Prospect Capital, Part Two

On February 1, Prospect (Nasdaq: PSEC) filed with the SEC a preliminary proxy statement in opposition to the proposed merger between Allied and Ares. (For who these entities are, see my Wednesday entry).

They note on the basis of Allied's own filings that as of January 15, 2010, Allied had on hand approximately $185 million of cash, money market and similar securities. This represents the result of significant debt paydowns, and cash and equivalents on hand, and reduces the degree to whicht he entity that would result from a Prospect-Allied tramsaction would start its life in debt. It reduced, in more SEC-atuned terms, "the pro forma leverage of a Prospect-Allied combination."

Also, Allied is associated with a portfolio company, Callidus, and Prospect anticipates that it could further improve its post-merger cash situation by selling Callidus' assets.

Your conclusion then, John Barry? "We believe our pending increased merger proposal, if consummated, will deliver significant benefits to both Prospect and Allied shareholders, including potential upside through Allied’s equity positions in a strengthening economy, increased diversification across more than 130 portfolio companies, and amortization of certain fixed costs across a greater asset base.”