Profile: Prospect Capital Corp (PSEC.OQ)
7 Mar 2014
Prospect Capital Corporation, incorporated on April 13, 2004, is a financial services company that primarily lends to and invests in middle market privately-held companies. The Company is a closed-end investment company. It invests primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development and recapitalization. The Company works with the management teams or financial sponsors to seek investments with historical cash flows, asset collateral or contracted pro-forma cash flows. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company lends in private equity sponsored transactions; lends directly to companies not owned by private equity firms; control investments in corporate operating companies; control investments in financial companies; invests in structured credit, real estate investments, and investments in syndicated debt. Prospect Capital Management acts as an investment adviser of the Company.
Lending in Private Equity Sponsored Transactions
The Company makes loans to companies which are controlled by private equity firms. This debt can take the form of first lien, second lien, unitranche or mezzanine loans. In making these investments, the Company looks for a diversified customer base, recurring demand for the product or service, barriers to entry, strong historical cash flow and experienced management teams.
Lending Directly to Companies
The Company provides debt financing to companies owned by non-private equity firms, the company founder, a management team or a family. The Company looks for in a sponsored transaction, it also looks for the alignment with the management team with invested capital.
Control Investments in Corporate Operating Companies
The Company acquires controlling stakes in non-financial operating companies. The Company’s investments in these companies are generally structured as a combination of yield-producing debt and equity.
Control Investments in Financial Companies
The Company acquires controlling stakes in financial companies, including consumer direct lending, subprime auto lending and other strategies. The Company’s investments in these companies are generally structured as a combination of yield-producing debt and equity.
Investments in Structured Credit
The Company makes investments in Collateralized Loan Obligations (CLOs), generally taking a position in the subordinated interests (equity) of the CLOs. The CLOs include a diversified portfolio of syndicated loans and do not have direct exposure to real estate, mortgages, sub-prime debt, or consumer based debt.
Real Estate Investments
The Company makes investments in real estate through its wholly-owned tax-efficient real estate investment trust (REIT), American Property Holdings Corp. Its real estate investments are in various classes of fully developed and occupied real estate properties that generate current yields. The Company partners with established property managers with experience in managing the property type to manage such properties after acquisition.
Investments in Syndicated Debt
The Company makes investments in loans and high yield bonds that have been sold to a syndicate of buyers. Here it looks for investments with risk-adjusted returns after it has completed a fundamental credit analysis. These investments are purchased with a long term, buy-and-hold outlook and it looks to provide structuring input by providing anchoring orders.
Prospect Capital Corp
44th Floor, 10 East 40th Street
NEW YORK NY 10016