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 December 31, 2013

 

 

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 January 31, 2014 was 310,346,894.

 


 



 

PROSPECT CAPITAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2013

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

 

Consolidated Statements of Assets and Liabilities – December 31, 2013 (Unaudited) and June 30, 2013 (Audited)

3

 

Consolidated Statements of Operations (Unaudited) – For the Three and Six Months Ended December 31, 2013 and 2012

4

 

Consolidated Statements of Changes in Net Assets (Unaudited) – For the Six Months Ended December 31, 2013 and 2012

5

 

Consolidated Statements of Cash Flows (Unaudited) – For the Six Months Ended December 31, 2013 and 2012

6

 

Consolidated Schedules of Investments – December 31, 2013 (Unaudited) and June 30, 2013 (Audited)

7

 

Notes to Consolidated Financial Statements (Unaudited)

41

Item 2.

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

70

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

107

Item 4.

Controls and Procedures

107

 

 

 

PART II.

OTHER INFORMATION

108

Item 1.

Legal Proceedings

108

Item 1A.

Risk Factors

108

Item 2.

Unregistered Sales in Equity Securities and Use of Proceeds

108

Item 3.

Defaults Upon Senior Securities

108

Item 4.

Mine Safety Disclosures

108

Item 5.

Other Information

108

Item 6.

Exhibits

108

 

Signatures

118

 

2



 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2013 and June 30, 2013
(in thousands, except share and per share data)

 

 

 

December 31,
2013

 

June 30,
2013

 

 

(Unaudited)

 

(Audited)

Assets (Note 4)

 

 

 

 

Investments at fair value:

 

 

 

 

Control investments (amortized cost of $1,236,286 and $830,151, respectively)

 

  $

1,163,300

 

  $

811,634

Affiliate investments (amortized cost of $49,278 and $49,189, respectively)

 

38,880

 

42,443

Non-control/Non-affiliate investments (amortized cost of $3,690,790 and $3,376,438, respectively)

 

3,683,840

 

3,318,775

Total investments at fair value (amortized cost of $4,976,354 and $4,255,778, respectively) (Note 3)

 

4,886,020

 

4,172,852

 

 

 

 

 

Investments in money market funds

 

220,850

 

143,262

Cash

 

25,154

 

59,974

Receivables for:

 

 

 

 

Interest, net

 

14,184

 

22,863

Other

 

2,067

 

4,397

Prepaid expenses

 

277

 

540

Deferred financing costs

 

45,470

 

44,329

Total Assets 

 

5,194,022

 

4,448,217

 

 

 

 

 

Liabilities 

 

 

 

 

Credit facility payable (Notes 4 and 8)

 

 

124,000

Senior Convertible Notes (Notes 5 and 8)

 

847,500

 

847,500

Senior Unsecured Notes (Notes 6 and 8)

 

347,814

 

347,725

Prospect Capital InterNotes® (Notes 7 and 8)

 

600,907

 

363,777

Due to broker

 

44,826

 

43,588

Dividends payable

 

33,229

 

27,299

Due to Prospect Administration (Note 12)

 

1,741

 

1,366

Due to Prospect Capital Management (Note 12)

 

48,108

 

5,324

Accrued expenses

 

3,624

 

2,345

Interest payable

 

26,753

 

24,384

Other liabilities

 

8,421

 

4,415

Total Liabilities 

 

1,962,923

 

1,791,723

Net Assets 

 

  $

3,231,099

 

  $

2,656,494

 

 

 

 

 

Components of Net Assets 

 

 

 

 

Common stock, par value $0.001 per share (500,000,000 common shares authorized; 301,259,436 and 247,836,965 issued and outstanding, respectively) (Note 9)

 

  $

301

 

  $

248

Paid-in capital in excess of par (Note 9)

 

3,332,469

 

2,739,864

Undistributed net investment income

 

68,321

 

77,084

Accumulated realized losses on investments

 

(79,658)

 

(77,776)

Unrealized depreciation on investments

 

(90,334)

 

(82,926)

Net Assets 

 

  $

3,231,099

 

  $

2,656,494

 

 

 

 

 

Net Asset Value Per Share (Note 15) 

 

  $

10.73

 

  $

10.72

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

3



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended December 31, 2013 and 2012
(in thousands, except share and per share data)
(Unaudited)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

December 31,

 

December 31,

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

Investment Income

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

Control investments

 

  $

37,086

 

  $

33,239

 

  $

69,719

 

  $

51,158

Affiliate investments

 

1,399

 

1,694

 

2,895

 

3,345

Non-control/Non-affiliate investments

 

79,420

 

58,513

 

157,532

 

103,540

CLO fund securities

 

29,198

 

23,420

 

55,378

 

37,133

Total interest income

 

147,103

 

116,866

 

285,524

 

195,176

 

 

 

 

 

 

 

 

 

Dividend income:

 

 

 

 

 

 

 

 

Control investments

 

8,877

 

31,717

 

15,952

 

64,967

Non-control/Non-affiliate investments

 

9

 

230

 

12

 

3,185

Money market funds

 

6

 

8

 

17

 

11

Total dividend income

 

8,892

 

31,955

 

15,981

 

68,163

 

 

 

 

 

 

 

 

 

Other income: (Note 10)

 

 

 

 

 

 

 

 

Control investments

 

17,928

 

5,095

 

27,149

 

5,097

Affiliate investments

 

5

 

605

 

7

 

613

Non-control/Non-affiliate investments

 

4,162

 

11,514

 

10,463

 

20,622

Total other income

 

22,095

 

17,214

 

37,619

 

26,332

Total Investment Income

 

178,090

 

166,035

 

339,124

 

289,671

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

Investment advisory fees:

 

 

 

 

 

 

 

 

Base management fee (Note 12)

 

25,075

 

16,306

 

48,120

 

29,534

Income incentive fee (Note 12)

 

23,054

 

24,804

 

43,638

 

43,311

Total investment advisory fees

 

48,129

 

41,110

 

91,758

 

72,845

 

 

 

 

 

 

 

 

 

Interest and credit facility expenses

 

29,256

 

16,414

 

56,663

 

29,925

Legal fees

 

(42)

 

635

 

177

 

1,257

Valuation services

 

449

 

371

 

888

 

747

Audit, compliance and tax related fees

 

745

 

378

 

1,368

 

810

Allocation of overhead from Prospect Administration (Note 12)

 

3,986

 

2,139

 

7,972

 

4,323

Insurance expense

 

90

 

78

 

183

 

171

Directors’ fees

 

75

 

75

 

150

 

150

Excise tax

 

1,000

 

4,500

 

2,000

 

4,500

Other general and administrative expenses

 

2,187

 

1,119

 

3,413

 

1,700

Total Operating Expenses

 

85,875

 

66,819

 

164,572

 

116,428

 

 

 

 

 

 

 

 

 

Net Investment Income

 

92,215

 

99,216

 

174,552

 

173,243

 

 

 

 

 

 

 

 

 

Net realized loss on investments (Note 3)

 

(5,671)

 

(8,123)

 

(1,882)

 

(6,348)

Net change in unrealized depreciation on investments (Note 3)

 

(1,182)

 

(44,604)

 

(7,408)

 

(73,157)

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Resulting from Operations

 

  $

85,362

 

  $

46,489

 

  $

165,262

 

  $

93,738

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations per share (Notes 11 and 16)

 

  $

0.30

 

  $

0.24

 

  $

0.61

 

  $

0.52

Dividends declared per share

 

  $

0.33

 

  $

0.31

 

  $

0.66

 

  $

0.62

 

See notes to consolidated financial statements.

 

4



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

For the Six Months Ended December 31, 2013 and 2012
(in thousands, except share data)
(Unaudited)

 

 

 

For the Six Months Ended December 31,

 

 

2013

 

2012

Increase in Net Assets from Operations: 

 

 

 

 

Net investment income

 

  $

174,552

 

  $

173,243

Net realized loss on investments

 

(1,882)

 

(6,348)

Net change in unrealized depreciation on investments

 

(7,408)

 

(73,157)

Net Increase in Net Assets Resulting from Operations 

 

165,262

 

93,738

 

 

 

 

 

Dividends to Shareholders:

 

 

 

 

Distribution of net investment income

 

(183,315)

 

(114,093)

Distribution of return of capital

 

 

Total Dividends to Shareholders

 

(183,315)

 

(114,093)

 

 

 

 

 

Capital Share Transactions: 

 

 

 

 

Proceeds from capital shares sold, net of underwriting costs

 

563,578

 

770,252

Less: Offering costs of public share offerings

 

(1,019)

 

(1,514)

Proceeds from shares issued to acquire controlled investments

 

21,006

 

59,251

Reinvestment of dividends

 

9,093

 

7,027

Net Increase in Net Assets Resulting from Capital Share Transactions 

 

592,658

 

835,016

 

 

 

 

 

Total Increase in Net Assets 

 

574,605

 

814,661

Net assets at beginning of period

 

2,656,494

 

1,511,974

Net Assets at End of Period 

 

  $

3,231,099

 

  $

2,326,635

 

 

 

 

 

Capital Share Activity: 

 

 

 

 

Shares sold

 

50,700,067

 

69,407,632

Shares issued to acquire controlled investments

 

1,918,342

 

5,507,381

Shares issued through reinvestment of dividends

 

804,062

 

624,527

Net increase in capital share activity

 

53,422,471

 

75,539,540

Shares outstanding at beginning of period

 

247,836,965

 

139,633,870

 

 

 

 

 

Shares Outstanding at End of Period 

 

301,259,436

 

215,173,410

 

See notes to consolidated financial statements.

 

5



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended December 31, 2013 and 2012
(in thousands, except share data)
(Unaudited)

 

 

 

For the Six Months Ended December 31,

 

 

2013

 

2012

Cash Flows from Operating Activities: 

 

 

 

 

Net increase in net assets resulting from operations

 

  $

165,262

 

  $

93,738

Net realized loss on investments

 

1,882

 

6,348

Net change in unrealized depreciation on investments

 

7,408

 

73,157

Amortization of discounts and premiums, net

 

23,133

 

(11,422)

Amortization of deferred financing costs

 

5,087

 

3,724

Payment-in-kind interest

 

(9,845)

 

(4,048)

Structuring fees

 

(15,533)

 

(24,273)

Change in operating assets and liabilities 

 

 

 

 

Payments for purchases of investments

 

(1,118,612)

 

(1,432,490)

Proceeds from sale of investments and collection of investment principal

 

419,405

 

507,392

Net increase of investments in money market funds

 

(77,588)

 

(312,576)

Decrease (increase) in interest receivable, net

 

8,679

 

(2,312)

Decrease (increase) in other receivables

 

2,328

 

(1,636)

Decrease in prepaid expenses

 

263

 

194

Increase (decrease) in due to broker

 

1,238

 

(6,242)

Increase (decrease) in due to Prospect Administration

 

375

 

(285)

Increase (decrease) in due to Prospect Capital Management

 

42,784

 

(5,894)

Increase in accrued expenses

 

1,279

 

380

Increase in interest payable

 

2,369

 

6,516

Increase in other liabilities

 

4,006

 

7,487

Net Cash Used In Operating Activities 

 

(536,080)

 

(1,102,242)

 

 

 

 

 

Cash Flows from Financing Activities: 

 

 

 

 

Borrowings under credit facility (Note 4)

 

96,000

 

99,000

Principal payments under credit facility (Note 4)

 

(220,000)

 

(195,000)

Issuance of Senior Convertible Notes (Note 5)

 

 

400,000

Issuance of Prospect Capital InterNotes® (Note 7)

 

238,780

 

144,355

Redemptions of Prospect Capital InterNotes® (Note 7)

 

(1,650)

 

Financing costs paid and deferred

 

(6,139)

 

(17,880)

Proceeds from issuance of common stock, net of underwriting costs

 

563,578

 

770,252

Offering costs from issuance of common stock

 

(1,019)

 

(1,514)

Dividends paid

 

(168,290)

 

(97,577)

Net Cash Provided By Financing Activities

 

501,260

 

1,101,636

 

 

 

 

 

Total Decrease in Cash 

 

(34,820)

 

(606)

Cash balance at beginning of period

 

59,974

 

2,825

Cash Balance at End of Period 

 

  $

25,154

 

  $

2,219

 

 

 

 

 

Cash Paid For Interest 

 

  $

47,226

 

  $

17,442

 

 

 

 

 

Non-Cash Financing Activity: 

 

 

 

 

Proceeds from shares issued in connection with dividend reinvestment plan

 

  $

9,093

 

  $

7,027

Proceeds from shares issued in conjunction with controlled investments

 

  $

21,006

 

  $

59,251

 

See notes to consolidated financial statements.

 

6



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULES OF INVESTMENTS

December 31, 2013 (Unaudited) and June 30, 2013 (Audited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

December 31, 2013 (Unaudited)

 

 

Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (greater than 25.00% voting control)(42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

$   27,881

 

$  27,881

 

$  27,881

 

0.9%

 

 

 

 

 

 

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

 

19,698

 

19,698

 

19,698

 

0.6%

 

 

 

 

 

 

Convertible Preferred Stock (9,919.684 shares)

 

 

 

9,920

 

1,888

 

0.1%

 

 

 

 

 

 

Common Stock (100 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

57,499

 

49,467

 

1.6%

 

 

Ajax Rolled Ring & Machine, Inc.

 

South Carolina / Manufacturing

 

Senior Secured Note (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 3/30/2018) (4)

 

19,536

 

19,536

 

19,536

 

0.6%

 

 

 

 

 

 

Convertible Preferred Stock — Series B (25,000 shares)

 

 

 

25,000

 

5,045

 

0.2%

 

 

 

 

 

 

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

 

 

 

6,057

 

 

0.0%

 

 

 

 

 

 

Unrestricted Common Stock (6 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

50,593

 

24,581

 

0.8%

 

 

APH Property Holdings, LLC(32)

 

Florida / Real Estate

 

Senior Secured Note (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 10/24/2020)(4)

 

161,662

 

161,662

 

161,662

 

5.0%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

32,240

 

32,240

 

1.0%

 

 

 

 

 

 

 

 

 

 

193,902

 

193,902

 

6.0%

 

 

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 — $1,150 Commitment (5.00% (PRIME + 1.75%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4), (25)

 

1,150

 

1,095

 

474

 

0.0%

 

 

 

 

 

 

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

 

1,501

 

 

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)

 

9,940

 

707

 

 

0.0%

 

 

 

 

 

 

Common Stock (100 shares)(21)

 

 

 

 

 

0.0%

 

 

 

 

 

 

Warrants (33,750 warrants)(21)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

3,303

 

474

 

0.0%

 

 

CCPI Holdings, Inc.(33)

 

Ohio / Manufacturing

 

Senior Secured Note (10.00%, due 12/31/2017)(3)

 

17,437

 

17,437

 

17,437

 

0.5%

 

 

 

 

 

 

Senior Secured Note (12.00% plus 7.00% PIK, due 6/30/2018)

 

8,075

 

8,075

 

8,075

 

0.2%

 

 

 

 

 

 

Common Stock (100 shares)

 

 

 

8,581

 

13,790

 

0.4%

 

 

 

 

 

 

Net Revenue Interest (4% of Net Revenue)

 

 

 

 

516

 

0.0%

 

 

 

 

 

 

 

 

 

 

34,093

 

39,818

 

1.1%

 

 

CP Holdings of Delaware LLC(38)

 

Oklahoma / Oil & Gas Production

 

Senior Secured Note (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor) plus 9.00% PIK, due 8/2/2018) (4)

 

75,773

 

75,773

 

75,773

 

2.3%

 

 

 

 

 

 

Senior Secured Note (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor), due 8/2/2018) (4)

 

22,400

 

22,400

 

22,400

 

0.7%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

15,228

 

20,955

 

0.6%

 

 

 

 

 

 

 

 

 

 

113,401

 

119,128

 

3.6%

 

 

See notes to consolidated financial statements.

 

7



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED)
December 31, 2013 (Unaudited) and June 30, 2013 (Audited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

December 31, 2013 (Unaudited)

 

 

Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (greater than 25.00% voting control)(42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Central Holdings of Delaware, LLC (22), (34)

 

South Carolina / Consumer Finance

 

Senior Secured Revolving Credit Facility — $60,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 12/31/2022)(4), (25)

 

$   38,082

 

$  38,082

 

$  38,082

 

1.2%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

9,581

 

10,957

 

0.3%

 

 

 

 

 

 

Net Revenue Interest (5% of Net Revenue)

 

 

 

 

2,207

 

0.1%

 

 

 

 

 

 

 

 

 

 

47,663

 

51,246

 

1.6%

 

 

Energy Solutions Holdings, Inc.(8)

 

Texas / Energy

 

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

 

3,500

 

3,500

 

3,500

 

0.1%

 

 

 

 

 

 

Senior Secured Debt to Vessel Holdings II, LLC (13.00%, in non-accrual status, due 11/25/2018)

 

13,000

 

13,000

 

11,928

 

0.4%

 

 

 

 

 

 

Senior Secured Debt to Vessel Holdings III, LLC (13.00%, due 12/3/2018)

 

16,000

 

16,000

 

14,584

 

0.5%

 

 

 

 

 

 

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

 

1,449

 

1,449

 

 

0.0%

 

 

 

 

 

 

Common Stock (100 shares)

 

 

 

8,318

 

3,539

 

0.1%

 

 

 

 

 

 

 

 

 

 

42,267

 

33,551

 

1.1%

 

 

First Tower Holdings of Delaware, LLC (22), (29)

 

Mississippi / Consumer Finance

 

Senior Secured Revolving Credit Facility — $400,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 6/30/2022)(4), (25)

 

273,260

 

273,260

 

273,260

 

8.4%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

44,693

 

34,648

 

1.1%

 

 

 

 

 

 

Net Revenue Interest (5% of Net Revenue & Distributions)

 

 

 

 

14,603

 

0.5%

 

 

 

 

 

 

 

 

 

 

317,953

 

322,511

 

10.0%

 

 

Gulf Coast Machine & Supply Company

 

Texas / Manufacturing

 

Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 10/12/2017)(4)

 

17,500

 

17,500

 

12,414

 

0.4%

 

 

 

 

 

 

Convertible Preferred Stock — Series A (99,900 shares)

 

 

 

25,950

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

43,450

 

12,414

 

0.4%

 

 

The Healing Staff, Inc.(9)

 

North Carolina / Contracting

 

Secured Promissory Notes (15.00%, in non-accrual status effective 12/22/2010, past due)

 

1,688

 

1,686

 

 

0.0%

 

 

 

 

 

 

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

 

1,170

 

1,170

 

 

0.0%

 

 

 

 

 

 

Common Stock (1,000 shares)

 

 

 

975

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

3,831

 

 

0.0%

 

 

Manx Energy, Inc.(12)

 

Kansas / Oil & Gas Production

 

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

 

225

 

225

 

 

0.0%

 

 

 

 

 

 

Preferred Stock (6,635 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

Common Stock (17,082 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

225

 

 

0.0%

 

 

MITY Holdings of Delaware Inc.(17)

 

Utah / Durable Consumer Products

 

Senior Secured Note (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor) plus 9.00% PIK, due 9/19/2019) (4)

 

22,968

 

22,968

 

22,968

 

0.7%

 

 

 

 

 

 

Senior Secured Note (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 3/19/2019) (3), (4)

 

18,250

 

18,250

 

18,250

 

0.6%

 

 

 

 

 

 

Common Stock (100 shares)

 

 

 

6,943

 

6,943

 

0.2%

 

 

 

 

 

 

 

 

 

 

48,161

 

48,161

 

1.5%

 

 

See notes to consolidated financial statements.

 

8



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED)
December 31, 2013 (Unaudited) and June 30, 2013 (Audited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

December 31, 2013 (Unaudited)

 

 

Portfolio Company

 

Locale / Industry

 

Investments(1)

 

Principal
Value

 

Cost

 

Fair
Value
(2)

 

% of Net
Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LEVEL 3 PORTFOLIO INVESTMENTS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Control Investments (greater than 25.00% voting control)(42)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nationwide Acceptance Holdings, LLC (22), (36)

 

Illinois / Consumer Finance

 

Senior Secured Revolving Credit Facility — $30,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 1/31/2023)(4), (25)

 

$   21,308

 

$  21,308

 

$  21,308

 

0.7%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

3,843

 

3,843

 

0.1%

 

 

 

 

 

 

Net Revenue Interest (5% of Net Revenue)

 

 

 

 

1,739

 

0.1%

 

 

 

 

 

 

 

 

 

 

25,151

 

26,890

 

0.9%

 

 

NMMB Holdings, Inc. (24)

 

New York / Media

 

Senior Secured Note (14.00%, due 5/6/2016)

 

10,714

 

10,714

 

10,714

 

0.3%

 

 

 

 

 

 

Series A Preferred Stock (8,086 shares)

 

 

 

12,486

 

453

 

0.0%

 

 

 

 

 

 

 

 

 

 

23,200

 

11,167

 

0.3%

 

 

NPH Property Holdings, LLC (40)

 

Texas / Real Estate

 

Senior Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 10/24/2020)(4)

 

88,109

 

88,109

 

88,109

 

2.7%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

18,135

 

18,135

 

0.6%

 

 

 

 

 

 

 

 

 

 

106,244

 

106,244

 

3.3%

 

 

R-V Industries, Inc.

 

Pennsylvania / Manufacturing

 

Senior Subordinated Note (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(3), (4)

 

32,750

 

32,750

 

32,750

 

1.0%

 

 

 

 

 

 

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

 

 

 

1,682

 

6,692

 

0.2%

 

 

 

 

 

 

Common Stock (545,107 shares)

 

 

 

5,087

 

18,238

 

0.6%

 

 

 

 

 

 

 

 

 

 

39,519

 

57,680

 

1.8%

 

 

UPH Property Holdings, LLC (41)

 

Georgia / Real Estate

 

Senior Secured Note (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 10/24/2020) (4)

 

18,855

 

18,855

 

18,855

 

0.6%

 

 

 

 

 

 

Membership Units (100 shares)

 

 

 

3,707

 

3,707

 

0.1%

 

 

 

 

 

 

 

 

 

 

22,562

 

22,562

 

0.7%

 

 

Valley Electric Holdings I, Inc.(35)

 

Washington / Construction & Engineering

 

Senior Secured Note (9.00% (LIBOR + 6.00%, with 3.00% LIBOR floor) plus 9.00% PIK, due 12/31/2018)(4)

 

35,648

 

35,648

 

28,163

 

0.9%

 

 

 

 

 

 

Senior Secured Note (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2017)(3),(4)

 

10,054

 

10,054

 

10,054

 

0.3%

 

 

 

 

 

 

Common Stock (50,000 shares)

 

 

 

9,526

 

 

0.0%

 

 

 

 

 

 

Net Revenue Interest (5% of Net Revenue)

 

 

 

 

724

 

0.0%

 

 

 

 

 

 

 

 

 

 

55,228

 

38,941

 

1.2%

 

 

Wolf Energy Holdings,
Inc.
(12), (37)

 

Kansas / Oil & Gas Production

 

Senior Secured Promissory Note secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018)

 

22,000

 

 

4,043

 

0.1%

 

 

 

 

 

 

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

 

2,753

 

2,000

 

 

0.0%

 

 

 

 

 

 

Appalachian Energy Holdings, LLC (“AEH”) — Senior Secured First Lien Note (8.00%, in non-accrual status, past due)

 

54

 

50

 

 

0.0%

 

 

 

 

 

 

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

 

8,258

 

5,991

 

 

0.0%

 

 

 

 

 

 

Common Stock (100 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

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

 

 

 

 

520

 

0.0%

 

 

 

 

 

 

 

 

 

 

8,041

 

4,563

 

0.1%

 

 

 

 

 

 

Total Control Investments

 

1,236,286

 

1,163,300

 

36.0%

 

 

See notes to consolidated financial statements.

 

9



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED)
December 31, 2013 (Unaudited) and June 30, 2013 (Audited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

December 31, 2013 (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)(43)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Michigan / Healthcare

 

Senior Secured Note (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 12/17/2017)(3),(4)

 

$    29,250

 

$  29,250

 

$  29,250

 

0.9%

 

 

 

 

 

 

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

 

 

 

2,300

 

1,869

 

0.1%

 

 

 

 

 

 

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

 

 

 

579

 

405

 

0.0%

 

 

 

 

 

 

 

 

 

 

32,129

 

31,524

 

1.0%

 

 

Boxercraft Incorporated(20)

 

Georgia / Textiles & Leather

 

Senior Secured Term Loan A (10.00% plus 1.00% PIK, due 9/15/2015)

 

1,621

 

1,621

 

1,621

 

0.0%

 

 

 

 

 

 

Senior Secured Term Loan B (10.00% plus 1.00% PIK, due 9/15/2015)

 

4,918

 

4,918

 

3,990

 

0.1%

 

 

 

 

 

 

Senior Secured Term Loan C (10.00% plus 1.00% PIK, due 9/15/2015)

 

2,383

 

2,383

 

 

0.0%

 

 

 

 

 

 

Senior Secured Term Loan (10.00% plus 1.00% PIK, due 9/15/2015)

 

8,368

 

8,227

 

 

0.0%

 

 

 

 

 

 

Preferred Stock (1,000,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

Common Stock (10,000 shares)

 

 

 

 

 

0.0%

 

 

 

 

 

 

Warrants (1 warrant, expiring 8/31/2022)

 

 

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

17,149

 

5,611

 

0.1%

 

 

Smart, LLC(14)

 

New York / Diversified / Conglomerate Service

 

Membership Interest

 

 

 

 

1,745

 

0.1%

 

 

 

 

 

 

 

 

 

 

 

1,745

 

0.1%

 

 

 

 

 

 

Total Affiliate Investments

 

49,278

 

38,880

 

1.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aderant North America, Inc.

 

Georgia / Software & Computer Services

 

Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 6/20/2019)(4)

 

7,000

 

6,907

 

7,000

 

0.2%

 

 

 

 

 

 

 

 

 

 

6,907

 

7,000

 

0.2%

 

 

Aircraft Fasteners International, LLC

 

California / Machinery

 

Convertible Preferred Stock (32,500 units)

 

 

 

396

 

571

 

0.0%

 

 

 

 

 

 

 

 

 

 

396

 

571

 

0.0%

 

 

ALG USA Holdings, LLC

 

Pennsylvania / Hotels, Restaurants & Leisure

 

Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 2/28/2020)(4)

 

12,000

 

11,778

 

12,000

 

0.4%

 

 

 

 

 

 

 

 

 

 

11,778

 

12,000

 

0.4%

 

 

Allied Defense Group, Inc.

 

Virginia / Aerospace & Defense

 

Common Stock (10,000 shares)

 

 

 

5

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

5

 

 

0.0%

 

 

American Broadband Holding Company and Cameron Holdings of NC, Inc

 

North Carolina / Telecommunication Services

 

Senior Secured Term Loan B (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018) (3), (4)

 

75,000

 

75,000

 

75,000

 

2.3%

 

 

 

 

 

 

 

 

 

 

75,000

 

75,000

 

2.3%

 

 

American Gilsonite Company

 

Utah / Specialty Minerals

 

Second Lien Term Loan (11.50%, due 9/1/2017)

 

38,500

 

38,500

 

38,500

 

1.2%

 

 

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

 

 

 

 

1,988

 

0.1%

 

 

 

 

 

 

 

 

 

 

38,500

 

40,488

 

1.3%

 

 

See notes to consolidated financial statements.

 

10



 

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED)
December 31, 2013 (Unaudited) and June 30, 2013 (Audited)
(in thousands, except share data)

 

 

 

 

 

 

 

 

December 31, 2013 (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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Apidos CLO IX, Ltd.(22)

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

$    20,525

 

$   18,932

 

$   20,196

 

0.6%

 

 

 

 

 

 

 

 

 

 

18,932

 

20,196

 

0.6%

 

 

Apidos CLO XI, Ltd.(22)

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

38,340

 

35,440

 

38,755

 

1.2%

 

 

 

 

 

 

 

 

 

 

35,440

 

38,755

 

1.2%

 

 

Apidos CLO XII, Ltd.(22)

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

44,063

 

42,873

 

41,681

 

1.3%

 

 

 

 

 

 

 

 

 

 

42,873

 

41,681

 

1.3%

 

 

Apidos CLO XV, Ltd.(22)

 

Cayman Islands / Diversified Financial Services

 

Subordinated Notes (Residual Interest)

 

36,515

 

37,111

 

36,326

 

1.1%

 

 

 

 

 

 

 

 

 

 

37,111

 

36,326

 

1.1%

 

 

Arctic Glacier U.S.A, Inc. (3) ,(4) 

 

Minnesota / Food Products

 

Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor), due 11/10/2019)

 

150,000

 

150,000

 

150,000

 

4.6%

 

 

 

 

 

 

 

 

 

 

150,000

 

150,000

 

4.6%

 

 

Armor Holding II LLC(16)

 

New York / Diversified Financial Services

 

Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020) (3), (4)

 

7,000

 

6,867

 

6,867

 

0.2%

 

 

 

 

 

 

 

 

 

 

6,867

 

6,867

 

0.2%

 

 

Atlantis Healthcare Group (Puerto Rico), Inc.(4) 

 

Puerto Rico / Healthcare

 

Revolving Line of Credit — $7,000 Commitment (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2014)(25),(26)

 

2,000

 

2,000

 

2,000

 

0.1%

 

 

 

 

 

 

Senior Term Loan (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2018)(3)

 

39,155

 

39,155

 

33,589

 

1.0%