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Understanding Prospect’s Total Investments

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Total investments fell

As of September 30, Prospect Capital (PSEC) reported total investments amounting to $5.6 billion (fair value), a marginal fall from its total investments balance as of June 30.

Out of the total investments of $5.6 billion, non-control investments amounted to $3.7 billion while affiliate investments stood at $17.7 million. However, control investments amounted to $1.9 billion.

Prospect Capital has a current yield of 12.18%. On the other hand, its peers (XLF) KCAP Financial (KCAP), BlackRock Capital Investment (BKCC), and Apollo Investment (AINV) have current yields of 14.16%, 10.18%, and 9.77%, respectively.

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Fall in net income

Prospect Capital has seen a substantial year-over-year and sequential decline in net income in fiscal 1Q18. The company reported net income of $11.9 million in fiscal 1Q18, compared to $81.3 million in fiscal 1Q17. The company reported net income of $51.1 million in fiscal 4Q17.

Compared to fiscal 4Q17, the fall in the net income came on the back of structured credit investments. However, fewer interest-bearing assets in fiscal 1Q18 also contributed to the fall.

In fiscal 1Q18, the company made the following changes to investments in relation to asset classes compared to fiscal 4Q17.

  • Investments in secured first liens rose marginally from 48.3% to 48.5%.
  • Exposure to secured second liens rose from 19.1% to 19.5%.
  • Investments in small business whole loans stood at 0.1%—no change.
  • Structured credit has fallen to 17% from 18.5%.
  • Exposure to unsecured debt fell from 0.8% to 0.6%.
  • Investments in equity are now 14.3%, up from 13.2%.
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