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Prospect Capital: Spotlight On Investing Activity


Periodically I investigate the lending activity of PSEC.

I document the moves made over the last quarter and discuss the implications.

There are pluses and minuses to the results.

Recall that I periodically cover Prospect Capital's (NASDAQ:PSEC) investing activity. With quarterly earnings coming up I thought it was time to check back in and see what has been happening in this regard with the company. Now, the approach I use indicates whether the company is being more aggressive or more defensive, but I will also tell you the company doesn't disclose CLO moves that it makes. So while we miss some activity digging into the investments the company does disclose is incredibly useful. While some find this material to be very dry, it is absolutely critical. I started getting behind the name all the way down to $5. But I stood behind the name and it has regained most of the losses since I started pulling the trigger. That said, we want to ensure that management is avoiding excessive risk and reducing the chances to run into underperforming or non-performing loans.

Before delving into the material I need to remind you Prospect focuses on offering non-control debt financing to corporate management teams as well as financial sponsors. While that may sound dry as dust, keep in mind that the company also makes very selective acquisitions by investing in multiple levels of business' capital structure. It's a lender. A financier. It invests. The company has grown its equity substantially in the last few years. I still expect that total to grow but expect the pace to continue to be extremely reduced. The company's asset portfolio is quite impressive, but with the recent issues the company has faced, it has become more selective in its investments.

So what has the company done recently? Well, not much, but investing did step up this quarter versus the first half of the year. It has been very quiet. Table 1 summarizes the investing activities since May 5th, found in a series of releases and in the 8/22 prospectus.

Table 1. Investing Activities of Prospect Capital in 2016, May 1, 2016 through August 22, 2016.



Investment ($ millions) activity

Brief description

Harbortouch Payments



Sold investment in Harbortouch Payments, LLC. Expects to receive $328.0 million...