GlobeNewswire Inc | Aug 24, 2021 07:06PM EDT

August 24, 2021

NEW YORK, Aug. 24, 2021 (GLOBE NEWSWIRE) -- Prospect Capital Corporation (NASDAQ: PSEC) (Prospect, our, or we) today announced financial results for our fiscal quarter and year ended June 30, 2021.

FINANCIAL RESULTS

All amounts in $000?s except Quarter Quarter Quarterper share amounts (on weighted average Ended Ended Endedbasis for period numbers) June 30, March 31, June 30, 2021 2021 2020 Net Investment Income (?NII?) $73,229 $73,402 $58,273Basic NII per Common Share $0.19 $0.19 $0.16Interest as % of Total Investment Income 87.5% 87.5% 88.8% Net Income Attributable to Common $242,421 $246,008 $162,613StockholdersBasic Net Income per Common Share $0.62 $0.64 $0.44 Distributions to Common Shareholders $69,857 $69,603 $66,823Distributions per Common Share $0.18 $0.18 $0.18 Since Oct 2017 Basic NII per Common Share $2.94 $2.74 $2.19Since Oct 2017 Distributions per Common Share $2.70 $2.52 $1.98Since Oct 2017 Basic NII Less Distributions $0.24 $0.22 $0.21per Common Share Net Asset Value (?NAV?) to Common $3,808,477 $3,634,940 $3,055,861ShareholdersNAV per Common Share $9.81 $9.38 $8.18 Net of Cash Debt to Equity Ratio^(^1) 55.9% 56.5% 69.6%Net of Cash Asset Coverage of Debt Ratio 277% 276% 244% Unsecured Debt as % of Total Debt 84.3% 84.3% 89.1%Unsecured and Non-Recourse Debt as % of Total 100.0% 100.0% 100.0%Debt

(1)Including our preferred stock as equity.

All amounts in $000?s except Year Ended Year Endedper share amounts June 30, 2021 June 30, 2020 Net Investment Income (?NII?) $285,737 $265,694Basic NII per Common Share $0.75 $0.72 Net Income (Loss) attributable to Common $962,096 $(16,224)StockholdersBasic Net Income (Loss) per Common Share $2.51 $(0.04) Distributions to Common Shareholders $276,145 $265,277Distributions per Common Share $0.72 $0.72

CASH COMMON SHAREHOLDER DISTRIBUTION DECLARATION

Prospect is declaring distributions to common shareholders as follows:

Monthly Cash Common Shareholder Record Payment Amount ($ perDistribution Date Date share)September 2021 9/28/2021 10/21/2021 $0.0600October 2021 10/27/2021 11/18/2021 $0.0600

These monthly cash distributions represent the 49th and 50th consecutive $0.06 per share distributions to common shareholders.

Prospect expects to declare November 2021, December 2021, and January 2022 distributions in November 2021.

Based on the declarations above, Prospects closing stock price of $8.11 at August 23, 2021 delivers to our common shareholders an annualized distribution yield of 8.9%.

We offer a 5% discount to the market price of our common stock to shareholders who have elected to participate in our dividend reinvestment plan (also known as our DRIP). Shareholders who participated in this plan for our fiscal year ended June 30, 2021 received a return 7.2% greater than non-participating shareholders, for a total return of over 85%.

Taking into account past distributions and our current share count for declared distributions, and since inception through our October 2021 declared distribution, Prospect will have distributed $18.96 per share to original common shareholders, aggregating over $3.4 billion in cumulative distributions to all common shareholders.

Since October 2017, our NII per common share has aggregated $2.94 while our common shareholder distributions per share have aggregated $2.70, resulting in our NII exceeding distributions during this period by $0.24 per common share.

Initiatives focused on enhancing accretive NII per share growth include (1) our $1 billion targeted 5.50% perpetual preferred stock offering, (2) our recent $150 million 5.35% listed perpetual preferred stock issuance, (3) a greater utilization of our cost efficient revolving credit facility (with an incremental cost of approximately 1.45% at todays one month Libor), (4) retirement of higher cost liabilities (including multiple recent tender offers and repurchases), (5) issuing lower cost notes (including recent five to 30 year senior unsecured notes with coupons of approximately 2.5% to 4.0%), and (6) increased originations of senior secured debt and selected equity investments to deliver targeted risk-adjusted yields and total returns as we deploy available capital from our current underleveraged balance sheet.

Our senior management team and employees own approximately 28% of shares outstanding, representing approximately $1.1 billion of our NAV.

CASH PREFERRED SHAREHOLDER DISTRIBUTION DECLARATION

Prospect is declaring distributions to Series A1, Series M1, and Series A2 preferred shareholders at an annual rate of 5.50% of the stated value of $25.00 per share, from the date of issuance or, if later, from the most recent dividend payment date, as follows:

Series A1, M1, and A2 Monthly Record Payment Monthly Amount ($ per share),Cash 5.50% Preferred Shareholder Date Date before pro ration for partialDistribution periodsSeptember 2021 9/15/ 10/1/ $0.114583 2021 2021October 2021 10/20/ 11/1/ $0.114583 2021 2021November 2021 11/17/ 12/1/ $0.114583 2021 2021

Prospect is declaring our first quarterly distribution to Series A preferred shareholders at an annual rate of 5.35% of the stated value of $25.00 per share, from the date of issuance as follows:

Series A Quarterly Cash 5.35% Preferred Record Payment Amount ($ perShareholder Distribution Date Date share)July - October 2021 10/20/ 11/1/ $0.382674 2021 2021

PORTFOLIO UPDATE AND INVESTMENT ACTIVITY

All amounts in $000?s except As of As of As ofper unit amounts June 30, March 31, June 30, 2021 2021 2020 Total Investments (at fair value) $6,201,778 $5,883,328 $5,232,328Number of Portfolio Companies 124 123 121 Secured First Lien 50.9% 51.8% 46.9%Other Senior Secured Debt 15.8% 15.2% 24.4%Subordinated Structured Notes 12.2% 12.8% 13.5%Unsecured and Other Debt 0.1% 0.1% 1.0%Equity Investments 21.0% 20.1% 14.2%Mix of Investments with Underlying Collateral 78.9% 79.8% 84.8%Security Annualized Current Yield ? All Investments 9.2% 9.4% 9.7%Annualized Current Yield ? Performing Interest 11.7% 11.8% 11.4%Bearing Investments Top Industry Concentration^(^1) 17.7% 16.7% 14.4%Retail Industry Concentration^(^1) 0.0% 0.0% 0.0%Energy Industry Concentration^(^1) 1.3% 1.3% 1.6%Hotels, Restaurants & Leisure Concentration^(^ 0.4% 0.4% 0.4%1) Non-Accrual Loans as % of Total Assets ^(2) 0.6% 0.7% 0.9% Middle-Market Loan Portfolio Company Weighted $89,116 $81,933 $71,970Average EBITDA^(^3)

As of the quarter ended June 30, 2021, Prospect had a 5.01x middle-market loan portfolio company weighted average net debt leverage ratio.(3)

(1)Excluding our underlying industry-diversified structured credit portfolio.

(2)Calculated at fair value.

(3) For additional disclosure see Middle-Market Loan Portfolio Company Weighted Average EBITDA and Net Leverage at the end of this release.

During the September 2021 (to date), June 2021 and March 2021 quarters, investment originations and repayments were as follows:

All amounts in $000?s Quarter Ended Quarter Ended Quarter Ended September 30, 2021 June 30, 2021 March 31, 2021 Total Originations $350,897 $306,675 $258,419 Middle-Market Lending 97.2% 77.4% 77.2%Real Estate 2.8% 18.9% 17.8%Subordinated Structured Notes 0.0% 1.8% 0.0%Middle-Market Lending / Buyout 0.0% 1.7% 5.0%Other 0.0% 0.2% 0.0% Total Repayments $165,107 $156,272 $182,458 Originations, Net of Repayments $185,790 $150,403 $75,961

Note: For additional disclosure see Primary Origination Strategies at the end of this release.

We have invested in subordinated structured notes benefiting from individual standalone financings non-recourse to Prospect, with our risk limited in each case to our net investment. At June 30, 2021 and March 31, 2021, our subordinated structured note portfolio at fair value consisted of the following:

All amounts in $000?s except As of As ofper unit amounts June 30, 2021 March 31, 2021

Total Subordinated Structured Notes $756,109 $750,603 # of Investments 39 39 TTM Average Cash Yield^(^1)(2) 15.3% 13.7%Annualized Cash Yield^(^1)(2) 19.1% 18.6%Annualized GAAP Yield on Fair Value^(^1)(2) 14.2% 15.2%Annualized GAAP Yield on Amortized Cost^(^2) 9.9% 10.4% Cumulative Cash Distributions $1,327,324 $1,291,282% of Original Investment 94.5% 91.9% # of Underlying Collateral Loans 1,713 1,718Total Asset Base of Underlying Portfolio $16,551,131 $16,806,835 Prospect TTM Default Rate 1.00% 1.71%Broadly Syndicated Market TTM Default Rate 1.25% 3.15%Prospect Default Rate Outperformance vs. Market 0.25% 1.44%

(1)Calculation based on fair value.

(2)Excludes investments being redeemed.

To date, including called investments being redeemed, we have exited nine subordinated structured notes totaling $263.4 million with an expected pooled average realized IRR of 16.7% and cash on cash multiple of 1.48 times.

Since December 31, 2017 through today, 30 of our subordinated structured note investments have completed multi-year extensions of their reinvestment periods (typically at reduced liability spreads and with increased weighted average life asset benefits). We believe further long-term optionality upside exists in our structured credit portfolio through additional refinancings and reinvestment period extensions.

CAPITAL AND LIQUIDITY

Our multi-year, long-term laddered and diversified funding profile includes a $1.1575 billion revolving credit facility (with 36 lenders, an increase of six lenders from before our April 2021 extension and upsizing), program notes, listed baby bonds, institutional bonds, convertible bonds, listed preferred stock, and program preferred stock. We have retired upcoming maturities, including a recent retirement in June 2021, and as of today have no debt maturing until July 2022.

On April 28, 2021, we completed an amendment and upsizing of our existing revolving credit facility (the Facility) for Prospect Capital Funding, extending the term 5.0 years from such date. Pricing for amounts drawn under the Facility is one-month Libor plus 2.05%, a decrease of 0.15% from before our extension. Undrawn pricing (1) was reduced by 0.30% for above 35% and up to 60% utilization and (2) was reduced by 0.10% for above 60% utilization. Our extended facility also has improved borrowing base benefits due to a change in concentration baskets, which we estimate increased our borrowing base by approximately $150 million.

The combined amount of our balance sheet cash and undrawn revolving credit facility commitments currentlyexceeds $800 million. Our total unfunded eligible commitments to non-control portfolio companies totals approximately $52 million, representing less than 1% of our total assets as of June 30, 2021.

As of As of As ofAll amounts in $000?s June 30, March 31, June 30, 2021 2021 2020Net of Cash Debt to Equity Ratio^(^1) 55.9% 56.5% 69.6%% of Interest-Bearing Assets at Floating 86.1% 86.7% 85.9%Rates% of Liabilities at Fixed Rates 84.3% 84.3% 89.1% % of Floating Loans with Libor Floors 92.5% 91.7% 85.2%Weighted Average Libor Floor 1.61% 1.68% 1.67% Unencumbered Assets $4,482,615 $4,401,757 $3,772,478% of Total Assets 71.1% 73.3% 71.2%

(1)Including our preferred stock as equity.

The below table summarizes our June 2021 quarter term debt issuance and repurchase/repayment activity:

All amounts in $000?s Principal Coupon MaturityDebt Issuances 3.364% 2026 Notes $300,000 3.364% November 2026Prospect Capital InterNotes $78,828 3.00% ? 4.00% April 2026 ? July 2033Total Debt Issuances $378,828 Debt Repurchases/Repayments 2022 Notes $50 4.95% July 20222023 Notes $836 5.875% March 20236.375% 2024 Notes $226 6.375% January 20242028 Notes $70,761 6.250% June 2028Prospect Capital InterNotes $243,397 4.00% - April 2024 ? October 6.625% 2043Total Debt Repurchases/ $315,270 Repayments Net Debt Issuances $63,558

$1.1575 billion of Facility commitments have closed to date with 36 lenders. An accordion feature allows the Facility, at Prospect's discretion, to accept up to $1.5 billion of commitments. The Facility matures April 27, 2026. The Facility includes a revolving period that extends through April 27, 2025, followed by an additional one-year amortization period.

We currently have seven separate unsecured debt issuances aggregating $1.4 billion outstanding, not including our program notes, with laddered maturities extending to June 2029. At June 30, 2021, $508.7 million of program notes were outstanding with laddered maturities through October 2043.

At June 30, 2021, our weighted average cost of unsecured debt financing was 4.86%, a decrease of 0.36% from March 31, 2021, and a decrease of 0.88% from June 30, 2020.

On August 3, 2020, we launched a $1 billion 5.50% perpetual preferred stock offering program. Prospect expects to use the net proceeds from the offering program to maintain and enhance balance sheet liquidity, including repaying our credit facility and purchasing high quality short-term debt instruments, and to make long-term investments in accordance with our investment objective. The preferred stock provides Prospect with a diversified source of accretive fixed-rate capital without creating maturity risk due to the perpetual term. To date we haveissued approximately $183 million in aggregate of our 5.50% perpetual preferred stock program.

On July 19, 2021, we closed a $150 million listed 5.35% perpetual preferred stock offering. Prospect used the net proceeds from the offering to maintain and enhance balance sheet liquidity, including repaying our credit facility and redeeming higher cost program notes.

In connection with the preferred stock offering program, effective August 3, 2020 and as amended on October 30, 2020, we adopted and amended, respectively, a Preferred Stock Dividend Reinvestment Plan, pursuant to which holders of the preferred stock will have dividends on their preferred stock automatically reinvested in additional shares of such preferred stock at a price per share of $25.00, if they elect.

We currently have over $337 million in preferred stock outstanding.

Prospect holds recently reaffirmed or initiated investment grade company ratings from Standard & Poors (BBB-), Moodys (Baa3), Kroll (BBB-), Egan-Jones (BBB), and DBRS (BBB (low)). Maintaining our investment grade ratings with prudent asset, liability, and risk management is an important objective for Prospect.

DIVIDEND REINVESTMENT PLAN

We have adopted a dividend reinvestment plan (also known as our DRIP) that provides for reinvestment of our distributions on behalf of our shareholders, unless a shareholder elects to receive cash. On April 17, 2020, our board of directors approved amendments to the Companys DRIP, effective May 21, 2020. These amendments principally provide for the number of newly-issued shares pursuant to the DRIP to be determined by dividing (i) the total dollar amount of the distribution payable by (ii) 95% of the closing market price per share of our stock on the valuation date of the distribution (providing a 5% discount to the market price of our common stock), a benefit to shareholders who participate.

HOW TO PARTICIPATE IN OUR DIVIDEND REINVESTMENT PLAN

Shares held with a broker or financial institution

Many shareholders have been automatically opted out of our DRIP by their brokers. Even if you have elected to automatically reinvest your PSEC stock with your broker, your broker may have opted out of our DRIP (which utilizes DTCs dividend reinvestment service), and you may therefore not be receiving the 5% pricing discount. Shareholders interested in participating in our DRIP to receive the 5% discount should contact their brokers to make sure each such DRIP participation election has been made through DTC. In making such DRIP election, each shareholder should specify to ones broker the desire to participate in the "Prospect Capital Corporation DRIP through DTC" that issues shares based on 95% of the market price (a 5% discount to the market price) and not the broker's own "synthetic DRIP plan (if any) that offers no such discount. Each shareholder should not assume ones broker will automatically place such shareholder in our DRIP through DTC. Each shareholder will need to make this election proactively with ones broker or risk not receiving the 5% discount. Each shareholder may also consult with a representative of such shareholders broker to request that the number of shares the shareholder wishes to enroll in our DRIP be re-registered by the broker in the shareholders own name as record owner in order to participate directly in our DRIP.

Shares registered directly with our transfer agent

If a shareholder holds shares registered in the shareholders own name with our transfer agent (less than 0.1% of our shareholders hold shares this way) and wants to make a change to how the shareholder receives dividends, please contact our plan administrator, American Stock Transfer and Trust Company LLC by calling (888) 888-0313 or by mailing American Stock Transfer and Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219.

EARNINGS CONFERENCE CALL

Prospect will host an earnings call on Wednesday August 25, 2021 at 11:00 am. Eastern Time. Dial 888-338-7333. For a replay prior to September 25, 2021 visit www.prospectstreet.com or call 877-344-7529 with passcode 10159756.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES(in thousands, except share and per share data)

Assets June 30, 2021 June 30, 2020 (Audited) (Audited)Investments at fair value: Control investments (amortized cost of $ 2,919,717 $ 2,259,292 $2,482,431 and $2,286,725, respectively)Affiliate investments (amortized cost of 356,734 187,537 $202,943 and $163,484, respectively)Non-control/non-affiliate investments(amortized cost of $3,372,750 and $3,332,509, 2,925,327 2,785,499 respectively)Total investments at fair value (amortized cost 6,201,778 5,232,328 of $6,058,124 and $5,782,718, respectively)Cash 63,610 44,561 Receivables for: Interest, net 12,575 11,712 Other 365 106 Due from broker 12,551 1,063 Deferred financing costs on Revolving Credit 11,141 9,145 FacilityPrepaid expenses 1,072 1,248 Total Assets 6,303,092 5,300,163 Liabilities Revolving Credit Facility 356,937 237,536 Convertible Notes (less unamortized debtissuance costs of $4,123 and $8,892, 263,100 450,598 respectively)Public Notes(less unamortized debt issuance 1,114,717 782,106 costs of $20,061 and $11,613,respectively)Prospect Capital InterNotes(less unamortizeddebt issuance costs of $10,496 and 498,215 667,427 $12,802,respectively)Due to Prospect Capital Management 48,612 42,481 Interest payable 27,359 29,066 Dividends payable 23,313 22,412 Due to broker 14,854 1 Accrued expenses 5,151 3,648 Due to Prospect Administration 4,835 7,000 Other liabilities 482 2,027 Total Liabilities 2,357,575 2,244,302 Net Assets $ 3,945,517 $ 3,055,861 Components of Net Assets Convertible preferred stock, par value $0.001per share (141,000,000 shares authorized, with40,000,000 shares of preferred stock authorizedfor each of the series A1, Series M1, andSeries M2 shares, 20,000,000 shares ofpreferred stock authorized for the Series AA1shares and 1,000,000 shares of preferred stockauthorized for the Series A2 shares; 5,163,926 $ 137,040 $ ? and 0 Series A1 shares issued and outstanding,respectively; 187,000 and 0 Series A2 sharesissued and outstanding, respectively; 0 and 0Series AA1 shares issued and outstandingrespectively; 130,666 and 0 Series M1 sharesissued and outstanding, respectively; and 0 and0 Series M2 shares issued and outstanding,respectively)Common stock, par value $0.001 per share(1,859,000,000 and 1,000,000,000 common shares 388 374 authorized; 388,419,573 and 373,538,499 issuedand outstanding, respectively)Paid-in capital in excess of par 4,040,748 3,986,417 Total distributable loss (232,659 ) (930,930 )Net Assets $ 3,945,517 $ 3,055,861 Net Asset Value Per Common Share $ 9.81 $ 8.18

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share and per share data)

Three Months Ended June Year Ended June 30, 30, 2021 2020 2021 2020Investment Income Interest income: Control investments $ $ 48,647 $ $ 200,948 50,567 201,983Affiliate investments 6,638 7,324 30,971 12,649 Non-control/non-affiliate 53,556 50,901 209,681 229,963 investmentsStructured credit 26,893 22,083 111,628 110,816 securitiesTotal interest income 137,654 128,955 554,263 554,376 Dividend income: Control investments 997 1,000 4,642 10,335 Affiliate Investments 378 ? 378 ? Non-control/non-affiliate 19 104 81 1,109 investmentsTotal dividend income 1,394 1,104 5,101 11,444 Other income: Control investments 16,674 13,299 62,167 47,311 Affiliate investments 7 37 109 38 Non-control/ non-affiliate 1,610 1,834 10,327 10,361 investmentsTotal other income 18,291 15,170 72,603 57,710 Total Investment Income 157,339 145,229 631,967 623,530 Operating Expenses Base management fee 30,756 26,279 114,622 108,910 Income incentive fee 17,873 16,202 71,227 68,057 Interest and credit 30,069 34,765 130,618 148,368 facility expensesAllocation of overheadfrom Prospect 3,494 4,646 14,262 18,247 AdministrationAudit, compliance and 1,594 1,299 3,861 4,028 tax related feesDirectors? fees 113 115 450 453 Other general and 211 1,316 11,190 9,773 administrative expensesTotal Operating 84,110 86,956 346,230 357,836 ExpensesNet Investment Income 73,229 58,273 285,737 265,694 Net Realized and NetChange in Unrealized Gains (Losses) fromInvestmentsNet realized gains (losses)Control investments 2 ? 2,955 ? Affiliate investments ? (7,311 ) 4,469 ? Non-control/non-affiliate 84 ? 113 (7,574 )investmentsNet realized gains 86 (7,311 ) 7,537 (7,574 )(losses)Net change inunrealized gains (losses)Control investments 140,753 54,775 464,719 (117,552 ) Affiliate investments 18,697 104,241 129,738 67,077 Non-control/ )non-affiliate 16,017 (47,310 ) 99,587 (221,167 investmentsNet change in )unrealized gains 175,467 111,706 694,044 (271,642 (losses)Net Realized and NetChange in Unrealized 175,553 104,395 701,581 (279,216 )Gains (Losses) from InvestmentsNet realized (losses)on extinguishment of (5,096 ) (55 ) (23,511 ) (2,702 )debtNet Increase (Decrease)in Net Assets Resulting 243,686 162,613 963,807 (16,224 )from OperationsPreferred stock (1,265 ) ? (1,711 ) ? dividendNet Increase (Decrease)in Net Assets Resulting from Operations $ 242,421 $ 162,613 $ 962,096 $ (16,224 )attributable to CommonStockholders

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIESROLLFORWARD OF NET ASSET VALUE PER SHARE(in actual dollars)

Three Months Ended Year Ended June 30, June 30, 2021 2020 2021 2020 Per Share Data - Basic Net asset value percommon share at $ 9.38 $ 7.98 $ 8.18 $ 9.01 beginning of periodNet investment income 0.19 0.16 0.75 0.72 (1)Net realized andchange in unrealized 0.44 0.28 1.77 (0.76 ) gains (losses) (1)Net increase(decrease) from 0.63 0.44 2.52 (0.04 ) operations (5)Distributions of netinvestment income to (0.18 ) (6 ) (0.08 ) (7 ) (0.69 ) (6 ) (0.49 ) (7 )common stockholdersDistributions of netinvestment income to ? (3 ) ? (4 ) ? (3 ) ? (4 )preferred stockholders

Return of Capital to ? (6 ) (0.10 ) (7 ) (0.03 ) (6 ) ) (7 )common stockholders (0.23Common stock ? (3 ) (0.05 ) (3 ) (0.11 ) (0.07 ) transactions(2)Offering costs fromissuance of preferred (0.02 ) (4 ) (0.04 ) ? (4 )stockNet asset value percommon share at end of $ 9.81 $ 8.18 (8 ) $ 9.81 (8 ) $ 8.18 period

(1) Per share data amount is based on the weighted average number of common shares outstanding for the period presented (except for dividends to stockholders which is based on actual rate per share).

(2) Common stock transactions include the effect of our issuance of common stock in public offerings (net of underwriting and offering costs), shares issued in connection with our common stock dividend reinvestment plan, common shares issued to acquire investments and common shares repurchased below net asset value pursuant to our Repurchase Program, and common shares issued pursuant to the Holder Optional Conversion of our preferred stock.

(3) Amount is less than $0.01.

(4) Not applicable for the respective fiscal period.

(5) Diluted net increase from operations was $0.61 and $2.50 for the three and twelve months ended June 30, 2021.

(6) Not finalized for the respective fiscal period.

(7) The amounts reflected for the respective fiscal periods were updated based on tax information received subsequent to our Form 10-K filing for the year ended June 30, 2020. Certain reclassifications have been made in the presentation of prior period amounts.

(8) Does not foot due to rounding.

MIDDLE-MARKET LOAN PORTFOLIO COMPANY WEIGHTED AVERAGE EBITDA AND NET LEVERAGE

Middle-Market Loan Portfolio Company Weighted Average Net Leverage (Middle-Market Portfolio Net Leverage) and Middle-Market Loan Portfolio Company Weighted Average EBITDA (Middle-Market Portfolio EBITDA) provide clarity into the underlying capital structure of PSECs middle-market loan portfolio investments and the likelihood that PSECs overall portfolio will make interest payments and repay principal. Middle-Market Portfolio Net Leverage reflects the net leverage of each of PSECs middle-market loan portfolio company debt investments, weighted based on the current fair market value of such debt investments. The net leverage for each middle-market loan portfolio company is calculated based on PSECs investment in the capital structure of such portfolio company, with a maximum limit of 10.0x adjusted EBITDA. This calculation excludes debt subordinate to PSECs position within the capital structure because PSECs exposure to interest payment and principal repayment risk is limited beyond that point. Additionally, subordinated structured notes, other structured credit, real estate investments, investments for which EBITDA is not available, and equity investments, for which principal repayment is not fixed, are also not included in the calculation. The calculation does not exceed 10.0x adjusted EBITDA for any individual investment because 10.0x captures the highest level of risk to PSEC. Middle-Market Portfolio Net Leverage provides PSEC with some guidance as to PSECs exposure to the interest payment and principal repayment risk of PSECs overall debt portfolio. PSEC monitors its Middle-Market Portfolio Net Leverage on a quarterly basis.

Middle-Market Portfolio EBITDA is used by PSEC to supplement Middle-Market Portfolio Net Leverage and generally indicates a portfolio companys ability to make interest payments and repay principal. Middle-Market Portfolio EBITDA is calculated using the EBITDA of each of PSECs middle-market loan portfolio companies, weighted based on the current fair market value of the related investments. The calculation provides PSEC with insight into profitability and scale of the portfolio companies within our overall debt investments.

These calculations include addbacks that are typically negotiated and documented in the applicable investment documents, including but not limited to transaction costs, share-based compensation, management fees, foreign currency translation adjustments and other nonrecurring transaction expenses.

Together, Middle-Market Portfolio Net Leverage and Middle-Market Portfolio EBITDA assist PSEC in assessing the likelihood that PSEC will timely receive interest and principal payments. However, these calculations are not meant to substitute for an analysis of PSECs our underlying portfolio company debt investments, but to supplement such analysis.

PRIMARY ORIGINATION STRATEGIES

Middle-Market Lending - We make directly-originated, agented loans to companies, including companies which are controlled by private equity sponsors and companies that are not controlled by private equity sponsors (such as companies that are controlled by the management team, the founder, a family or public shareholders). This debt can take the form of first lien, second lien, unitranche or unsecured loans. These loans typically have equity subordinate to our loan position. We may also purchase selected equity co-investments in such companies. In addition to directly-originated, agented loans, we also invest in senior and secured loans, syndicated loans and high yield bonds that have been sold to a club or syndicate of buyers, both in the primary and secondary markets. These investments are often purchased with a long term, buy-and-hold outlook, and we often look to provide significant input to the transaction by providing anchoring orders.

Middle-Market Lending / Buyout - This strategy involves purchasing senior and secured yield-producing debt and controlling equity positions in operating companies across various industries. We believe this strategy provides enhanced certainty of closure to sellers, and the opportunity for management to continue in their current roles. These investments are often structured in tax-efficient partnerships, enhancing returns.

Real Estate - We purchase debt and controlling equity positions in tax-efficient real estate investment trusts (REIT or REITs). The real estate investments of National Property REIT Corp. (NPRC) are in various classes of developed and occupied real estate properties that generate current yields, including multi-family properties, student housing, and self-storage. NPRC seeks to identify properties that have historically attractive occupancy rates and recurring cash flow generation. NPRC generally co-invests with established and experienced property management teams that manage such properties after acquisition.

Subordinated Structured Notes - We make investments in structured credit, often taking a significant position in subordinated structured notes (equity) and rated secured structured notes (debt). The underlying portfolio of each structured credit investment is diversified across approximately 100 to 200 broadly syndicated loans and does not have direct exposure to real estate, mortgages, or consumer-based credit assets. The structured credit portfolios in which we invest are managed by established collateral management teams with many years of experience in the industry.

ABOUT PROSPECT CAPITAL CORPORATION

Prospect Capital Corporation (www.prospectstreet.com) is a business development company that focuses on lending to and investing in private businesses. Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

We have elected to be treated as a business development company under the Investment Company Act of 1940 (1940 Act). We are required to comply with regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, whose safe harbor for forward-looking statements does not apply to business development companies. Any such statements, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under our control, and that we may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from any forward-looking statements. Such statements speak only as of the time when made. We undertake no obligation to update any such statement now or in the future.

For additional information, contact:

Grier Eliasek, President and Chief Operating Officergrier@prospectcap.comTelephone (212) 448-0702