Good day and welcome to the Prospect Capital Corporation's 3rd fiscal quarter earnings release and conference call. All participants will be in After today's presentation, there will be an opportunity Please note this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead.
Thank you, Sean. Good morning, everyone. Joining me on the call today are Grier Eliasek, our President and Chief Operating Officer and Kristin Van Dask, our Chief Financial Officer. Kristin?
Thanks, John. This call is the property of Prospect Capital Corporation. Unauthorized use is prohibited. This call contains forward looking statements within the meaning of the securities laws that are intended to be subject to Safe Harbor protection. Actual outcomes and results could differ materially from those forecast due to the impact of many factors.
We do not undertake to update our forward looking statements unless required by law. For additional disclosure see our earnings press release our 10 Q and our corporate presentation, filed previously and available on the Investor Relations tab, on our website, prospectstreet.com. Now, I'll turn the call back over to John.
For the March 2019 quarter, our net investment income or NII was $77,300,000 or $0.21 per share, down 0 point 0 $1 from the prior quarter and exceeding our current Our ratio of NII to distributions was 117%. In the March 2019 quarter, our net debt to equity ratio was 69.1%, down 5.9% from the prior quarter. Our net income for the quarter was $89,200,000 or $0.24 per share, an increase of $0.42 from the prior quarter. We are announcing monthly cash distributions to shareholders of $0.06 per share for each of May, June July August, aggregating 133 consecutive shareholder distributions. We plan on announcing our next series of shareholder distributions Since our IPO 15 years ago, through our August 2019 distribution at our current shareholder count.
We will pay down $17.40 per share. To original shareholders, aggregating $2,900,000,000 in cumulative distributions to all shareholders. $6 from the prior quarter. Our balance sheet as of March 2019 consisted of 88 percent fixed rate liabilities. Our percentage of total investment income from interest income was 90 an increase of 6 point We believe there is no greater alignment between management and shareholders than for management to purchase a significant amount of stock.
Particularly when management has purchased stock on the same basis as other shareholders in the open market. Prospect management is the largest shareholder in Prospect and has never sold a share. Management and affiliates on a combined basis have purchased at cost over $375,000,000 Our management team has been in the investment business for decades with experience handling both challenges and opportunities. Provided by dynamic, economic and interest rate cycles. We have learned when it is more productive to reduce risk than to reach for yield, and the current environment is one of those time periods.
At the same time, we believe the future will provide us with substantial opportunities to purchase attractive assets utilizing dry powder we have filled and reserved. Thank you. I'll now turn the call over to Greer Isaac.
Thank you, John. Our scale business with over $6,000,000,000 of assets and undrawn credit continues to deliver solid performance. Our experienced team consists of approximately 100 professionals, representing 1 of the largest middle market credit groups in the industry. With our scale, longevity, experience and deep bench, we continue to focus on a diversified investment strategy that covers 3rd party private equity sponsor related and direct non sponsor lending, prospect sponsored operating and financial buyouts structured credit, real estate yield points at fair value stood 42% of our portfolio, up 0.4% from the prior quarter. This diversity allows us to source a broad range and high volume of opportunities then select in a disciplined bottoms up manner the opportunities we deem to be the most attractive on a risk adjusted basis.
Our team typically evaluates thousands of opportunities annually, and invests in a disciplined manner in a low single digit percentage of such opportunities. Our non bank structure gives us the flexibility to invest in multiple levels of the corporate capital stack. With a preference, for secured lending and senior loans. As of March 2019, our portfolio at fair value comprised 44.6% secured first lien, 23.5% secured second lien, 15.5 percent subordinated structured notes with underlying secured first lien collateral, 0.8% rated secured structured notes, 0.5% unsecured debt and 15.1 percent equity investments, resulting in 84% of our investments being assets, with underlying secured debt benefiting from borrower pledge collateral. Prospects approach is one that generates attractive risk adjusted yields.
And our performing interest bearing investments were generating an annualized yield of 12.8 percent as of March total gains, contributors as such positions generate distributions. We've continued to prioritize senior and secured debt with our originations to protect against downside risk, while still achieving above market yields through credit selection discipline and a differentiated origination approach. As of March 2019, we held 137 portfolio companies down 2 from the prior quarter, with a fair value of $5,700,000,000. We also continued to invest in a diversified fashion across many different portfolio company industries, with no significant industry concentrations, the largest of 13.8%. As of March, 2019, our asset concentration in the energy sector stood at 3%, and our concentration in the retail industry stood at 0.
Non accruals as a percentage of total assets stood at approximately 3.3% in March 2019, down 0.3% from the prior quarter. Our weighted average portfolio net leverage stood at 4.51 times EBITDA, down from 4.57 the prior quarter and the 4th straight quarterly decrease. Our weighted average EBITDA per portfolio company stood at $59,800,000 in March 2019, up from $58,500,000 in the prior quarter. The largest segment of our portfolio consists of sole agented and self originated middle market loans. In recent years, we have perceived the risk adjusted reward to be higher for agented, self originated and anchor investor opportunities compared to the non anchor broadly syndicated market, causing us to prioritize our proactive sourcing efforts.
Our differentiated call center initiative continues to drive proprietary 2019 quarter aggregated $36,000,000. We also experienced $195,000,000 of repayments and exits as a validation of our capital preservation objective and sell down of larger credit exposures. Resulting in net repayments of $159,000,000. During the March 2019 quarter, our originations comprised 100% non Asian debt, including early look anchoring and club investments. To date, we've made multiple investments in the real estate arena through our private REIT strategy, largely focused on multifamily, stabilized yield acquisitions with attractive 10 or more year financing.
NPRC, our private REIT has a real estate portfolio that has benefited from rising rents, strong occupancies, high returning value added renovation programs, and attractive financing recapitalizations, resulting in an increase in cash yields as a validation of this income growth business. Alongside our corporate credit businesses. NPRC has exited completely 12 properties, with an objective to redeploy capital into new property acquisitions, including We expect our exits to continue, and we've identified multiple additional properties for potential exit, in calendar year 2019 and beyond. Our structured credit business has delivered attractive cash yields demonstrating the benefits of pursuing majority stakes, working with world class management teams, providing strong collateral underwriting through primary issuance and 18, we held $881,000,000 across 43 non recourse subordinated structured notes investments. These underlying structured credit portfolios comprised of 1800 loans and a total asset base of over 18,000,000,000.
As of March 2019, the structured credit portfolio experienced a trailing 12 month default rate of 29 basis points, down 63 basis points in the prior quarter and 64 basis points less than the broadly syndicated market default rate of 93 basis points. In the March 2019 quarter, this portfolio generated an annualized GAAP yield of 15.8%. Up 0.3% from the prior quarter. As of March 2019, our subordinated structured credit portfolio has generated over $1,270,000,000 in cumulative cash distributions to us, representing around 83% of our original investment. Through March 2019, we've also exited 9 investments, totaling 263,000,000 with an average realized IRR of 16.8 percent and cash on cash multiple of 1.49 times.
Our subordinate structured credit portfolio consists entirely of majority owned positions. Such positions can enjoy significant benefits compared to minority holdings, in the same tranche. In many cases, we receive fee rebates because of our majority position. As majority holder, we control the ability to call a transaction in our sole discretion in the future, and we believe such options add substantial value to our portfolio. We have the option of waiting years to call a transaction in an optimal fashion rather than when loan asset valuations might be temporarily low.
We as majority investor can refinance liabilities on more advantageous terms. Remove bond baskets in exchange for better terms from debt investors in the deal and extend or reset the investment period to enhance value. We've completed 22 refis and resets since December 2017. Our structured credit equity portfolio has paid us an average 17.9% cash yield, in the 12 months ended December 2018, excluding redeeming and new deals. So far in the current June 2019 quarter, We booked $26,000,000 in originations and received repayments of $62,000,000 resulting in net repayments of $36,000,000.
Originations have comprised 65 percent non agent to debt and 35% agent to sponsor debt. Thank you. I'll now turn the call over to Kristin.
Thanks, Greer. We believe our prudent leverage, diversified access to matched book funding, substantial majority of unencumbered assets, and waiting toward unsecured fixed rate debt demonstrate both balance sheet strength as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of fixed rate liabilities extending 24 years into the future, while the significant majority of our loans float with LIBOR, providing potential upside to shareholders as interest rates rise. We are a leader and innovator in our marketplace. We were the 1st company in our industry to issue a convertible bond, develop a notes program, issue under a bond ATM, acquire another BDC and many other lists of 1st.
Shareholders and unsecured creditors alike should appreciate the thoughtful approach. Differentiated in our industry, which we have taken toward construction of the right hand side of our balance sheet. As of March 2019, we held approximately $4,150,000,000 of our assets as unencumbered assets, representing approximately 71% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, where we recently completed an extension of our revolver by 5.7 years, reducing the interest rate on drawn amounts to 1 month LIBOR plus 220 basis points. We currently have 1.05 We are targeting adding more commitments from additional lenders.
The facility revolves until March 2022 followed by 2 years of amortization with interest distributions continuing to and benefiting from our unencumbered assets, we've issued at Prospect Capital Corporation, including recently multiple types of investment grade unsecured debt, including convertible bonds, institutional bonds, baby bonds, and program notes. All of these types of unsecured debt have no financial covenants, no asset restrictions, and no cross defaults with our revolver. We enjoy an investment grade BBB rating from Kroll, an investment grade BBB rating from Egan Jones, an investment grade BBB negative rating from S and P and an investment grade Baa3 rating from Moody's, so a total of 4 investment grade ratings. We've now tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration up 24 years. Our debt maturities extend through 2043.
With so many banks and debt investors across so many debt tranches, we have substantially reduced our counterparty risk over the years. In the March 2019 quarter, we repurchased $130,000,000 of our April 2020 notes as well as $24,000,000 of our program notes. We also issued $201,000,000 of a March 2025 convertible bond, issued $33,000,000 of baby bonds through our ATM program, and continued our weekly programmatic intranotes issuances. If the need should arise to decrease our leverage ratio, we believe we could slow originations and allowed repayments and exits to come in during the ordinary course, as we demonstrated in the first half of calendar year twenty sixteen during market volatility. We now have 8 separate unsecured debt issuances aggregating $1,600,000,000, not including our program notes, with maturities extending to June 2029.
As of March 2019, we had 7 $55,000,000 call back over to John.
We will now begin session. Our first question comes from Robert Dodd with Raymond James. Please go ahead. Hi guys.
On the dividend,
in the quarter. Obviously, the REITs dividend declined from 9 last quarter to 1 this, you talked about identifying additional properties. I guess I'm just trying to get a feel obviously on that decent sized contributor in the past. I mean, is this kind of the new near term run rate to be to be quite a low dividend from that business or would you expect that to rebound if you do do more exits of properties later in the year.
John, do you want me to take that?
Actually, I think Robert wants to hear from you Greer.
The distributions from NPRC actually didn't change quite as sharply as one might just looking at the dividend, row, Robert, we recapped our investment or series of investments in NPRC to basically, because of the growth in income, cash flows, strong performance out of the book of around 60 or so properties. We actually increased our the amount of debt we have against that portfolio company. And so there's actually more of our income as Prospect Capital Corporation coming through interest income now in the March quarter, but different from the December quarter, which I think reflects confidence in the sustainability of net operating income of the underlying portfolio companies. We would expect, given visibility on how these assets are performing, as well as some of our pending exit processes, some of which we've signed contracts on, some of which are in various different status in terms of being sold, being marketed, Our model recall is to fix up these properties, optimize them essentially adding value to the common areas as well as the individual units and then sell at an attractive, a low cap rate high multiple to a buyer that doesn't want to fuss with the substantial operating improvements that we spent the hard time and hard years and hard work upgrading and optimizing.
So it's a long way of saying we feel pretty good about sustainability and visibility. For the next year, Robert. Beyond that, it's tough to say, it's tough to say for any asset class, of course, on a multi year based, especially given where we are in the cycle. What we try to do is to remove as much as possible from the equation, the financing risk side of things, by getting very long term financing when we first started, within NPRC and, and, other predecessors, purchasing and optimizing these assets, we were getting like 7 to 8 years financing, maybe 2 years interest only. We're now getting from our financing sources as much as 12 years of financing, 8 years interest only and and that continues to be attractive as locked in fixed rate financing for the long term.
And as of course, as we get closer, to the end, the likelihood of selling an asset or refinancing, it goes up as well. So we really don't have any pressing maturities to worry about there and can be very patient and optimize on the timetable in program that we envision and then sell at the optimal point. Is that helpful, Robert? That is very helpful.
It actually leads into the next question not about the REIT, but I mean, you're talking about recapitalizing that the financing markets are very favorable right now for the other debt. When I look at some of your control positions like Valley Electric or first time, and obviously the equity marks are up. They appear they're doing really well. Value electrics, obviously, paying you a dividend, etcetera. It's still carrying some pretty high cost debt, though.
So what's the thought process of why given the 3rd party debt is pretty cheap right now? What's the thought process on not refinancing some of those successful businesses to lower their cost of debt and maybe increase your equity that.
Sure. I'll tackle those and then see if John has anything to add on that as well as NPRC. So, Regarding each one's a little bit different, in the case of First Tower as an installment, a lender that's been in business for decades and half a dozen different U. S. States long standing management team, sort of founder, CEO, run as a substantial owner of the business alongside us and fully aligned to perform.
We already do, we think optimize financing, which uses a healthy amount of 3rd party ABL financing from a diversified and long supportive bank group. That knows the company well, the management team, the industry, quite well. We do explore from time to time, our, and our team spends a lot of time on this on the prospect side in addition to the management team. Different models for financing the business. And it's not all or nothing, but it obvious place to look as the securitization markets.
There are drawbacks of that market, including the cost of issuance that need to be amortized over a relatively short term asset base. So tower mix, in general, 2 year fully amortizing loans or prepayment So the duration is substantially less than that. It's not a long time to amortize the fixed cost of issuance set of costs, the legal costs, the rating costs, the whatever arranger is arranging liabilities, their costs, which is non trivial. And you compare and contrast that with, say, the CLO structured credit market where you're amortizing such costs they're similar in nature over a much longer duration. You expect the life of, say, 6 years.
And that looks quite different from amortizing a high upfront cost over only a year. So we continue to explore that market. It kind of keeps the ABL lenders in check and helps us negotiate more favorable terms with them candidly. It's nice to have options. We feel like we could pivot to that market if we needed to, but we're not sure it's the right It's the right move.
And also it's relatively short term financing. It's not like you're getting some big benefit from locking in long term. Rates as well. In the case of Valley, it's a little bit tricky on the 3rd party financing front. We do have an ABL and we like ABL financing that doesn't tend to have amortization attached to it, allows fully distributions.
And we have a maximized distribution model, of course. That business that's in the infrastructure management business does have some surety non trivial surety and bonding requirements with governmental institutional and corporate accounts largely in the Pacific Northwest. And that there's certain ways they look at tangible net worth ratios equity count, etcetera. And it tends to limit some of the financing we can actually utilize from third parties. But we have grown that successfully, and we continue to grow and diversify our base of charities in addition to ABL lenders.
But that company has been performing quite well, as you pointed out. Let's see if John has anything to add to the commentary for those 3 companies, NPRC Valley And Tower. John? Okay. While we wait for him.
Robert, any follow ups, to that? That that is great. I'm sorry. Hold a second.
Yeah, I was just going to say I was on mute. One of the great blessings of working with Greer Elizik is that when he's done answering your question, I just can't think of anything to add. So, Robert, if you have any softball questions for me, I'd love to take them. Otherwise, it's
good. No, I just had a lot to say. That was the last one. So I appreciate it. Thank you.
Oh, I saw you add another. No? Okay. Thank you very much, Robert.
This will conclude our question and answer session. I would like to turn the conference back over to John Barry for any closing remarks.
Alright. Well, Greer, thank you very much for answering the questions as completely as you did. There don't seem to be any more. I hope everyone has a wonderful day, and we'll see you in approximately 4 months.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.