Grier Eliasek, President and Chief Operating Officer of Prospect Capital Corporation, appeared recently on The Stu Taylor Show to discuss some of the success enjoyed by his company. Prospect Capital Corporation trades on NASDAQ (PSEC) and aims to provide flexible private debt and equity capital to middle market companies across North America. Based in New York, New York, Prospect Capital Corporation employs approximately 100 individuals, and is one of the larger middle-market business development companies in the northeast.
Eliasek discussed what, in his opinion, has made Prospect Capital Corporation successful. He cites in part the relative size of the organization, which allows the firm to use a number of sources in identifying potential deals. In tandem, he cites high standards of quality, which cause Prospect Capital Corporation to close only 1-2% of the deals sourced. This allows for significant quality of transactions, while still accomplishing a significant number. For instance, Eliasek notes that 4,000 deals generally are sourced annually, meaning that the 80 deals that are closed upon annually are the highest quality of available deals.
Aside from Prospect Capital Corporation’s size and quality standards, Eliasek also credits a culture of innovation within the firm for some of its success. He describes how his company was the first of its kind to acquire a competitor and the first to use certain types of bonds (e.g., convertible bonds, institutional bonds). He also describes Prospect Capital Corporation’s unique use of a weekly bond program, which allows for great access to multiple broker-dealers.
Finally, Eliasek credits the high level of reinvestment by the management team into the business for much of the success of Prospect Capital Corporation. According to Mr. Eliasek, approximately $40 million dollars of cash equity has been invested back into the business, a larger number than its competitors. “We believe in ourselves and we believe in our strategy,” Eliasek says.
There appears to be some merit to this formula. Prospect Capital Corporation has, after 26 years in the industry, been able to achieve one of the highest dividend yields in the industry at 12%, and, according to Eliasek, has generally outperformed the industry in many different metrics, including total return, credit quality, yield, and volume.
To find out more about Prospect Capital Corporations, visit www.prospectstreet.com.
For more information, or to listen to the full interview with Stu Taylor, please click here.