| | | Prospect Capital Corp. slid firmly into junk territory after a second major credit-rating company lowered its assessment of the $7.6 billion private credit fund following a deterioration in the quality of its assets.
Moody’s Ratings late Monday downgraded Prospect to Ba1, or one level below investment grade, owing to a combination of weaker earnings, higher investment losses, an increase in payment-in-kind income and a weaker asset-to-debt ratio for the fund.
While Prospect “has announced measures to improve investment composition by increasing its senior secured credit mix and ease demands on liquidity, we expect that it will take time for the company’s financial condition to stabilize,” Moody’s said in a note. “In the meantime, its performance will likely be weaker than many peers.”
Moody’s decision, which follows a similar action by S&P Global Ratings earlier this month, means Prospect now has junk ratings from both of its main credit graders, which could make it harder for it to raise fresh financing. The fund is structured as a business development company and is publicly traded under the PSEC ticker. |
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