PROSPECT CAPITAL CORP

Prospect Capital Corporation

What the company is

• Closed-end investment company organized in Maryland.
• Regulated as a business development company (BDC) under the Investment Company Act of 1940 and elected to be treated as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code.
• Externally managed and administered by Prospect Capital Management L.P. (investment adviser) and Prospect Administration LLC (administrator). The company itself has no employees.

Core business model and investment strategy

• Objective: generate current income and long-term capital appreciation.
• Primary focus: private U.S. middle-market companies.
• Typical investments:
  • Senior and secured loans (first lien), generally less than $250 million per investment.
  • Second lien loans and equity or equity-linked investments with capital appreciation potential (convertible debt, preferred equity, common equity, warrants).
• Origination and monitoring:
  • Direct origination through relationships with private equity-backed sponsors, independent sponsors, financial intermediaries, and management teams.
  • Ongoing portfolio monitoring performed by Prospect Capital Management.
• Valuation:
  • Investments without market quotations are fair-valued quarterly under ASC 820 guidance, with input from independent valuation firms and the Audit Committee.

Portfolio characteristics

• Broadly diversified across 31 industry categories (CLOs excluded from the diversification measure).
• No single industry exceeds 18.1% of the portfolio by cost or fair value (excluding CLOs).
• Up to 30% of the portfolio may be invested in broadly traded public companies, financial companies, or non-U.S. issuers.
• Real estate exposure is held through National Property REIT Corp. (NPRC), focused on developed/occupied properties such as multi-family and student housing.
• Historically engaged in structured credit but has largely exited those positions.

Scale and key financials (as of stated dates)

• Total assets: approximately $6.4 billion (as of June 30, 2026).
• NAV per common share: $5.71 (as of June 30, 2026).
• Common stockholders’ equity: approximately $2.8 billion (used in leverage illustrations).
• Asset coverage (as of June 30, 2026):
  • Asset coverage for senior securities: 339.4%.
  • Asset coverage for senior securities that are stock: 177.6%.
• Portfolio concentration: 31 industry categories; CLOs are not counted in the industry concentration metric.
• Real estate affiliate NPRC: investments in multi-family and student housing, with exposure to tenancy, financing, and market risks typical of real estate.

Capital structure and leverage

• Uses a mix of leverage — revolving credit facility, unsecured notes, and preferred stock — to fund investments.
• Operates under BDC asset coverage requirements that limit leverage.
• Has engaged in securitization transactions as part of its financing strategy; securitizations introduce additional structural and market risks.
• Provides illustrations showing how debt and preferred stock affect net asset value and distributions.

Fees, expenses, and income for the Investment Adviser

• Base management fee: 2.00% per year on total assets, paid quarterly.
• Incentive fees:
  • Income incentive fee (quarterly): based on pre-incentive fee net investment income, with a quarterly hurdle rate of 1.75% (7% annualized). The fee structure includes a catch-up mechanism and a 20% share above 125% of the hurdle.
  • Capital gains incentive fee (annually): 20% of realized capital gains for the year, net of realized losses and unrealized depreciation, calculated using the specified aggregation method.
• Administration and other costs: Prospect Administration provides administrative services; the company reimburses allocable overhead. No income is recognized by Prospect for providing managerial assistance to portfolio companies. The company pays recurring fees to the adviser and administrator as described.

Management and governance

• Investment Adviser: Prospect Capital Management (Delaware limited partnership) manages day-to-day operations, investment selection, and portfolio monitoring.
• Portfolio managers: John F. Barry III (Chairman/CEO) and M. Grier Eliasek (President/COO) manage day-to-day investment activities. Eliasek receives compensation from Prospect Capital Management, not directly from the company.
• Board and executive compensation: The company relies on non-employee directors; executive compensation is provided through the adviser/administrator arrangements.
• Investment Advisory Agreement: renewed for a 12-month term ending June 21, 2027.
• Name license: non-exclusive, royalty-free license to use the Prospect Capital name while the Investment Advisory Agreement remains in effect.

Markets, risks and regulatory posture

• Identified risk categories include leverage risk, liquidity risk, fair value accounting uncertainties for private assets, regulatory changes, and concentration risk.
• Exposed to macroeconomic conditions, interest rate changes, capital market disruptions, and geopolitical events that could affect valuations and liquidity.
• Reliant on the Investment Adviser’s key personnel, with potential conflicts of interest arising from the adviser’s multi-client activities and incentive fee structure.

Notable data points

• Assets: $6.4 billion (as of 6/30/2026).
• NAV per share: $5.71 (6/30/2026).
• Common equity: approximately $2.8 billion.
• Senior security asset coverage: 339.4%; stock senior-asset coverage: 177.6%.
• Portfolio diversification: 31 industry categories; no single industry > 18.1% (excluding CLOs).
• Portfolio mix: primarily senior and secured loans; up to 30% in broadly traded public companies or non-U.S. investments.
• Real estate exposure: NPRC (multi-family, student housing).
• Employment: the company has no employees; investment and administrative staffing are provided by Prospect Capital Management and Prospect Administration.
• Fees: base management fee 2.00%; income and capital gains incentive fees as described; administration and allocable overhead reimbursed.

Bottom line

Prospect Capital Corporation is a large, externally managed BDC that provides debt and equity financing to U.S. middle-market companies, with a primary focus on senior secured loans and select equity or equity-linked positions. The company maintains a diversified portfolio across 31 industries, uses external management and administration, and employs leverage within BDC regulatory limits to fund investments. The most recent disclosed scale is approximately $6.4 billion in assets, a NAV of $5.71 per share, and about $2.8 billion of common equity.