Prospect Capital Corporation (PSEC) is reportedly preparing to issue new unsecured senior notes, with market whispers suggesting an 8% yield. This issuance is expected to primarily refinance existing indebtedness, indicating a leverage-neutral transaction. The company, a business development company (BDC) focusing on middle-market lending, has a track record of issuing InterNotes under its medium-term note program, with $637.2 million outstanding as of early 2026 within a board-authorized capacity of up to $1 billion.
Morningstar DBRS recently assigned a provisional credit rating of (P) BBB (low) with a Stable trend to PSEC's planned $500 million senior notes due 2031. This rating reflects PSEC's strong franchise, diversified funding, and appropriate capitalization, while also noting portfolio characteristics like subordinated positions, equity-linked investments, and sector concentrations in real estate and consumer finance. The rating also acknowledges PSEC's strategic initiatives, including exiting its subordinated structured notes (CLO) portfolio and increasing first-lien senior investments, which are expected to reduce earnings volatility.
As of December 31, 2025, Prospect Capital reported approximately $6.5 billion in total assets, with a portfolio fair value of about $6.4 billion across 91 portfolio companies and CLOs. The annualized current yield on performing interest-bearing investments was 10.9%, with an overall annualized current yield of 8.3%. Recent activities include the sale of Valley Electric Company, Inc. for approximately $328 million and opportunistic repurchases of outstanding 2026 and 2028 notes, alongside continuous dividend payments on common and preferred stock.
