Prospect Capital Corp (PSEC, Financial) has released its financial results for the fiscal quarter ended September 30, 2023, on November 8, 2023. The company reported a Net Investment Income (NII) of $125.6 million, or $0.25 per common share, showing a consistent increase from the previous quarters. Interest income remained the dominant contributor to total investment income, accounting for 85.7%. The Basic NII Coverage of Distributions to Common Shareholders stood strong at 139%, indicating a healthy surplus over distributions.
Financial Highlights and Portfolio Performance
Prospect Capital exhibited a robust financial position with a Net Asset Value (NAV) to common shareholders of $3.78 billion, translating to $9.25 per common share. The company's balance sheet remained underleveraged with a net of cash debt to equity ratio of 46.5% and a net of cash asset coverage of debt ratio of 314%. The portfolio consisted of 128 companies, with first lien debt representing the largest portion at 57.3%. The annualized current yield on all investments stood at 10.3%, with performing interest-bearing investments yielding 12.7%.
Dividend Declarations and Shareholder Returns
Prospect Capital declared monthly cash distributions to common shareholders of $0.06 per share for November 2023, December 2023, and January 2024. These distributions mark the 75th, 76th, and 77th consecutive $0.06 per share distributions to common shareholders. The company's closing stock price of $5.35 as of November 7, 2023, delivers an annualized distribution yield of 13.5% and an annualized basic NII yield of 18.7%, representing 139% basic NII coverage of common distributions.
Capital and Liquidity
Prospect Capital's capital structure includes a $1.95 billion revolving credit facility, program notes, institutional bonds, convertible bonds, listed preferred stock, and program preferred stock. The company has a significant amount of balance sheet cash and undrawn revolving credit facility commitments, totaling approximately $968 million. Prospect Capital has also issued over $1.5 billion of its 6.50% and 5.50% perpetual preferred stock programs, enhancing its liquidity position.
Investment Activity and Strategies
The company's investment activities include direct originations, agented loans, and investments in structured credit. Prospect Capital has invested $20.4 billion across 419 investments since inception, exiting 283 of these investments. The company's primary origination strategies focus on lending to companies, purchasing controlling equity positions, and investing in structured credit.
Outlook and Management Commentary
Prospect Capital's management team, owning over 27% of all common shares outstanding, remains committed to enhancing accretive NII per share growth. The company's strategies include utilizing its cost-efficient revolving credit facility, optimizing portfolio company performance, and deploying dry powder from its underleveraged balance sheet to target attractive risk-adjusted yields and total returns.
Prospect Capital Corp (PSEC, Financial) continues to demonstrate a strong financial performance with increased net investment income and a solid net asset value. The company's commitment to maintaining monthly dividends and its strategic investment activities position it well for future growth and shareholder returns.
Explore the complete 8-K earnings release (here) from Prospect Capital Corp for further details.
