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[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]

October 19, 2016

VIA EDGAR

Asen Parachkevov, Attorney Adviser

Jeff Long, Staff Accountant

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C.  20549

RE:

 Registration Statement (333-213391) of

Prospect Capital Corporation (the “Fund”)

Dear Mr. Parachkevov and Mr. Long:

We are in receipt of oral comments provided by each of you on October 3, 2016 regarding the Fund’s Registration Statement on Form N-2 (the “Registration Statement”).

The Fund has considered your comments and has authorized us to make on its behalf the responses and changes to the Fund’s Registration Statement discussed below.  These changes are reflected in Pre-Effective Amendment No. 1 to the Fund’s Registration Statement being filed today.

The Fund’s responses to the comments are set forth below.  For ease of reference, a summary of each comment is set forth in bold font and followed by the corresponding response.  Terms that are capitalized but not defined herein shall have the same meaning assigned to them in the Registration Statement.

Mr. Asen Parachkevov

Mr. Long

October 19, 2016

Page 2

National Property REIT Corp. (“NPRC”)

1.

 Please provide the analysis as to how NPRC is eligible for an exclusion from investment company status under the Investment Company Act of 1940 (the “1940 Act”) pursuant to Section 3(c)(5)(C).

NPRC does not rely on the Section 3(c)(5)(C) exception under the 1940 Act, which is for real estate mortgage companies and is not designed to apply to real estate operating companies or holding companies.  NPRC is not an “investment company” as defined in Section 3(a) of the 1940 Act.  An “investment company” is generally defined under sections 3(a)(1)(A) and (C) of the 1940 Act as a company that either:

•

 is or holds itself out as being primarily engaged, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

•

 is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”).1

NPRC is and holds itself out as being primarily engaged, through its direct and indirect subsidiaries, in the business of purchasing and managing real properties.  NPRC is not and does not propose to engage in the business of investing, reinvesting or trading in securities. As such, NPRC is not an “orthodox” investment company that falls within the scope of Section 3(a)(1)(A) of the 1940 Act. Likewise, NPRC’s holdings in “investment securities” do not exceed 40% of its total assets on an unconsolidated basis. As such, NPRC is not an investment company that falls within the scope of Section 3(a)(1)(C) of the 1940 Act. A more detailed analysis in support of our conclusion regarding Section 3(a)(1)(C) follows.

A. Section 3(a)(1)(C)

NPRC’s holdings in “investment securities” do not exceed 40% of its total assets on an unconsolidated basis. As such, NPRC is not an investment company that falls within the scope of Section 3(a)(1)(C) of the 1940 Act.

Section 3(a)(1)(C) of the 1940 Act defines an investment company as “any issuer which . . . is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer’s total

1 Section 3(a)(1)(B) of the 1940 Act also defines an “investment company” as an issuer that is engaged or proposes to engage in the business of issuing face-amount securities of the installment type or has been engaged in such business and has any such certificate outstanding. NPRC is not engaged, and does not propose to engage, in the business of issuing face-amount securities of the installment type. Nor does NPRC have any such certificates outstanding.

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Mr. Long

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assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.” An “investment security” is defined in section 3(a)(2) of the 1940 Act as “all securities except (A) U.S. government securities, (B) securities issued by employee securities companies, and (C) securities issued by majority-owned subsidiaries2 of the owner which (i) are not investment companies, and (ii) are not relying on the exception from the definition of investment company in sections 3(c)(1) or 3(c)(7) of the 1940 Act.”

Because the 40% test set forth in Section 3(a)(1)(C) is applied on an unconsolidated basis, in order to determine whether NPRC falls within the definition of a Section 3(a)(1)(C) investment company, it is necessary to perform a “bottom-up” entity-by-entity analysis of the NPRC structure to identify which of NPRC’s total assets constitute “investment securities.”

In total, NPRC has 15 direct subsidiaries that are primarily engaged in the business of purchasing and managing properties and one direct subsidiary that is primarily engaged in the business of  making or acquiring loans and other receivables that qualify under Section 3(c)(5)(A) or (B) of the 1940 Act.  Accordingly, none of those subsidiaries are investment companies.  NPRC also directly holds three real estate assets.  NPRC’s direct real estate holdings and 15 direct subsidiaries that are primarily engaged in the business of purchasing and managing properties represent approximately 64% of NPRC’s assets on an unconsolidated basis as of June 30, 2016.3

1.  Prospect Finance Company, LLC (“PFC”)

PFC is a subsidiary of NPRC that conducts a consumer online loan business.  PFC conducts its businesses primarily through subsidiaries in a manner that complies with the 40% test discussed above. The value of PFC’s investment securities, together with any securities issued by its wholly-owned or majority-owned subsidiaries excepted from the definition of investment company pursuant to Section 3(c)(1) or 3(c)(7) of the 1940 Act (exclusive of U.S. government securities and cash items) represents less than 40% of value of PFC’s total assets on an unconsolidated basis.  PFC regularly monitors the value of its assets to ensure continuing and ongoing compliance with the 40% test.  In addition, the Fund believes that PFC is not considered an investment company under Section 3(a)(1)(A) of the 1940 Act because it is neither engaged primarily, nor holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities because PFC primarily engages, and will continue to engage, in the non-investment company businesses of its current and

2 A majority-owned subsidiary of a person is defined in section 2(a)(24) of the 1940 Act as a company 50% or more of whose outstanding voting securities are owned by such person.

3 The Fund also notes that Section 3(c)(5)(C) does not apply to NPRC’s real estate subsidiaries because fee ownership in real property is not included in Section 3(c)(5)(C) as good assets unless the entity holds so many investment securities that one has to bring in “mortgages and other interests in real property” to qualify under Section 3(c)(5)(C).  Controlling interests in subsidiaries that primarily own fee interests in real property are similarly normally outside of the scope of Section 3(c)(5)(C).

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future subsidiaries, which involve or will involve making or acquiring loans and other receivables that qualify under Sections 3(c)(5)(A) or (B).

Sections 3(c)(5)(A) and (B)

An issuer of securities may rely on the Sections 3(c)(5)(A) and (B) exceptions if it is (i) not engaged in the business of issuing (A) redeemable securities, (B) face-amount certificates of the installment type or (C) periodic payment plan certificates and (ii) primarily engaged in either of the following (X) for purposes of Section 3(c)(5)(A), the business of purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance and services or (Y) for purposes of Section 3(c)(5)(B), the business of making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance and services.

The staff of the Division of Investment Management (“IM Staff”) of the SEC has issued numerous no-action letters that identify the types of loans and receivables that an issuer must hold in order to qualify for the exceptions under Section 3(c)(5)(A) and (B). Earlier no-action letters under Section 3(c)(5)(A) in particular espoused the view that this Section excluded only those companies engaged in “sales financing activity.”4  The prevailing theme in those letters is that the receivables or loans held by the issuer must relate to the sale of specific merchandise, insurance or services. For purposes of Section 3(c)(5)(A), the loans and receivables must represent the sales price of merchandise, insurance or services,5 and for purposes of Section 3(c)(5)(B), the loans must represent the purchase price of specific goods or services.6  In New England Education Loan Marketing Corp.,7 however, the IM Staff noted that “sales financing activity” is not a defined term in Section 3(c)(5) and appears to be used by the IM Staff to describe the requirement, for purposes of Sections 3(c)(5)(A) and (B), that a note must relate to “a sale of specified merchandise, insurance or services.”8 In this same letter, the IM Staff emphasized that the appropriate test under Section 3(c)(5)(A) is not whether a company is engaged in “sales financing,” but whether there is a direct nexus between the obligation being purchased and the sale of specific merchandise, insurance or services. As articulated in the IM Staff’s most recent no-action letter addressing Section 3(c)(5)(A), “a company not engaged in a traditional form of factoring or sales financing, but otherwise falling within the terms of Section 3(c)(5)(A), may be excluded from the definition of ‘investment company’ by the Section.”9

4 See, e.g., Educational Loan Mktg. Assn., Inc., SEC No-Action Letter (Feb. 4, 1986); World Evangelical Dev., Ltd., SEC Staff No-Action Letter (Apr. 5, 1979) ) (“World Evangelical”).

5 See, e.g., Raymond James & Assocs., Inc., SEC No-Action Letter (July 14, 1988); World Evangelical.

6 See, e.g., Alleco, Inc., SEC No-Action Letter (July 14, 1988); Architects/Engineers Reciprocal Capitalization Corp., SEC No-Action Letter (Apr. 15, 1981); MESBIC, Inc., SEC No-Action Letter (June 21, 1979) (“MESBIC”); World Evangelical.

7 SEC No-Action Letter (May 22, 1998).

8 Id.

9 See, Royalty Pharma, SEC No Action Letter (Aug. 13, 2010).

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In various no-action letters over the years, the IM Staff has taken the position that, in order to rely on Section 3(c)(5)(A) or (B), generally at least 55% of an issuer’s assets must consist of qualifying assets that meet the requirements of the relevant exception. These no action letters identify the following as qualifying assets under Section 3(c)(5)(A) and (B): bankers and trade acceptances,10 credit card receivables,11 equipment leases,12 equipment loans,13 inventory loans,14 loans to finance the purchase of electric facilities and related equipment and machinery,15 loans to purchase farm products,16 franchise fee receivables,17 installment sales contracts tied to specific manufactured home units,18 loans to finance public works projects,19 and student loans to finance the purchase of educational services.20 Over time, the IM Staff has established certain guiding principles with respect to whether loans are sufficiently tied to “specific” merchandise and services. In general, the IM Staff has conditioned reliance on Section 3(c)(5)(A) not on the nature of the obligations but rather on the strength of the connection between the obligations held by the issuer and the subject merchandise, services, or equipment.21

The IM Staff has also taken the position in several no-action letters, which we refer to as the Refinance Letters,22 that qualifying assets also include loans that are provided to a borrower where the proceeds from the loan are used by the borrower to refinance existing loans originally used to purchase specific merchandise. For example, in the Refinance Letters, the IM Staff did not recommend enforcement against certain foreign sovereigns that sought to offer securities to the public in the United States but did not register the respective issuing entities (generally organized as trusts) as investment companies in reliance on Section 3(c)(5)(A) of the 1940 Act.23 The Refinance Letters suggest that the IM Staff would not

10 Sterling Franc Invs. & Fin., SEC No-Action Letter (Apr. 26, 1985); First Nat’l. Bank of Chicago, SEC No-Action Letter (May 5, 1980).

11 See, e.g., Ambassador Capital Corp., SEC No-Action Letter (Oct. 6, 1986).

12 See, e.g., B.C. Zeigler and Co., SEC No-Action Letter (Sept. 11, 1991); State of New Jersey, SEC No-Action Letter (May 21, 1984) (“State of New Jersey”); U.S. Mun. Lease Acceptance Corp., SEC No-Action Letter (Apr. 11, 1983) (“U.S. Mun. Lease”); Imperial Bank, SEC No-Action Letter (Dec. 15, 1982) (“Imperial Bank”); The Chicago Corp. SEC No-Action Letter (Oct. 12, 1982); Woodside Group, SEC No-Action Letter (Apr. 14, 1982).

13 See, e.g., Citytrust, SEC No-Action Letter (Dec. 19, 1990); State of Georgia Installment Purchase Contracts, SEC No-Action Letter (Apr. 10, 1985); Coop. Ass’n of Tractor Dealers, Inc., SEC No-Action Letter (June 22, 1981).

14 See, e.g., Crescent Capital Corp., SEC No-Action Letter (Oct. 3, 1980).

15 See, e.g., Colorado-Ute Fin. Serv. Corp., SEC No-Action Letter (May 5, 1986).

16 See, e.g., Union Trust Co., SEC No-Action Letter (Nov. 26, 1971).

17 See, e.g., Econo Lodges of Am., SEC No-Action Letter (Dec. 22, 1989) (“Econo Lodges”); Days Inn of Am., Inc. SEC No-Action Letter (Dec. 30, 1988) (“Days Inn”).

18 See, e.g., Ziegler Mortgage Sec., Inc., SEC No-Action Letter (Oct. 8, 1984).

19 See, e.g., Municipality Fin. Ltd., SEC No-Action Letter (Apr. 28, 1994); Banco Nacional de Obras y Servicios Publicos, S.A., SEC No-Action Letter (Nov. 24, 1977).

20 See, e.g., New England Educ. Loan Mktg. Corp., SEC No-Action Letter (May 22, 1998).

21 See, e.g., Econo Lodges.

22 See, e.g., Hellenic Republic Foreign Military Sales Loans, SEC No-Action Letter (Jan. 10, 1991); Islamic Republic of Pakistan, SEC No-Action Letter (Jan 18, 1989); Hashemite Kingdom of Jordan, SEC No-Action Letter (Nov. 21, 1988); Republic of Turkey, SEC No-Action Letter (Nov. 3, 1988); State of Israel Foreign Military, SEC No-Action Letter (Aug. 17, 1988) (collectively, the “Refinance Letters”).

23 See n. 14.

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recommend enforcement against a refinancing arrangement if there were a direct nexus between the loans being refinanced and the original, underlying merchandise24 consistent with Section 3(c)(5)(A) and (B).

PFC subsidiaries qualifying for an exception from registration as an investment company under the 1940 Act pursuant to either Section 3(c)(5)(A) or Section 3(c)(5)(B) of the 1940 Act primarily acquire marketplace loans that are used to purchase specified merchandise, services or insurance or are used to refinance indebtedness that was initially incurred to purchase specified merchandise, services or insurance. Any marketplace loans acquired by such subsidiaries are subject to an analysis of the borrower’s use of proceeds from the marketplace loan.  PFC uses that information to determine whether the loan in question is sufficiently tied to specifi