SecProbe.io

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     September 30, 2015  Richard Prins Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036  Re:  Prospect Capital Corporation
Registration Statement on Form N-2  File No. 333-206661
Dear Mr. Prins:
Prospect Capital Corporation (the “Fund”) f iled a draft shelf registration statement on
August 31, 2015 (the “Registration Statement”), under which the Fund may offer up to $5,000,000,000 of shares of its common stock, prefe rred stock, warrants, subscription rights,
debt securities or units (collectively, the “Securi ties”).  The Securities may be offered at prices
and on terms to be disclosed in one or more supplements to this Prospectus.  Terms that are
capitalized but not defined herein shall have  the same meaning assigned to them in the
Registration Statement.

Whenever a comment is made in one location,  you should consider it applicable to all
similar disclosure appearing elsewhere in the registration statement (including all future prospectus supplements).  We have the following comments:

General

1. Please advise us if you have submitted or exp ect to submit an exemptive application or
no-action request in connection wi th your Registration Statement.

2. Please confirm that the Fund does not intend to issue preferred stock within a year from
the effective date of the Registration Statement.

3. Please state in your response letter whethe r FINRA will or has reviewed the proposed
underwriting terms and arrangements of the transaction involved in the Registration
Statement.

4. The Registration Statement discloses that more than 15% of the Fund’s assets are
invested in CLO vehicles. Plea se explain in your response whether the CLO vehicles in

which the Fund invests would be deemed to be investment companies under the 1940 Act
but for the exceptions set forth in Section 3(c)(1) or 3(c)(7).

Prospectus Summary

Page 3

5. In the “Our Investment Objectives and Policie s” subsection, it is disc losed that the Fund
invests “primarily in first and second lie n senior loans and mezzanine debt.” Please
explain if the Fund seeks to achieve a particular allocatio n among the three categories of
debt investments (the Fund’s investments in  first lien, subordinated secured debt and
subordinated unsecured debt is, respectiv ely, 55.1%, 18.8% and 2.2% as of June 30,
2015).
6. The disclosure states that “CLOs are typi cally highly levered up to approximately 10
times, and therefore the junior debt and equity tranches that [the Fund] will invest in are
subject to a higher risk of total loss.” Is th e stated leverage ratio representative of the
Fund’s investments? Please disclose the range  of CLO leverage ratios in the Fund’s
portfolio.
Page 4

7. Under “Use of Proceeds,” the disclosure st ates that the Fund intends to use the net
proceeds from selling securities “initially to maintain balance sheet liquidity, involving
repayment of debt under [the Fund’s] credit f acility, if any, investments in high quality
short-term debt instruments or a combination thereof, and thereafter to make long-term
investments in accordance with [the Fund’s] i nvestment objective.” We also note that on
page 79, the Fund indicates that it “anticipates  substantially all of the proceeds…will be
used for the above purposes within six months.”  It is the Staff’s view that Section 58 of
the 1940 Act requires a business development comp any to invest all or substantially all of
the proceeds from an offering in accordance with its business objective within two years
from the month in which funds are received by  the registrant.  Please confirm that the
Fund will comply with the Staff’s position a nd revise the disclosure accordingly.
 Further, please disclose if the Fund intends to use offering proceeds to make distributions
to shareholders, which will constitute a return of capital. If so, please explain briefly the
tax consequences of returning capital to shareholders.
8. Under “Distributions,” it is disclosed that F und distributions may include a portion that is
a “tax-free” return of capital. Please remove the reference to term “tax-free” return, as it
is potentially mislead ing to investors.

Fees and Expenses

Page 6

9. The Fee Table indicates that “Other Expenses” of the F und have increased. In your
response, please explain the reason for the increase.

Risk Factors

Page 10

10. Please include specific risk disclosures regard ing the Fund’s investme nts in the “Business
Services” industry. In your re sponse, please explain to the Staff how the Fund defines the
industry. Furthermore, with respect to the Fund’s investme nts in CLOs, does the Fund
have sufficient information regarding the unde rlying borrowers to determine whether the
Fund is concentrated in a pa rticular industry? The Fund cannot ignore CLO investments
if it has reason to know the industry classification of the underlying borrowers
comprising the CLOs.
11. Please add risk disclosures regarding the Fund’s proposed spin-offs of its consumer
online lending business, real es tate business and structured credit business, including any
risks to the Fund if it fails to obtai n regulatory approval for the spin-offs.

Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations

Page 42

12. In the subsection describing the Fund’s proposed  spin-off transactions, please explain that
while the Fund has applied for exemptive reli ef to authorize the transactions under
Section 57(a)(4) of the 1940 Act, there is no gua rantee that such relief  will be granted.

Please clearly state which of the proposed spin -offs are going to be partial rather than
complete divestitures.   Further, please explain in the corresponden ce filing whether any of the proposed “spin-
offs” represent a spin-off of a business as described in ASC 505-620-20?  Did the Fund’s auditors concur with the assessment?

Page 44

13. The Prospectus includes a chart of the com position of the investme nt portfolios by type
of investment.  The percentage noted for th e CLO investments does not agree to what is
noted as a CLO in the Schedul e of Investments.  Are there CLOs in the Schedule of
Investments that are not identif ied as a CLO?  If so, ensure  going forward that each CLO
is identified appropriately in the Schedule of  Investments as either CLO equity or CLO
Debt.

Page 69

14. Under the sub-section titled “Operating Expenses ”, it is disclosed that the allocation of
overhead expenses from Prospect Admi nistration was (in t housands) $21,906, $14,373
and $8,737 for the years ended June 30, 2015, 2014 and 2013, respectively.  In your response, please explain the reason for th e increasing allocation of administrative
expenses to the Fund.

Page 70

15. In the “Net Realized Losses” subsection, the disclosure stat es that the impairments of
several Fund investments were “other-than- temporary.”  Please explain how the Fund
determines than an impairment is “temporary.” Please provide your analysis how such treatment is consistent with GAAP.

Business

Page 84

16. In the Senior Securities table, consider disc losing total senior securities and the overall
asset coverage ratio by year.
 Page 111

17. With respect to the Board’s approval of th e Investment Advisory Agreement, please
revise the disclosure to disc uss the specific circumstances of the registrant and how the
board evaluated each factor, as conclusory statements or a list of factors are not considered sufficient disclosure. See It em 24 of Form N-2, Instruction 6(f).

Financial Statements

General

18. Prospect Small Business Lending formed on 1/ 27/14 and is a wholly owned consolidated
subsidiary.  The Schedule of Investments de scribes the investment as “Small Business
Whole Loan Portfolio” and states that there are 40 small business loans purchased from Direct Capital Corporation and 2306 small business loans purchased from On Deck
Capital, Inc.  As Prospect Small Business Le nding is disclosed as being a wholly owned
consolidated subsidiary pleas e explain why the underlying loans are not individually
identified in the Schedule of Investments.     In addition, please explain why the
investment is categorized under Non Controlle d/Non Affiliated Investments when this is
a wholly owned subsidiary.
19. We note that certain investments are linked to LIBOR rates.  Please disclose the specific
LIBOR rate (1 month, 3 month, 6 month.)

20. In the Correspondence filing please discuss what  the Net Operating Income Interest or
Net Revenue Interest lines represen t for particular investments.

21. Consider enhancing the Accompany Notes to th e Financial Statements in the section for
Investment Risk on Page F-42 for investme nts in CLO Equities.  See Notes to the
Financial Statements, dated March 31, 2015, fo r Oxford Lane Capital Corp for an
example of this disclosure.
 Consolidated Schedule of Investments:

22. In your response, confirm that all wholly owned and all substant ially wholly owned
subsidiaries are consolid ated with the financial statements of the Fund.

23. Has the Fund performed an analysis as to wh ether the disclosure requirements of Rules 3-
09 or 4-08(g) of Regulation S-X should be ap plied? The Staff believes that Rules 3-09
and 4-08(g) of Regulation S-X apply to BD Cs and registered investment companies
(“RICs”).  Rule 3-09 of Regul ation S-X is applicable for a majority owned subsidiary
(greater than 50% ownership) which is not c onsolidated by the Registrant. Rule 4-08(g)
of Regulation S-X is applicable for subsidiari es (generally, 25% or more ownership) not
consolidated.

24. In the Footnotes to the Schedule of Inve stments, include the percentage of non-
qualifying assets under Section 55(a) of the 1940 Act.  Wh at was the percentage at
6/30/15?
25. With respect to your valuation methodology for debt investments, pl ease explain in your
response whether the Fund is in compliance wi th the principles stated in ASC 820, as
approximately 55% of the portfolio is valu ed at cost.  Specifically, ASC 820-10-35-54f
states:  “The objective is to determine th e point within that range that is most
representative of fair value under current ma rket conditions. A wide range of fair value
estimates may be an indication that  further analysis is needed.”

26. Provide detail on the valuation of the Ed mentum Ultimate Holdings Class A Common
Units at 6/30/15.  The price per shar e works out to $17.73 ($6,577,000 / 370,964
shares).   TCP Capital owns some of the co mmon shares and is valuing them at $4.26 per
share at 6/30/15.  Fift h Street Finance placed a value of  $1.00 at 6/30/15.  In addition,
discuss the valuation of the 10% PIK unsecu red junior note.  The current value is
$19,868,000 which represents cost/principal va lue.  In looking at the SOI for New
Mountain Finance Corp. they had a similar 10% PIK note that was valu ed at a si gnificant
discount to cost/princip al value.  Provide detail on how the value of this security was
derived.

27. Harbortouch Payments LLC – provide detail on  the write-up of the Class C shares from
3/31/15 to 6/30/15 when the valuation more than doubled from $39,372,000 to $80,202,000.
28. Confirm for the Staff in future periodic and annual filings that the Fund will comply with
the requirements of Rule 12-14 and (a) Li st each issue separately and group (1)
investments in majority-owned subsidiaries, segregating subsidiari es consolidated; (2)
other controlled companies; and (3) other affilia tes (b) if during the period there has been
any increase or decrease in the amount of inve stment in and advance to any affiliate, state
in a footnote (or if there have  been changes to numerous a ffiliates, in a supplementary
schedule) (1) name of each issuer and title of issue or nature of i ndebtedness; (2) balance
at beginning of period; (3) gross additions; (4) gross reductions; (5) balance at close of
period as shown in Column E. Include in the footnote or schedule comparable information as to affiliates in which ther e was an investment at any time during the
period even though there was no investment at the close of the period of report.

29. We note that certain investments pay PIK intere st.  Please confirm that those investment
paying PIK interest disclose the current PIK ra te along with the possibl e PIK interest rate
range or the maximum PIK interest rate that  could be paid. Please see the item addressed
in the AICPA Audit Risk Alert- Invest ment Company Industry Developments 2013/14.

Statement of Assets and Liabilities:

30. Add a “Commitments and Contingencies” line item to the Statement of Assets and
Liabilities along with a parenthetical reference to the specific note to  financial statements
that include disclosures of commitments and contingencies, such as the valuation note
included in the summary of investments.  See Article 6-04.15 of Regulation S-X.

31. What is the composition of “Cash and Cash  Equivalents” at 6/ 30/15 ($110,026,000)?  If
any investments are in money market mutual funds or other investment companies, these
investments should be disclosed separately on the Schedule of
Investments.  Additionally, confirm that a ny acquired fund fees and expenses (“AFFE”)
related to these investments is included in the fee table.
 Consolidated Statement of Operations:

32. Please explain why the full amount of the overhead allocation of $21.9 million is not
reflected on the income statement.  Should they be reported on a gross basis?
33. In your response, discuss what the income fr om Structured Credit Se curities represents
on the Statement of Operations.

Notes to Consolidated Financial Statements:

34. From Note 3. Portfolio Investments:
 “During the year ended June 30, 2015, th e valuation methodology for CCPI Inc.
(“CCPI”) changed to solely an EV analysis by removing the di scounted cash flow used in
previous periods. Management adopted this ch ange due to a lack of long-term forecasts
for CCPI. As a result of this change, and in recognition of recent company performance
and current market conditions, we increased the fair value of our investment in CCPI to
$41,352 as of June 30, 2015, a premium of $7,192 to  its amortized cost, compared to the
$1,443 unrealized depreciation recorded at June 30, 2014.”  How much of the increased fair  value was due to th e change from a discounted cash flow
method to an EV analysis?

35. As of June 30, 2015, the Fund had $88,288,000 in unfunded commitments
disclosed.  Please disclose each unfunde d commitment separately by portfolio
company.  Please confirm that the unf unded commitments are accounted for in
accordance with the comments discussed at  the January 2006 AICPA Expert Panel
Meeting:
 In making senior loan investments, the RIC might make commitments to provide
funding for a loan prior to it being issued or commit to additional amounts beyond the
existing funded portion.
 Such unfunded commitments might create a value to the RIC different from the
underlying commitment, which would create unr ealized appreciation or depreciation.
For each unfunded commitment, the RIC s hould disclose the amount and extended
value of the unfunded commitment as of  the date of the reporting period.

 The RIC may provide this disclosure by in cluding a listing of unfunded commitments
by senior loan in a separate  schedule located within th e schedule of investments or
within the notes to the schedule of investments or notes to the financial statements.   Alternatively, the RIC may state the amount and extended value of the
unfunded commitment within a footnote attached to each senior loan.

 The EP noted that the effect of such valuation changes shoul d be recognized in
determining the net asset value of the RIC even in situations in which the entire unfunded commitment itself is not reflected as a liability because it does meet the
FASB Statement No. 5 requirements.

36. Please represent to us that the Fund: (1) ha s sufficient unencumbered liquid assets to
cover the amount of its currently outstand