SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
Steven Grigoriou
Skadden, Ars, Slate,
Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Re: Prospect Capital Corporation (the "Fund")
File Numbers 814-00659 & 333-176637
Dear Mr. Grgoriou:
On September 1, 2011, the Fund filed a registration statement on Form N-2 under
the Securities Act of1933 ("Securities Act"). Your letter dated September 8,2011,
followed the filing and requested expedited review consistent with the term of Securities
Act Release No. 6510 (February 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 registers the
offering, pursuant to Rule 415 under the Securities Act, ofthe Fund's common and
preferred stocks, warants and debt securities. The filing is intended to replace the
Fund's current shelf registration statement and, accordingly, it has been submitted
pursuant to the requirements of Rule 415(a)(6) under the Securities Act.
Our comments regarding the filing are set forth below.
General
1. The shelf includes units which are unspecified combinations of other securities.
Please add an undertaking to the effect that the Fund wil not sell any units until after the
Fund has filed a reviewable post-effective amendment under §8(c) of the Securities Act
and each such filing has been accelerated by the staff
Later related disclosure captioned "Description of Our Units" states that: "We
may issue units comprised of one or more ofthe other securities described in this
prospectus in any combination. Each unit may also include debt obligations of third
paries, such as U.S. Treasury securities. Each unit wil be issued so that the holder of the
unit is also the holder of each security included in the unit. Thus, the holder of a unit wil
have the rights and obligations ofa holder of each included security." Explain to the staff
whether, to your knowledge, other funds or entities have offered similar units, whether
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such other units have been offered off the shelf, whether the units wil be offered at
below net asset value, whether such offerings wil involve a pooling of interests, whether
the Fund may be subject to any continuing liability to holders of such units, whether the
units wil be rated, whether the thid pary securities may include derivatives,
commodities or structured products, and the material risks related to the various
groupings ofunderlying securities, including any market or liquidity risks.
Last of all, confi that the unit agreement governing the units wil be filed,
clarify whether each unit issuance or unit series issuance wil be based on a unique
agreement, and that the applicable prospectus supplemerit wil be updated to reflect the
circumstances of each unit offering.
Prospectus Cover
2. The caption lists "Units" as one of the instruments to be offered under this
registration statement. Delete this disclosure or fully describe how the units fit within the
capital structure requirements of §§18 and 61 of the 1940 Act. Disclose all the ttrms and
limitations. Further, describe how these instruments are valued.
3. Disclosure in the fist paragraph indicates that the Fund may offer various types
of securities from time to time "in one or more offerings or series." Later disclosure
captioned "Description of Our Capital Stock" states that: "Under our charer, our Board
of Directors is authoried to classify and reclassify any unissued shares of stock into
other classes or series of stock, and to authorize the issuance of such shares, without
obtaining stockholder approvaL." (Emphasis added.) The Board may also increase or
decrease the aggregate number of shares of stock or the number of shares of stock of any
class or series that the Fund has authority to issue. Disclose in the prospectus that the
Fund wil only take these actions consistent with § § 18 and 61 of the 1940 Act. Also
summarize the basic limitations under these provisions.
4. The second paragraph discloses that the Fund may offer its shares at a discount to
net asset value. Disclose how much discount to net asset value was authoried by
shareholders and how long this authority lasts.
Prospectus
5. Disclosure captioned "Prospectus Summary - The Investment Adviser" states, in
connection with discussing the payment ofthe investment advisory fee, that: "we have
agreed to pay Prospect Capital Management investment advisory fees, which wil consist
of an annual base management fee based on our gross assets, which we define as total
assets without deduction for any liabilities . . .." Is the advisory fee based upon both
borrowings for leverage and all other Fund liabilities? Revise the disclosure to exclude
non-leverage borrowings, or disclose that the advisory fee increases as a result of any
debt or liability.
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6. Disclose on the prospectus cover the matters discussed in the second and third
sentences ofthe third paragraph under the sub-caption "The Offering," which begins with
the clause: "At our 2010 anual meeting, held on December 10, 2010, our stockholders
approved. . .." The fourth sentence of that paragraph discusses the 2008 shareholder
approval of the Fund's ability to issue warants, options and rights to acquire its common
stock over an unlimited time period. Confi that the policy satisfies the various
limitations of §61 (a) of the 1940 Act, including the requirements that such issuance
expire withi ten years, that the exercise price be not less than current market value and
that the resultant voting securities not exceed 25% of the Fund's outstanding voting
securities.
7. Revise the fee table as follows:
i) the Management Fee and Incentive Fee line items should be presented with one
total, however, that item may have two components,
ii) the three interest payment line items should appear as sub-totals of an item;
we suggest "Leverage/Interest Expense,"
iii) revise Footnote 5 to indicate, if accurate, that the Fund has no intent to
borrow more than the $400 millon referenced therein in the upcomig year,
iv) with respect to Footnote 6, explain why the Fund annualized the incentive
fees paid for the fourth fiscal quarer, ~, was the fee higher or lower durig that
period, and
v. with respect to the Fund's ability to issue preferred, add a line item regarding
preferred expenses, estimating such expenses for the upcomig year, or add a .
statement that the Fund has no intent to issue preferred durig the year.
8. The sub-caption "Risk Factors - Most of our portfolio investments are recorded at
fair value. . ." indicates that a significant portion of the Fund's portfolio wil be iliquid.
Disclose the Fund's liquidity policy, including, if applicable, the miimum amount that
must be invested in liquid securities.
9. The caption "Description of Our Debt Securities" discloses that: "The description
below is a summary with respect to future debt securities we may issue and not a
summary of the Notes. Please see 'Business-General-Notes' for a description ofthe
Notes." Explain to the staffwhy these discussions are separated in this manner.
10. The prospectus states that the Fund wil fie the form 0 f the indenture with the
SEC prior to the commencement of any debt offering, at which time the form of
indenture would be publicly available. File the indenture as a pre-effective amendment to
this registration statement and advise the staff when the Fund wil fie a Form T -1.
** * * * * * * * * *
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 exhbits added in any pre-effective amendments.
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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 fied
pursuant to Rule 472 under the Securities Act. Where no change wil be made in the
filing 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
application or no-action request 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 accuracy and adequacy of the
disclosure in the fiings 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 ofthe disclosures they have made.
In the event the Fund requests acceleration of the effective date ofthe pending
registration statement, it should furnish a letter, at the time of such request,
acknowledging that
. the Fund is responsible for the adequacy and accuracy of the disclosure in
the filing;
. should the Commssion 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 of the Commission or the staff acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the Fund from
its full responsibility for the adequacy and accuracy of the 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.
In addition, please be advised that the Division of Enforcement has access to all
information you provide to the staff of the Division ofInvestment Management in
connection with our review of your filing or in response to our comments on your fiing.
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We wil consider a written request for acceleration ofthe effective date ofthe
registration statement as confiation 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,
Thursday, October 06,2011
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