PROSPECT CAPITAL CORP Q4 FY2024 earnings call

• Prospect Capital is celebrating 20th anniversary as a leading provider of private debt and equity to U.S. middle-market companies, having invested $20.9 billion across 423 investments and exited 303. - In the June quarter, net investment income was $102.9 million, NAV was $3.71 billion. - Announcing monthly common shareholder distributions of $0.06 per share for September and October, with 86th consecutive distribution. - Portfolio composition includes various debt and equity types, with focus on increasing first lien and reducing second lien exposure. - Held 117 portfolio companies with fair value of $7.7 billion, diversified across industries. - Real estate private REIT has invested in 110 properties, exited 49 with average net realized IRR of 24.4% and cash multiple of 2.5 times. - Structured credit portfolio generated cumulative cash distributions of $2.1 billion through June.

In the June quarter, Prospect Capital's net investment income (NII) was $102.9 million, or $0.25 per common share. NAV was $3.71 billion, or $8.74 per common share. At June 30, the net debt to total assets ratio was 30.5%, and unsecured debt plus preferred was 80.3% of total debt plus preferred. The portfolio at fair value comprised 60.3% first lien debt (up 3.8% from prior year), 13.6% second lien debt (down 2.8% from prior year), 6.9% subordinated structured notes with underlying secured first lien collateral (down 1.7% from prior year), and 19.2% unsecured debt and equity investments (up 0.7% from prior year). Interest income in the June quarter was 89.2% of total investment income. Non-accruals as a percentage of total assets stood at approximately 0.3% in June. The weighted average middle-market portfolio net leverage was 5.5 times EBITDA. Originations in the June quarter aggregated $242 million, with $245 million of repayments and exits, resulting in net repayments of $3 million. The real estate private REIT has invested in 110 properties with a $4 billion aggregate initial property value. The structured credit business held $532 million across 32 non-recourse subordinated structured notes investments, generating a GAAP yield of 4.1% and a cash yield of 22.3% as of June.

• No specific forward-looking guidance on new targets, but continues with monthly shareholder distributions and focus on investment strategies as outlined.

• No detailed discussion of specific risks during the call, though general mentions of market and capital structure risks in relation to preferreds/convertibles not actively contemplated.

Q: Questions on preferreds to convertible preferreds, PSEC crisis option, CLOs, and REIT.

A: John Barry and Grier Eliasek responded that they haven't contemplated invoking the PSEC crisis option, discussed preferred conversion trends (one large conversion from Israel due to liquidity needs, legacy options not invokable, exchanging preferreds instead of converting), noted CLOs reclassification had no NAV impact and are a small part of the portfolio, and explained REIT investments including value-add multifamily with high IRR potential