Q4 2023 WhiteHorse Finance Inc Earnings Call

Participants

Stuart Aronson; CEO; WhiteHorse Finance Inc

Joyson Thomas; CFO; WhiteHorse Finance Inc

Jacob Moeller; Analyst; Rose & Co

Mickey Schleien; Analyst; Ladenburg Thalmann & Co Inc

Bryce Rowe; Analyst; B Riley Securities Inc

Erik Zwick; Analyst; Hovde Group LLC

Melissa Wedel; Analyst; JPMorgan Chase & Co

Presentation

Operator

That Please standby your program is about to begin. If you need assistance during your conference today, please press star zero.
Good afternoon. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Fourth Quarter and Full Year 2023 earnings conference call. Our hosts for today's call are Stuart Aronson, Chief Executive Officer, and Joyson Thomas, Chief Financial Officer. Today's call is being recorded and will be made available for replay beginning at 4 PM Eastern time. The replay dial-in number is four zero two two two zero two nine eight five. No passcode is required at this time all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time please press star one on your telephone keypad. If you wish to remove yourself from the queue, press star two. It is now my pleasure to turn the floor over to Jacob Muller of Rose & Co. Please go ahead.

Jacob Moeller

Thank you, operator, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's Fourth Quarter 2023 earnings results. Before we begin, I would like to remind everyone that certain statements which are not based on historical facts made during this call, including any statements relating to financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Whitehorse Finance assumes no obligation or responsibility to update update any forward-looking statement. These speakers may refer to material from the WhiteHorse Finance Fourth Quarter 2023 earnings presentation, which was posted to our website this morning.
With that, allow me to introduce WHEREAS Finance's CEO, Stuart Aronson, you may begin.

Stuart Aronson

Thank you, Jacob, and good afternoon, everybody. Thank you for joining us today. As you're aware, we issued our earnings this morning prior to market open, and I hope you've had a chance to review our results for the period ending December 31, 2023, which can also be found on our website.
On today's call, I'll begin by addressing our fourth quarter results and current market conditions. Then Joyson Thomas, our Chief Financial Officer, will discuss our performance in greater detail, after which we will open the floor for questions.
This afternoon. I'm pleased to report strong performance for the fourth quarter of 2023. Q4 GAAP net investment income and core net interest income was $10.6 million or $0.456 per share, which more than covered our quarterly base dividend of $0.385 per share. This represents a slight decline from the Q3 GAAP and core NII of $10.8 million or $0.465 per share. Nav per share at the end of Q4 was $13.63, representing a 1.7% decrease from the prior quarter. Nav per share was negatively impacted by $6.8 million of net to net net mark-to-market losses on our portfolio. Mark downs were related to company-specific performance and were partially offset by markups across four credits, as I will discuss shortly.
Turning to our portfolio activity in Q4, gross capital deployments totaled $56.9 million with $54.1 million funding, eight new transactions and the remaining $2.8 million funding add-ons to existing portfolio investments. This was the highest level of origination activity in 2023, but was slightly below quarters in past year, fourth quarters and past years, origination constraints for primarily a lack of deal opportunities with a slow 2023 M&A environment, leading to a tight steel market after our new originations in Q4 were sponsor deals and the other half are nonsponsor deals with sponsored deals at an average leverage of approximately 4.3 times debt to EBITDA. I note that these deals were all first lien loans with spreads of 575 basis points or higher and haven't had an average all-in rate of 12% during the quarter. The BDC transferred four of these new deals and one add-on to the Ohio STRS. JV totaling $27.6 million, and that was done in exchange for cash. I will discuss activity within the JV in more detail shortly at the end of Q4, more than 97% of our debt portfolio was first lien senior secured and following fourth quarter originations, our portfolio mix, it was approximately two-thirds sponsor and one-third non-sponsored in Q4. Total repayments and sales were $34.9 million, primarily driven by two complete and two partial realizations. In addition, there were $0.6 million in net repayments made on revolver commitments. As addressed in our last earnings call, repayment activity remained elevated during the first half of 2020 sorry, relative to the first half of 2023 and we anticipate this trend to continue through 2024 based on a pickup in M&A, active M&A activities and the ability of some companies to refinance at lower rates. Currently, we have visibility into a number of likely repayments in Q1. And as of today, I've already had $39 million in full repayments and sales across five investments. We will seek to redeploy this capital into attractive investments this quarter and going forward with repayments and JV transfers.
Offsetting our modest deployment activity, the company's net effective leverage remained at 1.16 times, unchanged from the prior quarter. This is still below the lower end of our target leverage range. And so long as our portfolio remains heavily concentrated in first-lien loans, which have lower risks than second lien loans. We expect to continue to run the BDC at up to 1.35 times leverage.
With that in mind, I now step back to bring our entire investment portfolio and to focus after the effects of net repayments and the STRSGV. transfers as well as $6.8 million in net mark to market changes and the $1.2 million of accretion, the fair value of our investment portfolio was $696.2 million at the end of Q four. This compares to our portfolio fair value of $706.8 million at the end of the previous quarter. Our weighted average effective yield on our income-producing debt investments increased to 13.7% as of the end of Q4, up from 13.6% at the end of Q three. The variance was primarily driven by a slight increase in the portfolio's base rate and spread. We continue to utilize the STRS. JV successfully. The JV generated investment income to the BDC of approximately $4.2 million in Q4, up from $3.9 million in Q3. As of December 31, the fair value of the JV's portfolio was $312.2 million. And at the end of Q4, the JV's portfolio had an average unlevered yield of 12.4%. This compares to 12.5% at the end of Q. 3% and 11.3% at the end of Q4 2022. The year-over-year increase in our unlevered yield is primarily due to rising base rates. The JV is currently producing an average annual return on equity in the mid 10s to the BDC. We believe White Horse as equity investment in the JV provides attractive returns for our shareholders.
Transitioning to the BDC's portfolio more broadly, there were some markdowns in the portfolio during Q4 with mark-to-market declines being driven by our investments in American Crafts, Atlas purchaser which is also known as aspect software and clarity products. These declines were partially offset by not mark-to-market increases in various portfolio investments. As we shared before, we continue to see some pressure in our portfolio and the general economy, primarily in the consumer segment. We remain vigilant in monitoring our portfolio companies, and we have not seen demand weakness in other sectors, including general industrial, B2B, health care, TMT or financial services. Additionally, our portfolio includes mostly non-cyclical or electrical borrowers. We have no direct exposure to oil and gas auto, new home construction or restaurants. The vast majority of our deals have strong covenant protection, and we are finding that in most cases, private equity firms we partnered with are supporting their credits with new cash or contingent equity as needed. No new credits were moved to nonaccrual during the quarter and at the end of Q4, investments in nonaccrual totaled 2% of our total portfolio at fair value compared with 2.8% at the end of Q. three across the portfolio. Generally, we see balanced activity in terms of credit performance and remain overall pleased with the health of our debt portfolio. American craft remains on nonaccrual status. The turnaround of this troubled asset is taking longer than anticipated, and the investment was marked down by $7.5 million or approximately $0.32 per share.
In terms of our portfolio NAV in Q4, our investments in play Monster, Crown brands and Archer remain on nonaccrual as well subsequent to the end of Q4, we and other lenders took control of our reserve, and we believe that the asset has potential upside in the coming 2018 to 24 months. As we implement changes in management and company structure to optimize profitability, we hope to successfully exit our Crown investment this quarter.
Finally, a markdown was taken on Atlas purchaser aspect software, which we believe to be appropriate given the Company's ongoing restructuring. The asset remains on accrual status and we continue to monitor the situation. We remain optimistic in our ability to effectively navigate and turnaround troubled investments, illustrated by the successful exit of our investment in our coal during Q2, which generated a 1.2 times return on invested capital White Horse and HRG. capital have a proven ability to leverage our collective resources and expertise to turnaround investments with the objective of minimizing losses and capital preservation. We are actively working with our troubled portfolio companies to improve their performance.
Turning to the broader lending market, the markets in Q4 were characterized by increased liquidity from both direct lenders and banks as a result, pricing in the market for sponsored deals fell by about 50 basis points on average as we enter 2024 as market activity has continued to ramp up with additional liquidity becoming available in the marketplace. We are seeing people have a more optimistic view on the economy than they had in most of 2023. And as a result, our competitors are becoming more aggressive on both leverage and price, including for companies that we see as moderate and deep cyclicals, the aggressiveness of the on-the-run sponsor market right now is reminiscent of 2021 in terms of both price and structure pricing on upper mid-market deals, it's come down to between so for $40, $75 and so for five 50, we are seeing so for $500 to $575 as pricing for mid-market deals. And so for $550 to $625 for lower mid-market deals in the lower mid-market, we're seeing deals being levered four to five times leverage on mid-market deals is higher at 4.5 to 6 times, and we're seeing deals getting done for cyclicals at 4.5 to 5.5 times leverage, which we view is very aggressive for a cyclical credit loan to value, which in Q3 was typically under 50% is now up to 55% in the lower mid-market and 60% to 65% in the mid-market and upper mid-market in the non-sponsor sector deals are still consistently at loan-to-value of under 50% with an average 40% to 45% loan to value. Additionally, pricing has remained stable in the nonsponsor market and so for [$650 to $850] with leverage multiples of three to 4.5 times in the current market environment, we are being very cautious in our deal sourcing with the On the Run sponsors, especially our focus remains on the off the run market and nonsponsor market for market terms remained comparatively more attractive. Our view on the economy in 2024 is that because unemployment remains low. And because we believe there are underlying pressures on wages and raw materials that are still raising prices, we don't think the Fed is going to hit its 2% inflation target as quickly as other people seem to think we can maintain our perspective that the market is overly optimistic on rate cuts and expect that higher rates will slow down the economy, we don't foresee a recession, but at a minimum, we expect slower growth through 2024 and into 2025 in an elevated market environment like what we are seeing thus far in 2024, we derive particular benefit from our sourcing model, which allows us to source deals and corners of the market where there is less competition, including the off-the-run sponsor market and the nonsponsor market. Our three-tier sourcing architecture continues to provide the BDC with differentiated capabilities, and we continue to derive significant advantages from the shared resources and affiliation with HIG, who is a leader in the mid-market and lower mid-market. Whitehorse has 22 origination professionals located in 11 regional markets across North America. The strength of our origination pipeline enables us to be conservative in our deal selection. As a result, we believe the deals we are originating are more attractive than the general market in terms of risk and return. In general, we're seeing continuing rebound in terms of both deal volume and quality, and our pipeline activity levels remain solid following repayment activity in Q4, the BDC balance sheet has approximately $50 million of capacity for new assets at our target leverage range. The JV has approximately $40 million of capacity supplementing the BDC's existing capacity with the move in the market steel sort of prices. So for $625 and below our target for the JV and those prices $625 and above are targeted for the BDC balance sheet, we're actively working on 12 new mandates and add-on acquisitions of the new platform mandates or non-sponsored deals. And while there can be no assurance that any of these deals will close, all these mandates would fit within the BDC or our JV should we elect to transact subsequent to quarter end, we have closed five new originations and three add-ons to existing portfolio companies with several more pending of the new originations. One investment was transferred to the JV during the first quarter. In short, activity continues to pick up, and we remain cautiously optimistic that market conditions remain conducive for Whitehorse. Despite sustained concerns of economics softening, we believe we are well positioned to continue to source attractive opportunities, navigate economic challenges due to our rigorous underwriting standards and continue delivering on it to our shareholders. As a result, in our Q3 earnings release, we announced that the Board of Directors of the BDC approved an increase to our quarterly base dividend from $0.37 per share, up to $0.385 per share. Starting in Q4 of this year, the Board approved the decrease in the base management fee rate paid to HIG, Whitehorse advisers, the BDC adviser from 2% to 1.75% effective directly effective January first, 2024. This will have a further positive effect on our financial results and our ability to cover the increased base dividend on a go-forward basis.
Before I conclude, I'd like to take a moment to address the recent passing of our friend and fellow Board member, Kevin Burke. Kevin provided invaluable counsel throughout his tenure on the Board, and we are grateful for his dedication and service to WhiteHorse Finance, who is truly a privilege to have worked alongside Kevin, and we are deeply saddened by his passing.
With that, I'll turn the call over to Jason for additional performance details.
And a review of our portfolio composition duration.

Joyson Thomas

Thanks, Stuart, and thank you, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $10.6 million or $0.456 per share. This compares with Q. three GAAP NII and core NII of $10.8 million or $0.465 per share and our previously declared quarterly distribution of $0.385 per share. Q4 fee income increased quarter over quarter to approximately $0.6 million in Q4 from $0.4 million in Q. three Q. four amounts are highlighted by a $0.4 million prepayment fee generated from the full realization of our investment in Aon and a small amendment fee from motivational marketing. For the quarter, we reported a net increase in net assets resulting from operations of $3.4 million. Our risk ratings during the quarter showed that 77.7% of our portfolio positions carried either one or two rating, slightly lower than 78.2% in the prior quarter. As a reminder, a one rating indicates that a company has seen its risk of loss reduced relative to initial expectations. And a two rating indicates the Company is performing according to initial expectations.
Regarding the JV specifically, we continue to grow its portfolio. As Stuart mentioned earlier, we transferred four new deals and one add-on transaction totaling $26.6 million as of December 31, 2023, the JV's portfolio held positions and 34 portfolio companies with an aggregate fair value of $312.2 million compared to 32 portfolio companies at an aggregate fair value through under $13 million as of September 30, 2023. Subsequent to the end of the fourth quarter, we the company transferred three investments to the JV, including one new portfolio company. Investment in the JV continues to be accretive to the BDC's earnings, generating a mid-teens return on equity. As we've noted in prior calls, the yield on our investment in the JV may fluctuate period-over-period as a result of a number of factors, including the timing and amount of additional capital investments the changes in asset yields in the underlying portfolio as well as the overall credit performance of the JV's investment portfolio.
Turning to our balance sheet, we had cash resources of approximately $24.5 million at the end of Q4, including $13.7 million in restricted cash and approximately $138 million of undrawn capacity available under our revolving credit facility.
As of December 31, 2023, the company's asset coverage ratio for BART amounts as defined by the 1940 Act was 181%, which was above the minimum asset coverage ratio of 150%. Our Q4 net effective debt to equity ratio after adjusting for cash on hand, was 1.16 times consistent with the prior quarter.
Before I conclude and open up the call to questions, I'd like to again highlight our distributions.
This morning.
We announced that our Board declared a first quarter 2024 distribution of $0.385 per share, which is consistent with the previous quarter. As mentioned earlier by Stuart, in the fourth quarter of 2023, we increased our quarterly base distribution to $0.385 per share, which represents a cumulative increase of 8.5% as compared with the normal $0.355 per share dividend that was declared at the BDC's IPO. These actions speak to both the consistent strength of the platform as well as our resilient dual sourcing capabilities and being able to create a well-balanced portfolio generating consistent current income.
As was announced in the beginning of 2023, our Board also implemented a formulaic supplemental quarterly distribution for the fourth quarter, the Board did not declare a supplemental distribution, which is consistent with our formulaic supplemental distribution framework. We believe this framework allows us to maximize distributions to our shareholders while preserving the stability of our NAV, a fashion that we believe to be an important driver of shareholder economics over time in assessing distributions, we also consider our taxable income relative to amounts that we have distributed during the year when setting our overall dividend. Our current estimate of undistributed undistributed taxable income sometimes referred to as our spillover as of the end of Q4 2023 is approximately $32 million. We continue to believe that having a healthy level of spillover income is beneficial to the long-term stability of our base dividend. We will continue to monitor our undistributed earnings and balance these levels against prudent capital management considerations.
The upcoming distribution, the 46 consecutive quarterly distribution paid since our IPO in December 2012, with all distributions at or above a rate of $0.355 per share per quarter will be payable on April second, 2024 to stockholders of record as of March 22, 2024. As we said previously, we will continue to evaluate our quarterly distribution, both in the near and medium term. Based on the core earnings power of our portfolio in addition to other relevant factors that may warrant consideration.
With that, I'll now turn the call over to the operator for your questions.

Question and Answer Session

Operator

Operator, at this time, if you'd like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star-1 to ask a question.
Our first question comes from Mickey Schleien with Ladenburg because Good afternoon stored and Georgeson.

Mickey Schleien

So Murdo.
Hi, one question. This afternoon, Stuart, you mentioned how aggressive the market has become and spreads were tighter spreads and as more liquid end of the continuum and your focus now on direct origination, which as we know is harder to source and has a longer lead time. So are you are you comfortable in the BDC's ability to potentially replace all these repayments that you're likely to see with the direct origination deal flow in this environment that we're experiencing?

Stuart Aronson

Well, Mickey, I'd start by sharing with you that in 2022 and 2023, which were very favorable markets for lenders to originate deals in. We focused very heavily more than most of our competitors on getting call protection and on our nonsponsor deals, we got call protection at three to four years. And on many of our sponsor deals, we got call protection of three years or at least two years. So we think that that while repayments will pick up this year due to M&A activity. We think the repayments due to pricing will be mitigated by the call protection that we got in 2022 and 2023. Our overall volumes in the pipeline right now are pretty solid. And what we hear from the market is that they're likely to pick up based on higher M&A activity being driven by the more aggressive debt markets and the strong desire of LPs to get our returns of capital from private equity firms. So we do think that there will be plenty of volume to replace deals that get repaid, but are deals that have been put on in a higher interest rate environment may be replaced with assets that have lower spreads. So in the JV that could look like deals that were on at $600 being replaced with deals at $550 or $575.
And on the BDC balance sheet that could look like deals that were at $700 being replaced with deals that are $650 or $675 on. But there's definitely been a tightening of the pricing market in the sponsor sector. And as we've always shared with you, the non-sponsor sector remains pretty stable with pricing on deals typically between sulfur 650 and sulfur 900.

Mickey Schleien

Thanks, Stuart. That's very helpful. That's my only question this afternoon.

Stuart Aronson

Thank you, Mickey.

Operator

Next question comes from Bryce Rowe with B. Riley.

Bryce Rowe

Thanks. Good afternoon, Celebros Stuart, let me let me kind of start with the, um, some of the commentary around quarter to date, first quarter to date repayment activity, you noted five deals. I'm curious if those are driven by kind of price refinance or were they are they kind of slated for award they slated for maturity here in 24, maybe even driven by kind of M&A activity.

Stuart Aronson

Bryce, one of the deals was a deal that was maturing and the sponsor owner of the company not only wanted to refinance the debt, but wanted to take a dividend. And given the credit profile of the Company, we did not feel comfortable giving the Company a dividend, whereas the other lenders that were in the company did feel comfortable doing it. So that deal refinanced, but we chose to exit the other deals that repaid were mostly based on M&A activity where companies were being sold and we were getting repaid on the sale of those companies.

Bryce Rowe

Okay.
That's helpful.
And if you looked at kind of your schedule of investments, you have, I guess, a decent amount of maturities in 24 on that. How do you how do you how do you feel about, you know, those those kind of getting to the finish line D, do you think they can get refinanced within the BDC or the kind of foresee them from moving outside of the BDC.

Stuart Aronson

We have certain assets that we like for the long term based on our expectation of a muted economy in 2024 and 25.
And for those situations, we would hope to our refinance those companies or follow them to new owners. But we have other companies where we see long-term trend lines that we are less optimistic about. And as these companies come up for refinancing, we will probably not definitely but probably choose to exit. So there really is a mix based on our credit outlook for each of the deals. But the market is very aggressive right now and anything that we have that's maturing that is performing and marked at a normal level. We feel highly confident that the market will refinance those transactions with no problem.

Bryce Rowe

Okay. Okay.
As you noted, the capacity both at the BDC level and at the at the JV, does that capacity or let's say, with us this way, the capacity at the JV, is it taken up with the new deals that have already been kind of transferred in there? And is that kind of based on that, I guess, to current equity capital or borrowing base within the within the JV? I mean, do you have kind of more more firepower behind that in terms of being able to have to invest or commit more capital into the JV.

Stuart Aronson

I believe that the numbers of $50 million for the BDC balance sheet and $40 million for the JV, take into account all the recent transfers that we have done, they do not take into account the deals that are in pipeline that we are looking to close and again, all the new deals in pipeline that are looking to close our non-sponsor deals and all of those deals are priced at. So for six, 50 or higher, in fact, one of the nonsponsor deals will be closed here in Q. one was at modest leverage and modest loan to value. But because of our origination network, we were able to source an opportunity at so for plus 900. So that was and that's a first lien deal at at the normal what we would call bank terms. So very, very good origination on that.

Bryce Rowe

Yes, yes.
Okay.
Last one for me on you mentioned some some markups within the portfolio. What's what's driving the markups on that? But your specific, just any thoughts around the markets would be helpful.
Thanks.

Stuart Aronson

Yes, there are certain accounts where there is an improving credit situation.
I mentioned earlier that our Crown brands, we may be exiting this quarter and we have negotiated an exit on that. That if it happens, will be that that deal was marked up in the last quarter. And if we get this transaction done as contemplated it will be at a price that's even higher than the current mark at.

Bryce Rowe

Okay.
Right.
I'll jump back in queue.
Thanks, Stuart.

Stuart Aronson

No problem.
Thank you, Brian.

Operator

Your next question comes from Erik Zwick with Health Group.

Erik Zwick

Good afternoon. Sort of one wanted to start first with a question on the pipeline, which you've mentioned, David has a number of attractive opportunities on it and a number in process now. But wondering if you could maybe provide a little additional commentary in terms of the mix in terms of new versus add-on opportunities and also whether there's any kind of common themes you're noticing in terms of the type of opportunities and or kind of by industry or region of the country that you're seeing.

Stuart Aronson

I believe that the mix is about five new platforms and about seven add-on opportunities.
The add-on opportunities for the most part price above the current market because those deals were done in a higher priced market, although borrowers are looking for adjustments to price based on the fact that the market has become more aggressive on, as I mentioned before, all of the new pipeline activity that is mandated right now are nonsponsor deals. And all of those nonsponsor deals are priced at six, 50 and above, so would be targeted for the BDC balance sheet and there is no particular sector that we are finding more attractive. I would say what we are seeing there was recently a deal that was brought to us for a company that we thought was a good company and a scaled company, but it was a cyclical company. And on a cyclical, we don't like putting more than four times leverage on the Company and this deal came to us at five and a quarter times leverage and about 65% loan to value. And we just found that to be a stunningly high leverage multiple and loan to value for a cyclical company heading into what we believe is a weakening economy. And so despite the fact that that deal was well priced at $650 or above, we walked away from that opportunity. So we are sticking to our knitting as it regards a conservative credit outlook and the non-sponsor deals that we're working on. I believe are all levered between three and four times. So modest leverage, good foot, good cash flow coverages and companies that we believe will be are either non-cyclical or light cyclicals.

Erik Zwick

Thank you.
I appreciate the additional details there. And then I'm just looking at slide 8 of the presentation. I noticed that the average investment size in the portfolio has come down about $1 million since third quarter of third quarter of '22. So curious if that's something, you know that you guys have actively been trying to do to work the position size smaller or if it's more reflective, as you said, kind of the larger end of the market becoming more competitive? And just curious, would you expect that trend to continue? I'm just thinking that certainly at smaller deals makes it a little bit harder too kind of run in place and keep the portfolio size the same, but also potentially have some benefits in terms of lower concentration to particular position. So it shows, but your thoughts there?

Stuart Aronson

Yes, for a significant portion of the last two years, the VDC. has either been full or almost full and not able to take on new deals. So we actually feel good about the fact that we're getting some repayments and getting the opportunity to put new deals into the BDC arm. We definitely believe with our three-tier sourcing architecture that we are well-positioned to continue to bring in a solid flow of deals. We are definitely, as I mentioned earlier, focused in on on the off the run market and the nonsponsor market, which sometimes do smaller deals to sometimes do larger deals on. I would say that in general, over the last quarter, you're correct that the deals we were doing were more lower mid-market deals. And as a result, the average asset allocation to the BDC was a little bit lower. But in general, the most important thing is we are not putting any large concentrations in the BDC. When I first joined, we had positions that were $35 million or $40 million which on a BDC of our size, we thought was just too much of a concentration and we are going to keep our maximum allocations to no more than approximately $20 million going forward with an average allocation that will probably be closer to $8 million to $10 million to give us good diversity across the portfolio.

Erik Zwick

Great.
I appreciate the commentary, and thanks for taking my questions.

Stuart Aronson

No problem.

Operator

Our next question comes from Melissa Wedel with JPMorgan.

Melissa Wedel

Hi, thanks for taking my questions today. And finally, if possible, I missed this, but I wanted to check in with you about whether or not you provided a specific amount on the post quarter end and new investment activity? I think you said there were $39 million of repayments subsequent to quarter end, but I'm not sure we got a total amount on the origination side.

Stuart Aronson

I think it was five deals closed. But Jason, do you have how much volume, the new deals and add-on deals represented in this quarter so far.

Joyson Thomas

Yes.
In regards to new deployments, during during Q1, they approximated about $30 million. So I think the way to think about this right now is as of the end of Q4 to Stuart's earlier comments, we had about $50 million of capacity on the BDC balance sheet, taking into account the approximately $40 million of repayments during Q1. And then that gets offset by the $30 million of deployments we just did in Q1 currently right now. So I think that's the best way to think about it.

Melissa Wedel

Okay.
Okay.
That's really helpful. Thank you. And I wanted to also follow up about your comments on sort of the pipeline and it sounds like it's very clear based on your comments today that there is strong preference for the non-sponsored space just because of and the terms, the pricing, the leverage levels you can get there right now, would you say that that segment is developed, the pipeline is developing as strongly as sort of the sponsored space? Or is it a little bit tougher to source those Thank you.

Stuart Aronson

On non-sponsor business is always much harder to find much harder and longer to underwrite and frankly, even more complicated from a portfolio perspective. That said, our experience including during the COVID downturn, is that the non-sponsored deals that we do because they're very conservatively structured and levered have performed as well or better than our sponsor portfolio on. So we are actively involved in sourcing those nonsponsor effort of those nonsponsor transactions. It is frankly harder to source them than it is to source to sponsor deals, which just sort of come out on a regular basis, but we have 22 originators in 11 locations across North America and many of whom understand that their primary responsibility is to source either nonsponsor or off-the-run sponsor deals. And those teams due to the fact that we've had extremely low turnover over the past three years are very experienced in their regions and more broadly and our pipeline is solid at the moment. The pipeline is certainly not as large as it was in 2021 or even 2022. But it's similar to what it was in 2023. And from what we hear in the marketplace with the more aggressive terms available in the financing market, there's more M&A and more M&A activity going on and that should feed both our sponsor and non-sponsor pipeline.

Melissa Wedel

That's really helpful. I appreciate it. And one last one, if I could sneak it in there, right. So in the non-sponsored space. You mentioned that I think the the example that you gave were the owner wanted a dividend and to do a refi, you were comfortable with refi, not the dividend, et cetera, it begs the question in the non-sponsored space, what are you seeing the use of capital and as being right now that have a lot of refi activity or non-sponsored companies also engaging in M&A? Thank you.

Stuart Aronson

On the non-sponsored deals that we're working on are primarily loans that are targeted to grow companies, either organically or through M&A activity. Tom, I don't think any of the mandated deals involve dividends.
We are always very cautious about doing dividends to either private equity firms or non-sponsor owners.
But so these are primarily growth loans and again, the pickup in M&A activity broadly across the market does serve both nonsponsor and sponsor deal flow.

Melissa Wedel

Makes sense. Thanks so much.

Operator

This does conclude today's question and answer period. I will now turn the program back over to our presenters for any additional or closing remarks.

Stuart Aronson

And I appreciate everyone spending time with us on the call today and recognize that all of the NI was very strong that the NAV did decrease for the quarter.
We do believe that we mark deals on a realistic and conservative basis, which is not necessarily true through the entire BDC industry.
And we tried to be accurate each quarter based on the information we have that shed the companies that we have marked down, we are using the expertise across Whitehorse and across HIG to tried to turn those companies around. And we do believe that there is a possibility of recovery and potentially significant recovery in both 2024 and 2025 on some of those accounts.
So we will work hard to continue to optimize the portfolio.
And as I said in my prepared remarks, the Armkel acquisition transaction was a good example of a deal that we had to own the company for three years, but we're ultimately able to get out of that one at a 1.2 times return to the original capital invested. And with hard work and hopefully some fortunate luck, we hope to have similar types of recoveries on some of the other troubled assets we're dealing with right now, and that's it.
Appreciate everyone's time.
Thank you very much.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time.