PROSPECT CAPITAL CORP - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX-32.2 - PROSPECT CAPITAL CORP	a12-8887_1ex32d2.htm
EX-31.1 - EX-31.1 - PROSPECT CAPITAL CORP	a12-8887_1ex31d1.htm
EX-31.2 - EX-31.2 - PROSPECT CAPITAL CORP	a12-8887_1ex31d2.htm
EX-32.1 - EX-32.1 - PROSPECT CAPITAL CORP	a12-8887_1ex32d1.htm

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 March 31, 2012

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 May 10, 2012 was 122,008,994.

PROSPECT CAPITAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2012
TABLE OF CONTENTS

		Page

PART I.	FINANCIAL INFORMATION	3
Item 1.	FINANCIAL STATEMENTS	3
	Consolidated Statements of Assets and Liabilities – March 31, 2012 (Unaudited) and June 30, 2011 (Audited)	3
	Consolidated Statements of Operations (Unaudited) - For the Three and Nine Months Ended March 31, 2012 and 2011	4
	Consolidated Statements of Changes in Net Assets (Unaudited) - For the Nine Months Ended March 31, 2012 and 2011	5
	Consolidated Statements of Cash Flows (Unaudited) - For the Nine Months Ended March 31, 2012 and 2011	6
	Consolidated Schedule of Investments – March 31, 2012 (Unaudited) and June 30, 2011 (Audited)	7
	Notes to Consolidated Financial Statements (Unaudited)	31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81
Item 4.	Controls and Procedures	81

PART II.	OTHER INFORMATION	81
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	82
Item 2.	Unregistered Sales in Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	83
Item 4.	Submission of Matters to a Vote of Security Holders	84
Item 5.	Other Information	84
Item 6.	Exhibits	84
	Signatures	86

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2012 and June 30, 2011

(in thousands, except share and per share data)

	March 31, 2012			June 30, 2011
	(Unaudited)			(Audited)
Assets (Note 4)
Investments at fair value:
Control investments (net cost of $232,459 and $262,301, respectively)	$	323,786		$	310,072
Affiliate investments (net cost of $59,606 and $56,833, respectively)	67,581			72,337
Non-control/Non-affiliate investments (net cost of $1,363,798 and $1,116,600, respectively)	1,300,213			1,080,601
Total investments at fair value (net cost of $1,655,863 and $1,435,734, respectively, Note 3)	1,691,580			1,463,010

Investments in money market funds	58,025			59,903
Cash	34,978			1,492
Receivables for:
Interest, net	12,407			9,269
Other	1,686			267
Prepaid expenses	154			101
Deferred financing costs	17,179			15,275
Total Assets	1,816,009			1,549,317

Liabilities
Credit facility payable (Note 4)	121,000			84,200
Senior Convertible Notes (Note 5)	317,500			322,500
Prospect Capital InterNotes® (Note 6)	5,465			—
Dividends payable	12,372			10,895
Due to Broker	26,569			—
Due to Prospect Administration (Note 10)	362			212
Due to Prospect Capital Management (Note 10)	4,315			7,706
Accrued expenses	6,166			5,876
Other liabilities	3,454			3,571
Total Liabilities	497,203			434,960
Net Assets	$	1,318,806		$	1,114,357

Components of Net Assets
Common stock, par value $0.001 per share (200,000,000 common shares authorized; 121,923,931 and 107,606,690 issued and outstanding, respectively) (Note 7)	$	122		$	108
Paid-in capital in excess of par (Note 7)	1,348,996			1,196,741
Distributions in excess of net investment income	(1,602		)	(21,638		)
Accumulated net realized losses on investments	(64,427		)	(88,130		)
Net unrealized appreciation on investments	35,717			27,276
Net Assets	$	1,318,806		$	1,114,357

Net Asset Value Per Share	$	10.82		$	10.36

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three and Nine Months Ended March 31, 2012 and 2011
(in thousands, except share and per share data)
(Unaudited)

	For The Three Months Ended				For The Nine Months Ended
	March 31,				March 31,
	2012		2011		2012		2011

Investment Income
Interest Income: (Note 3)
Control investments	$	32,966	$	5,180	$	45,546	$	15,798
Affiliate investments	2,378		3,049		7,179		9,523
Non-control/Non-affiliate investments	37,602		26,275		107,636		65,466
Total interest income	72,946		34,504		160,361		90,787

Dividend income:
Control investments	5,474		2,760		29,819		6,810
Non-control/Non-affiliate investments	2,002		—		4,843		1,508
Money market funds	1		3		2		10
Total dividend income	7,477		2,763		34,664		8,328

Other income: (Note 8)
Control investments	13,768		2		14,386		1,787
Affiliate investments	11		22		85		176
Non-control/Non-affiliate investments	1,421		7,282		8,732		12,007
Total other income	15,200		7,306		23,203		13,970
Total Investment Income	95,623		44,573		218,228		113,085

Operating Expenses
Investment advisory fees:
Base management fee (Note 10)	8,949		6,037		25,985		15,216
Income incentive fee (Note 10)	14,518		5,997		30,614		16,015
Total investment advisory fees	23,467		12,034		56,599		31,231

Interest and credit facility expenses	9,655		5,660		28,374		10,182
Legal fees	256		283		1,198		763
Valuation services	308		262		916		711
Audit, compliance and tax related fees	276		168		1,141		649
Allocation of overhead from Prospect Administration (Note 10)	2,910		1,669		5,143		3,309
Insurance expense	69		74		168		217
Directors’ fees	68		64		195		191
Other general and administrative expenses	542		403		2,037		1,801
Total Operating Expenses	37,551		20,617		95,771		49,054

Net Investment Income	58,072		23,956		122,457		64,031

Net realized gain on investments (Note 3)	24,812		2,078		23,703		7,094
Net change in unrealized appreciation /depreciation on investments (Note 3)	(32,675)		7,725		8,441		20,154

Net Increase in Net Assets Resulting from Operations	$	50,209	$	33,759	$	154,601	$	91,279

Net increase in net assets resulting from operations per share: (Note 9 and Note 14)	$	0.44	$	0.38	$	1.39	$	1.11
Dividends declared per share	$	0.30	$	0.30	$	0.91	$	0.91

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
For The Nine Months Ended March 31, 2012 and 2011
(in thousands, except share data)
(Unaudited)

	For The Nine Months Ended March 31,
	2012		2011
Increase in Net Assets from Operations:
Net investment income	$	122,457	$	64,031
Net realized gain on investments	23,703		7,094
Net change in unrealized appreciation on investments	8,441		20,154
Net Increase in Net Assets Resulting from Operations	154,601		91,279

Dividends to Shareholders	(102,421)		(75,541)

Capital Share Transactions:
Proceeds from capital shares sold, net of underwriting costs	144,900		178,317
Less: Offering costs of public share offerings	(524)		(724)
Reinvestment of dividends	7,893		8,166
Net Increase in Net Assets Resulting from Capital Share Transactions	152,269		185,759

Total Increase in Net Assets	204,449		201,497
Net assets at beginning of period	1,114,357		711,424
Net Assets at End of Period	$	1,318,806	$	912,921

Capital Share Activity:
Shares sold	13,500,000		18,494,476
Shares issued through reinvestment of dividends	817,241		777,473
Net increase in capital share activity	14,317,241		19,271,949
Shares outstanding at beginning of period	107,606,690		69,086,862

Shares Outstanding at End of Period	121,923,931		88,358,811

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended March 31, 2012 and 2011
(in thousands, except share data)
(Unaudited)

	For The Nine Months Ended March 31,
	2012			2011
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$	154,601		$	91,279
Net realized gain on investments	(23,703		)	(7,094		)
Net change in unrealized appreciation on investments	(8,441		)	(20,154		)
Accretion of purchase discount on investments	(3,741		)	(10,874		)
Amortization of deferred financing costs	7,174			3,628

Change in operating assets and liabilities
Payments for purchases of investments	(542,846		)	(632,526		)
Proceeds from sale of investments and collection of investment principal	354,660			214,124
Net decrease (increase) of investments in money market funds	1,878			(26,048		)
Increase in interest receivable	(7,637		)	(13,882		)
Increase in dividends receivable	(75		)	(59		)
Increase in other receivables	(1,344		)	(142		)
Increase in prepaid expenses	(53		)	(125		)
Decrease in other assets	—			534
Increase in due to broker	26,569			—
Increase in due to Prospect Administration	150			1,162
Decrease in due to Prospect Capital Management	(3,391		)	(2,653		)
Increase in payable for securities purchased	—			31,984
Increase in accrued expenses	290			1,262
(Decrease) increase in other liabilities	(117		)	1,184
Net Cash Used In Operating Activities	(46,026		)	(368,400		)

Cash Flows from Financing Activities:
Borrowings under Senior Convertible Notes (Note 5)	—			322,500
Repurchases under Senior Convertible Notes (Note 5)	(5,000		)	—
Borrowings under credit facility (Note 4)	615,800			259,100
Principal payments under credit facility (Note 4)	(579,000		)	(311,900		)
Borrowings under Prospect Capital InterNotes® (Note 6)	5,465			—
Financing costs paid and deferred	(9,078		)	(12,235		)
Proceeds from issuance of common stock, net of underwriting costs	144,900			178,317
Offering costs from issuance of common stock	(524		)	(724		)
Dividends paid	(93,051		)	(65,344		)
Net Cash Provided By Financing Activities	79,512			369,714

Total Increase in Cash	33,486			1,314
Cash balance at beginning of period	1,492			1,081
Cash Balance at End of Period	$	34,978		$	2,395

Cash Paid For Interest	$	19,607		$	1,377

Non-Cash Financing Activity:
Payment-in-kind interest	$	4,499		$	8,510
Amount of shares issued in connection with dividend reinvestment plan	$	7,893		$	8,166

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2012 and June 30, 2011

(in thousands, except share data)

			March 31, 2012 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Cost	Fair Value(2)	% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS:

Control Investments (25.00% or greater of voting control)

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)	$ 29,500	$ 29,500	$ 29,500	2.2%
		Senior Subordinated Term Loan (12.00% plus 6.00% PIK, due 12/31/2015)	12,500	12,500	12,500	1.0%
		Convertible Preferred Stock (9,919.684 shares)		9,920	5,803	0.4%
		Common Stock (100 shares)		—	—	0.0%
				51,920	47,803	3.6%
Ajax Rolled Ring & Machine, Inc.	South Carolina / Manufacturing	Senior Secured Note — Tranche A (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 4/01/2013)(3), (4)	20,277	20,277	20,277	1.5%
		Subordinated Secured Note — Tranche B (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor) plus 6.00% PIK, due 4/01/2013)(3), (4)	15,035	15,035	15,035	1.1%
		Convertible Preferred Stock — Series A (6,142.6 shares)		6,057	11,212	0.9%
		Unrestricted Common Stock (6 shares)		—	11	0.0%
				41,369	46,535	3.5%
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 — $1,000 Commitment (5.00% (PRIME + 1.75%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4), (25)	1,000	945	936	0.1%
		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	1,500	—	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)	9,259	707	—	0.0%
		Common Stock (100 shares)(21)		—	—	0.0%
		Warrants (33,750 warrants)(21)		—	—	0.0%
				3,152	936	0.1%
C&J Cladding LLC	Texas / Metal Services and Minerals	Membership Interest (400 units)(22)		580	5,231	0.4%
				580	5,231	0.4%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

			March 31, 2012 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Cost	Fair Value(2)	% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS:

Control Investments (25.00% or greater of voting control)

Energy Solutions Holdings, Inc.(8)	Texas / Gas Gathering and Processing	Senior Secured Note (18.00%, due 12/11/2016) (3)	$ 25,000	$ 25,000	$ 25,000	1.8%
		Junior Secured Note (18.00%, due 12/12/2016) (3)	12,000	12,000	12,000	0.9%
		Senior Secured Note to Vessel Holdings LLC (18.00%, due 12/12/2016)	3,500	3,500	3,500	0.3%
		Subordinated Secured Note to Freedom Marine Holdings, LLC (12.00% (LIBOR + 6.11% with 5.89% LIBOR floor) plus 4.00% PIK, in non-accrual status effective 10/1/2010, due 12/31/2011)	13,219	12,504	3,549	0.3%
		Senior Secured Debt to Yatesville Coal Holdings, Inc. (Non-accrual status effective 1/01/2009, past due)	1,035	1,035	—	0.0%
		Junior Secured Debt to Yatesville Coal Holdings, Inc. (Non-accrual status effective 1/01/2009, past due)	414	414	—	0.0%
		Common Stock (100 shares)(3)		8,792	122,211	8.7%
				63,245	166,260	12.6%
Integrated Contract Services, Inc.(9)	North Carolina / Contracting	Secured Promissory Notes (15.00%, in non-accrual status effective 12/22/2010, due 3/21/2012 – 12/31/2013) (10)	2,581	2,580	1,106	0.1%
		Senior Demand Note (15.00%, in non-accrual status effective 11/1/2010, past due)(10)	1,170	1,170	—	0.0%
		Senior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)	300	—	—	0.0%
		Junior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)	11,520	11,520	—	0.0%
		Preferred Stock — Series A (10 shares)		—	—	0.0%
		Common Stock (49 shares)		679	—	0.0%
				15,949	1,106	0.1%
Manx Energy, Inc. (“Manx”)(12)	Kansas / Oil & Gas Production	Appalachian Energy Holdings, LLC (“AEH”) — Senior Secured First Lien Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)	2,388	2,000	—	0.0%
		Coalbed, LLC — Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)(6)	7,165	5,991	—	0.0%
		Manx — Senior Secured Note (13.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)	3,550	3,550	—	0.0%
		Manx — Preferred Stock (6,635 shares)		6,307	—	0.0%
		Manx — Common Stock (17,082 shares)		1,170	—	0.0%
				19,018	—	0.0%
NMMB Holdings, Inc. (24)	New York / Media	Senior Term Loan (14.00%, due 5/6/2016)	21,700	21,700	21,700	1.6%
		Senior Subordinated Term Loan (15.00%, due 5/6/2016)	2,800	2,800	2,800	0.2%
		Series A Preferred Stock (4,400 shares)		4,400	947	0.1%
				28,900	25,447	1.9%
NRG Manufacturing, Inc.	Texas / Manufacturing	Escrow Receivable	11,492	—	6,302	0.5%
				—	6,302	0.5%

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

			March 31, 2012 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Cost	Fair Value(2)	% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS:

Control Investments (25.00% or greater of voting control)

Nupla Corporation	California / Home & Office Furnishings, Housewares & Durable	Revolving Line of Credit — $2,000 Commitment (7.25% (PRIME + 4.00%), plus 2.00% default interest, due 9/04/2012)(4), (25)	$ 1,093	$ 1,063	$ 1,093	0.1%
		Senior Secured Term Loan A (8.00% (PRIME + 4.75%) plus 2.00% default interest, due 9/04/2012)(4)	4,130	494	4,130	0.3%
		Senior Subordinated Debt (15.00% PIK, in non-accrual status effective 4/01/2009, due 3/04/2013)	4,373	—	500	0.0%
		Preferred Stock — Class A (2,850 shares)		—	—	0.0%
		Preferred Stock — Class B (1,330 shares)		—	—	0.0%
		Common Stock (2,360,743 shares)		—	—	0.0%
				1,557	5,723	0.4%
R-V Industries, Inc.	Pennsylvania / Manufacturing	Warrants (200,000 warrants, expiring 6/30/2017)		1,682	4,950	0.4%
R-V Industries, Inc.	Pennsylvania / Manufacturing	Common Stock (545,107 shares)		5,087	13,493	1.0%
				6,769	18,443	1.4%
		Total Control Investments		232,459	323,786	24.5%

Affiliate Investments (5.00% to 24.99% voting control)

BNN Holdings Corp., (f/k/a Biotronic NeuroNetwork)	Michigan / Healthcare	Senior Secured Note (11.50% (LIBOR + 7.00% with 4.50% LIBOR floor) plus 1.00% PIK, due 2/21/2013)(3), (4)	26,227	26,227	26,227	2.0%
		Preferred Stock Series A (9,925.455 shares)(13)		2,300	315	0.0%
		Preferred Stock Series B (1,753.64 shares)(13)		579	79	0.0%
				29,106	26,621	2.0%
Boxercraft Incorporated	Georgia / Textiles & Leather	Senior Secured Term Loan A (9.50% (LIBOR + 6.50% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)	1,919	1,770	1,919	0.1%
		Senior Secured Term Loan B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)	4,712	4,200	4,712	0.4%
		Senior Secured Term Loan C (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 9/16/2013)(3), (4)	2,283	2,283	2,283	0.2%
		Subordinated Secured Term Loan (12.00% plus 3.00% PIK, due 3/16/2014)(3)	7,906	6,895	7,906	0.6%
		Preferred Stock (1,000,000 shares)		—	1,112	0.1%
		Common Stock (10,000 shares)		—	—	0.0%
				15,148	17,932	1.4%
Smart, LLC(14)	New York / Diversified / Conglomerate Service	Membership Interest		—	35	0.0%
				—	35	0.0%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)

March 31, 2012 and June 30, 2011

(in thousands, except share data)

					March 31, 2012 (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)

Sport Helmets Holdings, LLC(14)		New York / Personal & Nondurable Consumer Products		Revolving Line of Credit — $3,000 Commitment (4.08% (LIBOR + 3.50%), due 12/14/2013) (4), (25), (26)	$ —	$ —	$ —	0.0%
				Senior Secured Term Loan A (4.08% (LIBOR + 3.50%), due 12/14/2013)(3), (4)	1,394	968	1,376	0.1%
				Senior Secured Term Loan B (4.58%, (LIBOR + 4.00%) due 12/14/2013)(3), (4)	7,256	6,015	7,124	0.5%
				Senior Subordinated Debt — Series A (12.00% plus 3.00% PIK, due 6/14/2014)(3)	7,724	6,719	7,724	0.6%
				Senior Subordinated Debt — Series B (10.00% plus 5.00% PIK, due 6/14/2014)(3)	1,482	1,191	1,482	0.1%
				Common Stock (20,974 shares)		459	5,287	0.4%
						15,352	22,993	1.7%
				Total Affiliate Investments		59,606	67,581		5.1%

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

ADAPCO, Inc.		Florida / Ecological		Common Stock (5,000 shares)		141	216	0.0%
						141	216	0.0%
Aircraft Fasteners International, LLC		California / Machinery		Convertible Preferred Stock (32,500 units)		396	465	0.0%



						396	465	0.0%
American Gilsonite Company		Utah / Specialty Minerals		Senior Subordinated Note (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/10/2016)(3), (4)	30,232	30,232	30,232	2.3%
				Senior Subordinated Note (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/10/2016)(4)	7,500	7,500	7,500	0.6%
				Membership Interest in AGC/PEP, LLC (99.9999%)(15)		—	5,059	0.4%
						37,732	42,791	3.3%
Apidos CLO VIII, Ltd		Cayman Islands / Diversified Financial Services		Subordinated Notes (Residual Interest)	—	18,543	20,042	1.5%
						18,543	20,042	1.5%
Babson CLO Ltd 2011-I		Cayman Islands / Diversified Financial Services		Subordinated Notes (Residual Interest)	—	32,116	32,331	2.5%
						32,116	32,331	2.5%
Babson CLO Ltd 2012-IA		Cayman Islands / Diversified Financial Services		Subordinated Notes (Residual Interest)	—	26,569	26,569	2.0%
						26,569	26,569	2.0%
Blue Coat Systems, Inc. (4)		Massachusetts / Software & Computer Services		Second Lien Term Loan (11.50% (LIBOR + 10.00% with 1.50% LIBOR floor), due 8/15/2018)	25,000	24,260	24,873	1.9%
						24,260	24,873	1.9%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

			March 31, 2012 (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)

Byrider Systems Acquisition Corp.	Indiana / Auto Finance	Senior Subordinated Notes (12.00% plus 2.00% PIK, due 11/3/2016) (3)	$ 25,424	$ 25,424	$ 22,843	1.7%
				25,424	22,843	1.7%
Caleel + Hayden, LLC (14)	Colorado / Personal & Nondurable Consumer Products	Membership Units (7,500 shares)		351	925	0.1%
Caleel + Hayden, LLC (14)	Colorado / Personal & Nondurable Consumer Products	Options in Mineral Fusion Natural Brands, LLC (11,662 options)		—	—	0.0%
				351	925	0.1%
Capstone Logistics, LLC (4)	Georgia / Commercial Services	Senior Secured Term Loan A (7.50% (LIBOR + 5.50% with 2.00% LIBOR floor), due 9/16/2016)	33,942	33,942	33,942	2.6%
Capstone Logistics, LLC (4)	Georgia / Commercial Services	Senior Secured Term Loan B (13.50% (LIBOR + 11.50% with 2.00% LIBOR floor), due 9/16/2016)(3)	41,625	41,625	41,625	3.2%
				75,567	75,567	5.8%
Cargo Airport Services USA, LLC	New York / Transportation	Senior Secured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 3/31/2016) (3), (4)	49,552	49,522	49,522	3.8%
Cargo Airport Services USA, LLC	New York / Transportation	Common Equity (1.5 units)		1,639	2,055	0.2%
				51,161	51,577	4.0%
CIFC Funding 2011-I, Ltd. (4)	Cayman Islands / Diversified Financial Services	Secured Class D Notes (5.79% (LIBOR + 5.00%), due 1/19/2023)	19,000	14,720	16,995	1.3%
CIFC Funding 2011-I, Ltd. (4)	Cayman Islands / Diversified Financial Services	Unsecured Class E Notes (7.79% (LIBOR + 7.00%), due 1/19/2023)	15,400	12,444	13,667	1.0%
				27,164	30,662	2.3%
Clearwater Seafoods LP	Canada / Food Products	Second Lien Term Loan (12.00%, due 2/4/2016) (3)	54,500	54,500	54,500	4.1%
				54,500	54,500	4.1%
The Copernicus Group, Inc.	North Carolina / Healthcare	Revolving Line of Credit — $1,000 Commitment (7.50% (LIBOR + 4.50% with 3.00% LIBOR floor), due 2/9/2016)(4), (25)	—	—	—	0.0%
		Senior Secured Term Loan A (7.50% (LIBOR + 4.50% with 3.00% LIBOR floor), due 2/9/2016)(3), (4)	10,125	10,125	10,125	0.8%
		Senior Secured Term Loan B (13.50% (LIBOR + 10.50% with 3.00% LIBOR floor), due 2/9/2016) (3), (4)	11,250	11,250	11,250	0.9%
		Preferred Stock — Series A (1,000,000 shares)		67	1,533	0.1%
		Preferred Stock — Series C (212,121 shares)		212	1,038	0.1%
				21,654	23,946	1.9%
CRT MIDCO, LLC	Wisconsin / Media	Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 6/30/2017)(3), (4)	73,875	73,875	71,921	5.5%
				73,875	71,921	5.5%
Diamondback Operating, LP	Oklahoma / Oil & Gas Production	Net Profits Interest (15.00% payable on Equity distributions)(7)		—	—	0.0%
				—	—	0.0%
Empire Today, LLC(16)	Illinois / Durable Consumer Products	Senior Secured Note (11.375%, due 2/1/2017)	15,700	15,236	15,700	1.2%
				15,236	15,700	1.2%
Fairchild Industrial Products, Co.	North Carolina / Electronics	Escrow Receivable	177	—	142	0.0%
				—	142	0.0%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED SCHEDULE OF INVESTMENTS – (CONTINUED)
March 31, 2012 and June 30, 2011
(in thousands, except share data)

March 31, 2012 (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)

PROSPECT CAPITAL CORP - FORM 10-Q - May 10, 2012

Attached files