Prospect Capital(US:PSEC)2024-02-09 16:28Financial Data and Key Metrics Changes - For the December quarter, the company's net investment income (NII) was $96.9 million, or $0.24 per common share, with a net asset value (NAV) of $3.68 billion, down $0.33 from the prior quarter [4] - The net debt equity ratio was 46.2%, down 27.9 percentage points from March 2020 and down 0.3 percentage points from September 2023, indicating an under-leveraged balance sheet [4] Business Line Data and Key Metrics Changes - The company's originations in the December quarter comprised 53.8% middle-market lending, 30.2% real estate, 10.5% middle-market lending and buyouts, and 5.5% subordinated structured notes investments [8] - The portfolio at fair value included 58.7% first-lien debt, up 1.4% from the prior quarter, while second-lien debt decreased to 15.5% [20] Market Data and Key Metrics Changes - The company has invested $3.8 billion in 108 properties, focusing on multifamily workforce housing and stabilized yield acquisitions [8] - Non-accruals as a percentage of total assets stood at approximately 0.2%, unchanged from the prior quarter [21] Company Strategy and Development Direction - The company aims to maintain significant dry powder and balance sheet flexibility to capitalize on attractive opportunities during market downturns [6] - The investment strategy focuses on secured lending and senior loans, with a preference for avoiding cyclicality and maintaining a diversified portfolio [20] Management's Comments on Operating Environment and Future Outlook - Management noted that the current higher financing cost environment is starting to abate, and the new investment focus includes preferred equity structures with significant third-party capital support [38] - The company expects to continue generating attractive risk-adjusted yields, with performing interest-bearing investments yielding an annualized 12.3% as of December 2023 [7] Other Important Information - The company announced monthly cash common shareholder distributions of $0.06 per share for February, March, and April, marking the 78th to 80th consecutive distributions at this rate [18] - As of December 2023, the company held approximately $4.7 billion in unencumbered assets, representing about 60% of its portfolio [25] Q&A Session Summary Question: On the preferred stock and issuer optional conversion feature - Management clarified that there are no plans to exercise the optional conversion feature for the Series A preferreds and mentioned a new series that is not convertible into common stock [46] Question: Regarding the sale of a property in the REIT - Management confirmed the sale of a student housing asset close to its mark, with a well-performing portfolio and significant buyer interest in that segment [47][49] Question: On the CLO book strategy - Management stated that the CLO book is actively managed, with options including calling investments, refinancing, and selling positions, while expecting the CLO book to decline as other strategies grow [50]