In Q2 FY2026, Prospect Capital generated net investment income of $0.19 per share, comfortably covering the $0.135 quarterly distribution. This 141% coverage ratio suggests current payouts are supportable from operating income, though coverage metrics alone may mask deeper balance sheet risks. The firm recorded $449.8 million in net realized losses over the past two quarters, driving NAV per share down from $7.25 in Q3 FY2025 to $6.21 in Q2 FY2026. This consistent quarterly decline reflects permanent capital erosion rather than temporary market volatility. Prospect faces a $300 million bond maturity in November 2026, which will test refinancing capacity amid reduced NAV. Management’s shift to first-lien senior secured loans (now 71.4% of the portfolio) and insider purchases signal confidence, but continued NAV declines could force further distribution cuts.