WhiteHorse Finance, Inc. (“WhiteHorse Finance” or the “Company”) (Nasdaq: WHF) today announced its financial results for the quarter ended September 30, 2022. In addition, the Company’s board of directors has declared a distribution of $0.355 per share with respect to the quarter ending December 31, 2022. The distribution will be payable on January 4, 2023 to stockholders of record as of December 21, 2022.
Third Quarter 2022 Summary Highlights
- Net Asset Value of $343.0 million, or $14.76 per share
- Investment portfolio(1) totaling $764.6 million
- STRS JV investment portfolio totaling $280.9 million
- Gross investment deployments(2) of $39.5 million for the third quarter, including new originations of $26.1 million and $13.4 million of fundings for add-ons to existing investments
- Net investment income of $9.8 million, or $0.420 per share
- Core net investment income of $8.6 million, or $0.372 per share(3)
- Third quarter distribution of $0.355 per share
Stuart Aronson, WhiteHorse Finance’s Chief Executive Officer, commented, “A rising interest rate environment positively impacted our results this past quarter as nearly 100% of our debt portfolio is comprised of floating rate investments. We believe, given the modest leverage levels that we underwrite our loans to, that the majority of our portfolio companies will be able to service our debt in a rising interest rate environment. Additionally, our portfolio remains overwhelmingly represented by non-cyclical or light cyclical borrowers. Despite continued economic headwinds, WhiteHorse ended the quarter with no investments on non-accrual status, and the portfolio is holding up very well. While our pipeline for future deal flow is at record levels, due in part to our differentiated three-tiered sourcing approach and relationship with the leading H.I.G. platform, we have always employed a cautious approach based on an extreme downside scenario and are keeping a careful eye on the market backdrop, especially in the consumer sector. Given the broad reset in credit pricing, we believe that WhiteHorse will be able to selectively take advantage of market conditions and redeploy capital from repayments into higher yielding investments. Combined with portfolio growth and the performance of the STRS JV, this should ultimately lead to earnings accretion and greater coverage of our dividend.”
Portfolio and Investment Activity
As of September 30, 2022, the fair value of WhiteHorse Finance’s investment portfolio was $764.6 million, compared with $766.5 million as of June 30, 2022. The portfolio as of September 30, 2022 consisted of 107 positions across 68 companies with a weighted average effective yield of 11.4% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV (as defined below)) was $7.7 million with the overall portfolio comprised of approximately 80.6% first lien secured loans, 2.7% second lien secured loans, 3.4% equity and 13.3% in investments in STRS JV. Almost all loans were variable rate investments (primarily indexed to the London Interbank Offered Rate or Secured Overnight Financing Rate) with fixed rate securities representing only 0.4% of loans at fair value. Nearly all performing floating rate investments have interest rate floors.
During the three months ended September 30, 2022, WhiteHorse Finance made investments in three new portfolio companies for a total of $26.1 million, added a total of $13.4 million to existing portfolio companies, and made net fundings of $0.6 million to revolver loans. Proceeds from sales and repayments totaled approximately $36.3 million for the three months ended September 30, 2022, driven by three full realizations in Mills Fleet Farm Group, LLC, Nelson Worldwide, LLC, and Maxitransfers Blocker Corp.
WHF STRS Ohio Senior Loan Fund LLC
As of September 30, 2022, STRS JV’s portfolio totaled $280.9 million, consisted of 28 portfolio companies and had a weighted average effective yield of 10.1% on its portfolio.
Results of Operations
For the three months ended September 30, 2022, the Company’s net investment income was approximately $9.8 million, compared with approximately $7.6 million for the same period in the prior year, representing an increase of approximately 28.9%. The increase in net investment income for the year-over-year period was primarily attributable to higher investment income from interest income and STRS JV due to larger portfolio sizes in both the Company and STRS JV, an increase in base rates and lower incentive fee expense. The lower incentive fee expense was due to a reversal of capital gains incentive fee component as a result of $5.9 million in net realized and unrealized losses recorded in the current quarter. This was partially offset by higher interest expense incurred due to higher leverage balances, higher base rates and lower accretion income and nonrecurring fee income recognized due to less repayment activities as compared to the same period in the prior year. For the three months ended September 30, 2022, the Company’s investment in STRS JV generated an annualized, gross investment yield of approximately 14.0%.
For the three months ended September 30, 2022, core net investment income(3) was $8.6 million, or $0.372 per share, compared with $7.8 million, or $0.372 per share for the same period in the prior year.
For the three months ended September 30, 2022, WhiteHorse Finance reported a net realized and unrealized loss on investments and foreign currency transactions of $5.9 million. This compares with a net realized and unrealized gain on investments and foreign currency transactions of $0.6 million for the three months ended September 30, 2021. The decrease for the year-over-year period was primarily attributable to markdowns on the portfolio in the current quarter.
WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $3.8 million for the three months ended September 30, 2022, which compares with a net increase of $8.3 million the three months ended September 30, 2021.
WhiteHorse Finance’s net asset value was $343.0 million, or $14.76 per share, as of September 30, 2022, compared with $347.4 million, or $14.95 per share, as of June 30, 2022.
Liquidity and Capital Resources
As of September 30, 2022, WhiteHorse Finance had cash and cash equivalents of $19.3 million, compared with $18.6 million as of June 30, 2022, inclusive of restricted cash. As of September 30, 2022, the Company also had $88.9 million of undrawn capacity under its revolving credit facility.
Distributions
The Company’s Board of Directors has declared a distribution of $0.355 per share with respect to the quarter ending December 31, 2022. The distribution will be payable on January 4, 2023 to stockholders of record as of December 21, 2022. In addition, previously on October 14, 2022, the Company declared a special distribution of $0.05 per share, which will be payable on December 9, 2022 to stockholders of record as of October 31, 2022.
On August 10, 2022, the Company declared a distribution of $0.355 per share for the quarter ended September 30, 2022, consistent with distributions declared for the fortieth consecutive quarter since the Company’s initial public offering. The distribution was paid on October 4, 2022 to stockholders of record as of September 20, 2022.
Distributions are paid from taxable earnings and may include return of capital and/or capital gains. The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company’s periodic reports filed with the Securities and Exchange Commission.
Conference Call
WhiteHorse Finance will host a conference call to discuss its third quarter results for the period ended September 30, 2022 at 1:00 p.m. ET on Monday, November 14, 2022. To access the teleconference, please dial 800-225-9448 (domestic and international) approximately 10 minutes before the teleconference’s scheduled start time and reference Conference ID #WHFQ322. Investors may also access the call on the investor relations portion of the Company’s website at www.whitehorsefinance.com.
If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call’s completion through November 21, 2022. The teleconference replay can be accessed by dialing 800-723-0532 (domestic and international).
News Source: PR Newswire
