DBRS, Inc. (DBRS Morningstar) assigned a provisional rating of BBB (low) to the $300 million Senior Notes due 2028 expected to be issued by Prospect Capital Corporation (PSEC or the Company).

The trend on the Notes is Stable. The proceeds from the Notes will be primarily used for the repayment of existing indebtedness, and as such, is expected to be leverage neutral.

RATING DRIVERS

Over the longer term, if the Company were to reduce its overall risk profile by increasing the portion of its secured first lien loan portfolio and/or limit the concentration in its key asset classes while maintaining its earnings power, the ratings would be upgraded. Conversely, a prolonged weakening in credit fundamentals and/or a meaningful deterioration in the buffer to the debt facility covenants or regulatory requirements would result in a ratings downgrade.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

Notes:

All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September 2, 2021), which can be found on our website under methodologies and criteria: https://www.dbrsmorningstar.com/research/383936/global-methodology-for-rating-non-bank-financial-institutions.

Other applicable methodologies include DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021):

https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The primary sources of information used for this rating include Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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