SecProbe.io

CORRESP
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filename1.htm

    proscapcorresp.htm

February 27, 2009

              Mr.
      Larry L. Greene

              United
      States Securities and Exchange Commission

              100
      F Street, N.E., Mail Stop 4720

              Washington,
      D.C. 20549

              RE:

              Prospect
      Capital Corporation (the "Company")

                File Nos. 814-00659
      & 333-143819

    Dear
Mr. Greene:

    We
are in receipt of your comments of February 26, 2009 regarding the Registration
Statement on Form N-2 of the Company.

    The
Company has considered your comments and has authorized us to make on its behalf
the responses and changes to the Company's Registration Statement discussed
below.  These changes will be reflected in Post-Effective Amendment
No. 10 to the Company's Registration Statement.  We are enclosing
copies of pages changed to respond to your comments that have been marked to
show the Company's responses to your comments.  We have also included
a draft prospectus supplement.

    The
Company's responses to your comments are set forth below.  For ease of
reference, the text of each of your comments is set forth in italics and
followed by the corresponding response.

    Prospectus
Cover

    1.
The first paragraph indicates that the Company will offer various types of
securities: “to provide us with funds 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?

    The
Company has determined to delete reference to use of proceeds on the
cover.  Please see responses to similar comments below relating to use
of proceeds sections.

    2.
The next sentence states that: “Securities 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

        Mr.
Larry L. Greene

        February
27, 2009

        Page
2

    per
share in certain circumstances.”  Move this statement to a separate
paragraph, specify that common shares are the securities to be 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.

    The
Company has revised the disclosure accordingly.

    3.
The paragraph towards the bottom of the page that begins with the phrase “This
prospectus contains important information . . .” should not appear in
bold.

    The
Company has revised the disclosure accordingly.

    Prospectus

    4.
Disclosure captioned “Prospectus Summary – 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.

    The
Company has revised use of proceeds disclosure throughout to ensure conformity
of substance.

    5.
The last sentence of the second paragraph of this discussion indicates that in
certain circumstances the sale of Company 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 a sale of common
below net asset value dilutes existing shareholders, causes the net asset value
of the Company 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.”

    The
Company has modified the disclosure as requested except that the Company
believes that sales below net asset value do not necessarily reduce the market
price of its common stock, particularly where the amount of dilution per share
is not material or where it is perceived that the sale will strengthen the
Company's financial position.

    Advise
the staff whether the Company could be simultaneously selling below net asset
value and making a distribution consisting of, in whole or in part, a return of
capital.

    The
Company does not anticipate that it would be simultaneously selling shares at a
discount and making distributions other than out of current or retained
income.

    6.
The discussion captioned “Prospectus Summary – Use of proceeds” states that the
net proceeds from the offering will be used to acquire: “new or additional
investments in portfolio companies in accordance with our investment objective
and strategies, repayment of then

        Mr.
Larry L. Greene

        February
27, 2009

        Page
3

    outstanding
indebtedness, acquisitions or
general corporate purposes.”  (Emphasis added.)  Please
advise the staff whether “acquisitions” is synonymous with “new or additional
investments.”

    The
term “acquisitions” has been deleted but was intended to be synonymous with “new
or additional investments.”

    7.
The discussion captioned “Prospectus Summary – Recent Developments” indicates
that the Company 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.

    This
item has been removed as it is no longer a recent development.  For
the information of the staff the commitment was solely to arrange a facility and
was not itself a commitment for a facility on any particular
terms.  Accordingly, it is not known whether the facility will be
secured although the Company expects that it will be.

    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?  If not, why assume that amount in the Example
only?  Is the Company currently at such level of
borrowing?  If not, does it intend to borrow all $200
million?

    The
third sentence of the first paragraph under “Fees and Expenses” states that same
assumption for all of the tables.  As disclosed, the Company had
approximately $134 million of debt outstanding at December 31,
2008.  The Company does not intend to borrow the full $200 million in
the current market environment.

    9.
In light of the Company’s total annual expenses, the expenses in the example
appear to be understated.  Please confirm the accuracy of that
information.

    The
Company hereby confirms the accuracy of the information in the
tables.

    10.
Footnote 8 to the fee table indicates that Other Expenses is based on annualized
expenses during the quarter ended September 30, 2008.  Please update
that information.

    The
Company has revised the item Other Expenses in the fee table to reflect the
Company's annualized expenses during the quarter ended December 31,
2008.  Footnote 8 to this fee table also has been revised
accordingly.  The Company has moved the Example table to the note
relating thereto and has revised the note to more accurately reflect the
instructions to that table in Form N-2.

    11.
The “Selected Condensed Financial Data” states that it is “For the Year/Period
Ended June 30.”  If not effective on or about March 2, 2009, the
Company will need to update 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.

        Mr.
Larry L. Greene

        February
27, 2009

        Page
4

    The
Company has updated the prospectus for December 31, 2008 financial
information.

    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 appearing under the later captioned discussion,
“Sales of Common Stock Below Net Asset Value.”  With respect to the
underlined clause, clarify the referenced exception.

    The
Company has updated and expanded the disclosure as requested.  The
Company believes the cross-reference to the exact terms of the exception is
explicit and that it would interfere with communicating the substance of the
risk factor to repeat the nine lines of text describing the
exception.  Accordingly, the Company has not altered the
cross-reference in that regard.

    13.
Revise the first paragraph of the discussion captioned “Use of Proceeds” adding
the substance of the first underlined clause and substitute the word
“specifically” in place of the second underlined clause, as follows: “Unless
otherwise specified in a prospectus supplement, we intend to use the net
proceeds from selling Securities pursuant to this prospectus, including the proceeds of
sales below net asset value, for investment in portfolio companies in
accordance with our investment objective and strategies, repayment of then
outstanding indebtedness, acquisitions or general corporate
purposes.  A supplement to this prospectus relating to each offering
will 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 of long-term
assets.”  (Emphasis added.)  In addition, disclose the
nature or general type of considerations that would lead the board to conclude
that the sale of Company securities at below net asset value might be of benefit
to current shareholders.

    The
first paragraph contains the underscored language as requested.  The
Company does not believe it appropriate to substitute the word “specifically”
for the phrase “more fully” inasmuch as it may in fact not have any more
detailed plans for such proceeds at the time of the offering.  The
Company has revised the disclosure to clarify this point.  The Company
has also expanded disclosure of the type of factors the directors would be
expected to consider.

    14.
The discussion captioned “Sales of Common Stock Below Net Asset Value” indicates
that the Company 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 particular, the
disclosure should address the matters discussed in Item 2(E) and related
footnote 13 of that release reflecting the staff’s 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 funds to be invested consistent with the Company’s
investment objectives and policies depending on conditions for the types of
securities in which the Company typically invests.

        Mr.
Larry L. Greene

        February
27, 2009

        Page
5

    The
Company does not believe that detailed disclosure regarding a rights offering is
appropriate in the base prospectus.  The role of the Board of
Directors and the disclosure vary considerably depending on whether the rights
are transferable or nontransferable and on other factors, none of which have
been considered as no rights offering is under consideration at this time and
all of which would be described in the prospectus supplement for the rights
offering.

    Please
disclose the aggregate limitation on the amount of discount in any one
offering the Company may make under the shelf registration, and whether the
Company has an aggregate ceiling on the amount of discount of all offerings made
by the Company under the shelf, the excess of which would trigger the need for a
post-effective amendment to the shelf offering.

    The
Company does not believe there should be any limitation on the amount of
discount in any particular offering as its stockholders did not approve any
restrictions.  The Company believes that the aggregate dilution due to
offerings under the shelf prior to the Company being required to file a
post-effective amendment to the Registration Statement should be 25%, which
would be measured in each offering under a particular amendment by multiplying
the difference between the most recently calculated NAV per share and the public
offering price times the number of shares sold in the offering and than
comparing the sum of such amounts for all such offerings to the aggregate NAV of
the Company most recently determined prior to the effectiveness of the amendment
pursuant to which such offerings are made.  Disclosure of this
standard has been added at the end of the section under a new
sub-heading.

    The
last sentence of the first paragraph indicates that the Company could also sell
shares of common stock below net asset value per share in certain other
circumstances, including rights offerings.  Specify the other
circumstances.

    Rights
offerings are effectively the only other type of discounted offering the Company
could currently make, and the Company has modified the disclosure
accordingly.

    15.
Add disclosure indicating that the adviser benefits from the sale of equity and
debt securities, including sales of common below net asset value, why that is
the case, and the impact of this conflict of interest on the Company and its
shareholders.

    The
Company has added disclosure on this point at the end of the introductory
paragraphs.

    16.
Confirm that the line item captioned “Investment Per Share Held by Stockholder
A,” under the sub-caption “Impact On Existing Stockholders Who Do Not
Participate” is correct in the case of Examples 1 – 3.

    The
Company confirms the accuracy of the calculations in these
examples.

    17.
The following disclosure appearing under the sub-caption “Impact 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
offering.  Revise the disclosure to take away this notion: “Our

        Mr.
Larry L. Greene

        February
27, 2009

        Page
6

    existing
stockholders who participate in an offering below NAV per share or who buy
additional shares in the secondary market at the same or lower price as
we obtain in the offering (after expenses and commissions) will experience
the same types of dilution as the nonparticipating 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.)

    The
Company understands this comment to request that any disclosure regarding the
impact on NAV for participating investors be balanced with discussion of the
potential market price dilution to such investors.  The Company does
believe that the section should be retained, inasmuch as, similar to a rights
offering, it is important to explain to potential investors the impact of
participating as well as not participating.  Accordingly, the Company
has added additional disclosure.

    18.
The first paragraph of the discussion captioned “Plan of Distribution” lists
four ways that Company 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.”  Clarify the d