NEW YORK - Prospect Capital (NASDAQ:PSEC) Corporation (NASDAQ:PSEC) has amended its Dealer Manager Agreement, increasing its preferred stock offering from $2 billion to $2.25 billion in aggregate liquidation preference, as detailed in an 8-K filing with the Securities and Exchange Commission (SEC) today.
The amendment, dated today, involves an agreement with Preferred Capital Securities, LLC, which acts as the company's agent and exclusive dealer manager for the preferred stock offering. The offering now allows for the issuance of up to 90 million shares of preferred stock, each with a par value of $0.001.
Concurrent with the increased offering, Prospect Capital has filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland, reclassifying 20 million shares from common to preferred stock. This reclassification reduces the number of shares designated as common stock from 1,352,100,000 to 1,332,100,000.
Venable LLP, serving as special Maryland counsel to Prospect Capital, has provided a legal opinion on the validity of the preferred stock shares in the offering. The full text of the amendment and the Articles Supplementary, along with the legal opinion, are attached to the 8-K filing as exhibits.
The expanded offering and reclassification are part of Prospect Capital's strategic initiatives to manage its capital structure. The company's common stock trades on the NASDAQ Global Select Market under the symbol PSEC, and its 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock trades on the New York Stock Exchange under the symbol PSEC PRA.
In other recent news, Prospect Capital Corporation has been the subject of revised expectations from Wells Fargo. The investment firm has reduced its price target for the company from $5.00 to $4.50, while maintaining an Underweight rating. This adjustment is primarily due to a lower Secured Overnight Financing Rate (SOFR) curve and an anticipated increase in the number of shares following the conversion of preferred stocks and Dividend Reinvestment Plan (DRIP) issuances.
In addition, Wells Fargo has updated its net operating income (NOI) forecasts for Prospect Capital for fiscal years 2025 and 2026, marking a decrease from the earlier predictions. Despite these challenges, Prospect Capital reported solid earnings for the fourth quarter of fiscal year 2024, with net investment income of $102.9 million and a net asset value of $3.71 billion.
The company has also emphasized its strong balance sheet, diversified funding sources, and significant liquidity. It is strategically shifting its investment portfolio towards first lien debt over second lien debt. Furthermore, Prospect Capital clarified that there is no ongoing discussion about forced conversions of preferred stock by the company's board.
Analysts have noted that Prospect Capital has successfully tapped into the unsecured term debt market to extend liability duration and reduce counterparty risk. These recent developments suggest that Prospect Capital is making strategic decisions to maintain shareholder distributions and strengthen its investment portfolio.
InvestingPro Insights
Prospect Capital Corporation's recent move to expand its preferred stock offering aligns with its robust dividend strategy. According to InvestingPro Tips, PSEC "pays a significant dividend to shareholders" and "has maintained dividend payments for 21 consecutive years." This commitment to shareholder returns is further evidenced by the company's impressive dividend yield of 13.64%, as reported by InvestingPro Data.
The company's financial health appears stable, with InvestingPro Data showing a market capitalization of $2.26 billion and a P/E ratio of 14.75. Additionally, PSEC has been "profitable over the last twelve months," as noted in the InvestingPro Tips. This profitability, combined with the expanded preferred stock offering, may provide the company with additional financial flexibility.
Investors considering PSEC should note that there are 4 additional InvestingPro Tips available, which could offer further insights into the company's financial position and outlook. These tips, along with real-time metrics, are accessible through the InvestingPro product, providing a more comprehensive view for those interested in deeper analysis of Prospect Capital Corporation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.