Prospect Capital (PSEC) is a business development company. It is a private equity firm specializing in late-venture, middle-market, mature, mezzanine finance, buyouts, recapitalizations, growth capital, development, cash flow term loans, and bridge transactions.
PSEC makes secured loans, creating senior debt, first-lien and second lien loans, mezzanine debt and equity investments in private and microcap public businesses. One of its most attractive qualities from an investors' perspective is that it typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors.
More specifically, PSEC invests in oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, health care, food and beverage, education, business services and other select sectors. It spreads the risk to a plethora of valuable sectors.
It prefers to invest in the United States and Canada, thus reducing geopolitical risk. PSEC seeks to invest between $10 million to $250 million in companies with ebitda between $5 million and $150 million, sales value up to $500 million and enterprise value of up to $250 million. The company places itself as lien-holders or as senior lenders. This way, if the borrower defaults it may take control of the company.PSEC finds investing partners to co-invest on larger deals. The firm seeks control acquisitions by providing multiple levels of the capital structure. PSEC was founded in 1988 and is based in New York City. The current dividend yield based on a share price of $10.48 is a remarkable 11.64%. It can afford to be so generous because its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The firm seeks to maximize returns and protect risk for its investors by applying rigorous credit analysis to make and monitor investments. PSEC is a yield-oriented investor and has paid a continuous, regular dividend to its investors since inception. PSEC is managed by Prospect Capital Management LLC. PCM has been registered as an investment adviser with the United States Securities and Exchange Commission since 2004. PCM, its predecessors and affiliates have a 24-year history of investing in companies and managing high-yielding debt and equity investments, using both private partnership and publicly traded closed-end structures.
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