8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.

Date of Report: December 05, 2005 (Date of earliest event reported)
Prospect Energy Corporation (Exact name of registrant as specified in its charter)
MD (State or other jurisdiction of incorporation)	333-114552 (Commission File Number)	43-2048643 (IRS Employer Identification Number)
10 East 40th Street, Suite 4400, New York, New York 10016 (Address of principal executive offices)		10016 (Zip Code)
212 448-0702 (Registrant's telephone number, including area code)
Not Applicable (Former Name or Former Address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01. Other Events

Prospect Energy Corporation Announces Release of Segregated Funds

Item 9.01. Financial Statements and Exhibits

(a) Financial statements:
            None
(b) Pro forma financial information:
            None
(c) Exhibits
            99.1       Press Release of Prospect Energy Corporation dated December 05, 2005

SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: December 05, 2005
PROSPECT ENERGY CORPORATION By:  /s/ John F. Barry III                    
     John F. Barry III
     Chief Executive Officer

Exhibit Index
Exhibit No.	Description
99.1	Press Release of Prospect Energy Corporation dated December 05, 2005

EX-99 2 prospectenergycorp.htm PROSPECT ENERGY CORPORATION PRESS RELEASE Prospect Energy Corporation Announces Release of Segregated Funds

NEW YORK, NY -- 12/05/2005 -- Prospect Energy Corporation (NASDAQ: PSEC) ("Prospect") announced today that Citibank Texas, N.A. ("Citibank") has released the $9.6 million of cash that Citibank had previously required be segregated in Prospect's custody account to secure a limited indemnity for the benefit of Citibank with respect to any claims that might be made in connection with Dallas Gas Partners, L.P. vs. Prospect Energy Corporation. On November 30, 2005, United States Magistrate Judge John R. Froeschner of the United States District Court for the Southern District of Texas, Galveston Division, issued a recommendation that the court grant Prospect's Motion for Summary Judgment dismissing all claims by Dallas Gas Partners. The previously segregated cash had been unavailable to Prospect for any return-generating investments. Prospect has now redeployed the cash into short-term yield-generating instruments and intends to use the funds for investment into private or microcap public energy-related companies as part of Prospect's long-term investment strategy.

About Prospect Energy Corporation

Prospect Energy Corporation (www.prospectenergy.com) is a closed-end investment company that lends to and invests in energy-related businesses and assets. Prospect Energy's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Prospect Energy has elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). Accordingly, we are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, state, and federal rules and regulations. In addition, we have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to Prospect Energy could have a material adverse effect on Prospect Energy and its shareholders.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties inherent in predicting future results and conditions, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

Contact:

Please send investment proposals to:

Prospect Energy Corporation

John Barry
jbarry@prospectstreet.com
(212) 448-0702

Grier Eliasek
grier@prospectstreet.com
(212) 448-0702

-----END PRIVACY-ENHANCED MESSAGE-----

EX-99

Prospect Energy Corporation Announces Release of Segregated Funds

NEW YORK, NY -- 12/05/2005 -- Prospect Energy Corporation (NASDAQ: PSEC) ("Prospect") announced today that Citibank Texas, N.A. ("Citibank") has released the $9.6 million of cash that Citibank had previously required be segregated in Prospect's custody account to secure a limited indemnity for the benefit of Citibank with respect to any claims that might be made in connection with Dallas Gas Partners, L.P. vs. Prospect Energy Corporation. On November 30, 2005, United States Magistrate Judge John R. Froeschner of the United States District Court for the Southern District of Texas, Galveston Division, issued a recommendation that the court grant Prospect's Motion for Summary Judgment dismissing all claims by Dallas Gas Partners. The previously segregated cash had been unavailable to Prospect for any return-generating investments. Prospect has now redeployed the cash into short-term yield-generating instruments and intends to use the funds for investment into private or microcap public energy-related companies as part of Prospect's long-term investment strategy.

About Prospect Energy Corporation

Prospect Energy Corporation (www.prospectenergy.com) is a closed-end investment company that lends to and invests in energy-related businesses and assets. Prospect Energy's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

Prospect Energy has elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). Accordingly, we are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, state, and federal rules and regulations. In addition, we have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to Prospect Energy could have a material adverse effect on Prospect Energy and its shareholders.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties inherent in predicting future results and conditions, including, but not limited to, statements as to our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our portfolio companies.

Contact:

Please send investment proposals to:

Prospect Energy Corporation

John Barry
jbarry@prospectstreet.com
(212) 448-0702

Grier Eliasek
grier@prospectstreet.com
(212) 448-0702