We hope you can join us for a Black Book presentation on New Active Short Prospect Capital Corporation (PSEC), which will be held after Thanksgiving on Wednesday, 11.29.23 @10am ET. PSEC is a ~2.4 billion equity market cap Business Development Company (BDC), but we think a more accurate description would be a "quasi-real estate company hiding in a BDC wrapper." Specifically, the company's outsized exposure to private NP REIT both in terms of % of assets but more importantly "cash flow," puts the company squarely in our coverage area. And it is fascinating! On a preliminary basis, which we continue to refine and will lay out in detail, we think the equity could have ~40-50% downside from current levels AT LEAST.
We plan to review, among other things:
- NP REIT's lack of internally-generated cash flow
- PSEC's support of its largest position, NP REIT, which in-turn pays PSEC interest + residual profit interests (sound familiar?)
- NP REIT's implied valuation, PSEC's history of assumptions, and market value implications
- Other top-10 and significant PSEC positions, including First Tower Finance, Town & Country and PGX
- PSEC's unsustainable common dividend
- PSEC's Non-Tradeable Convertible Preferred Stock (reviewing for The People), which is one of the crazier things that we have seen
We fully expect the coverage of this name to be an ongoing process.
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
