SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
Leonard B. Mackey, Jr., Esq.
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019-6131
Re: Prospect Capital Corporation (the "Fund")
File Numbers 814-00659 & 333-143819
Dear Mr. Mackey, Jr.:
On June 18, 2007, the Fund filed a registration statement on Form N-2 under the
Securties Act of 1933 ("Securities Act"). Your letter dated June 15,2007, accompanied
the filing. Your letter requests limited review in accordance with Securties Act Release
No. 6510 (Februar 15, 1984). With certain exceptions, we have limited our review of
the filing. The Fund is a business development company ("BDC") regulated under the
Investment Company Act of 1940 (" 1940 Act"). The filing was made to register the
offering, pursuant to Rule 415 under the Securties Act, of the Fund's common and
preferred stocks, debt securities and warants.
Our comments regarding the filing are set fort below.
General
1. Please state in your response letter whether the NASD wil or has reviewed the
proposed underwting terms and arangements of the transaction involved in the
registration statement. In view of the Fund's reliance on Rule 415, when wil this matter
be submitted to the NASD, e.g., will the NASD review each supplement?
2. Confirm that the disclosure in the filing meets the type size requirements of Rule
420 under Regulation C of the Securties Act.
3. On facing page of the filing the Fund checked the box related to the filing of a
pre-effective amendment and indicates that the filing is Pre-effective Amendment No.4.
Explain and correct this discrepancy.
4. Notwithstanding the Fund's name change in May ofthis year, the EDGAR system
curently designates the Fund as "Prospect Energy Corporation". Please take appropriate
action to update the Fund's records on EDGAR.
Loc: Computa-IPCC7052OO7RPFD
71212007-3:11:11 PM

5. The filing constitutes a unversal shelf registration statement registering an
indeterminate amount of common, preferred, debt and warants which wil in no event
exceed $500,000,000. Unless the filing contains all of the information to be disclosed in
subsequent supplements related to the offering of the Fund's.preferred, debt and warants,
the Fund should fie draft supplements reflecting the form of filings expected to be made
in connection with futue take downs.
6. Please see the U.S. Securties and Exchange Commission, A Plain English
Handbook, (1998). Please review and revise the disclosure where it appears necessar so
as to assure conformity with the Commission's plain English requirements. For example,
briefly explain the underlined terms.in the following sentence: "Our Securities may be
offered directly to one or more purchasers, including existing stockholders in a rights
offering, to new stockholders, via an optional cash purchase or designated offeree
program, or through agents designated from time to time by us, or to or though
underwters or dealers."
7. We remind the Fund of its obligation to fie electronic reports with respect to its
fidelity bond coverage under Rule 17g-1(g) under the 1940 Act.
Prosvectus Cover
8. Add the disclosure required by Rule 481(d) under the Securities Act regarding
over-allotments.
9. Disclosure in the first paragraph states that the Fund may offer: "up to
$500,000,000 of our common stock, preferred stock, debt securties or warants
representing rights to purchase shares of our common stock, preferred stock or debt
securties. . ." The second paragraph discloses that securties: "may be offered directly
to one or more purchasers, including existing stockholders in a rights offering, . . ." If, in
addition to warants, the Fund also expects to offer separately rights, revise the document
appropriately to disclose and register the offerig of rights.
1 O. Revise the second paragraph to add the following underlined clause: "We may not
sell any of our Securties though agents, underwters or dealers without delivery of the
prospectus and a prospectus supplement describing the method and terms of the offering
of such Securties."
11. The third paragraph describes the Fund as a "financial services company." Why.
not refer to the Fund as a business development company?
Prosvectus
12. A paragraph of disclosure appearng in bold text on page three begins with the
following sentence: "The registration statement contains additional information about us
and the Securties being registered by this prospectus." Do not format ths disclosure in
bold.
Loc: Compula-IPCC7052OO7RPFD
71212007-3:11:11 PM

13; With respect to the following statement required by Rule 481 (b), confirm that the
disclosure wil appear on the outside front cover page, and do not bold this disclosure:
"Neither the SEC nor any state securities commssion has approved or disapproved of
these securties or determined if ths prospectus is trthful or complete. Any
representation to the contrar is a criminal offense."
14. Disclosure captioned "About This Prospectus" indicates that the registration
statement constitutes a "shelf' filing. Revise the disclosure to indicate whether ths
offering wil be conducted on a continuous or delayed basis.
15. Revise the discussion captioned "Prospectus Sumar to clarfy that any
forward-looking statements contaied in the prospectus do not meet the safe harbor for
forward-looking statements pursuant to Section 27 A of the Securities Act.
16. Disclosure sub-captioned "Prospectus Sunar - Use of proceeds" states that
uness stated otherwise in a supplement the Fund wil use the net offering proceeds to,
among others, repay debt. The use of proceeds to payoff debt should be disclosed
prominently because, in effect, investors are purchasing liabilties. Revise this disclosure
accordingly.
17. Disclosure sub-captioned "Prospectus Sumar - Distrbutions" states that the
Fund has paid: "quarerly dividends to the holders of our common stock and generally
intend to continue to do so." Use another term because the underlined term is misleading
if it includes retus of capital. For example, use the term "distrbutions." Other
disclosure under this caption indicates that: "Certain amounts of the quarterly dividends
may from time to time be paid out of our capital rather than from eargs for the quarer
as a result of our deliberate planng or by accounting reclassifications." At an
appropriate location disclose the signficance of return of capital distrbutions to a
shareholder, including any affect on a shareholder's basis in the Fund. Advise the staff
how you wil notify shareholders about the character of the distrbutions.
18. Disclosure sub-captioned "Prospectus Sumar - Risk factors" indicates that an
investment in the Fund involves certain risks relating to the Fund's strcture and
investment objectives that should be considered by investors. Other than statements
similar to the above, we can find no discussion of the Fund's objective and strategies in
the prospectus. Accordingly, add the disclosure required by Items 1(b) and 8.2 of Form
N-2.
19. Revise the disclosure under ths sub-caption (or a later discussion sub-captioned:
"The energy industr is subject to many risks") to indicate the percentage ofthe Fund's
assets invested in the energy industr.
20. To the extent appropriate, revise the fee table consistent with the following:
Loc: Compula-IPCC7052OO7RPFD
71212007-3:11:11 PM

· Combine the management fee and incentive fee line items appearing under the
anual expenses segment of the table,
· In light of the Fund's investments in other investment companes (See the caption
"Regulation"), add an additional line item for Acquired Fund Fees and
Expenses (See Investment Company Act Release No. 27399 (June 20,2006)),
· Move the footnotes appearng after "Total anual expenses (estimated)" to follow
the Example,
· Delete the word "(estimated)" from the above referenced line item,
· With respect to. footnote 5, explain whether $50 millon cònstitutes the projected
borrowings over the next year,
· Explain the legal basis and the meanng of the iiderlined disclosure in footnote 6
which states: "We expect to invest all of the net proceeds from securities
registered under the registration statement of which this prospectus is a par
withn thee years or less of the date of the initial registration. . .,"
· In addition, conform the disclosure referenced imediately above with earlier
disclosure under the sub-caption "Prospectus Sumar - Use of Proceeds," to the
effect that proceeds may be use to repay debt,
· Explain the consequences of the situation referenced in footnote 6, namely: "The
income incentive fee wil be computed and paid on income that may include
interest that is accrued but not yet received in cash," where payment is never
received.
21. With respect to the fee table, confi that the Fund does not have any debt or
preferred expenses required to be disclosed in the table.
22. Expand the disclosure sub-caption "Risk Factors - We are a relatively new
company with limited operating history" to indicate when the Fund became a BDC.
23. Disclosure sub-caption "Risk Factors - Regulations governng our operation. . ."
states: "In addition, we may in the future seek to securtize our loans to generate cash for
funding new investments. To securtize loans, we may create a wholly owned subsidiary
and contrbute a pool of loans to such subsidiar. Ths could include the sale of interests
in the subsidiar on a non-recourse basis. . ." Add disclosure regarding any risk or
liabilty to the Fund or its shareholders stemming from the use of these entities.
Advise the staff how the Fund proposes to securtize its loans and whether the
proposal is (i) consistent with the puroses of a BDC, (ii) requires exemptive relief under
§57, and (iii) comports with the capital strctue requirements under §§18 and 61. We
may have further comment.
Lo: Compuia-IPCC7052OO7RFD.
71212007-3:11:11 PM

24. The discussion captioned "Board approval of the Investment Advisory
Agreement" contains disclosure regarding the approval of the advisory agreement.
Revise ths discussion by adding a discussion of the material factors and conclusions that
formed the basis for the Board's approval of the advisory agreements. See Item 18.13 of
Form N-2.
25. The discussion sub-captioned "Provisions of The Marland General Corporation
Law and Our Charer and Bylaws," as well as several subsequent segments, discuss
matters that restrict the effectiveness of actions to take control of the Fund. The
discussion should be formatted so as to clearly draw attention to those provisions the
effect of which is to impede others in gaining control of the Fund. In addition, revise the
disclosure to indicate that anti-takeover provisions could have the effect of depriving
shareholders of an opportty to sell their shares at a premium over prevailing market
prices by discouraging a third pary from seeking to obtain control of the Fund.
26. Disclosure in the fift paragraph of the discussion captioned "Plan of
Distrbution" describes the conditions applicable to the sales of Fund securties at below
curent net asset value. Omitted from the disclosure is any reference to the shareholder
approval required in §63(2)(A) of the 1940 Act. Add appropriate disclosure.
Part C
27. Disclosure in Item 25.2 of Form N-2 indicates that Exhbit I (Opinon and
Consent of Clifford Chance US LLP) wil be fied by amendment. Explain to the staff
whether the Fund wil file post-effective amendments in order to sell securities off the
shelf or whether it proposes to file supplements under Rule 497. If the latter, advise the
staffhow the legal opinon wil be updated.
28. Exhibit k-4, is a Credit Agreement between the Fund, its domestic subsidiaries,
certain lenders and Ban of Montreal. Disclosure in the fiing indicates that the
agreement wil be submitted along with a subsequent amendment. Confirm that ths
agreement establishes the credit facility referred to in the text as the agreement under
which the Fund curently has $50 milion available to it. Confirm also that the agreement
does not authorize or permit any lender or other third party thereunder to alter or change
investment policies or strategies of the Fund.
Accountine: Comment
29. The Balance Sheet, Statements of Operations, Statements of Changes in Net
Assets and Statements of Cash Flows contain a footnote that states: "Certain amounts
have been reclassified to conform to the curent period's presentation." Please disclose
what amounts have been reclassified and why.
*** * * * * * * * *
Lo: Computa-IPCC7052OO7RPFD
7/2312007-3:11:11 PM

We note that portions of the filing are incomplete. We may have additional
comments on such portions when you complete them in a pre-effective amendment, on
disclosures made in response to this letter, on information supplied in your response
letter, or on exhibits added in any pre-effective amendments.
Whenever a comment is made in one location, it is considered applicable to all
similar disclosure appearng elsewhere in the registration statement.
Response to this letter should be in the form of a pre-effective amendment filed
pursuant to Rule 472 under the Securities Act. Where no change wil be made in the
fiing in response to a comment, please indicate this fact in your response letter and
briefly state the basis for your position. Where changes are made in response to our
comments provide information regarding the nature of the change and, if appropriate, the
location of such new or revised disclosure in the amended filing. As required by the rule,
please insure that you mark new or revised disclosure to indicate change. .
Please advise us if you have submitted or expect to submit an exemptive
appIlcation or no-action request in connection with your registration statement.
You should review and comply with all applicable requirements of the federal
securties laws in connection with the preparation and distrbution of a preliminar
prospectus.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filings reviewed by the staff to be certain that they have provided all
information investors require for an informed decision. Since the Fund and its
management are in possession of all facts relating to the Fund's disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In the event the Ftid requests acceleration ofthe effective date of the pending
registration statement, it should furnsh a letter, at the time of such request,
acknowledging that
. the Fund is responsible for the adequacy and accuracy of the disclosure in
the fiing;
. should the Commission or the staff, acting pursuant to delegated authority,
declare the filing effective, it does not foreclose the Commission from
takg any action with respect to the filing;
. the action of the Commssion or the staff, acting pursuant to delegated
authority, in declaring the fiing effective, does not relieve the Fund from
its full responsibilty for the adequacy and accuracy ofthe disclosure inthe filing; and .
. the Fund may not assert ths action as a defense in any proceeding initiated
by the Commission or any person under the federal securties laws of the
United States.
Loc: Compula-IPCC7052007RPFD
71212007-3:11:11 PM

In addition, please be advised that the Division of Enforcement has access to all
information you provide to the staff of the Division of Investment Management in
connection with our review of your filing or in response to our comments on your filing.
We wil consider a written request for acceleration of the effective date of the
registration statement as confirmation of the fact that those requesting acceleration are
aware of their respective responsibilties.
Should you have any questions regarding this letter, please contact me at (202)551-6976. .
Sincerely,~~Larr L. Gree e
Senior Counsel
Monday, July 23, 2007
Lo: Compula-IPCC7052007RPFD
7/2312007-3:11:11 PM