

 

 

 

 

 

 

 

 

 

19,019

 

1,650

 

0.1%

 

NMMB Holdings, Inc. (24)

 

New York / Media

 

Revolving Line of Credit — $3,000 Commitment (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 5/6/2016) (4), (25)

 

 

 

 

0.0%

 

 

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

 

23,700

 

23,700

 

23,700

 

2.1%

 

 

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

 

5,358

 

0.5%

 

 

 

 

 

 

 

 

 

30,900

 

31,858

 

2.8%

 

NRG Manufacturing, Inc.

 

Texas / Manufacturing

 

Senior Secured Note (16.50% (LIBOR + 11.00% with 5.50% LIBOR floor), due 7/31/2012)(3), (4)

 

13,080

 

13,080

 

13,080

 

1.1%

 

 

Common Stock (800 shares)

 

 

 

2,317

 

45,122

 

4.0%

 

 

 

 

 

 

 

 

 

15,397

 

58,202

 

5.1%

 

 

See notes to consolidated financial statements.

 

8



 

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

 

 

 

 

 

 

 

September 30, 2011 (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 + 6.00%), plus 2.00% default interest, due 9/04/2012)(4), (25)

 

$

1,093

 

$

1,030

 

$

1,093

 

0.1%

 

 

Senior Secured Term Loan A (8.00% (PRIME + 6.75%) plus 2.00% default interest, due 9/04/2012)(4)

 

4,418

 

782

 

4,000

 

0.4%

 

 

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

 

4,059

 

 

96

 

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%

 

 

 

 

 

 

 

 

 

1,812

 

5,189

 

0.5%

 

R-V Industries, Inc.

 

Pennsylvania / Manufacturing

 

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

 

 

 

1,682

 

3,330

 

0.3%

 

 

Common Stock (545,107 shares)

 

 

 

5,087

 

9,078

 

0.8%

 

 

 

 

 

 

 

 

 

6,769

 

12,408

 

1.1%

 

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, past due)(4)

 

1,035

 

1,035

 

 

0.0%

 

 

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

 

414

 

413

 

 

0.0%

 

 

Common Stock (1,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

1,448

 

 

0.0%

 

 

 

 

 

Total Control Investments

 

259,272

 

329,536

 

28.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

27,014

 

2.4%

 

 

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

 

 

 

2,300

 

3,382

 

0.3%

 

 

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

 

 

 

579

 

851

 

0.1%

 

 

 

 

 

 

 

 

 

29,106

 

31,247

 

2.8%

 

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)

 

2,469

 

2,232

 

2,506

 

0.2%

 

 

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

 

4,739

 

4,081

 

4,810

 

0.4%

 

 

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

 

2,294

 

2,294

 

2,329

 

0.2%

 

 

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

 

7,787

 

6,614

 

7,904

 

0.7%

 

 

Preferred Stock (1,000,000 shares)

 

 

 

 

1,094

 

0.1%

 

 

Common Stock (10,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

15,221

 

18,643

 

1.6%

 

Smart, LLC(14)

 

New York / Diversified / Conglomerate Service

 

Membership Interest — Class B (1,218 units)

 

 

 

 

 

0.0%

 

 

Membership Interest — Class D (1 unit)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

0.0%

 

 

See notes to consolidated financial statements.

 

9



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS — (CONTINUED)
September 30, 2011 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

September 30, 2011 (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 (3.97% (LIBOR + 3.75%), due 12/14/2013) (4), (25), (26)

 

$

 

$

 

$

 

0.0%

 

Senior Secured Term Loan A (3.97% (LIBOR + 3.75%), due 12/14/2013)(3), (4)

 

1,900

 

1,232

 

1,874

 

0.2%

 

 

 

 

 

Senior Secured Term Loan B (4.47%, (LIBOR + 4.25%) due 12/14/2013)(3), (4)

 

7,294

 

5,744

 

7,172

 

0.6%

 

 

 

 

 

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

 

7,608

 

6,446

 

7,608

 

0.7%

 

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

 

1,445

 

1,113

 

1,444

 

0.1%

 

Common Stock (20,974 shares)

 

 

 

459

 

4,422

 

0.4%

 

 

 

 

 

 

 

 

 

14,994

 

22,520

 

2.0%

 

 

 

 

 

Total Affiliate Investments

 

59,321

 

72,410

 

6.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADAPCO, Inc.

 

Florida / Ecological

 

Common Stock (5,000 shares)

 

 

 

141

 

214

 

0.0%

 

 

 

 

 

 

 

 

 

141

 

214

 

0.0%

 

Aircraft Fasteners International, LLC

 

California / Machinery

 

Revolving Line of Credit — $500 Commitment (9.50% (LIBOR + 7.00% with 2.50% LIBOR floor), due 11/01/2012)(4) , (25), (26)

 

 

 

 

0.0%

 

 

 

 

 

Senior Secured Term Loan (9.50% (LIBOR + 7.00% with 2.50% LIBOR floor), due 11/01/2012)(3), (4)

 

3,527

 

3,527

 

3,527

 

0.3%

 

 

 

 

 

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

 

4,975

 

4,975

 

4,975

 

0.4%

 

 

 

 

 

Convertible Preferred Stock (32,500 units)

 

 

 

396

 

378

 

0.0%

 

 

 

 

 

 

 

 

 

8,898

 

8,880

 

0.7%

 

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)

 

30,169

 

30,169

 

30,169

 

2.7%

 

 

 

 

 

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

 

 

 

 

4,799

 

0.4%

 

 

 

 

 

 

 

 

 

30,169

 

34,968

 

3.1%

 

Anchor Hocking, LLC

 

Ohio / Durable Consumer Products

 

Senior Secured Term Loan (10.50% (LIBOR + 9.00% with 1.50% LIBOR floor), due 9/27/2016) (4)

 

23,000

 

23,000

 

23,000

 

2.0%

 

 

 

 

 

 

 

 

 

23,000

 

23,000

 

2.0%

 

Arrowhead General Insurance Agency, Inc.(16)

 

California / Insurance

 

Junior Secured Term Loan (11.25% (LIBOR + 9.50% with 1.75% LIBOR floor), due 9/30/2017) (4)

 

27,000

 

27,000

 

24,540

 

2.2%

 

 

 

 

 

 

 

 

 

27,000

 

24,540

 

2.2%

 

Babson CLO Ltd 2011-I

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

 

32,116

 

32,116

 

2.8%

 

 

 

 

 

 

 

 

 

32,116

 

32,116

 

2.8%

 

Byrider Systems Acquisition Corp.

 

Indiana / Auto Finance

 

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

 

25,168

 

25,168

 

25,378

 

2.2%

 

 

 

 

 

 

 

 

 

25,168

 

25,378

 

2.2%

 

 

See notes to consolidated financial statements.

 

10



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS — (CONTINUED)
September 30, 2011 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

September 30, 2011 (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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Caleel + Hayden, LLC (14)

Colorado / Personal & Nondurable Consumer Products

 

Membership Units (7,500 shares)
Options in Mineral Fusion Natural Brands, LLC (11,662 options)

 

 

 

$

351

 

$

39

 

0.0%
0.0%

 

 

 

 

 

 

 

 

 

351

 

39

 

0.0%

 

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)

 

$

41,500

 

41,500

 

41,500

 

3.6%

 

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

 

 

 

 

 

 

 

 

 

 

49,000

 

49,000

 

49,000

 

4.3%

 

 

 

 

 

 

 

 

 

90,500

 

90,500

 

7.9%

 

Cargo Airport Services USA, LLC

 

New York / Transportation

 

Revolving Line of Credit — $5,000 Commitment (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 3/31/2012)(4) ,(25)

 

1,000

 

1,000

 

1,000

 

0.1%

 

 

 

 

 

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

 

52,338

 

52,338

 

53,036

 

4.7%

 

 

 

 

 

Common Equity (1.5 units)

 

 

 

1,500

 

1,627

 

0.1%

 

 

 

 

 

 

 

 

 

54,838

 

55,663

 

4.9%

 

Clearwater Seafoods LP

 

Canada / Food Products

 

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

 

45,000

 

45,000

 

45,000

 

4.0%

 

 

 

 

 

 

 

 

 

45,000

 

45,000

 

4.0%

 

The Copernicus Group, Inc.

 

North Carolina / Healthcare

 

Revolving Line of Credit — $1,000 Commitment (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor), due 2/9/2016)(4), (25)

 

 

 

 

0.0%

 

 

 

 

 

Senior Secured Term Loan A (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor), due 2/9/2016)(3), (4)

 

10,688

 

10,688

 

10,848

 

1.0%

 

 

 

 

 

Senior Secured Term Loan B (14.00% (LIBOR + 11.00% with 3.00% LIBOR floor), due 2/9/2016) (3), (4)

 

11,250

 

11,250

 

11,419

 

1.0%

 

 

 

 

 

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

 

 

 

67

 

1,448

 

0.1%

 

 

 

 

 

Preferred Stock — Series C (212,121 shares)

 

 

 

212

 

419

 

0.0%

 

 

 

 

 

 

 

 

 

22,217

 

24,134

 

2.1%

 

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)

 

74,625

 

74,625

 

74,625

 

6.6%

 

 

 

 

 

 

 

 

 

74,625

 

74,625

 

6.6%

 

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)

 

7,500

 

7,427

 

7,500

 

0.7%

 

 

 

 

 

 

 

 

 

7,427

 

7,500

 

0.7%

 

Fairchild Industrial Products, Co.

 

North Carolina / Electronics

 

Preferred Stock — Class A (285.1 shares)

Common Stock — Class B (28 shares)

 

 

 

377
211

 

805
570

 

0.1%
0.1%

 

 

 

 

 

 

 

 

 

588

 

1,375

 

0.2%

 

Fischbein, LLC

 

North Carolina / Machinery

 

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

 

3,362

 

3,362

 

3,362

 

0.3%

 

 

 

 

 

Membership Class A (875,000 units)

 

 

 

875

 

1,240

 

0.1%

 

 

 

 

 

 

 

 

 

4,237

 

4,602

 

0.4%

 

 

See notes to consolidated financial statements.

 

11



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS — (CONTINUED)
September 30, 2011 and June 30, 2011
(in thousands, except share data)

 

 

 

 

 

 

 

September 30, 2011 (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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, in non-accrual status effective 01/01/2011, past due)(4)

 

$

61,398

 

$

60,019

 

$

38,785

 

3.4%

 

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

 

 

 

 

 

0.0%