Prospect Capital(US:PSEC)2025-05-09 14:02Financial Data and Key Metrics Changes - For the quarter ending March, the company's net investment income (NII) was $83.5 million, or $0.19 per common share, with a net asset value (NAV) of $3.2 billion, or $7.25 per common share [5] - The net debt to total assets ratio stood at 28.7%, with unsecured debt plus unsecured preferred accounting for 87.5% of total debt plus preferred [5] Business Line Data and Key Metrics Changes - The portfolio at fair value comprised 65.5% first lien debt, up 650 basis points from the prior year, while senior secured second lien debt decreased to 10.5%, down 410 basis points [7] - The company originated $196 million in investments during the quarter, with $149 million (76%) in first lien loans [12] - The real estate property portfolio yielded an income of 4.5% for the quarter, with an unrealized gain of $460 million as of March [10] Market Data and Key Metrics Changes - The weighted average EBITDA per portfolio company was just under $100 million, with non-accruals as a percentage of total assets at approximately 0.6% [11] - The company experienced $192 million in repayments and exits, resulting in net originations of $4.5 million for the quarter [12] Company Strategy and Development Direction - The company focuses on lower middle market lending, prioritizing first lien senior secured loans, and aims to rotate its portfolio to enhance yields [24][26] - The strategy includes a gradual reduction of the National Property REIT Corp (NPRC) portfolio while exploring additional asset sales [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is affected by macroeconomic factors, including interest rate hikes, which have slowed the pacing of exits from the real estate portfolio [21] - The company is under-levered compared to peers, with a debt to total capital ratio around 30%, allowing for potential leverage to enhance net investment income [27] Other Important Information - The company has a strong liquidity position with $1.7 billion in combined balance sheet cash and undrawn revolving credit facility commitments [13] - The weighted average cost of unsecured debt financing was 4.33% as of March [16] Q&A Session Summary Question: Regarding low other income from NPRC this quarter - Management explained that the slowdown in other income is due to the pacing of exits being affected by macroeconomic conditions, but they expect normalization in the future [20][22] Question: On dividend coverage and potential levers to pull - Management indicated that they are prioritizing lower middle market lending and are exploring portfolio rotation to boost yields, while also considering leverage options [24][27] Question: Anticipation of preferreds ramping up - Management confirmed that they will prioritize both unsecured debt and preferred financing, emphasizing their diverse financing sources [29][30]