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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Prospect Capital Reports March 2019 Quarterly Results and Declares Additional Monthly Distributions

May 8, 2019

NEW YORK, May 08, 2019 (GLOBE NEWSWIRE) -- Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect”, “our”, or “we”) today announced financial results for our third fiscal quarter ended March 31, 2019.

All amounts in $000’s except Quarter Ended Quarter Ended Quarter Ended per share amounts (on weighted average March 31, December 31, March 31, basis for period numbers) 2019 2018 2018 ---------------------------------------- ------------- -------------- ------------- Net Investment Income (“NII”) $77,262 $80,811 $70,446 ---------------------------------------- ------ ------ ------ ------- ------ ------ Interest as % of Total Investment Income 90.6% 84.1% 89.6% ---------------------------------------- ------------- -------------- ------------- NII per Share $0.21 $0.22 $0.19 ---------------------------------------- ------------- -------------- ------------- $ Net Income (Loss) $89,195 (67,389 $51,859 ) ---------------------------------------- ------ ------ ------ ------- ------ ------ Net Income (Loss) per Share $0.24 $ $0.14 (0.18) ---------------------------------------- ------------- -------------- ------------- Distributions to Shareholders $66,024 $65,837 $65,174 ---------------------------------------- ------ ------ ------ ------- ------ ------ Distributions per Share $0.18 $0.18 $0.18 ---------------------------------------- ------------- -------------- ------------- NII / Distributions to Shareholders 117% 123% 108% ---------------------------------------- ------------- -------------- ------------- NAV per Share at Period End $9.08 $9.02 $9.23 ---------------------------------------- ------------- -------------- ------------- Net of Cash Debt to Equity Ratio 69.1% 75.0% 69.1% ---------------------------------------- ----- ------ ----- ------- ----- ------

For the March 2019 quarter, we earned net investment income (“NII”) of $77.3 million, or $0.21 per weighted average share, down $0.01 from the December 2018 quarter, exceeding our current quarterly dividend rate of $0.18 per share by $0.03 per share. The decrease in NII per share for the March 2019 quarter is primarily due to lower levels of dividends and structuring fee income compared to the December 2018 quarter. Our ratio of NII to distributions was 117% in the March 2019 quarter.

In the March 2019 quarter, our net of cash debt to equity ratio was 69.1%, down 5.9% from December 2018.

For the March 2019 quarter, our net income was $89.2 million, or $0.24 per weighted average share. The $0.42 increase in net income for the March 2019 quarter is primarily due to realized and unrealized gains in our portfolio.

Our net asset value (“NAV”) per share increased by $0.06 to $9.08 during the March 2019 quarter.

All amounts in $000’s except Nine Months Ended Nine Months Ended per share amounts (on weighted March 31, 2019 March 31, 2018 average basis for period numbers) --------------------------------- ----------------- ----------------- NII $243,232 $207,370 --------------------------------- ----------------- ----------------- NII per Share $0.67 $0.57 --------------------------------- ----------------- ----------------- Net Income (“NI”) $105,601 $185,559 --------------------------------- ----------------- ----------------- NI per Share $0.29 $0.51 --------------------------------- ----------------- ----------------- Distributions to Shareholders $197,555 $211,733 --------------------------------- ----------------- ----------------- Distributions per Share $0.54 $0.59 --------------------------------- ----------------- -----------------

For the nine months ended March 31, 2019, we earned NII of $243.2 million, or $0.67 per weighted average share, up $0.10 from the prior year. For the nine months ended March 31, 2019, we earned NI of $105.6 million, or $0.29 per weighted average share, down $0.22 from the prior year.

DISTRIBUTION DECLARATION

Prospect is declaring distributions as follows:

-- $0.06 per share for May 2019 to May 31, 2019 record holders with June 20, 2019 payment date; -- $0.06 per share for June 2019 to June 28, 2019 record holders with July 18, 2019 payment date; -- $0.06 per share for July 2019 to July 31, 2019 record holders with August 22, 2019 payment date; and -- $0.06 per share for August 2019 to August 30, 2019 record holders with September 19, 2019 payment date.

These distributions are Prospect’s 130th, 131th, and 132nd, and 133rd consecutive cash distributions to shareholders.

Based on the declarations above, Prospect’s closing stock price of $6.78 at May 7, 2019 delivers to shareholders a distribution yield of 10.6%.

Based on past distributions and our current share count for declared distributions, Prospect since inception through our August 2019 distribution will have distributed $17.40 per share to original shareholders, aggregating approximately $2.9 billion in cumulative distributions to all shareholders.

Prospect expects to declare September 2019 and October 2019 distributions in August 2019.

PORTFOLIO AND INVESTMENT ACTIVITY

All amounts in $000’s except As of As of As of per unit amounts March 31, December 31, June 30, 2019 2018 2018 ------------------------------------------------------------------ ---------- ------------- --------- Total Investments (at fair value) $5,700, $5,842, $5,727, 673 570 279 ------------------------------------------------------------------ ------ --- ------ ------ ------ -- Number of Portfolio Companies 137 139 135 ------------------------------------------------------------------ ----- --- ----- ------ ----- -- % Controlled Investments (at fair value) 42.0% 41.6% 42.0% ------------------------------------------------------------------ ---------- ------------- --------- Secured First Lien 44.6% 46.2% 43.9% ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Secured Second Lien 23.5% 23.1% 22.1% ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Subordinated Structured Notes 15.5% 15.2% 16.8% ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Equity Investments 15.1% 14.3% 16.6% ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Rated Secured Structured Notes (1) 0.8% 0.8% - ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Unsecured Debt 0.5% 0.4% 0.6% ------------------------------------------------------------------ ---------- ------------- --------- Annualized Current Yield – All Investments 10.4% 10.7% 10.5% ------------------------------------------------------------------ ----- --- ----- ------ ----- -- Annualized Current Yield – Performing Interest Bearing Investments 12.8% 13.1% 13.0% ------------------------------------------------------------------ ----- --- ----- ------ --------- Top Industry Concentration(2) 13.8% 13.8% 14.2% ------------------------------------------------------------------ ---------- ------------- --------- Energy Industry Concentration(2) 3.0% 3.0% 3.0% ------------------------------------------------------------------ ---------- ------------- --------- Non-Accrual Loans as % of Total Assets (3) 3.3% 3.6% 2.5% ------------------------------------------------------------------ ---------- ------------- --------- Weighted Average Portfolio Net Leverage(4) 4.51x 4.57x 4.60x ------------------------------------------------------------------ ---------- ------------- --------- Weighted Average Portfolio EBITDA(4) $59,835 $58,491 $55,384 ------------------------------------------------------------------ ------ --- ------ ------ ------ --

(1) Our Rated Secured Structured Notes are considered non-agented debt where applicable.

(2) Excluding our underlying industry-diversified structured credit portfolio.

(3) Calculated at fair value.

(4) For additional disclosure see “Weighted Average Portfolio EBITDA and Net Leverage” at the end of this release.

During the March 2019 and December 2018 quarters, our investment origination and repayment activity was as follows:

All amounts in $000’s Quarter Quarter Ended Ended March 31, December 31, 2019 2018 ------------------------------- ----------- --------------- Total Originations $35,711 $226,25 2 ------------------------------- ----------- --------------- Non-Agented Debt (1) 100.0% 72.5% ------------------------------- ------ --- ----- -------- Agented Sponsor Debt — 14.5% ------------------------------- ------ --- ----- -------- Subordinated Structured Notes — 10.2% ------------------------------- ------ --- ----- -------- Agented Non-Sponsor Debt — 2.1% ------------------------------- ------ --- ----- -------- Real Estate — 0.6% ------------------------------- ------ --- ----- -------- Corporate Yield Buyouts — 0.1% ------------------------------- ----------- --------------- Total Repayments $195,055 $163,50 2 ------------------------------- ------- --- ------ -------- $ Originations, Net of Repayments (159,344 $62,750 ) ------------------------------- ------- --- ------ --------

(1) Non-Agented Debt includes 8.8% of origination activity in Rated Secured Structured Notes for the quarter ended December 31, 2018.

For a list of transactions completed during the quarter, please see “Portfolio Investment Activity” in our Form 10-Q for the quarter ended March 31, 2019.

We have invested in structured credit investments with individual standalone financings non-recourse to Prospect and with our risk limited in each case to our net investment amount. At March 31, 2019 and December 31, 2018, our subordinated structured note portfolio at fair value consisted of the following:

All amounts in $000’s except As of As of per unit amounts March 31, December 31, 2019 2018 ----------------------------------------------- --------- ------------ Total Subordinated Structured Notes $881,12 $889,49 8 1 ----------------------------------------------- --------- ------------ # of Investments 43 43 ----------------------------------------------- --------- ------------ TTM Average Cash Yield(1)(2)(3) 17.9% 17.5% ----------------------------------------------- ----- -- ----- ----- Annualized Cash Yield(1)(2)(3) 15.2% 21.0% ----------------------------------------------- ----- -- ----- ----- Annualized GAAP Yield on Fair Value(1)(2) 15.8% 15.5% ----------------------------------------------- ----- -- ----- ----- Annualized GAAP Yield on Amortized Cost(2)(4) 12.7% 12.6% ----------------------------------------------- --------- ------------ Cumulative Cash Distributions $1,271, $1,237, 206 719 ----------------------------------------------- ------ -- ------ ----- % of Original Investment 83.0% 80.8% ----------------------------------------------- --------- ------------ # of Underlying Collateral Loans 1,808 1,853 ----------------------------------------------- ----- -- ----- ----- Total Asset Base of Underlying Portfolio $18,426 $18,646 ,692 ,090 ----------------------------------------------- --------- ------------ Prospect TTM Default Rate 0.29% 0.92% ----------------------------------------------- ----- -- ----- ----- Broadly Syndicated Market TTM Default Rate 0.93% 1.63% ----------------------------------------------- ----- -- ----- ----- Prospect Default Rate Outperformance vs. Market 0.64% 0.71% ----------------------------------------------- ----- -- ----- -----

(1) Calculation based on fair value.

(2) Excludes deals being redeemed.

(3) Excludes deals that have yet to make a first payment.

(4) Calculation based on amortized cost.

To date, including called deals being liquidated, we have exited nine subordinated structured notes totaling $263.4 million with an expected pooled average realized IRR of 16.8% and cash on cash multiple of 1.49 times.

Since December 31, 2017 through today, 22 of our structured credit investments have completed multi-year extensions of their reinvestment periods (typically at reduced liability spreads). We believe further optionality upside exists in our structured credit portfolio through additional re-financings and reinvestment period extensions.

To date during the March 2019 quarter, we have completed new and follow-on investments as follows:

All amounts in $000’s Quarter Ended June 30, 2019 ------------------------------- ---------- Total Originations $25,919 ------------------------------- ---------- Non-Agented Debt 64.7% ------------------------------- ----- --- Agented Sponsor Debt 35.3% ------------------------------- ---------- Total Repayments $61,651 ------------------------------- ------ --- $ Originations, Net of Repayments (35,732 ) ------------------------------- ------ ---

LIQUIDITY AND FINANCIAL RESULTS

As of As of As of All amounts in $000’s March 31, December 31, March 31, 2019 2018 2018 -------------------------------- ---------- ------------- ---------- Net of Cash Debt to Equity Ratio 69.1% 75.0% 69.1% -------------------------------- ----- --- ----- ------ ----- --- % of Assets at Floating Rates 88.0% 88.2% 90.1% -------------------------------- ----- --- ----- ------ ----- --- % of Liabilities at Fixed Rates 95.9% 88.5% 96.4% -------------------------------- ---------- ------------- ---------- Unencumbered Assets $4,152, $4,322, $4,619, 393 091 909 -------------------------------- ------ --- ------ ------ ------ --- % of Total Assets 71.0% 72.4% 78.9% -------------------------------- ----- --- ----- ------ ----- ---

We repaid the remaining $101.6 million of our January 2019 notes at maturity. The below table summarizes our March 2019 quarter issuance and repurchase activity, including at-the-market (“ATM”) follow-on issuance:

All amounts in $000’s Principal Rate Maturity ---------------------------- --------- ------------- ---------- Debt Issuances ---------------------------- --------- ------------- ---------- 2025 Notes $201,250 6.375% March 2025 ---------------------------- --------- ------ ------ ---------- 2024 Notes ATM $12,576 6.25% June 2024 ---------------------------- --------- ------ ------ ---------- 2028 Notes ATM $1,465 6.25% June 2028 ---------------------------- --------- ------ ------ ---------- 2029 Notes ATM $19,170 6.875% June 2029 ---------------------------- --------- ------ ------ ---------- Repurchases ---------------------------- --------- ------------- ---------- 2020 Notes $129,798 4.75% April 2020 ---------------------------- --------- ------ ------ ---------- Prospect Capital InterNotes® $23,986 4.50% - 4.75% July 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%.

$1.05 billion of Facility commitments have closed to date with 29 institutional lenders (representing one of the largest and most diversified bank groups in our industry), with further increases targeted. An accordion feature allows the Facility, at Prospect’s discretion, to accept up to $1.5 billion of commitments. The Facility matures 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 eight separate unsecured debt issuances aggregating $1.6 billion outstanding, not including our program notes, with laddered maturities extending to June 2029. At March 31, 2019, $754.7 million of program notes were outstanding with laddered maturities through October 2043.

EARNINGS CONFERENCE CALL

Prospect will host an earnings call on Thursday, May 9, 2019 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to June 8, 2019, visit www.prospectstreet.com or call 877-344-7529 with passcode 10131367.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share and per share data) March 31, June 30, 2019 2018 (Unaudited) (Audited) Assets Investments at fair value: Control investments (amortized cost of $2,331,616 and $2,300,526, respectively) $ 2,394,716 $ 2,404,326 Affiliate investments (amortized cost of $180,279 and $55,637, respectively) 91,042 58,436 Non-control/non-affiliate investments (amortized cost of $3,437,174 and 3,214,915 3,264,517 $3,475,295, respectively) ----------- - ----------- - Total investments at fair value (amortized cost of $5,949,069 and $5,831,458, 5,700,673 5,727,279 respectively) Cash 120,566 83,758 Receivables for: Interest, net 16,925 19,783 Other 985 1,867 Deferred financing costs on Revolving Credit Facility 8,386 2,032 Due from broker 539 3,029 Prepaid expenses 285 984 Due from Affiliate 88 88 ----------- - ----------- - Total Assets 5,848,447 5,838,820 ----------- - ----------- - Liabilities Revolving Credit Facility 99,000 37,000 Convertible Notes (less unamortized debt issuance costs of $15,207 and $13,074, 763,245 809,073 respectively) Public Notes (less unamortized discount and debt issuance costs of $14,296 and $11,007, respectively) 775,624 716,810 Prospect Capital InterNotes® (less unamortized debt issuance costs of $11,969 and $11,998, respectively) 742,752 748,926 Due to Prospect Capital Management 48,855 49,045 Interest payable 25,426 33,741 Due to broker 31,819 6,159 Dividends payable 22,013 21,865 Accrued expenses 5,478 5,426 Due to Prospect Administration 1,807 2,212 Other liabilities 613 1,516 ----------- ----------- Total Liabilities 2,516,632 2,431,773 ----------- - ----------- - Commitments and Contingencies ----------- ----------- Net Assets $ 3,331,815 $ 3,407,047 - --------- - - --------- - Components of Net Assets Common stock, par value $0.001 per share (1,000,000,000 common shares $ 367 $ 364 authorized; 366,884,974 and 364,409,938 issued and outstanding, respectively) Paid-in capital in excess of par 4,038,229 4,021,541 Total distributable earnings (loss) (706,781 ) (614,858 ) ----------- - ----------- - Net Assets $ 3,331,815 $ 3,407,047 - --------- - - --------- - Net Asset Value Per Share $ 9.08 $ 9.35 - --------- - - --------- -

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Three Months Ended Nine Months Ended March 31, March 31, ---------------------- ------------------------ 2019 2018 2019 2018 ---------- ---------- ----------- ----------- Investment Income Interest income: Control investments $ 51,078 $ 45,944 $ 161,206 $ 139,392 Affiliate investments 230 271 631 476 Non-control/non-affiliate investments 67,656 68,376 204,944 216,639 Structured credit securities 36,112 31,271 105,731 90,822 -------- - -------- - --------- - --------- - Total interest income 155,076 145,862 472,512 447,329 -------- - -------- - --------- - --------- - Dividend income: Control investments 3,612 5,639 31,277 5,639 Affiliate investments 659 — 659 — Non-control/non-affiliate investments 253 648 781 1,518 -------- - -------- - --------- - --------- - Total dividend income 4,524 6,287 32,717 7,157 -------- - -------- - --------- - --------- - Other income: Control investments 10,799 6,188 29,331 12,317 Non-control/non-affiliate investments 710 4,498 4,854 17,011 -------- - -------- - --------- - --------- - Total other income 11,509 10,686 34,185 29,328 -------- - -------- - --------- - --------- - Total Investment Income 171,109 162,835 539,414 483,814 -------- - -------- - --------- - --------- - Operating Expenses Base management fee 29,540 29,268 92,684 88,990 Income incentive fee 19,315 17,612 60,808 51,843 Interest and credit facility expenses 38,946 37,479 117,510 117,861 Allocation of overhead from Prospect Administration 2,084 3,195 11,091 5,899 Audit, compliance and tax related fees 680 1,130 3,462 4,084 Directors’ fees 112 113 341 338 Other general and administrative expenses 3,170 3,592 10,286 7,429 -------- - -------- - --------- - --------- - Total Operating Expenses 93,847 92,389 296,182 276,444 -------- - -------- - --------- - --------- - Net Investment Income 77,262 70,446 243,232 207,370 -------- - -------- - --------- - --------- - Net Realized and Net Change in Unrealized Gains (Losses) from Investments Net realized gains (losses) Control investments 11,507 2 14,309 13 Affiliate investments — (14,197 ) — (13,351 ) Non-control/non-affiliate investments (2,024 ) (23 ) (792 ) (5,116 ) -------- -------- --------- --------- Net realized gains (losses) 9,483 (14,218 ) 13,517 (18,454 ) -------- - -------- - --------- - --------- - Net change in unrealized gains (losses) Control investments 11,686 1,380 (22,129 ) 46,898 Affiliate investments (4,101 ) 12,952 (23,750 ) 19,678 Non-control/non-affiliate investments (2,155 ) (18,188 ) (98,338 ) (68,488 ) -------- -------- --------- --------- Net change in unrealized gains (losses) 5,430 (3,856 ) (144,217 ) (1,912 ) -------- - -------- - --------- - --------- - Net Realized and Net Change in Unrealized Gains (Losses) from 14,913 (18,074 ) (130,700 ) (20,366 ) Investments -------- - -------- - --------- - --------- - Net realized losses on extinguishment of debt (2,980 ) (513 ) (6,931 ) (1,445 ) -------- -------- --------- --------- Net Increase in Net Assets Resulting from Operations $ 89,195 $ 51,859 $ 105,601 $ 185,559 - ------ - - ------ - - ------- - - ------- - Net increase in net assets resulting from operations per $ 0.24 $ 0.14 $ 0.29 $ 0.51 share - ------ - - ------ - - ------- - - ------- - Dividends declared per share $ (0.18 ) $ (0.18 ) $ (0.54 ) $ (0.59 ) - ------ - - ------ - - ------- - - ------- -

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES ROLLFORWARD OF NET ASSET VALUE PER SHARE (in actual dollars) Three Months Ended Nine Months Ended March 31, March 31, ------------------ ----------------- 2019 2018 2019 2018 -------- -------- ------ - ------ - Per Share Data Net asset value at beginning of period $ 9.02 $ 9.28 $ 9.35 $ 9.32 Net investment income(1) 0.21 0.19 0.67 0.57 Net realized and change in unrealized gains (losses) (1) 0.03 (0.05 ) (0.38 ) (0.06 ) Distributions of net investment income (0.18 ) (0.18 ) (0.54 ) (0.59 ) Common stock transactions(2)(3) 0.00 (0.01 ) (0.02 ) (0.01 ) ------ - ------ - ------ - ------ - Net asset value at end of period $ 9.08 $ 9.23 $ 9.08 $ 9.23 - ---- - - ---- - - ---- - - ---- -

(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.

WEIGHTED AVERAGE PORTFOLIO EBITDA AND NET LEVERAGE

Weighted Average Portfolio Net Leverage (“Portfolio Net Leverage”) and Weighted Average Portfolio EBITDA (“Portfolio EBITDA”) provide clarity into the underlying capital structure of our portfolio debt investments and the likelihood that our overall portfolio will make interest payments and repay principal.

Portfolio Net Leverage reflects the net leverage of each of our portfolio company debt investments, weighted based on the current debt principal outstanding of such investments. The net leverage for each portfolio company is calculated based on our investment in the capital structure of such portfolio company, with a maximum limit of 10.0x adjusted EBITDA. This calculation excludes debt subordinate to our position within the capital structure because our exposure to interest payment and principal repayment risk is limited beyond that point. Additionally, structured credit residual interests and equity investments, for which principal repayment is not fixed, are also not included in the calculation. The calculation does not exceed 10.0x adjusted EBITDA for any individual investment because 10.0x captures the highest level of risk to us. Portfolio Net Leverage provides us with some guidance as to our exposure to the interest payment and principal repayment risk of our overall debt portfolio. We monitor our Portfolio Net Leverage on a quarterly basis.

Portfolio EBITDA is used by Prospect to supplement Portfolio Net Leverage and generally indicates a portfolio company’s ability to make interest payments and repay principal. Portfolio EBITDA is calculated using the weighted average dollar amount EBITDA of each of our portfolio company debt investments. The calculation provides us with insight into profitability and scale of the portfolio companies within our overall debt investments.

These calculations include addbacks that are typically negotiated and documented in the applicable investment documents, including but not limited to transaction costs, share-based compensation, management fees, foreign currency translation adjustments and other nonrecurring transaction expenses.

Together, Portfolio Net Leverage and Portfolio EBITDA assist us in assessing the likelihood that we will timely receive interest and principal payments. However, these calculations are not meant to substitute for an analysis of our underlying portfolio company debt investments, but to supplement such analysis.

ABOUT PROSPECT CAPITAL CORPORATION

Prospect Capital Corporation ( www.prospectstreet.com ) is a business development company that focuses on lending to and investing in private businesses. Our investment objective is to generate both 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, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future 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