PROSPECT CAPITAL CORP - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX-32.2 - PROSPECT CAPITAL CORP	psec10-qq22021ex322.htm
EX-32.1 - EX-32.1 - PROSPECT CAPITAL CORP	psec10-qq22021ex321.htm
EX-31.2 - EX-31.2 - PROSPECT CAPITAL CORP	psec10-qq22021ex312.htm
EX-31.1 - EX-31.1 - PROSPECT CAPITAL CORP	psec10-qq22021ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020
OR
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, 42nd Floor
New York, New York			10016
(Address of principal executive offices)			(Zip Code)
Registrant's telephone number, including area code: (212) 448-0702

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbols	Name of each exchange on which registered
Common Stock, $0.001 par value	PSEC	NASDAQ Global Select Market
6.25% Notes due 2024, par value $25	PBB	New York Stock Exchange
6.25% Notes due 2028, par value $25	PBY	New York Stock Exchange
6.875% Notes due 2029, par value $25	PBC	New York Stock Exchange

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. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý						Accelerated filer o
Non-accelerated filer o						Smaller reporting company o
						Emerging growth company o
(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

As of February 8, 2021, there were 385,660,915 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
	Forward-Looking Statements	3
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of December 31, 2020 (unaudited) and June 30, 2020	4
	Consolidated Statements of Operations for the three and six months ended December 31, 2020 and December 31, 2019 (unaudited)	5
	Consolidated Statements of Changes in Net Assets for the three and six months ended December 31, 2020 and December 31, 2019 (unaudited)	7
	Consolidated Statements of Cash Flows for the three and six months ended December 31, 2020 and December 31, 2019 (unaudited)	9
	Consolidated Schedules of Investments as of December 31, 2020 (unaudited) and June 30, 2020	10
	Notes to Consolidated Financial Statements	49
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	109
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	149
Item 4.	Controls and Procedures	150
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	151
Item 1A.	Risk Factors	151
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	155
Item 3.	Defaults Upon Senior Securities	155
Item 4.	Mine Safety Disclosures	155
Item 5.	Other Information	156
Item 6.	Exhibits	159
	Signatures

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,”

“intend,” “estimate,” “anticipate,” “project,” “will,” “should,” “could,” “may,” “plan” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended June 30, 2020, and those described from time to time in reports that we have filed or in the future may file with the Securities and Exchange Commission.

The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

•our future operating results;

•our business prospects and the prospects of our portfolio companies;

•the impact of investments that we expect to make;

•our contractual arrangements and relationships with third parties;

•the dependence of our future success on the general economy and its impact on the industries in which we invest;

•the impact of global health epidemics, including, but not limited to, the recent and ongoing novel coronavirus (“Wuhan Virus”) pandemic, on our and our portfolio companies’ business and the global economy;

•uncertainty surrounding the financial stability of the United States, Europe, and China;

•the ability of our portfolio companies to achieve their objectives;

•difficulty in obtaining financing or raising capital, especially in the current credit and equity environment, and the impact of a protracted decline in the liquidity of credit markets on our and our portfolio companies’ business;

•the level and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets;

•the impact of changes in London Interbank Offered Rate (“LIBOR”) on our operating results;

•adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise;

•a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us;

•our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company;

•the adequacy of our cash resources and working capital;

•the timing of cash flows, if any, from the operations of our portfolio companies;

•the ability of the Investment Adviser to locate suitable investments for us and to monitor and administer our investments; and

•authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the Securities and Exchange Commission, Internal Revenue Service, the NASDAQ Global Select Market, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business.

PART I

Item 1. Financial Statements

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share and per share data)


	December 31, 2020		June 30, 2020

	(Unaudited)		(Audited)
Assets
Investments at fair value:
Control investments (amortized cost of $2,394,568 and $2,286,725, respectively)	$	2,548,723	$	2,259,292
Affiliate investments (amortized cost of $154,176 and $163,484, respectively)	263,935		187,537
Non-control/non-affiliate investments (amortized cost of $3,293,434 and $3,332,509, respectively)	2,812,747		2,785,499
Total investments at fair value (amortized cost of $5,842,178 and $5,782,718, respectively)	5,625,405		5,232,328
Cash	50,097		44,561
Receivables for:
Interest, net	13,743		11,712
Other	2,906		106
Deferred financing costs on Revolving Credit Facility (Note 4)	8,047		9,145
Due from broker	—		1,063
Prepaid expenses	550		1,248
Due from Affiliate (Note 13)	6		—
Total Assets	5,700,754		5,300,163
Liabilities
Revolving Credit Facility (Notes 4 and 8)	284,895		237,536
Prospect Capital InterNotes® (less unamortized debt issuance costs of $13,278 and $12,802, respectively) (Notes 7 and 8)	745,729		667,427
Public Notes (less unamortized discount and debt issuance costs of $10,179 and $11,613, respectively) (Notes 6 and 8)	743,540		782,106
Convertible Notes (less unamortized debt issuance costs of $6,571 and $8,892, respectively) (Notes 5 and 8)	357,601		450,598
Due to Prospect Capital Management (Note 13)	48,550		42,481
Interest payable	27,187		29,066
Dividends payable	23,046		22,412
Due to Prospect Administration (Note 13)	9,240		7,000
Accrued expenses	3,512		3,648

Due to broker	31		1
Other liabilities	903		2,027
Total Liabilities	2,244,234		2,244,302
Commitments and Contingencies (Note 3)
Net Assets	$	3,456,520	$	3,055,861

Components of Net Assets
Convertible Preferred Stock, par value $0.001 per share (140,000,000 shares authorized, with 40,000,000 shares of preferred stock authorized for each of the Series A1, Series M1, and Series M2 shares and 20,000,000 shares of preferred stock authorized for the Series AA1 shares; 551,424 and 0 Series A1 shares issued and outstanding, respectively; 0 and 0 Series AA1 shares issued and outstanding, respectively; 0 and 0 Series M1 shares issued and outstanding, respectively; and 0 and 0 Series M2 shares issued and outstanding, respectively) (Note 9)	$	13,786	$	—
Common stock, par value $0.001 per share (1,860,000,000 common shares authorized; 384,097,645 and 373,538,499 issued and outstanding, respectively) (Note 9)	384		374
Paid-in capital in excess of par (Note 9 and 12)	4,023,978		3,986,417
Total distributable loss	(581,628)		(930,930)
Net Assets	$	3,456,520	$	3,055,861
Net Asset Value Per Common Share (Note 16)	$	8.96	$	8.18

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
Investment Income
Interest income:
Control investments	$	50,633	$	49,602	$	99,360	$	100,468
Affiliate investments	10,826		2,463		18,188		2,702
Non-control/non-affiliate investments	52,029		59,152		103,279		121,102
Structured credit securities	31,299		29,442		56,199		62,343
Total interest income	144,787		140,659		277,026		286,615
Dividend income:
Control investments	2,261		3,268		2,261		7,068

Non-control/non-affiliate investments	19		241		44		695
Total dividend income	2,280		3,509		2,305		7,763
Other income:
Control investments	20,545		13,189		29,616		24,572
Affiliate investments	64		—		64		—
Non-control/non-affiliate investments	4,616		4,560		6,161		4,850
Total other income (Note 10)	25,225		17,749		35,841		29,422
Total Investment Income	172,292		161,917		315,172		323,800
Operating Expenses
Base management fee (Note 13)	27,833		27,543		54,683		56,006
Income incentive fee (Note 13)	20,717		16,971		35,103		34,736
Interest and credit facility expenses	33,727		37,059		67,776		75,957
Allocation of overhead from Prospect Administration (Note 13)	3,426		6,011		8,083		9,505
Audit, compliance and tax related fees	340		1,933		1,278		2,308
Directors’ fees	113		113		226		226

Other general and administrative expenses	4,575		4,402		8,917		6,117
Total Operating Expenses	90,731		94,032		176,066		184,855
Net Investment Income	81,561		67,885		139,106		138,945
Net Realized and Net Change in Unrealized Gains (Losses) from Investments
Net realized gains (losses)
Control investments	—		—		2,832		—
Affiliate investments	3,724		—		3,724		—
Non-control/non-affiliate investments	3		1,909		14		(289)
Net realized gains (losses)	3,727		1,909		6,570		(289)
Net change in unrealized gains (losses)
Control investments	168,053		(35,863)		181,588		(74,884)
Affiliate investments	19,233		12,242		85,706		30,262
Non-control/non-affiliate investments	38,487		(54,271)		66,323		(81,729)
Net change in unrealized gains (losses)	225,773		(77,892)		333,617		(126,351)
Net Realized and Net Change in Unrealized Gains (Losses) from Investments	229,500		(75,983)		340,187		(126,640)
Net realized losses on extinguishment of debt	(5,094)		(3,105)		(5,580)		(5,443)
Net Increase (Decrease) in Net Assets Resulting from Operations	305,967		(11,203)		473,713		6,862
Preferred stock dividend	46		—		46		—
Net Increase (Decrease) in Net Assets Resulting from Operations attributable to Common Stockholders	$	305,921	$	(11,203)	$	473,667	$	6,862

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2020		2019		2020		2019
Basic and diluted earnings (loss) per common share (Note 11)
Basic	$	0.80	$	(0.03)	$	1.25	$	0.02
Diluted	$	0.80	$	(0.03)	$	1.25	$	0.02
Weighted-average shares of common stock outstanding (Note 11)
Basic	381,157,121		367,459,411		378,534,006		367,349,087
Diluted	381,817,317		367,459,411		378,864,104		367,349,087

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except share data)

(Unaudited)


	Common Stock
Six Months Ended December 31, 2019	Shares	Par		Paid-in capital in excess of par		Distributable earnings (loss)		Total Net Assets
Balance as of June 30, 2019	367,131,025	$	367	$	4,039,872	$	(733,964)	$	3,306,275
Net Increase in Net Assets resulting from Operations:
Net investment income						138,945		138,945
Net realized losses						(5,732)		(5,732)
Net change in unrealized losses						(126,351)		(126,351)
Distributions to Shareholders(1)
Distributions from earnings						(120,251)		(120,251)
Return of capital to common stockholders				(12,012)				(12,012)
Capital Transactions
Shares issued through reinvestment of dividends	453,219	—		2,991				2,991
Tax reclassifications of net assets (Note 12)				(78)		78		—
Total increase (decrease) for the six months ended December 31, 2019	453,219	—		(9,099)		(113,311)		(122,410)
Balance as of December 31, 2019(1)	367,584,244	$	367	$	4,030,773	$	(847,275)	$	3,183,865


	Convertible Preferred Stock		Common Stock
Six Months Ended December 31, 2020			Shares	Par		Paid-in capital in excess of par		Distributable earnings (loss)		Total Net Assets
Balance as of June 30, 2020(1)	$	—	373,538,499	$374		$	3,986,417	$	(930,930)	$	3,055,861
Net Increase in Net Assets resulting from Operations:
Net investment income								139,106		139,106
Net realized gains								990		990
Net change in unrealized gains								333,617		333,617
Distributions to Shareholders(1)
Distributions from earnings								(124,468)		(124,468)
Return of capital to common stockholders						(12,263)				(12,263)
Capital Transactions
Issuance of preferred stock	13,786					(2,031)				11,755
Shares issued through reinvestment of dividends			10,559,146	10		51,912				51,922
Tax reclassifications of net assets (Note 12)						(57)		57		—
Total increase for the six months ended December 31, 2020	13,786		10,559,146	10		37,561		349,302		400,659
Balance as of December 31, 2020	$	13,786	384,097,645	$	384	$	4,023,978	$	(581,628)	$	3,456,520

(1)Certain reclassifications have been made in the presentation of prior year and prior quarter amounts to conform to the presentation for the current fiscal year. See Note 2 and Note 12 within the accompanying notes to financial statements for further discussion.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

(in thousands, except share data)

(Unaudited)


	Common Stock
Three Months Ended December 31, 2019	Shares	Par		Paid-in capital in excess of par		Distributable earnings (loss)		Total Net Assets
Balance as of September 30, 2019	367,363,872	$367		$	4,041,338	$	(781,932)	$	3,259,773
Net Decrease in Net Assets resulting from Operations:
Net investment income						67,885		67,885
Net realized losses						(1,196)		(1,196)
Net change in unrealized losses						(77,892)		(77,892)
Distributions to Shareholders(1)
Distributions from earnings						(54,140)		(54,140)
Return of capital to common stockholders				(12,012)				(12,012)
Capital Transactions
Shares issued through reinvestment of dividends	220,372	—		1,447				1,447
Total increase (decrease) for the three months ended December 31, 2019	220,372	—		(10,565)		(65,343)		(75,908)
Balance as of December 31, 2019	367,584,244	$	367	$	4,030,773	$	(847,275)	$	3,183,865


	Convertible Preferred Stock		Common Stock
For the Three Months Ended December 31, 2020			Shares	Par		Paid-in capital in excess of par		Distributable earnings (loss)		Total Net Assets
Balance as of September 30, 2020(1)	$	—	378,776,958	$379		$	3,999,430	$	(818,782)	$	3,181,027
Net Increase in Net Assets resulting from Operations:
Net investment income								81,561		81,561
Net realized losses								(1,367)		(1,367)
Net change in unrealized gains								225,773		225,773
Distributions to Shareholders
Distributions from earnings								(68,870)		(68,870)

Capital Transactions
Issuance of preferred stock	13,786					(2,031)				11,755
Shares issued through reinvestment of dividends			5,320,687	5		26,636				26,641
Tax reclassifications of net assets (Note 12)						(57)		57		—
Total increase for the three months ended December 31, 2020	13,786		5,320,687	5		24,548		237,154		275,493
Balance as of December 31, 2020	$	13,786	384,097,645	$	384	$	4,023,978	$	(581,628)	$	3,456,520

(1)Certain reclassifications have been made in the presentation of prior year to conform to the presentation for the current fiscal year. See Note 2 and Note 12 within the accompanying notes to financial statements for further discussion.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share data)

(Unaudited)


	Six Months Ended December 31,
	2020		2019
Operating Activities
Net increase in net assets resulting from operations	$	473,713	$	6,862
Net realized losses on extinguishment of debt	5,580		5,443
Net realized (gains) losses on investments	(6,570)		289
Net change in unrealized (gains) losses on investments	(333,617)		126,351
Amortization of (accretion of premiums) discounts, net	(20,161)		2,858
Accretion of original issue discount	538		515
Amortization of deferred financing costs	3,770		4,110
Payment-in-kind interest	(37,824)		(21,175)
Structuring fees	(14,273)		(5,177)
Change in operating assets and liabilities:
Payments for purchases of investments	(470,622)		(344,587)
Proceeds from sale of investments and collection of investment principal	489,990		626,450
Increase in due to broker	30		—
Increase (decrease) in due to Prospect Capital Management	6,069		(2,010)
(Increase) decrease in interest receivable, net	(2,031)		14,632
Decrease in interest payable	(1,879)		(3,267)
(Decrease) increase in accrued expenses	(136)		799
Decrease (increase) in due from broker	1,063		(3,140)

(Decrease) increase in other liabilities	(1,124)		308
(Increase) decrease in other receivables	(2,800)		3,167

Increase in due from affiliate	(6)		—
Decrease in prepaid expenses	698		575
Increase in due to Prospect Administration	2,240		1,044
Net Cash Provided by Operating Activities	92,648		414,047
Financing Activities
Borrowings under Revolving Credit Facility (Note 4)	495,300		398,000
Principal payments under Revolving Credit Facility (Note 4)	(447,941)		(473,000)

Redemptions of Public Notes (Note 6)	(42,337)		—
Redemptions of Convertible Notes, net (Note 5)	(96,958)		(87,244)


Issuances of Prospect Capital InterNotes® (Note 7)	81,467		158,078
Redemptions of Prospect Capital InterNotes®, net (Note 7)	(2,689)		(243,368)
Financing costs paid and deferred	(1,534)		(6,497)



Proceeds from issuance of preferred stock, net of underwriting costs	12,407		—
Offering costs from issuance of preferred stock	(652)		—
Dividends paid	(84,175)		(129,247)
Net Cash Used in Financing Activities	(87,112)		(383,278)
Net Increase in Cash	5,536		30,769
Cash at beginning of period	44,561		107,098
Cash at End of Period	$	50,097	$	137,867
Supplemental Disclosures
Cash paid for interest	$	65,346	$	74,599
Purchases of investments settled net of proceeds from sale of investments	$	—	$	50,237
Non-Cash Financing Activities
Value of shares issued through reinvestment of dividends	$	51,922	$	2,991
Cost basis of investments written off as worthless	$	—	$	2,420

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Control Investments (greater than 25.00% voting control)(40)

CP Energy Services Inc. (20)	Energy Equipment & Services	Senior Secured Term Loan	10/1/2017	12.00% (3ML+ 11.00%)	1.00	12/29/2022	$	39,032	$	39,031	$	36,487	1.0	%	(10)(39)
		Senior Secured Term Loan A to Spartan Energy Services, LLC	10/20/2014	9.00% (1ML+ 8.00%)	1.00	12/31/2022	13,156		13,156		13,156		0.4	%	(10)
		Series A Preferred Units to Spartan Energy Holdings, Inc. (97,875 shares)	9/25/2020		—	N/A	—		26,193		7,110		0.2	%	(16)
		Series B Convertible Preferred Stock (790 shares)	10/30/2015		—	N/A	—		63,225		—		—	%	(16)
		Common Stock (102,924 shares)	8/2/2013		—	N/A	—		86,240		—		—	%	(16)
									227,845		56,753		1.6	%
Credit Central Loan Company, LLC (21)	Consumer Finance	Subordinated Term Loan	12/28/2012	10.00% plus 10.00% PIK	—	6/26/2024	69,564		66,786		69,564		1.9	%	(14)(39)
		Class A Units (14,867,312 units)	12/28/2012		—	N/A	—		19,331		8,984		0.3	%	(14)(16)
		Net Revenues Interest (25% of Net Revenues)	1/28/2015		—	N/A	—		—		—		—	%	(14)(16)
									86,117		78,548		2.2	%
Echelon Transportation, LLC	Aerospace & Defense	Senior Secured Term Loan	3/31/2014	11.75% (1ML+ 9.75%) plus 2.25% PIK	2.00	3/31/2022	48,685		48,685		48,685		1.4	%	(10)(39)
		Senior Secured Term Loan	12/9/2016	11.00% (1ML+ 9.00%) plus 1.00% PIK	2.00	12/7/2024	21,637		21,637		21,637		0.6	%	(10)(39)
		Membership Interest (100%)	3/31/2014		—	N/A	—		22,738		14,519		0.4	%	(16)
									93,060		84,841		2.4	%
First Tower Finance Company LLC (23)	Consumer Finance	Subordinated Term Loan to First Tower, LLC	6/24/2014	10.00% plus 12.00% PIK	—	6/24/2024	272,170		272,170		272,170		7.8	%	(14)(39)
		Class A Units (95,709,910 units)	6/14/2012		—	N/A	—		81,146		258,471		7.5	%	(14)(16)
									353,316		530,641		15.3	%
Freedom Marine Solutions, LLC (24)	Energy Equipment & Services	Membership Interest (100%)	11/9/2006		—	N/A	—		43,892		12,312		0.4	%	(16)
									43,892		12,312		0.4	%
InterDent, Inc. (29)	Health Care Providers & Services	Senior Secured Term Loan A/B	8/1/2018	11.85% (1ML+ 9.85%)	2.00	9/5/2022	14,249		14,249		14,249		0.4	%	(10)
		Senior Secured Term Loan A	8/3/2012	6.50% (1ML+ 5.50%)	1.00	9/5/2022	79,242		79,242		79,242		2.3	%	(10)
		Senior Secured Term Loan B	8/3/2012	12.00% PIK	—	9/5/2022	135,765		135,765		135,765		3.9	%	(39)
		Common Stock (99,900 shares)	5/3/2019		—	N/A	—		45,118		75,115		2.2	%	(16)
									274,374		304,371		8.8	%
Kickapoo Ranch Pet Resort	Diversified Consumer Services	Membership Interest (100%)	8/26/2019		—	N/A	—		2,378		3,000		0.1	%	(16)
									2,378		3,000		0.1	%
MITY, Inc. (25)	Commercial Services & Supplies	Senior Secured Note A	9/19/2013	10.00% (3ML+ 7.00%)	3.00	4/30/2025	26,250		26,250		26,250		0.8	%	(10)
		Senior Secured Note B	6/23/2014	10.00% (3ML+ 7.00%) plus 10.00% PIK	3.00	4/30/2025	34,731		34,731		21,141		0.6	%	(10)(39)
		Subordinated Unsecured Note to Broda Enterprises ULC	9/19/2013	10.00%	—	1/1/2028	5,785		6,058		—		—	%	(14)
		Common Stock (42,053 shares)	9/19/2013		—	N/A	—		6,849		—		—	%	(16)
									73,888		47,391		1.4	%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Control Investments (greater than 25.00% voting control)(40)

National Property REIT Corp. (26)	Equity Real Estate Investment Trusts (REITs) / Online Lending / Structured Finance	Senior Secured Term Loan A	12/31/2018	4.44% (3ML+ 1.44%) plus 3.53% PIK	3.00	12/31/2023	$	390,403	$	390,403	$	390,403	11.3	%	(10)(39)
		Senior Secured Term Loan B	12/31/2018	5.00% (3ML+ 2.00%) plus 5.50% PIK	3.00	12/31/2023	19,200		19,200		19,200		0.6	%	(10)(39)
		Senior Secured Term Loan C	10/31/2019	11.00% (3ML+ 10.00%) plus 2.25% PIK	1.00	12/31/2023	101,200		101,200		101,200		2.9	%	(10)(39)
		Senior Secured Term Loan D	6/19/2020	3.50% (3ML+ 0.50%) plus 2.50% PIK	3.00	12/31/2023	183,425		183,425		183,425		5.3	%	(10)(39)
		Residual Profit Interest	12/31/2018		—	N/A	—		—		26,748		0.8	%	(35)
		Common Stock (3,254,594 shares)	12/31/2013		—	N/A	—		210		311,297		9.0	%	(45)
									694,438		1,032,273		29.9	%
Nationwide Loan Company LLC (27)	Consumer Finance	Senior Subordinated Term Loan to Nationwide Acceptance LLC	6/18/2014	10.00% plus 10.00% PIK	—	6/18/2021	20,260		20,260		20,260		0.6	%	(14)(39)
		Class A Units (38,550,460 units)	1/31/2013		—	N/A	—		20,462		16,573		0.5	%	(14)(16)
									40,722		36,833		1.1	%
NMMB, Inc. (28)	Media	Delayed Draw Term Loan - $10,000 Commitment	3/25/2020	10.50% (3ML+ 8.50%)	2.00	12/30/2024	—		—		—		—	%	(10)(15)
		Senior Secured Note	12/30/2019	10.50% (3ML+ 8.50%)	2.00	12/30/2024	4,949		4,949		4,949		0.1	%	(3)(10)
		Common Stock (21,419 shares)	12/30/2019		—	N/A	—		12,869		32,583		0.9	%	(16)
									17,818		37,532		1.0	%
Pacific World Corporation (36)	Personal Products	Revolving Line of Credit - $26,000 Commitment	9/26/2014	8.25% (1ML+ 7.25%)	1.00	9/26/2025	20,825		20,825		20,825		0.6	%	(10)(15)
		Senior Secured Term Loan A	12/31/2014	6.25% PIK (1ML+ 5.25%)	1.00	9/26/2025	40,347		40,347		40,347		1.2	%	(10)(39)
		Convertible Preferred Equity (277,867 shares)	6/15/2018		—	N/A	—		186,795		8,457		0.2	%	(16)
		Common Stock (6,778,414 shares)	9/29/2017		—	N/A	—		—		—		—	%	(16)
									247,967		69,629		2.0	%
R-V Industries, Inc.	Machinery	Senior Secured Term Loan	12/15/2020	10.00% (3ML+ 9.00%)	1.00	12/15/2028	28,622		28,622		28,622		0.8	%	(3)(10)
		Common Stock (745,107 shares)	6/26/2007		—	N/A	—		6,866		18,246		0.5	%	(16)
									35,488		46,868		1.3	%
Universal Turbine Parts, LLC (34)	Trading Companies & Distributors	Delayed Draw Term Loan - $5,000 Commitment	2/28/2019	10.25% (1ML+ 7.75%)	2.50	7/22/2021	2,873		2,873		2,873		0.1	%	(10)(15)
		Senior Secured Term Loan A	7/22/2016	6.75% (3ML+ 5.75%)	1.00	7/22/2021	29,738		29,738		22,638		0.7	%	(10)
		Senior Secured Term Loan B	7/22/2016	12.75% PIK (3ML+ 11.75%)	1.00	7/22/2021	45,785		32,500		—		—	%	(9)(10)
		Common Stock (10,000 units)	12/10/2018		—	N/A	—		—		—		—	%	(16)
									65,111		25,511		0.8	%
USES Corp. (30)	Commercial Services & Supplies	Senior Secured Term Loan A	3/31/2014	9.00% PIK	—	7/29/2022	52,687		30,651		31,890		0.9	%	(9)
		Senior Secured Term Loan B	3/31/2014	15.50% PIK	—	7/29/2022	71,710		35,568		—		—	%	(9)
		Senior Secured Term Loan	12/30/2020	10.00% (3ML+ 9.00%)	1.00	7/29/2024	2,000		2,000		2,000		0.1	%	(10)
		Common Stock (268,962 shares)	6/15/2016		—	N/A	—		—		—		—	%	(16)
									68,219		33,890		1.0	%
Valley Electric Company, Inc. (31)	Construction & Engineering	Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc.	12/31/2012	8.00% (3ML+ 5.00%) plus 2.50% PIK	3.00	12/31/2024	10,430		10,430		10,430		0.3	%	(3)(10)(39)
		Senior Secured Note	6/24/2014	8.00% plus 10.00% PIK	—	6/23/2024	33,301		33,301		33,301		1.0	%	(39)
		Consolidated Revenue Interest (2.0%)	6/22/2018		—	N/A	—		—		2,173		0.1	%	(12)
		Common Stock (50,000 shares)	12/31/2012		—	N/A	—		26,204		102,426		3.0	%
									69,935		148,330		4.4	%
Total Control Investments (Level 3)									$	2,394,568	$	2,548,723	73.7	%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Affiliate Investments (5.00% to 24.99% voting control)(41)

Nixon, Inc. (32)	Textiles, Apparel & Luxury Goods	Common Stock (857 units)	5/12/2017		—	N/A	$	—	$	—	$	—	—	%	(16)
									—		—		—	%
PGX Holdings, Inc. (6)	Diversified Consumer Services	First Lien Term Loan	11/13/2020	6.25% (3ML+ 5.25%) plus 4.25% PIK	1.00	9/29/2023	22,909		21,327		22,909		0.7	%	(3)(10)(39)
		1.5 Lien Term Loan	5/27/2020	14.50% PIK (12ML+ 13.50%)	1.00	6/28/2024	16,909		16,909		16,909		0.5	%	(10)(39)
		Second Lien Term Loan	9/29/2014	15.75% PIK (1ML+ 14.75%)	1.00	9/29/2024	113,135		113,135		113,135		3.2	%	(10)(39)
		Common Stock (40,780,359 shares)	5/27/2020		—	N/A	—		—		86,968		2.5	%	(16)
									151,371		239,921		6.9	%
Targus Cayman HoldCo Limited (33)	Textiles, Apparel & Luxury Goods	Common Stock (7,383,395 shares)	2/12/2016		—	N/A	—		2,805		24,014		0.7	%	(16)
									2,805		24,014		0.7	%
Total Affiliate Investments (Level 3)									$	154,176	$	263,935	7.6	%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

8th Avenue Food & Provisions, Inc.	Food Products	Second Lien Term Loan	10/10/2018	7.90% (1ML+ 7.75%)	—	10/1/2026	$	27,133	$	26,966	$	27,133	0.8	%	(3)(8)(10)
									26,966		27,133		0.8	%
ACE Cash Express, Inc.	Consumer Finance	Senior Secured Note	12/15/2017	12.00%	—	12/15/2022	39,998		36,542		37,432		1.1	%	(8)(46)
									36,542		37,432		1.1	%
Ahead Data Blue, LLC	IT Services	Second Lien Term Loan	10/16/2020	9.50% (3ML+ 8.50%)	1.00	10/16/2028	57,500		57,500		57,500		1.7	%	(3)(10)
									57,500		57,500		1.7	%
AmeriLife Holdings, LLC	Insurance	Second Lien Term Loan	4/2/2020	9.50% (6ML+ 8.50%)	1.00	3/18/2028	21,750		21,358		21,641		0.6	%	(3)(8)(10)
									21,358		21,641		0.6	%
Apidos CLO XI	Structured Finance	Subordinated Structured Note	12/6/2012	Residual Interest, current yield 12.22%	—	10/17/2030	40,500		32,579		26,422		0.8	%	(5)(14)
									32,579		26,422		0.8	%
Apidos CLO XII	Structured Finance	Subordinated Structured Note	3/15/2013	Residual Interest, current yield 15.89%	—	4/15/2031	52,203		38,878		30,590		0.9	%	(5)(14)
									38,878		30,590		0.9	%
Apidos CLO XV	Structured Finance	Subordinated Structured Note	9/13/2013	Residual Interest, current yield 14.91%	—	4/21/2031	48,515		39,865		29,582		0.9	%	(5)(14)
									39,865		29,582		0.9	%
Apidos CLO XXII	Structured Finance	Subordinated Structured Note	9/16/2015	Residual Interest, current yield 17.98%	—	4/21/2031	35,855		30,650		26,042		0.8	%	(5)(14)
									30,650		26,042		0.8	%
Atlantis Health Care Group (Puerto Rico), Inc.	Health Care Providers & Services	Revolving Line of Credit - $3,000 Commitment	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/30/2021	—		—		—		—	%	(10)(15)
		Senior Secured Term Loan	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/29/2022	71,001		71,001		71,001		2.1	%	(3)(10)
									71,001		71,001		2.1	%
Barings CLO 2018-III	Structured Finance	Subordinated Structured Note	10/9/2014	Residual Interest, current yield 11.17%	—	7/20/2029	83,098		47,084		32,611		0.9	%	(5)(14)
									47,084		32,611		0.9	%
Broder Bros., Co.	Textiles, Apparel & Luxury Goods	Senior Secured Note	12/4/2017	9.75% (3ML+ 8.50%)	1.25	12/2/2022	164,473		164,473		164,473		4.8	%	(3)(10)
									164,473		164,473		4.8	%
Brookside Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	4/25/2013	Residual Interest, current yield 0.00%	—	1/17/2028	36,300		16,385		12,537		0.4	%	(5)(14)(17)
									16,385		12,537		0.4	%
California Street CLO IX Ltd.	Structured Finance	Subordinated Structured Note	4/19/2012	Residual Interest, current yield 11.34%	—	7/16/2032	58,915		41,623		29,050		0.8	%	(5)(14)
									41,623		29,050		0.8	%
Candle-Lite Company, LLC	Household Products	Senior Secured Term Loan A	1/23/2018	6.75% (3ML+ 5.50%)	1.25	1/23/2023	11,813		11,813		11,813		0.3	%	(3)(10)
		Senior Secured Term Loan B	1/23/2018	10.75% (3ML+ 9.50%)	1.25	1/23/2023	12,500		12,500		12,500		0.4	%	(3)(10)
									24,313		24,313		0.7	%
Capstone Logistics Acquisition, Inc.	Commercial Services & Supplies	Second Lien Term Loan	11/19/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	8,500		8,186		8,327		0.2	%	(3)(8)(10)
		Delayed Draw Term Loan - $1,500 Commitment	11/19/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	—		—		—		—	%	(8)(10)(15)
									8,186		8,327		0.2	%
Carlyle C17 CLO Limited	Structured Finance	Subordinated Structured Note	1/24/2013	Residual Interest, current yield 22.02%	—	4/30/2031	24,870		15,738		14,039		0.4	%	(5)(14)
									15,738		14,039		0.4	%
Carlyle Global Market Strategies CLO 2014-4-R, Ltd.	Structured Finance	Subordinated Structured Note	4/7/2017	Residual Interest, current yield 19.09%	—	7/15/2030	25,534		20,260		16,954		0.5	%	(5)(14)
									20,260		16,954		0.5	%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

Carlyle Global Market Strategies CLO 2016-3, Ltd.	Structured Finance	Subordinated Structured Note	8/9/2016	Residual Interest, current yield 13.70%	—	10/22/2029	$	32,200	$	34,106	$	27,418	0.8	%	(5)(14)
									34,106		27,418		0.8	%
CCS-CMGC Holdings, Inc.	Health Care Providers & Services	First Lien Term Loan	5/23/2019	5.71% (3ML+ 5.50%)	—	10/1/2025	4,788		4,729		4,787		0.1	%	(3)(8)(10)
		First Lien Term Loan	5/23/2019	5.65% (1ML+ 5.50%)	—	10/1/2025	4,788		4,729		4,787		0.1	%	(3)(8)(10)
		Second Lien Term Loan	10/12/2018	9.21% (3ML+ 9.00%)	—	10/1/2026	37,000		36,488		37,000		1.1	%	(3)(8)(10)
									45,946		46,574		1.3	%
Cent CLO 21 Limited	Structured Finance	Subordinated Structured Note	5/15/2014	Residual Interest, current yield 11.49%	—	7/29/2030	49,552		39,634		28,042		0.8	%	(5)(14)
									39,634		28,042		0.8	%
CIFC Funding 2013-III-R, Ltd.	Structured Finance	Subordinated Structured Note	8/2/2013	Residual Interest, current yield 15.56%	—	4/24/2031	44,100		29,916		22,455		0.6	%	(5)(14)
									29,916		22,455		0.6	%
CIFC Funding 2013-IV, Ltd.	Structured Finance	Subordinated Structured Note	10/22/2013	Residual Interest, current yield 17.79%	—	4/28/2031	45,500		33,543		30,422		0.9	%	(5)(14)
									33,543		30,422		0.9	%
CIFC Funding 2014-IV-R, Ltd.	Structured Finance	Subordinated Structured Note	8/5/2014	Residual Interest, current yield 14.81%	—	10/17/2030	44,467		31,751		22,177		0.6	%	(5)(14)
									31,751		22,177		0.6	%
CIFC Funding 2016-I, Ltd.	Structured Finance	Subordinated Structured Note	12/9/2016	Residual Interest, current yield 12.08%	—	10/21/2031	34,000		30,256		28,889		0.8	%	(5)(14)
									30,256		28,889		0.8	%
Cinedigm DC Holdings, LLC	Entertainment	Senior Secured Term Loan	2/28/2013	11.00% (3ML+ 9.00%) plus 2.50% PIK	2.00	3/31/2021	12,036		11,986		11,937		0.3	%	(10)(39)
									11,986		11,937		0.3	%
Class Valuation, LLC	Real Estate Management & Development	Senior Secured Term Loan	3/12/2018	9.75% (3ML+ 8.25%)	1.50	3/10/2023	31,327		31,327		31,327		0.9	%	(3)(10)
									31,327		31,327		0.9	%
Collections Acquisition Company, Inc.	Diversified Financial Services	Senior Secured Term Loan	12/3/2019	10.15% (3ML+ 7.65%)	2.50	6/3/2024	30,165		30,165		30,165		0.9	%	(3)(10)
									30,165		30,165		0.9	%
Columbia Cent CLO 27 Limited	Structured Finance	Subordinated Structured Note	12/18/2013	Residual Interest, current yield 11.65%	—	10/25/2028	40,274		23,574		19,401		0.6	%	(5)(14)
									23,574		19,401		0.6	%
Coverall North America, Inc.	Commercial Services & Supplies	Senior Secured Term Loan B	11/2/2015	12.00% (3ML+ 11.00%)	1.00	5/3/2021	15,872		15,872		15,872		0.5	%	(3)(10)
									15,872		15,872		0.5	%
CP VI Bella Midco	IT Services	Second Lien Term Loan	2/26/2018	6.90% (1ML+ 6.75%)	0.15	12/29/2025	15,750		15,714		15,750		0.5	%	(3)(8)(10)
									15,714		15,750		0.5	%
Curo Group Holdings Corp.	Consumer Finance	Second Lien Term Loan	7/30/2020	8.25%	—	9/1/2025	14,621		12,273		13,981		0.4	%	(14)(47)
									12,273		13,981		0.4	%
Digital Room, LLC	Commercial Services & Supplies	First Lien Term Loan	5/29/2019	5.27% (6ML+ 5.00%)	0.27	5/21/2026	9,850		9,752		9,727		0.3	%	(3)(8)(10)
		Second Lien Term Loan	5/30/2019	9.27% (6ML+ 9.00%)	0.27	5/21/2027	70,000		70,000		70,000		2.0	%	(3)(8)(10)
									79,752		79,727		2.3	%
Dunn Paper, Inc.	Paper & Forest Products	First Lien Term Loan	11/27/2019	5.75% (1ML+ 4.75%)	1.00	8/26/2022	2,244		2,208		2,214		0.1	%	(3)(8)(10)
		First Lien Term Loan	11/27/2019	5.75% (1ML+ 4.75%)	1.00	8/26/2022	2,244		2,208		2,214		0.1	%	(3)(8)(10)
		Second Lien Term Loan	10/7/2016	9.75% (1ML+ 8.75%)	1.00	8/26/2023	11,500		11,412		11,412		0.3	%	(3)(8)(10)
									15,828		15,840		0.5	%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF DECEMBER 31, 2020 (Unaudited)

(in thousands, except share data)


							December 31, 2020 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

Easy Gardener Products, Inc.	Household Durables	Third Lien Term Loan	6/11/2020	10.26% (3ML+ 10.00%)	0.25	9/30/2024	$	3,970	$	3,970	$	3,970	0.1	%	(10)
		Class A Units of EZG Holdings, Inc. (200 units)	6/11/2020		—	N/A	—		313		781		—	%	(16)
		Class B Units of EZG Holdings, Inc. (12,525 units)	6/11/2020		—	N/A	—		1,688		6,173		0.2	%	(16)
									5,971		10,924		0.3	%
Engine Group, Inc. (7)	Media	Senior Secured Term Loan	11/17/2020	5.75% (3ML+ 4.75%)	1.00	11/17/2023	12,229		12,229		10,672		0.3	%	(8)(10)
		Class B Common Units (1,039,554 units)	11/17/2020		—	N/A	—		26,991		—		—	%	(8)
									39,220		10,672		0.3	%
EXC Holdings III Corp	Technology Hardware, Storage & Peripherals	Second Lien Term Loan	12/5/2017	8.50% (3ML+ 7.50%)	1.00	12/1/2025	12,500		12,423		12,500		0.4	%	(3)(8)(10)
									12,423		12,500		0.4	%
Eze Castle Integration, Inc. (f/k/a/ H.I.G. ECI Merger Sub, Inc.)	IT Services	First Lien Term Loan	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	47,973		47,973		47,973		1.4	%	(3)(10)
		Delayed Draw Term Loan - $1,786 Commitment	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	—		—		—		—	%	(10)(15)
									47,973		47,973		1.4	%
First Brands Group	Auto Components	First Lien Term Loan	8/6/2020	8.50% (2ML+ 7.50%)	1.00	2/2/2024	40,919		39,486		40,919		1.2	%	(3)(8)(10)
									39,486		40,919		1.2	%
Galaxy XV CLO, Ltd.	Structured Finance	Subordinated Structured Note	2/13/2013	Residual Interest, current yield 14.74%	—	10/15/2030	50,525		35,695		26,640		0.8	%	(5)(14)
									35,695		26,640		0.8	%
Galaxy XXVII CLO, Ltd.	Structured Finance	Subordinated Structured Note	9/30/2013	Residual Interest, current yield 15.97%	—	5/16/2031	24,575		16,868		11,988		0.3	%	(5)(14)
									16,868		11,988		0.3	%
Galaxy XXVIII CLO, Ltd.	Structured Finance	Subordinated Structured Note	5/30/2014	Residual Interest, current yield 12.78%	—	7/15/2031	39,905		29,230		16,984		0.5	%	(5)(14)
									29,230		16,984		0.5	%
GEON Performance Solutions, LLC	Chemicals

PROSPECT CAPITAL CORP - FORM 10-Q - February 9, 2021

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