Prospect Capital (PSEC) Lower Following Report of SEC Query - Wells Fargo
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Prospect Capital Corporation (NASDAQ: PSEC) is under pressure Monday (-4.3%) after Wells Fargo analyst Jonathan Bock highlighted that Asset Backed Alert reported on Friday that an SEC query was underway at PSEC as to whether the company and the firm that values PSEC's CLOs (Gifford Fong) "conspired with Prospect to set improper marks for its CLO investments."
According to Bock, the article said the company's auditor, BDO, may also come under scrutiny.In addition, it states that another question ties to whether or not PSEC rebuffed advances from other valuation firms to value the CLO portfolio out of
fear this would lead to CLO markdowns of 20% or greater.
On January 11th, Bock downgraded PSEC to Underperform as a result of a potential $250-300MM write-down in the CLO portfolio.
"We believe our initial estimates may prove conservative as CLO equity marks continue to deteriorate," the analyst said. "Overall, we reiterate our Underperform rating on PSEC shares as we believe news of any potential SEC query/investigation into PSEC’s CLO marks may negatively impact the share price."
Shares of Prospect Capital Corporation closed at $5.99 yesterday.
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