SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
Richard T. Prins
Skadden Ars Slate Meagher
& Flom LLP
4 Times Square
New York, New York 10036
Re: Prospect Capital Corporation (the "Fund")
File Numbers 814-0.0659 & 333-143819
Dear Mr. Prins:
On Januar 29,2009, the Fund filed post-effective amendment No.9 to its
registration statement on Form N-2 under the Securities Act of 1933 ("Securties Act").
Your letter of even date accompaned the filing. 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 amend the Fund's universal shelf offering, pursuant to Rule 415 under the
Securities Act to sell shares of common stock, including shares subscribed for by rights,
at a price below net asset value.
Our comments regarding the filing are set forth below.
Prospectus Cover
1. The first paragraph indicates that the Fund will offer various types of securties:
"to provide us with fuds to . . . acquire investments that we reasonably believe are in our
acquisition pipeline." (Emphasis added.) Does the phrase "acquisition pipeline" mean
the same as "in accordance with our investment objective and strategies?"
2. The next sentence states that: "Securties may be offered at prices and on terms to
be disclosed in one or more supplements to this prospectus, possibly at a discount to net
asset value per share in certain circumstances." Move this statement to a separate
paragraph, specify that common shares are the securities to b~ offered at below net asset
value, and indicate that sales below net asset value dilute existing shareholders and have
the effect of reducing net asset value.
3. The paragraph towards the bottom of the page that begins with the phrase "This
prospectus contains important information. . ." should not appear in bold.
Prospectus
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4. Disclosure captioned "Prospectus Sumary - The Offering" states that: "We may
offer, from time to time, in one or more offerings or series, together or separately, up to
$500,000,000 of our Securities to provide us with funds to repay outstanding debt, and to
acquire investments that we reasonably believe are in our acquisition pipeline." Other
similar disclosures reflect other formulations reflecting other purposes for which the
funds may be used. The statements should be consistent.
5. The last sentence ofthe second paragraph of this discussion indicates that in
certain circumstances the sale of Fund shares may be at a discount to net asset value
which may be dilutive to stockholders. The sentence should be moved to a separate
paragraph and the circumstances therein referred to should be identified. Disclose the
risk that asale of common below net asset value dilutes existing shareholders, causes the
net asset value of the Fund to drop, and has the effect of reducing the market price of
shares. Add a cross reference to the discussion captioned "Sales of Common Stock
Below Net Asset Value."
Advise the staff whether the Fund could be simultaneously selling below net asset
value and making a distribution consisting of, in whole or in par, a retur of capitaL.
6. The discussion captioned "Prospectus Summar - Use of proceeds" states that the
net proceeds from the offering wil be used to acquie: "new or additional investments in
portfolio companies in accordance with our investment objective and strategies,
repayment of then outstanding indebtedness, acquisitions or gèneralcorporate puroses."
(Emphasis added.) Please advise the staffwhether "acquisitions" is synonymous with
"new or additional investments."
7. The discussion captioned "Prospectus Sumar - Recent Developments"
indicates that the Fund has entered into a commitment establishing a dual rated credit
facility. Indicate whether the facility is secured by a pledge of assets. If so, disclose the
details.
8. The proviso paragraph following the caption "Example" in the fee table contains
the following clause: "we have assumed we would have borrowed all $200 million
available under our line of credit." Is this assumed in the fee table above? Ifnot, why
assume that amount in the Example only? .Is the Fund curently at such level of
borrowing? Ifnot, does it intend to borrow all $200 millon?
9. In light ofthe Fund's total annual expenses, the expenses in the example appear to
be understated. Please confirm the accuracy of that information.
10. Footnote 8 to the fee table indicates that Other Expenses is based on anualized
expenses during the quarter ended September 30, 2008. Please update that information.
11. The "Selected Condensed Financial Data" states that it is "For the Year/Period
Ended June 30." Ifnot effective on or about March 2,2009, the Fund will need to update
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the information to comply with 17 CFR Reg. 210.3-18 of Regulation S-x. Later in the
table other information appears as of, or .'For the Three Months ended September 30."
This information should be updated to December 31.
12. Under the caption "Risk Factors" it is disclosed that "We have asked our
stockholders for approval for us to be able to sell an unlimited number of shares of our
common stock at any level of discount from net asset value per share in accordance with
the exception described above in . . ." Revise the disclosure to indicate whether
shareholders approved the sales of shares below net asset value, and if so, when that
approval expires. Similarly, revise disclosure on this topic appearng under the later
captioned discussion, "Sales of Common Stock Below Net Asset Value." With respect to
the underlined clause, clarify the referenced exception.
13.. Revise the first paragraph ofthe discussion captioned "Use of Proceeds" adding
the substance of the first underlined clause.and substitute the word "specifically" in place
ofthe second underlined clause, as follows: "Unless otherwise specified in a prospectus.
supplement, we intend to use the net proceeds from sellng Securties pursuant to this
pro~pectus, including the proceeds of sales below net asset value, for investment in
portfolio companes in accordance with our investment objective and strategies,
repayment ofthen outstanding indebtedness, acquisitions or general corporate
puroses. A supplement to this prospectus relating to each offering wil more fully
identify the use of the proceeds from such offering including any intention to utilize
proceeds to pay expenses in order to avoid sales oflong-term assets." (Emphasis added.)
In addition, disclose the natue or general tye of considerations that would lead the
board to conclude that the sale of Fund securities at below net asset value might be of
benefit to curent shareholders.
i 4. The discussion captioned .'Sales of Common Stock Below Net Asset Value"
indicates that the Fund might engage in rights offerings. In that connection, note that any
such offering should be based on the factors and determinations discussed in Investment
Company Act Release No. 9932 (September 15, 1977) with respect to rights offerings. In
paricular, the disclosure should address the matters discussed in Item 2(E) and related
footnote 13 of that release reflecting the staffs view that there should be a specific
intended use for the offering proceeds and disclose it under the caption '.Use of
Proceeds." The disclosure should indicate that the offering is designed to raise fuds to
be invested consistent with the Fund's investment objectives and policies depending on
conditions forthetypesof securties in which the Fund typically invests.
Please disclose the aggregate limitation on the amount of discount in anyone
offering the Fund may make under the shelf registration, and whether the Fund has an
aggregate ceiling on the amount of discount of all offerings made by the Fund under the
shelf, the excess of which would trigger the need for a post-effective amendment to the
shelf offering.
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The last sentence of the first paragraph indicates that the Fund could also sell
shares of common stock below net asset value per share in certain other circumstances,
including rights offerings. Specify the other circumstances.
15. Add disclosure indicating that the adviser benefits from the sale of equity and
debt securties, including sales of common below net asset value, why that is the case,
and the impact of this conflict of interest on the Fund and its shareholders.
.16. Confirm that the line item captioned "Investment Per Share Held by Stockholder
A," under the sub-caption "hnpact On Existing Stockholders Who Do Not Paricipate" is
correct in the case of Examples 1 - 3.
17. The following disclosure appearing under the sub-caption "hnpact On Existing
Stockholders Who Do Participate," particularly the underlined clause below, suggests
that the dilutive effect of an offering below net asset value may be mitigated to the extent
a shareholder buys a large enough portion of the offerig. Revise the disclosure to take
away ths notion: "Our existing stockholders who participate in an offering below NA V
per share or who buy additional shares in the secondar market at the same or lower price
as we obtain in the offering (after expenses and commissions) wil experience the same
types of dilution as the nonparicipating stockholders, albeit at a lower leveL. to the extent
they purchase less than the same percentage of the discounted offering as their interest in
our shares immediately prior to the offering."(Emphasis added.)
18. The first paragraph of the discussion captioned "Plan of Distrbution" lists fourways that Fund securities may be sold. Item (b) states the following: "(b) directly to a
limited number of purchasers or to a single purchaser, including existing stockholders in
a rights offering." Clarfy the disclosure so as to indicate the type of offering
contemplated by this provision. Furher, if this is a private offering, indicate the extent to
which it may be integrated with other offerings by the Fund.
19. The second paragraph under this caption states: "If so indicated in the applicable
prospectus supplement, we will authorize underwriters or other persons acting as our
agents to solicit offers by certain institutions to purchase the Securties from Us pursuant
to contracts providing for payment and delivery on a future date," Explain to the staff
more fully the nature and operation of these contracts. For example, àre purchasers
subject to these contracts obligated to take delivery of securties at the election ofthe
Fund. Explain the connection, if any, between these contracts, and optional cash
purchase plans and designated offeree programs briefly mentioned earlier under
.'Prospectus Summary - Plan of Distribution." If the latter plans and programs are not
related to the contracts, then explain to the staffhow the plans and programs arestructured and why investing through these means is different than regular way investing
in the Fund.
** ** * * ** * **
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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 appearing 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 will 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 natue ofthe change and, if appropriate, the
location of such new or revised disclosure in the amended fiing. 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
application or no-action reqnest in connection with your registration statement.
You should review and comply with all applicable requirements of the federal
securities laws in connection with the preparation and distribution of a preliminary
prospectus.
We urge all persons who are responsible for the accurácy and adequacy of thedisclosure in the filings reviewed by the staffto 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 areresponsible for the accuracy and adequacy ofthe disclosures they have made.
In the event the Fund requests acceleration ofthe effective date ofthe pending
registration statement, it should fuish a letter, at the time of such request,
acknowledging that
· the Fund is responsible for the adeqúacy and accuracy ofthe disclosure in
the fiing;
· should the Commission or the staff, acting pursuant to. delegated authority,
declare the fiing effective, it does not foreclose the Commission from
taking any action with respect to the filing;
· the action ofthe Commission or the staff, acting pursuant to delegated
authority, in declarng the filing effective, does not relieve the Fund from
its full responsibility for the adequacy and accuracy ofthe disclosure in
the filing; and
· the Fund may not assert this action as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the
United States.
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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 fiing.
We will consider a written request for acceleration of the effective date of the
registration statement as confiration of the fact that those requesting acceleration are
aware of their respective responsibilities.
Should you have any questions regarding this letter, please contact me at (202)
551-6976.
Sincerely, _. fl .~.~. Lary L~
Senior Counsel
Tuesday, Februar 24,2009
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