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What were the key takeaways from Prospect Capital's earnings call?

- **Strategic Repositioning**: First-lien loans now 71.1% of portfolio (+701bps), with exits from subordinated notes (now 0.3%) and real estate
- **Financial Strength**: $1.5B liquidity, 48-bank revolver, 4.54% cost of unsecured debt
- **Portfolio Performance**: 11.8% yield on investments, 23% IRR on real estate exits
- **Growth Drivers**: Lower middle market deals with 700+bps spreads, 10-12% unlevered IRR
- **Funding Innovation**: $168M 5.5% notes issuance, entry into Israeli bond market

**【Management Opening Remarks】**
- Q1 2026 NII: $79.4 million ($0.17 per share), up 12% YoY. NAV: $3 billion ($6.45 per share). Debt/Assets: 28.2%. 
- Monthly distributions of $4.5 per share for Nov-Jan 2026. Total distributions since IPO: $4.6 billion.
- Strategic repositioning: 
  - First-lien senior secured loans mix +701bps to 71.1% (vs 64.1% Q2 2024)
  - Exiting subordinated notes (-808bps to 0.3%), real estate, and equity-linked securities
  - Targeting < $50M EBITDA companies with less competition

**【CFO Financial Commentary】**
- Q1 2026 Financial Highlights:
  - Interest income: $103.2 million (11.8% yield)
  - Non-accruals: 0.7% of assets
  - Revolver utilization: $1.5 billion (SOFR +2.05% pricing)
- Capital Structure:
  - $4.2 billion unencumbered assets (63% of portfolio)
  - 48-bank revolver ($2.12 billion undrawn, maturing 2029)
  - $168 million 5.5% senior unsecured notes issued in Q1
- Weighted average cost of unsecured debt: 4.54%

**【Portfolio & Investment Update】**
- Middle Market Lending:
  - 85% of portfolio at cost in senior secured debt
  - Q1 originations: $92 million (72% middle market)
  - Repayments/exits: $235 million (net $143M)
- Real Estate Strategy:
  - 55 properties sold since 2012 (24% IRR, 2.4x CoC multiple)
  - 3 properties sold in Q1 for $59M (23% IRR)
  - Remaining portfolio: 55 properties, 5.1% income yield
- Lower Middle Market Focus:
  - 700+bps spreads vs upper middle market
  - 10-12% unlevered IRR, 15%+ levered yield

**【Balance Sheet & Funding Update】**
- Liquidity:
  - $1.5 billion cash + undrawn revolver
  - $4.2 billion unencumbered assets
- Diversified Funding:
  - 48-bank revolver
  - Unsecured bonds (convertible, non-convertible, retail)
  - 26-year liability ladder (maturities through 2052)
- Recent Actions:
  - $168M 5.5% notes due 2030
  - Israeli bond market entry

**【Q&A Highlights】**
1. Equity-linked rotation strategy:
   - Rotating out of low-yielding assets (5% real estate yield) into 15%+ senior secured loans
   - Financials book retained for tax benefits and recurring cash flows
2. Liability management:
   - Israeli bonds part of diversified funding strategy
   - No material counterparty risk with 48-bank revolver
   - 2026 maturities covered by revolver and asset sales

Prospect Capital Corporation(PSEC)-20251107-2026 Q1 Earnings call transcript

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