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On July 27, 2026, Prospect Capital Corporation, a business development company focused on middle-market, privately-held firms, announced the pricing of three unsecured note offerings under its InterNotes program. The company issued $22 million of 6.000% notes maturing in 2029, $65 million of 6.250% notes due 2031, and $2 million of 6.500% notes due 2033, raising combined net proceeds of approximately $87.6 million. This debt issuance follows Prospect Capital’s recent divestiture of Valley Electric Company as part of its ongoing balance sheet optimization efforts.
Key Points
- NYSE: PSEC-PA
- Prospect Capital priced three unsecured InterNotes tranches on July 27, 2026, with maturities from 2029 to 2033
- Total principal amounting to $89 million with coupon rates between 6.000% and 6.500%
- All notes include survivor's options and are callable at par starting January 15, 2027
- Recently completed sale of Valley Electric Company for about $328 million
Multi-Tranche InterNotes Offering Featuring Staggered Maturities
Prospect Capital Corporation priced three series of unsecured InterNotes on July 27, 2026, each with distinct maturity dates and coupon rates. The 2029 Notes carry a 6.000% fixed coupon, pay semi-annually, and total $22 million, priced at par (100.000%). The 2031 Notes, the largest tranche, issued $65 million at a 6.250% fixed coupon, also priced at par. The 2033 Notes, the longest maturity, consist of $2 million principal with a 6.500% coupon rate. All three series were priced at 100.000% of par on the trade date.
This staggered maturity approach enables Prospect Capital to strategically manage its liabilities over multiple time horizons. Interest payments are scheduled uniformly on January 15 and July 15 annually, beginning with the first coupon payment on January 15, 2027. Initial coupon payments amount to $27.50 per $1,000 note for the 2029 series, $28.65 for the 2031 series, and $29.79 for the 2033 series, reflecting market-driven yield differences across durations.
Gross Concessions and Net Proceeds Breakdown
The 2029 Notes incurred gross concessions of 1.125%, yielding net proceeds of $21.752 million from the $22 million principal. The 2031 Notes had gross concessions of 1.700%, generating $63.895 million net proceeds on $65 million principal. The 2033 Notes carried a 1.950% gross concession, resulting in net proceeds of $1.961 million on $2 million principal. Collectively, net proceeds from all tranches totaled approximately $87.608 million after concessions paid to agents and dealers.
Variations in gross concession rates correspond to typical compensation structures in multi-tranche offerings, with longer maturities generally attracting higher dealer fees relative to principal amounts. The purchasing agent retains discretion to resell notes to agents and selected dealers at concessions equal to or lower than the gross concession. Notes sold to level-fee investment or advisory accounts were offered without additional dealer compensation beyond stated concessions.
Callable Features and Redemption Terms
Each InterNotes series is callable at par ($1,000 per note) by Prospect Capital starting January 15, 2027, and on any subsequent business day. The company must provide 5 to 60 days’ written notice to noteholders and the trustee prior to redemption. Redemption payments include the principal plus accrued interest up to, but excluding, the redemption date. This call option grants Prospect Capital flexibility to refinance debt if market conditions or financial performance improve.
The early redemption option, available just six months post-issuance, allows proactive debt portfolio management. If liquidity improves via asset sales or operations, management can retire notes ahead of maturity. Additionally, all three note series include survivor’s options for certain registered holders, with details outlined in the prospectus and indenture documents.
Settlement and Trading Details
The offering traded on July 27, 2026, at 12:00 PM Eastern Time, with settlement set for July 30, 2026. Notes have a minimum denomination of $1,000 and trade in $1,000 increments. Initial trades settled on a flat basis through the Depository Trust Company (DTC) book-entry system, eliminating physical certificates and streamlining settlement. The notes are registered under Registration Statement No. 333-293349, with Pricing Supplements No. 1691, 1692, and 1693 filed on July 27, 2026, pursuant to Securities Act Rule 424(b)(2).
The DTC book-entry format facilitates efficient ownership transfers and secondary market trading among institutional and retail investors. The notes are governed by the Indenture dated February 16, 2012, supplemented by the One Thousand Six Hundred Ninety-First, One Thousand Six Hundred Ninety-Second, and One Thousand Six Hundred Ninety-Third Supplemental Indentures dated July 30, 2026. U.S. Bank National Association acts as indenture trustee, overseeing compliance with note terms and safeguarding noteholder interests.
Context of Recent Asset Sale and Capital Deployment
On July 1, 2026, Prospect Capital completed the sale of its investment in Valley Electric Company, Inc. for approximately $328 million, subject to net asset adjustments and potential earn-outs. This transaction significantly bolstered the company’s liquidity, enabling capital deployment for new investments, debt repayment, or operational needs. The timing of the InterNotes offering shortly after this divestiture indicates a strategic capital structure rebalancing.
The Valley Electric sale exemplifies Prospect Capital’s approach of monetizing investments in middle-market private companies to generate shareholder returns and redeploy capital. The $328 million proceeds provide substantial financial flexibility, while the concurrent InterNotes issuance demonstrates management’s strategy to access capital markets to support operational and investment goals. Prospect Capital’s externally-managed structure, with Prospect Capital Management L.P. handling investments and Prospect Administration LLC overseeing administration, supports focused execution of its investment strategy.
Business Model and Investment Strategy of Prospect Capital
Prospect Capital Corporation is an externally-managed, non-diversified closed-end management investment company that has elected business development company status under the Investment Company Act of 1940. It specializes in lending to and investing equity in middle-market, privately-held firms, often providing both debt and equity capital to facilitate growth, management buyouts, and other corporate transactions. This sector focus allows the company to develop specialized expertise and maintain close borrower relationships.
The BDC structure offers regulatory flexibility and favorable tax treatment, contingent on compliance with diversification, leverage, and distribution requirements. Prospect Capital’s combination of debt and equity investments generates diversified revenue streams, including interest income, dividends, and capital gains upon exits. The Valley Electric transaction highlights the company’s ability to create value through operational improvements or market growth that justify substantial exit valuations.
Legal Opinions on Note Validity and Authorization
Russell Wininger, Deputy General Counsel of Prospect Administration, opined that the Note Certificates constitute valid, binding obligations of Prospect Capital enforceable under New York law, subject to bankruptcy and insolvency statutes. This opinion, limited to New York law as of issuance, confirms the notes’ legal validity as debt securities and excludes assessments of fraudulent conveyance provisions.
Maryland counsel Venable LLP provided an opinion affirming that the Indenture execution, delivery, and note issuance were duly authorized under Maryland corporate law. This dual jurisdiction legal review ensures comprehensive coverage of enforceability and corporate authorization relevant to the issuer and securities. Both opinions are subject to customary assumptions and limitations detailed in the offering documents and prior SEC filings.
Risk Factors and Regulatory Disclosures
The pricing supplement refers investors to the detailed Risk Factors section starting on page 12 of the February 10, 2026 prospectus, outlining material risks related to these notes. Investors are advised to review all prospectus, supplement, and pricing documents thoroughly before investing. Neither the SEC nor any state securities commission has approved or disapproved the securities or evaluated the offering documents’ accuracy.
Prospect Capital maintains an active SEC reporting schedule, filing annual, quarterly, current reports, and proxy statements that provide transparency on investments, financials, and material events. These filings are freely accessible via the SEC’s EDGAR system at www.sec.gov and directly from the company. The prospectus disclaims incorporation of website information, emphasizing reliance solely on formal regulatory filings for investment decisions.
InterNotes Program and Capital Market Access
The InterNotes program is Prospect Capital’s established platform for issuing unsecured debt under its shelf registration statement. InterNotes, a registered trademark of InspereX Holdings LLC, enables the company to efficiently issue multiple debt tranches with varying maturities and coupons without filing new registration statements for each issuance. This program facilitates timely capital market access aligned with strategic or financial needs.
Issuing three tranches simultaneously allowed Prospect Capital to gauge investor demand across different maturities and coupon levels. The coupon rates—6.000% for three-year, 6.250% for five-year, and 6.500% for seven-year maturities—reflect a typical yield curve where longer maturities command higher yields. This structure likely enhanced distribution efficiency and attracted a diverse fixed-income investor base with varying duration preferences.
