Kroll Bond Rating Agency affirmed Prospect Capital Corp.'s BBB issuer and senior unsecured debt ratings and negative outlook.

Kroll said the ratings reflect Prospect Capital's diversified $5.45 billion investment portfolio, which is about 66% senior secured first- and second-lien loans to 125 middle-market companies; leverage at 0.68x with no plans to raise that above 1-to-1; and operating history of more than 15 years. The alignment of the senior unsecured rating with the issuer rating reflects a "good level of unencumbered assets," the rating agency said.

Prospect Capital holds 34% of its investments outside of senior secured first- and second-lien debt, a "significant" share compared with peers, according to Kroll, which offsets the positive rating factors. Other concerns offsetting the positives include the company's high and increasing nonaccruals as a percent of debt investments and the relative illiquidity of the investments.