Kroll Bond Rating Agency Comments on Prospect Capital’s $225 Million Convertible Senior Notes due 2022

Kroll Bond Rating Agency (KBRA) currently maintains issuer and senior unsecured debt ratings of BBB+ with a stable outlook for Prospect Capital Corporation (NASDAQ: PSEC) (“Prospect” or “the Company”). On April 5, 2017, PSEC announced a public offering of $225 million of 4.95% convertible senior unsecured notes due in 2022 (the “Notes”). The company aims to use the proceeds from the issuance to redeem portions of its 5.375% Notes due 2017 and its 5.75% Notes due 2018. The Notes will rank equally with existing and future senior unsecured notes issued by PSEC. KBRA’s current unsecured debt rating covers all of PSEC’s Senior Unsecured Debt; including Convertible Notes, Retail Notes and Institutional Term Debt.

PSEC is a business development company (BDC) that primarily lends to and invests in middle market privately-held companies. Prospect Capital Corporation invests primarily in senior and subordinated debt and equity of U.S. private companies in need of capital. PSEC focuses on secured lending, with approximately 69% of the balance sheet as of December 31, 2016 comprised of secured loans. PSEC is externally managed by Prospect Capital Management L.P.

In October 2016, KBRA affirmed an issuer and senior unsecured debt rating of BBB+ with a stable outlook to PSEC. The ratings of Prospect reflect the company’s focus on senior secured debt investments, adequate leverage metrics that are below the BDC regulatory limits and robustness of its credit originations and monitoring. The rating is further supported by Prospect’s proven management expertise in middle market lending. These strengths are balanced by the potential risks related to PSEC’s more volatile performance embedded in equity exposures within its buyout portfolio, collateralized loan obligation (CLO) investments, and slightly deteriorating asset quality.

The ratings are assigned using KBRA’s Finance Company Rating Methodology, published April 1, 2013. The ratings and supporting rationale are available at www.kbra.com.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

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