Prospect Capital (PSEC) 8/8/12
$200m (+30m) 144a sen unsec cb overnight from BAR. Terms: 5.5 yr bullet, 5.75% up 10%, re-offer at 99. All prtns, UOP=maintain liquidity, investments. PSEC is a small biz development co (BDC) that invests in mid-market privately held co’s. There are three CB’s in existence, IG rates. Co. just did stk offering (July 11). Borrow got better post stk deal but this will retest that, ~3%. For what its worth, model w/600 credit, 20 vol & 3% borrow, worth 98.72. If we use 10.83 (stk) and 99, we see 2.5 pts rich, theo 96.59. All PSEC bonds model rich, and we don’t see it as a model trade. We thought the last one was an AVOID and think these are too, the last one’s have barely budged since issue. A deal too far – Again