Prospect Capital raises $46m in public offering

The business development company, which has seen its share price slide 37% from its 52-week high, will use the proceeds of the capital raise for investments and to maintain liquidity.

Prospect Capital Corporation, a business development company that lends to and invests in private and microcap public businesses, has raised $46 million in a public offering to help maintain liquidity and make investments.

Prospect offered 5,175,000 shares of common stock at $9 per share, the company said in a statement. The company also may use the proceeds to pay back a “portion of the amounts outstanding under its credit facility”.

The company recently held a first close on a $250 million revolving credit facility. In June, lenders closed on $175 million for the facility, which can accept up to a total of $250 million.

Prospect has investments in H&M Oil & Gas, American Gilsonite, Ajax Rolled Ring & Machine, Appalachian Energy Holdings and Castro Cheese.

Prospect held an initial public offering in 2004, raising $105 million, when it was called Prospect Energy Corporation. The company changed its name to Prospect Capital Corporation in 2007 to better reflect the fact that it is an investment company and not an operating company.

The Nasdaq-listed company was trading around $8.91 Wednesday, down from its high Tuesday of $9.17. Prospect’s 52-week high is $14.59.

Other business development companies have struggled in the market downturn over the past year. Nasdaq-listed American Capital, among the most active of private equity investors in the past few years, has been in default on $2.3 billion of unsecured debt for several months. The company’s president Malon Wilkus said during an earnings call in May there was an outside chance the company would have to seek bankruptcy protection.

On Tuesday, IAC, an operator of internet businesses, including dating service, said it was buying People Media from American Capital for $80 million in cash. People Media also operates internet matching services.

Allied Capital, another business development company, has seen more than $1 billion in investment losses since the beginning of 2008. The New York Stock Exchange-listed company reported losses of $348 million in the first quarter of 2009, compared to losses of $41 million in the same quarter last year. Allied’s portfolio company, Ciena Capital, a real estate lender, collapsed into bankruptcy last year.