Patriot Capital Funding Reports 2008 Fourth Quarter and Year-End Results

• Press Release
• Source: Patriot Capital Funding, Inc.
• On 6:36 am EDT, Monday March 16, 2009

WESTPORT, Conn., March 16, 2009 (GLOBE NEWSWIRE) -- Patriot Capital Funding, Inc. (NasdaqGS:PCAP - News) today announced results for the three-month period and the year ended December 31, 2008.

Related Quotes

Symbol	Price	Change
PCAP	3.85	-0.11

{"s" : "pcap","k" : "c10,l10,p20,t10","o" : "","j" : ""}

2008 Fourth Quarter Summary

 * Total investment income of $10.2 million

 * Net investment income of $6.0 million, or $0.29 per basic and
   diluted share

 * Net loss of $16.9 million, or a loss of $0.81 per basic and diluted
   share

 * Originated approximately $22.5 million in new gross investment
   commitments

 * Net asset value per share of common stock at December 31, 2008 was
   $8.65, as compared to $9.74 at September 30, 2008 and $10.73 at
   December 31, 2007

Portfolio Activity

During the 2008 fourth quarter, we acted as lead arranger and administrative agent on a $32.5 million financing to a leading provider of services for the biomedical research industry. We committed $22.5 million to the financing, which was comprised of senior and subordinated debt and an equity investment, and we syndicated the remaining $10.0 million, which was comprised of senior secured debt, to another financial institution. We funded $21.3 million of our commitment at closing.

Also during the 2008 fourth quarter:

 * We received proceeds of $1.4 million in conjunction with the sale
   of our senior secured term loan in a publisher of textbooks and
   educational materials. We realized a loss of approximately
   $459,000 upon the sale.

 * We received proceeds of $1.4 million in conjunction with the sale
   of our senior secured term loan in a provider of electrical
   services. We realized a loss of approximately $446,000 upon the
   sale.

Subsequent to the 2008 fourth quarter we received proceeds of $3.9 million in connection with the full repayment of our senior subordinated debt investment in a distributor of automotive oils, chemicals and parts. No realized gain or loss was recorded as a result of this paydown.

Portfolio Yield

The weighted average yield on all of our debt investments for the year ended December 31, 2008 was 12.1%, as compared to a weighted average yield of 12.4% for the year ended December 31, 2007.

Portfolio Asset Quality

We utilize the following investment rating system for our entire portfolio of debt investments:

 Investment Rating 1 - Investments that exceed expectations and/or a
 capital gain is expected.
 Investment Rating 2 - Investments that are generally performing in
 accordance with expectations.
 Investment Rating 3 - Investments that require closer monitoring.
 Investment Rating 4 - Investments performing below expectations where
 a higher risk of loss exists.
 Investment Rating 5 - Investments performing significantly below
 expectations where we expect a loss.

At December 31, 2008, the distribution of our debt investments on the 1 to 5 investment rating scale at fair value was as follows:

 Investment Rating 1 investments totaled $82.2 million (26.7% of the
 total portfolio)
 Investment Rating 2 investments totaled $184.5 million (59.9% of the
 total portfolio)
 Investment Rating 3 investments totaled $21.3 million (6.9% of the
 total portfolio)
 Investment Rating 4 investments totaled $8.5 million (2.7% of the
 total portfolio)
 Investment Rating 5 investments totaled $11.6 million (3.8% of the
 total portfolio)

At December 31, 2008, we had loans from three of our portfolio companies on non-accrual status. At December 31, 2007, none of our loans were on non-accrual status.

Liquidity and Capital Resources

At December 31, 2008, we had cash and cash equivalents of $6.4 million, total assets of $354.3 million and net assets of $180.1 million. We had $162.6 million of borrowings outstanding at December 31, 2008 under our second amended and restated securitization revolving credit facility (the ``Credit Facility''). Currently, we are in compliance with the terms of the Credit Facility. At December 31, 2008, the interest rate on our Credit Facility was 3.6% and our regulatory asset coverage was 211%. We are required to maintain regulatory asset coverage of at least 200%.

Since the turmoil in the financial markets began in mid-2007, we have taken a number of steps to help ensure the continued availability of liquidity, including largely curtailing investment originations that fall outside the parameters of the Credit Facility. However, in light of the recent worsening of the conditions in the financial markets and the U.S. economy overall, we are considering other measures to help ensure adequate liquidity, including the sale of selected portfolio investments, forming and licensing a Small Business Investment Company subsidiary, further operating expense reductions, lowering our dividends and availing ourselves to a recent IRS revenue procedure that will allow us to maintain our regulated investment company tax status through the payment of a dividend partly in cash and partly in shares of our common stock.

Moreover, we are currently negotiating the renewal of the liquidity facility, which matures in April 2009, supporting our Credit Facility with our lenders. In the event that our lenders do not renew the liquidity facility, the terms of the Credit Facility require that all principal and interest collected from the debt investments secured by the Credit Facility must be used to pay down amounts outstanding under the Credit Facility by April 2011. Because substantially all of our debt investments are secured by our Credit Facility, we cannot provide any assurance that we would have sufficient cash and liquid assets to fund normal operations and dividend distributions to our stockholders during the period of time when we are required to repay amounts outstanding under the Credit Facility if such amounts became due. If the liquidity facility is not renewed, we believe that we may be able to negotiate an arrangement with the lenders of the Credit Facility for repayment terms that do not require us to use all principal and interest collected from the debt investments secured by the Credit Facility to pay down amounts outstanding thereunder. Such an arrangement may allow us to continue to operate our business in a more normal manner while we pay down the outstanding balance under the Credit Facility.

Our lenders have provided us with a term sheet that outlines the terms and conditions under which they would consider renewing the liquidity facility. Because the term sheet is non-binding and remains subject to credit approval of each lender and satisfactory documentation, there is no assurance that the liquidity facility will be renewed. As a result of the uncertainty surrounding the renewal of the liquidity facility, our independent registered public accounting firm is expected to include an explanatory paragraph in its 2008 audit opinion that expresses substantial doubt about our ability to continue as a going concern.

Dividend Information

Historically, our board of directors has declared our quarterly dividends prior to the completion of the fiscal quarter to which such dividends relate. However, our board of directors has postponed making a decision regarding the declaration of our first quarter 2009 dividend until we have more information on whether the liquidity facility will be renewed. Moreover, in light of the unprecedented uncertainty regarding the financial markets and the economy, our board of directors is considering whether to alter its existing dividend declaration practice and declare dividends subsequent to the completion of the fiscal quarter to which such dividends relate.

Our dividend is paid from taxable income. Our board of directors determines the dividend based on annual estimates of taxable income, which differs from book income due to changes in unrealized appreciation and depreciation of investments and due to temporary and permanent differences in income and expense recognition.

We have adopted a dividend reinvestment plan (``DRIP'') that provides for reinvestment of our dividends on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if we declare a cash dividend, then our stockholders who have not ``opted out'' of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. If your shares of our common stock are held through a brokerage firm or other financial intermediary and you wish to participate in the DRIP, please contact your broker or other financial intermediary.

2008 Fourth Quarter Conference Call/Webcast Information

 Conference Call:       Today - March 16, 2009 at 8:30 a.m. EDT
 Dial-in Number:        800/771-7941
 Call Replay Until:     March 18, 2009 at 10:30 a.m. EDT
 Replay Number:         800/633-8284
 Replay Access Code:    21416961
 Webcast:               http://www.patcapfunding.com
 Web Replay:            30 days

About Patriot Capital Funding, Inc.

Patriot Capital Funding, Inc. (http://www.patcapfunding.com) is a specialty finance company providing customized financing solutions primarily to private equity sponsors focused on making investments in small- to mid-sized companies. Patriot Capital Funding typically invests in companies with annual revenues ranging from $10 million to $100 million that operate in diverse industry sectors. Investments usually take the form of senior secured loans, junior secured loans, and/or subordinated debt investments -- which may contain equity or equity-related instruments. Patriot Capital Funding also offers ``one-stop'' financing, which typically includes a revolving credit line, one or more senior term loans and a subordinated debt investment. Patriot Capital Funding also makes equity co-investments of generally up to $3.0 million and investments in broadly syndicated loans.

Forward-Looking Statements

This press release may contain certain forward-looking statements, including statements with regard to the liquidity facility and the future performance of Patriot Capital Funding. Words such as ``believes,'' ``expects,'' ``projects,'' and ``future'' or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in Patriot Capital Funding's Form 10-K for the year ended December 31, 2008, and other filings with the Securities and Exchange Commission. Patriot Capital Funding undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 Financial Statements

                    Patriot Capital Funding, Inc.
                     Consolidated Balance Sheets

                                                   December 31,
                                                   ------------
                                                2008          2007
                                            --------------------------
 ASSETS
 Investments at fair value:
  Non-control/non-affiliate investments
   ($269,577,008 - 2008,
   $294,686,727 - 2007)                     $240,486,620  $290,225,759
  Affiliate investments (cost of
   $53,129,533 - 2008, $86,577,905 - 2007)    51,457,082    85,171,605
  Control investments (cost of
   $43,192,484 - 2008, $6,980,389 - 2007)     30,427,046     9,328,389
                                            --------------------------
   Total investments                         322,370,748   384,725,753
 Cash and cash equivalents                     6,449,454       789,451
 Restricted cash                              22,155,073    10,487,202
 Interest receivable                           1,390,285     1,758,954
 Other assets                                  1,897,086       617,448
                                            --------------------------

  TOTAL ASSETS                              $354,262,646  $398,378,808
                                            ==========================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 LIABILITIES
 Borrowings                                 $162,600,000  $164,900,000
 Interest payable                                514,125       821,124
 Dividends payable                             5,253,709     6,814,650
 Accounts payable, accrued expenses and
  other                                        5,777,642     4,245,350
                                            --------------------------

  TOTAL LIABILITIES                          174,145,476   176,781,124
                                            --------------------------

 STOCKHOLDERS' EQUITY
 Preferred stock, $.01 par value, 1,000,000
  shares authorized; no shares issued and
  outstanding                                         --            --
 Common stock, $.01 par value, 49,000,000
  shares authorized; 20,827,334 and
  20,650,455 shares issued and outstanding
  at December 31, 2008, and December 31,
  2007, respectively                             208,274       206,504
 Paid-in capital                             234,385,063   233,722,593
 Accumulated net investment loss              (1,912,061)   (1,912,061)
 Distributions in excess of net investment
  income                                      (1,758,877)   (2,824,651)
 Net realized loss on investments             (4,053,953)   (3,171,365)
 Net unrealized depreciation on interest
  rate swaps                                  (3,097,384)     (762,365)
 Net unrealized depreciation on investments  (43,653,892)   (3,660,971)
                                            --------------------------

  TOTAL STOCKHOLDERS' EQUITY                 180,117,170   221,597,684
                                            --------------------------

 TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY                                    $354,262,646  $398,378,808
                                            ==========================

 NET ASSET VALUE PER COMMON SHARE           $       8.65  $      10.73
                                            ==========================

 Certain prior period amounts have been reclassified to the current
 presentation.


                    Patriot Capital Funding, Inc.
                Consolidated Statements of Operations

                     Three Months Ended         Twelve Months Ended
                         December 31,               December 31,
                         (unaudited)                 (audited)
                  -------------------------  -------------------------
                      2008          2007         2008          2007
                  -------------------------  -------------------------
 INVESTMENT INCOME
 Interest and
  dividends:
  Non-control/
   non-affiliate
   investments    $  7,351,849  $ 8,565,426  $ 29,261,759  $31,729,397
  Affiliate
   investments       1,496,905    1,899,496     8,504,451    4,947,294
  Control
   investments         728,766      178,382     2,373,877      470,584
                  -------------------------  -------------------------
 Total interest
  and dividend
  income             9,577,520   10,643,304    40,140,087   37,147,275
                  -------------------------  -------------------------
 Fees
  Non-control/
   non-affiliate
   investments         465,563      349,879       809,113    1,080,929
  Affiliate
   investments          73,469       43,475       432,435       93,419
  Control
   investments          54,328        6,250       168,065      106,013
                  -------------------------  -------------------------
 Total fee income      593,360      399,604     1,409,613    1,280,361
                  -------------------------  -------------------------
 Other investment
  income:
  Non-control/
   non-affiliate
   investments              --       99,771       300,076      534,901
  Affiliate
   investments              --           --       307,245           --
                  -------------------------  -------------------------
  Control
   investments              --           --       142,383           --
                  -------------------------  -------------------------
 Total other
  investment
  income                    --       99,771       749,704      534,901
                  -------------------------  -------------------------
 Total Investment
  Income            10,170,880   11,142,679    42,299,404   38,962,537
                  -------------------------  -------------------------

 EXPENSES
 Compensation
  expense              532,752    1,526,490     3,973,030    5,410,075
 Interest expense    2,383,965    2,205,408     8,158,473    7,421,596
 Professional fees     624,400      222,644     1,635,519      887,021
 General and
  administrative
  expense              666,875      680,987     2,807,113    2,498,724
                  -------------------------  -------------------------
 Total Expenses      4,207,992    4,635,529    16,574,135   16,217,416
                  -------------------------  -------------------------

 Net Investment
  Income             5,962,888    6,507,150    25,725,269   22,745,121
                  -------------------------  -------------------------

 NET REALIZED GAIN
  AND (LOSS) AND
  NET UNREALIZED
  APPRECIATION
  (DEPRECIATION)
 Net realized gain
  (loss) on
  investments -
  non-control/
  non-affiliate
  investments         (904,726)          --      (990,993)      91,601
 Net realized gain
  on investments -
  affiliate
  investments               --           --       458,405           --
 Net realized loss
  on investments -
  control
  investments               --           --      (350,000)          --
 Net unrealized
  depreciation on
  investments -
  non-control/
  non-affiliate
  investments      (12,210,075)  (2,996,224)  (22,894,683)  (4,620,406)
 Net unrealized
  depreciation on
  investments -
  affiliate
 investments        (1,143,006)    (288,200)   (9,613,047)  (1,365,300)
 Net unrealized
  appreciation
  (depreciation)
  on investments -
  control
  investments       (6,272,559)     653,800    (7,485,191)   2,348,000
 Net unrealized
  depreciation on
  interest rate
  swaps             (2,369,791)    (515,790)   (2,335,019)    (775,326)
                  -------------------------  -------------------------
 Net Realized Gain
  (Loss) and Net
  Unrealized
  Appreciation
  (Depreciation)   (22,900,157)  (3,146,414)  (43,210,528)  (4,321,431)
                  -------------------------  -------------------------

 NET INCOME
  (LOSS)          $(16,937,269) $ 3,360,736  $(17,485,259) $18,423,690
                  =========================  =========================

 Earnings (loss)
  per share,
  basic           $      (0.81) $      0.16  $      (0.84) $      0.99
                  =========================  =========================
 Earnings (loss)
  per share,
  diluted         $      (0.81) $      0.16  $      (0.84) $      0.98
                  =========================  =========================
 Weighted average
  shares
  outstanding,
  basic             20,806,978   20,589,650    20,713,540   18,670,904
                  =========================  =========================
 Weighted average
  shares
  outstanding,
  diluted           20,806,978   20,748,959    20,713,540   18,830,213
                  =========================  =========================

          Patriot Capital Funding, Inc.
          Richard Buckanavage, President and Chief Executive Officer
          203/429-2700

          Jaffoni & Collins Incorporated
          Robert Rinderman
          Norberto Aja
          212/835-8500
          PCAP@jcir.com