UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 23, 2004
PROSPECT ENERGY CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 333-114552 43-2048643
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification
incorporation) Number)
10 East 40th Street, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
(212) 448-0702
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
Item 1.01 Entry into a Material Definitive Agreement.
On December 23, 2004, Gas Solutions II Ltd., or "Gas Solutions," a wholly owned
subsidiary and investment portfolio company of Prospect Energy Corporation, or
"Prospect Energy," entered into a senior secured loan of $12.5 million from
First American Bank, SSB, or "FAB." The term loan matures on December 22, 2010,
is payable in quarterly installment beginning in June 30, 2005 and bears
interest at LIBOR plus 225 basis points. The agreement benefits from standard
covenant protection for a loan of this type. The loan agreement and any other
material contracts will be filed with Prospect Energy's next quarterly report on
Form 10-Q for the quarter ended December 31, 2004.
Gas Solutions used $9.3 million of the proceeds of the loan to repay debt owed
to Prospect Energy. Prospect Energy's investment in Gas Solutions now stands at
$5.3 million of equity and $18.4 million of second-lien secured debt. In
connection with this refinancing, on December 22, 2004, Prospect Energy provided
certain limited assurances to FAB with respect to potential legal claims that
might or could be asserted by certain third parties. Pursuant to another
agreement with FAB dated December 22, 2004, these assurances are backed by
segregated funds in Prospect Energy's custody account aggregating approximately
$12.85 million. These funds are to be released after the earlier of (1) legal
resolution of such claims, should any be made, or (2) 91 days after the FAB loan
is refinanced or otherwise repaid.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
(b) Concluding a thorough screening process, Prospect Energy has identified a
candidate for chief financial officer and plans to announce an appointment
within the next two weeks. Prospect Energy's chief financial and compliance
officer was placed on administrative leave as of December 23, 2004.
Prospect Energy expects to engage an outsourced compliance consulting firm
to provide compliance-related services.
SECTION 8 - OTHER EVENTS
Item 8.01 Other Events.
As previously disclosed in the current report on Form 8-K/A filed December 8,
2004, on December 6, 2004, Dallas Gas Partners, LP, or "DGP," served Prospect
Energy with a complaint filed November 30, 2004 in the United States District
Court for the Southern District of Texas in Galveston. Prospect Energy believes
that the DGP complaint is frivolous and without merit. DGP alleges that DGP was
fraudulently induced to sign an agreement with Prospect Energy, that Prospect
Energy breached an alleged fiduciary duty to DGP, and that Prospect
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Energy tortiously interfered with DGP's contract with Gas Solutions in
connection with Prospect Energy's agreement with DGP. DGP alleges it is the
successor to MNW Acquisition, LP, or "MNW", with whom Prospect Energy entered
into two agreements. The first agreement, a letter of intent dated September 3,
2004 under which Prospect proposed to provide financing to MNW, was subject to
Prospect's due diligence in its sole discretion. Under the second agreement, on
September 24, 2004, an affiliate of the Company acquired MNW's rights to
purchase Gas Solutions, Prospect Energy paid DGP and its affiliates more than $3
million, and each of the principals of the predecessor general partner of DGP,
constituting what we understand to be all of the management and ownership
interests in such predecessor, and all of the limited partners of DGP, executed
a release, forever discharging Prospect Energy from any and all claims in
connection with Prospect Energy's agreements with DGP. On December 20, 2004,
Prospect Energy filed a motion to dismiss, an answer and counterclaim to the
DGP complaint denying all of DGP's material claims. Prospect Energy intends to
defend itself against DGP's claims and prosecute Prospect Energy's counterclaims
vigorously. While Prospect Energy is confident of its defenses, Prospect Energy
recognizes that the results of litigation are inherently uncertain and
unpredictable and, as a result, Prospect Energy can offer no assurances with
respect to any ultimate outcome with respect to this matter.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Listed below are the exhibits that are furnished herewith as part of
this report (according to the number assigned to them in Item 601 of Regulation
S-K):
Exhibit No. Description of Document
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99.1 Press Release dated December 27, 2004
This Form 8-K may contain, among other things, forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements with respect to Prospect Energy's plans, objectives,
expectations and intentions and other statements identified by words such as
"may," "could," "would," "will," "should," "believes," "expects," "anticipates,"
"estimates," "intends," "plans" or other similar expressions. We base such
statements on currently available operating, financial and competitive
information; such statements are subject to various risks and uncertainties that
could cause actual results to differ materially from our historical experience
and our present expectations. You should not place undue reliance on such
forward-looking statements, as they speak only as of the date on which they are
made. Additional information regarding these and other risks and uncertainties
is contained in our periodic filings with the Securities and Exchange
Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
PROSPECT ENERGY CORPORATION
(Registrant)
By: /s/ John F. Barry III
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Name: John F. Barry III
Title: Chief Executive Officer
Date: December 28, 2004