Attached files
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| 8-K - 8-K - PROSPECT CAPITAL CORP | a20180828-psec8xkearningsa.htm |
Exhibit 99.1
Prospect Capital Reports June 2018 Annual Results and
Declares Additional Monthly Distributions
NEW YORK - (GLOBE NEWSWIRE) - August 28, 2018 - Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our fiscal year ended June 30, 2018.
All amounts in $000’s except per share amounts | Quarter Ended | Quarter Ended | Quarter Ended |
June 30, 2018 | March 31, 2018 | June 30, 2017 | |
Net Investment Income (“NII”) | $79,480 | $70,446 | $69,678 |
Interest as % of Total Investment Income | 91.8% | 89.6% | 96.3% |
NII per Share | $0.22 | $0.19 | $0.19 |
Net Increase in Net Assets Resulting from Operations (“NI”) | $114,304 | $51,859 | $51,168 |
NI per Share | $0.31 | $0.14 | $0.14 |
Distributions to Shareholders | $65,491 | $65,174 | $89,998 |
Distributions per Share | $0.18 | $0.18 | $0.25 |
Net Asset Value (“NAV”) per Share | $9.35 | $9.23 | $9.32 |
Net of Cash Debt to Equity Ratio | 66.5% | 69.1% | 70.5% |
For the June 2018 quarter, we earned net investment income (“NII”) of $79.5 million, or $0.22 per weighted average share, up $0.03 from the March 2018 quarter, and exceeding our current quarterly dividend rate of $0.18 per share by $0.04 per share. The increase in NII per share resulted primarily from an increase in interest and other income compared to the March 2018 quarter.
In the June 2018 quarter, our net of cash debt to equity ratio was 66.5%, down 2.6% from March 2018 and down 4.0% from June 2017.
For the June 2018 quarter, our net increase in net assets resulting from operations (“NI”) was $114.3 million, or $0.31 per weighted average share, an increase of $0.17 from the March 2018 quarter as a result of an increased NII and a net increase in the fair value of our portfolio, including investments in the real estate, CLO, consumer finance, and other sectors.
Our interest income as a percentage of total investment income was 91.8% in the June 2018 quarter, up 2.2% from 89.6% in the March 2018 quarter.
Our net asset value (“NAV”) per share increased by $0.12 to $9.35 during the June 2018 quarter.
All amounts in $000’s except per share amounts | Year Ended June 30, 2018 | Year Ended June 30, 2017 |
NII | $286,850 | $306,082 |
NII per Share | $0.79 | $0.85 |
NI | $299,863 | $252,906 |
NI per Share | $0.83 | $0.70 |
Distributions to Shareholders | $277,224 | $358,987 |
Distributions per Share | $0.77 | $1.00 |
For the year ended June 30, 2018, we earned NII of $286.9 million, or $0.79 per weighted average share, down $0.06 from the prior year. For the year ended June 30, 2018, we earned NI of $299.9 million, or $0.83 per weighted average share, up $0.13 from the prior year.
DISTRIBUTION DECLARATION
Prospect is declaring distributions as follows:
• | $0.06 per share for September 2018 to September 28, 2018 record holders with October 18, 2018 payment date; and |
• | $0.06 per share for October 2018 to October 31, 2018 record holders with November 21, 2018 payment date. |
These distributions mark Prospect’s 122nd and 123rd consecutive cash distributions to shareholders.
Based on the declarations above, Prospect’s closing stock price of $7.18 at August 27, 2018 delivers to shareholders a dividend yield of 10.0%.
Based on past distributions and our current share count for declared distributions, Prospect since inception through our October 2018 distribution will have distributed $16.80 per share to original shareholders, exceeding $2.6 billion in cumulative distributions to all shareholders.
Prospect expects to declare November 2018, December 2018, and January 2019 distributions in November 2018.
PORTFOLIO AND INVESTMENT ACTIVITY
We continue to prioritize secured lending. At June 30, 2018, March 31, 2018, and June 30, 2017, our portfolio comprised the following:
All amounts in $000’s except per unit amounts | As of | As of | As of |
June 30, 2018 | March 31, 2018 | June 30, 2017 | |
Total Investments (at fair value) | $5,727,279 | $5,719,804 | $5,838,305 |
Number of Portfolio Companies | 135 | 134 | 121 |
% Controlled Investments (at fair value) | 42.0% | 34.7% | 32.7% |
Secured First Lien | 43.9% | 44.9% | 48.3% |
Secured Second Lien | 22.1% | 23.2% | 19.1% |
Structured Credit | 16.8% | 16.5% | 18.5% |
Equity Investments | 16.6% | 14.9% | 13.2% |
Unsecured Debt | 0.6% | 0.5% | 0.8% |
Small Business Whole Loans | 0.0% | 0.0% | 0.1% |
Annualized Current Yield - All Investments | 10.5% | 10.8% | 10.4% |
Annualized Current Yield - Performing Interest Bearing Investments | 13.0% | 12.9% | 12.2% |
Top Industry Concentration(1) | 14.2% | 12.8% | 10.7% |
Energy Industry Concentration(1) | 3.0% | 2.8% | 2.4% |
Non-Accrual Loans as % of Total Assets(4) | 2.5% | 1.3% | 2.5%(3) |
Weighted Average Portfolio Net Leverage(2) | 4.60x | 4.65x | 4.19x |
Weighted Average Portfolio EBITDA | $55,384 | $62,628 | $48,340 |
(1) | Excluding our underlying industry-diversified structured credit portfolio. |
(2) | Through our investment in the portfolio company’s capital structure. |
(3) | Includes 1.3% from USC, which timely paid income-producing, contractual interest to us in June 2017 quarter. |
(4) | Calculated at fair value |
During the June 2018 and March 2018 quarters, our investment origination and repayment activity was as follows:
All amounts in $000’s | Quarter Ended | Quarter Ended |
June 30, 2018 | March 31, 2018 | |
Total Originations | $339,841 | $429,928 |
Agented Sponsor Debt | 42% | 40% |
Agented Non-Sponsor Debt | 33% | 0% |
Real Estate | 15% | 3% |
Structured Credit | 6% | 7% |
Non-Agented Debt | 3% | 43% |
Corporate Yield Buyouts | 1% | 6% |
Online Lending | —% | 1% |
Total Repayments | $362,287 | $116,978 |
Originations, Net of Repayments | ($22,446) | $312,950 |
For a listing of transactions completed during the quarter, please see section titled “Portfolio Investment Activity” in our Form 10-K for the year ended June 30, 2018 as filed with the Securities and Exchange Commission on August 28, 2018.
Our structured credit investments have individual standalone financings each non-recourse to Prospect and with our risk limited in each case to our net investment amount. At June 30, 2018 and March 31, 2018, our structured credit portfolio at fair value consisted of the following:
All amounts in $000’s except per unit amounts | As of | As of |
June 30, 2018 | March 31, 2018 | |
Total Structured Credit Investments | $960,194 | $944,815 |
# of Investments | 44 | 43 |
TTM Average Cash Yield on Fair Value(1)(2) | 17.6% | 17.3% |
Annualized Cash Yield on Fair Value(1)(2) | 21.1% | 13.2% |
Annualized GAAP Yield on Fair Value(1)(2) | 14.5% | 13.2% |
Annualized GAAP Yield on Amortized Cost(1)(2) | 12.6% | 11.6% |
Cumulative Cash Distributions | $1,163,691 | $1,112,703 |
% of Original Investment | 76.3% | 73.8% |
# of Underlying Collateral Loans | 2,025 | 2,184 |
Total Asset Base of Underlying Portfolio | $19,087,415 | $18,762,162 |
Prospect TTM Default Rate | 1.15% | 1.10% |
Broadly Syndicated Market TTM Default Rate | 1.98% | 2.42% |
Prospect Default Rate Outperformance vs. Market | 0.83% | 1.32% |
(1) | Excludes deals in the process of redemption. |
(2) | Cash yield includes all cash distributions from an investment, while GAAP yield subtracts out amortization of cost basis. |
To date, including called deals in the process of liquidation, we have exited 11 structured credit investments totaling $290.5 million with an expected average realized IRR of 16.1% and cash on cash multiple of 1.49 times.
Since June 30, 2017 through today, one of our structured credit investments has completed a refinancing to reduce liability spreads, and 19 additional structured credit investments have completed multi-year extensions of their reinvestment periods (with most resulting in reduced liability spreads as well as higher asset spread possibilities from longer weighted average life tests). We believe further upside exists in our structured credit portfolio through additional refinancings and reinvestment period extensions, and are actively working on such transactions.
To date during the September 2018 quarter, we have completed new and follow-on investments as follows:
All amounts in $000’s | Quarter Ended |
September 30, 2018 | |
Total Originations | $180,901 |
Agented Sponsor Debt | 66% |
Non-Agented Debt | 24% |
Structured Credit | 6% |
Real Estate | 4% |
Agented Non-Sponsor Debt | 0% |
Total Repayments | $20,126 |
Originations, Net of Repayments | $160,775 |
LIQUIDITY AND FINANCIAL RESULTS
The following table summarizes key leverage statistics at June 30, 2018, March 31, 2018, and June 30, 2017:
All amounts in $000’s | As of June 30, 2018 | As of March 31, 2018 | As of June 30, 2017 |
Net of Cash Debt to Equity Ratio | 66.5% | 69.1% | 70.5% |
% of Assets at Floating Rates | 89.7% | 90.1% | 90.4% |
% of Liabilities at Fixed Rates | 98.4% | 96.4% | 99.9% |
Unencumbered Assets | $4,502,764 | $4,619,909 | $4,546,147 |
% of Total Assets | 77.1% | 79.0% | 73.6% |
In the past year, we repaid our remaining October 2017 and March 2018 convertible notes at maturity and repurchased $269.4 million of our program notes. In May 2018 we repurchased $98.4 million in principal amount of our January 2019 convertible notes and issued an additional $103.5 million of our July 2022 convertible notes. In June 2018 we repurchased $146.5 million in principal amount of our 5% coupon July 2019 notes, issued $70.0 million of our March 2023 notes, and issued $55.0 million of our June 2028 notes. The below table summarizes our issuance and repurchase activity:
All amounts in $000’s | Principal | Rate | Maturity |
Debt Issuances | |||
2022 Notes | $103,500 | 4.95% | July 2022 |
2023 Notes | $70,000 | 5.875% | March 2023 |
2028 Notes | $55,000 | 6.25% | June 2028 |
Repurchases | |||
2017 Notes | $50,734 | 5.375% | October 2017 |
2018 Notes | $85,419 | 5.75% | March 2018 |
2019 Notes | $98,353 | 5.875% | January 2019 |
5% 2019 Notes | $146,464 | 5.00% | July 2019 |
Prospect Capital InterNotes® | $298,735 | 3.75% - 5.85% | February 2018- September 2020 |
On August 1, 2018, we completed an extension of the revolving credit facility (the “Facility”) for Prospect Capital Funding, extending the term 5.7 years from such date and reducing the interest rate on drawn amounts to one-month Libor plus 2.20%. The new Facility, for which $770 million of commitments have been closed to date with 19 institutional lenders (representing one of the most diversified bank groups in our industry), with further increases targeted, includes an accordion feature that allows the Facility, at Prospect's discretion, to accept up to a total of $1.5 billion of commitments. The Facility matures on March 27, 2024. The Facility includes a revolving period that extends through March 27, 2022, followed by an additional two-year amortization period, with distributions allowed to Prospect after the completion of the revolving period.
We currently have seven separate unsecured debt issuances aggregating $1.6 billion outstanding, not including our program notes, with laddered maturities extending to June 2028. At June 30, 2018, $760.9 million of program notes were outstanding with staggered maturities through October 2043.
EARNINGS CONFERENCE CALL
Prospect will host an earnings call on Wednesday, August 29, 2018 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to September 28, 2018, call 877-344-7529 passcode 10123493. The call will be available prior to September 28, 2018 on Prospect’s website, www.prospectstreet.com.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
June 30, 2018 | June 30, 2017 | ||||||
Assets | |||||||
Investments at fair value: | |||||||
Control investments (amortized cost of $2,300,526 and $1,840,731, respectively) | $ | 2,404,326 | $ | 1,911,775 | |||
Affiliate investments (amortized cost of $55,637 and $22,957, respectively) | 58,436 | 11,429 | |||||
Non-control/non-affiliate investments (amortized cost of $3,475,295 and $4,117,868, respectively) | 3,264,517 | 3,915,101 | |||||
Total investments at fair value (amortized cost of $5,831,458 and $5,981,556, respectively) | 5,727,279 | 5,838,305 | |||||
Cash | 83,758 | 318,083 | |||||
Receivables for: | |||||||
Interest, net | 19,783 | 9,559 | |||||
Other | 1,867 | 924 | |||||
Due from broker | 3,029 | — | |||||
Prepaid expenses | 984 | 1,125 | |||||
Due from Affiliate | 88 | 14 | |||||
Deferred financing costs on Revolving Credit Facility | 2,032 | 4,779 | |||||
Total Assets | 5,838,820 | 6,172,789 | |||||
Liabilities | |||||||
Revolving Credit Facility | 37,000 | — | |||||
Convertible Notes (less unamortized debt issuance costs of $13,074 and $15,512, respectively) | 809,073 | 937,641 | |||||
Prospect Capital InterNotes® (less unamortized debt issuance costs of $11,998 and $14,240, respectively) | 748,926 | 966,254 | |||||
Public Notes (less unamortized discount and debt issuance costs of $11,007 and $10,981, respectively) | 716,810 | 738,300 | |||||
Due to Prospect Capital Management | 49,045 | 48,249 | |||||
Interest payable | 33,741 | 38,630 | |||||
Dividends payable | 21,865 | 30,005 | |||||
Due to broker | 6,159 | 50,371 | |||||
Accrued expenses | 5,426 | 4,380 | |||||
Due to Prospect Administration | 2,212 | 1,910 | |||||
Other liabilities | 1,516 | 2,097 | |||||
Total Liabilities | 2,431,773 | 2,817,837 | |||||
Commitments and Contingencies | — | — | |||||
Net Assets | $ | 3,407,047 | $ | 3,354,952 | |||
Components of Net Assets | |||||||
Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; 364,409,938 and 360,076,933 issued and outstanding, respectively) | $ | 364 | $ | 360 | |||
Paid-in capital in excess of par | 4,021,541 | 3,991,317 | |||||
Accumulated overdistributed net investment income | (45,186 | ) | (54,039 | ) | |||
Accumulated net realized loss | (465,493 | ) | (439,435 | ) | |||
Net unrealized loss | (104,179 | ) | (143,251 | ) | |||
Net Assets | $ | 3,407,047 | $ | 3,354,952 | |||
Net Asset Value Per Share | $ | 9.35 | $ | 9.32 | |||
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended June 30, | Year Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Investment Income | |||||||||||||||
Interest income: | |||||||||||||||
Control investments | $ | 57,527 | $ | 41,953 | $ | 195,487 | $ | 177,496 | |||||||
Affiliate investments | 234 | 297 | 553 | 297 | |||||||||||
Non-control/non-affiliate investments | 67,244 | 84,777 | 285,473 | 342,696 | |||||||||||
Structured credit securities | 34,678 | 33,538 | 125,499 | 148,228 | |||||||||||
Total interest income | 159,683 | 160,565 | 607,012 | 668,717 | |||||||||||
Dividend income: | |||||||||||||||
Control investments | 5,639 | 1,000 | 11,279 | 5,250 | |||||||||||
Non-control/non-affiliate investments | 250 | 99 | 1,767 | 429 | |||||||||||
Total dividend income | 5,889 | 1,099 | 13,046 | 5,679 | |||||||||||
Other income: | |||||||||||||||
Control investments | 2,765 | 1,721 | 15,080 | 11,470 | |||||||||||
Non-control/non-affiliate investments | 5,694 | 3,317 | 22,707 | 15,180 | |||||||||||
Total other income | 8,459 | 5,038 | 37,787 | 26,650 | |||||||||||
Total Investment Income | 174,031 | 166,702 | 657,845 | 701,046 | |||||||||||
Operating Expenses | |||||||||||||||
Base management fee | 29,056 | 30,647 | 118,046 | 122,874 | |||||||||||
Income incentive fee | 19,870 | 17,419 | 71,713 | 76,520 | |||||||||||
Interest and credit facility expenses | 37,178 | 40,867 | 155,039 | 164,848 | |||||||||||
Allocation of overhead from Prospect Administration | 4,132 | 3,475 | 10,031 | 13,246 | |||||||||||
Audit, compliance and tax related fees | 1,455 | 1,412 | 5,539 | 5,088 | |||||||||||
Directors’ fees | 237 | 116 | 450 | 454 | |||||||||||
Excise tax | — | — | — | (1,100 | ) | ||||||||||
Other general and administrative expenses | 2,623 | 3,088 | 10,177 | 13,034 | |||||||||||
Total Operating Expenses | 94,551 | 97,024 | 370,995 | 394,964 | |||||||||||
Net Investment Income | 79,480 | 69,678 | 286,850 | 306,082 | |||||||||||
Net Realized and Change in Unrealized Gains (Losses) from Investments | |||||||||||||||
Net realized gains (losses) | |||||||||||||||
Control investments | 1 | (66,099 | ) | 13 | (65,915 | ) | |||||||||
Affiliate investments | — | — | (13,351 | ) | 137 | ||||||||||
Non-control/non-affiliate investments | (11 | ) | (31,017 | ) | (5,126 | ) | (30,528 | ) | |||||||
Net realized losses | (10 | ) | (97,116 | ) | (18,464 | ) | (96,306 | ) | |||||||
Net change in unrealized gains (losses) | |||||||||||||||
Control investments | (25,487 | ) | 117,754 | 55,670 | 86,817 | ||||||||||
Affiliate investments | 5,994 | 2,407 | 25,671 | 553 | |||||||||||
Non-control/non-affiliate investments | 60,475 | (34,749 | ) | (42,270 | ) | (37,229 | ) | ||||||||
Net change in unrealized gains (losses) | 40,982 | 85,412 | 39,071 | 50,141 | |||||||||||
Net Realized and Change in Unrealized Gains (Losses) from Investments | 40,972 | (11,704 | ) | 20,607 | (46,165 | ) | |||||||||
Net realized (losses) gains on extinguishment of debt | (6,148 | ) | (6,806 | ) | (7,594 | ) | (7,011 | ) | |||||||
Net Increase in Net Assets Resulting from Operations | $ | 114,304 | $ | 51,168 | $ | 299,863 | $ | 252,906 | |||||||
Net increase in net assets resulting from operations per share | $ | 0.31 | $ | 0.14 | $ | 0.83 | $ | 0.70 | |||||||
Dividends declared per share | $ | (0.18 | ) | $ | (0.25 | ) | $ | (0.77 | ) | $ | (1.00 | ) | |||
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
ROLLFORWARD OF NET ASSET VALUE PER SHARE
(in actual dollars)
Three Months Ended June 30, | Year Ended June 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Per Share Data | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.23 | $ | 9.43 | $ | 9.32 | $ | 9.62 | ||||||||||
Net investment income(1) | 0.22 | 0.19 | 0.79 | 0.85 | ||||||||||||||
Net realized and change in unrealized gains (losses) (1) | 0.09 | (0.05 | ) | (0.04 | ) | (0.15 | ) | |||||||||||
Distributions of net investment income | (0.18 | ) | (0.25 | ) | (0.77 | ) | (1.00 | ) | ||||||||||
Common stock transactions(2) | (0.01 | ) | — | (3) | (0.03 | ) | — | (3) | ||||||||||
Net asset value at end of period | $ | 9.35 | $ | 9.32 | $ | 9.35 | $ | 9.32 | ||||||||||
(1) | Per share data amount is based on the weighted average number of common shares outstanding for the period presented (except for dividends to shareholders which is based on actual rate per share). |
(2) | Common stock transactions include the effect of issuances and repurchases of common stock, if any. |
(3) | Amount is less than $0.01. |
ABOUT PROSPECT CAPITAL CORPORATION
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
ROLLFORWARD OF NET ASSET VALUE PER SHARE
(in actual dollars)
Prospect Capital Corporation (www.prospectstreet.com) is a business development company lending to and investing in private businesses. Our investment objective is to generate current income and long-term capital appreciation through debt and equity investments.
We have elected to be treated as a business development company under the Investment Company Act of 1940 (“1940 Act”). We are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, whose safe harbor for forward-looking statements does not apply to business development companies. Any such statements are highly likely to be affected by unknowable future events and conditions, including some that are or are not under our control, and that we may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from any forward-looking statements. Such statements speak only as of the time when made. We undertake no obligation to update any such statement now or in the future.
For additional information, contact:
Grier Eliasek, President and Chief Operating Officer
grier@prospectstreet.com
Telephone (212) 448-0702