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Prospect Capital Corporation – Pleased with the overall credit quality of our portfolio

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Prospect Capital Corporation (NASDAQ: PSEC) announced financial results for second fiscal quarter ended December 31, 2011.

Company States: For the three and six months ended December 31, 2011, our net income was $64.5 million and $104.4 million, respectively, or $0.59 per share and $0.96 per share, respectively. For the September 2011 quarter, our net income was $39.9 million or $0.37 per share.

Our net income increased 62%, and our net income per share was up 60%, from the September 2011 quarter to the December 2011 quarter. These increases are primarily due to growing interest income from additional investments, higher dividend income from our investments in Energy Solutions Holdings, Inc. (“Energy Solutions”) and NRG Manufacturing, Inc. (“NRG”), and significant realized and unrealized gains recognized in connection with Energy Solutions and NRG. These companies have delivered significantly enhanced operating results, and NRG has generated realizations in December 2011 and early calendar year 2012.


Our net investment income (“NII”) was $36.5 million and $19.1 million for the December 2011 quarter and December 2010 quarter, respectively, or $0.33 per share and $0.23 per share, respectively. Our NII was $64.4 million and $40.1 million for the six months ended December 31, 2011 and December 31, 2010, respectively, or $0.59 per share and $0.51 per share, respectively. Our NII was $27.9 million for the September 2011 quarter, or $0.26 per share. Increases in the December 2011 quarter were primarily due to growing interest income from additional investments and higher dividends from our investments in Energy Solutions and NRG. Our NII per share in the December 2011 quarter represented an increase of 27% from the September 2011 quarter and an increase of 43% from the December 2010 quarter.

We are targeting growth in NII per share as we utilize prudent leverage to finance our growth through new originations, given our debt to equity ratio stood at less than 49% as of December 31, 2011 and stands at approximately 37% as of today. We estimate that our NII for the current third fiscal quarter ended March 31, 2012 will be $0.53 to $0.58 per share.

Our net asset value per share on December 31, 2011 stood at $10.69 per share, an increase of $0.28 per share from September 30, 2011. Our portfolio continued to perform during the December 2011 quarter, with increases in the value of our assets. None of our loans originated in over four years has gone on non-accrual status.

We are pleased with the overall credit quality of our portfolio, with many of our companies generating year-over-year and sequential growth in top-line revenues and bottom-line profits. None of our loans originated in over four years has gone on non-accrual status. The fair market value of our loan assets on non-accrual as a percentage of total assets stood at approximately 3.1% on December 31, 2011, down from 3.5% on June 30, 2011.

Because of the performance of several controlled positions in our portfolio, we have selectively monetized certain such companies and may monetize other positions if we identify attractive opportunities for exit. As such exits materialize, we expect to reinvest such proceeds into new income-producing opportunities. We are pleased with the performance of our controlled portfolio companies, and are actively exploring other new investment opportunities at attractive multiples of cash flow.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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