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PennantPark Investment (NASDAQ:PNNT) released its earnings for the quarter ended December 31, 2010 after the close yesterday. A quick peek at the numbers suggest Net Asset Value was up over the prior period, as were earnings per share, which were also above consensus.

The company seems to have been very active adding new loans but pay-offs on the existing portfolio continue to be high, as we've seen across the industry in recent quarters. Unrealized Appreciation was significant for the period, adding even more to the bottom line than Net Investment Income Per Share, and helping Net Increase in Net Assets From Operations to a $0.71 per share increase in the last 3 months.

MONEY TO SPEND

Liquidity is more than OK thanks to a recent increase of its Revolver by $15mn and additional lending capacity from SBIC monies. Nominally, PNNT has another $130mn or more to spend, or nearly 20% of its current investment assets at cost, and all at enticingly low rates.

ALWAYS SOMETHING TO WORRY ABOUT

Still, debt to equity is creeping up: 68% at quarter end and over 100% if every last drop of additional liquidity is tapped. More likely that PNNT will raise more equity. Management's request to shareholders to sell equity even if the price is below Net Asset Value (mentioned in the press release) seems moot as the stock price at $12.5 is trading at a premium of 12% over the latest NAV per share.

More might be revealed at the tortuously early (for those of us on the West Coast) earnings conference call Thursday at 9 a.m.

Disclosure: I am long PNNT.

Source: PennantPark Earnings: Debt to Equity Creeping Up