WhiteHorse Finance, Inc. Announces Second Quarter 2020 Earnings Results and Declares Quarterly Distribution of $0.355 Per Share

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NEW YORK , Aug. 10, 2020 /PRNewswire/ --  WhiteHorse Finance, Inc.  ("WhiteHorse Finance" or the "Company") (Nasdaq: WHF) today announced its financial results for the quarter ended June 30, 2020 . Additionally, the Company announced that its board of directors has declared a distribution of $0.355 per share with respect to the quarter ending September 30, 2020 . The distribution will be payable on October 2, 2020 to stockholders of record as of September 21, 2020 .

Second Quarter 2020 Summary Highlights

  • Net Asset Value of $300.2 million , or $14.61 per share

  • Investment portfolio (1)  totaling $547.4 million

  • STRS JV investment portfolio totaling $160.8 million

  • Gross investment additions (2)  of $39.4 million , including new positions of $33.6 million and $5.8 million of fundings for add-ons to existing investments

  • Net investment income of $5.2 million , or $0.255 per share

  • Core net investment income of $5.2 million , or $0.255 per share (3)

  • Second quarter distribution of $0.355 per share

(1)

Includes investments in WHF STRS Ohio Senior Loan Fund LLC ("STRS JV"), an unconsolidated joint venture, totaling $48.9 million, at fair value.

(2)

Excludes investments made in STRS JV.

(3)

Core net investment income is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding (i) the net impact of costs associated with the refinancing of the Company's indebtedness, (ii) the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and (iii) excise and other income taxes related to such net realized gains and losses (net of incentive fees). The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Additional information on core net investment income and a reconciliation of core net investment income to its most directly comparable GAAP financial measure, net investment income, are set forth in Schedule 1 hereto.

Stuart Aronson , WhiteHorse Finance's Chief Executive Officer commented, "Five months into the COVID-19 pandemic, we have seen the market slowly recover from the first shock with moderate pricing and slightly higher deal activity. While NII for the quarter was below our goal, NAV increased materially and liquidity dramatically improved. During the quarter, we continued to grow our portfolio with three new first lien positions and our portfolio is now comprised of 93.8% first lien loans. Recently, we also reduced outstanding borrowings on our credit facility to its minimum requirement and this influx of liquidity will allow us to rebuild our pipeline and take advantage of the better deals we are now seeing in the marketplace. We will continue leveraging our three-tiered sourcing approach and rigorous underwriting standards while continuing to build value for our shareholders."

Portfolio and Investment Activity

As of June 30, 2020 , the fair value of WhiteHorse Finance's investment portfolio was $547.4 million , compared with $557.1 million as of March 31, 2020 . The portfolio at June 30, 2020 consisted of 68 positions across 53 companies with a weighted average effective yield of 9.6% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV) was $8.8 million with the overall portfolio comprised of approximately 83% first lien secured loans, 5% second lien secured loans, 3% equity and 9% in investments in STRS JV.  Almost all loans were substantially variable-rate investments (primarily indexed to the London Interbank Offered 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 June 30, 2020 , WhiteHorse Finance made investments in three new portfolio companies totaling $33.6 million and added a total of $5.8 million to three existing portfolio companies. Proceeds from sales and repayments, including $0.3 million of net repayments on revolvers, totaled approximately $36.9 million for the quarter ended June 30, 2020 , driven by a full paydown from Sigue Corporation of $24.8 million

In addition to the transactions above, during the three months ended June 30, 2020 , WhiteHorse Finance transferred an aggregate of $36.6 million in assets to STRS JV in exchange for a net investment in STRS JV of $5.7 million as well as cash proceeds of $30.9 million .

WHF STRS Ohio Senior Loan Fund LLC

As of June 30, 2020 , STRS JV's portfolio totaled $160.8 million , consisted of 18 portfolio companies and had a weighted average effective yield of 7.9% on its portfolio.

Results of Operations

For the three months ended June 30, 2020 , the Company's net investment income was approximately $5.2 million , compared with approximately $7.2 million for the same period in the prior year, representing a decrease of approximately 27.8%. The decrease in net investment income for the year-over-year period is primarily attributable to lower non-recurring fee income in the current quarter. The decrease in fee income during the quarter ended June 30, 2020 as compared to the same period in the prior year is a result of a lower volume in non-recurring, fee-generating events. The decrease in fee income during the quarter ended June 30, 2020 was partially offset by a decrease in incentive fees as compared to the same period in the prior year. The incentive fees decrease was primarily due to lower net investment income in the current quarter.

For the three months ended June 30, 2020 , core net investment income, a non-GAAP financial measure that excludes capital gains incentive fee accruals, the net effects of excise or other income taxes related to net realized gains and losses, and the associated costs of refinancing the Company's indebtedness, was $5.2 million , compared with $7.4 million for the same period in the prior year, representing a decrease of approximately 29.4%.

For the three months ended June 30, 2020 , WhiteHorse Finance reported a net realized and unrealized gain on investments and foreign currency transactions of $17.6 million . This compares with a net realized and unrealized gain on investments and foreign currency transactions of $1.0 million for the three months ended June 30, 2019 . The increase in the year-over-year period was primarily attributable to markups in the portfolio as a result of overall market stability and price recovery from the COVID-19 pandemic in the prior quarter.

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $22.8 million for the three months ended June 30, 2020 , which compares with a net increase of $8.2 million for the three months ended June 30, 2019 .

WhiteHorse Finance's net asset value was $300.2 million , or $14.61 per share, as of June 30, 2020 , as compared with $284.7 million , or $13.86 per share, as of March 31, 2020 .

Liquidity and Capital Resources

As of June 30, 2020 , WhiteHorse Finance had cash and cash equivalents of $20.9 million , as compared with $28.1 million as of March 31, 2020 , inclusive of restricted cash. As of June 30, 2020 , the Company also had $57.8 million of undrawn capacity under its revolving credit facility.

Distributions

On June 2, 2020 , the Company declared a distribution of $0.355 per share for the quarter ended June 30, 2020 . The distribution was paid on July 3, 2020 to stockholders of record as of June 19, 2020 , and marks the thirty-first consecutive quarterly distribution paid since the Company's initial public offering with all distributions consistently paid at the quarterly rate of $0.355 per share.

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 second quarter results at 2:00 p.m. ET on Monday, August 10, 2020 . To access the teleconference, please dial 706-758-9224 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference ID #3181299. 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 August 17, 2020 . The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID #3181299. A webcast replay will also be available on the investor relations portion of the Company's website at www.whitehorsefinance.com .

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held, lower middle market companies across a broad range of industries.  The Company's investment activities are managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC, ("H.I.G. Capital"). H.I.G. Capital is a leading global alternative asset manager with $39 billion of capital under management(4) across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com .  For more information about the Company, please visit http://www.whitehorsefinance.com .

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

 (4) Based on total capital commitments managed by H.I.G. Capital and affiliates.

SCHEDULE 1

As a supplement to GAAP financial measures, the Company has provided information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. The Company's non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted to exclude the net impact of costs associated with the refinancing of the Company's indebtedness, the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and excise or other income taxes related to such net realized gains and losses (net of incentive fees). There were no excise or other income taxes related to net realized gains and losses, nor did the Company refinance any of its indebtedness for the quarters ended June 30, 2020 and June 30, 2019 . Additionally, there were no accruals for the capital gains incentive fee attributable to net realized and unrealized gains and losses for the three months ended June 30, 2020 .

The following table provides a reconciliation of net investment income to core net investment income for the three months ended June 30, 2020 and June 30, 2019 (in thousands, except per share data):



June 30, 2020



June 30, 2019




Amount



  Per Share

Amounts



Amount



  Per Share

Amounts


Net investment income


$

5,240



$

0.255



$

7,226



$

0.352


Net impact of costs associated with refinancing of
indebtedness



-




-




-




-


Accrual for capital gains incentive fee



-




-




198




0.010


Net impact of excise tax expense related to net realized gains
and losses



-




-




-




-


Core net investment income


$

5,240



$

0.255



$

7,424



$

0.362



















 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)  




June 30, 2020



December 31,
2019




(Unaudited)





Assets









Investments, at fair value









   Non-controlled/non-affiliate company investments


$

490,013



$

546,744


   Non-controlled affiliate company investments



8,521




9,651


   Controlled affiliate company investments



48,863




33,293


Total investments, at fair value (amortized cost $565,762 and $597,725, respectively)



547,397




589,688


Cash and cash equivalents



2,263




4,294


Restricted cash and cash equivalents



18,487




23,252


Restricted foreign currency (cost of $143)



136





Interest and dividend receivable



5,900




6,010


Amounts receivable on unsettled investment transactions



297




360


Prepaid expenses and other receivables



464




7,620


Total assets


$

574,944



$

631,224











Liabilities









Debt


$

252,671



$

298,924


Distributions payable



7,294




7,294


Management and incentive fees payable



7,359




8,290


Interest payable



1,315




1,674


Accounts payable and accrued expenses



1,163




1,944


Amounts payable on unsettled investment transactions



4,900





Unrealized depreciation on foreign currency forward contracts



3





Advances received from unfunded credit facilities



17




143


Total liabilities



274,722




318,269











Commitments and contingencies


















Net assets









Common stock, 20,546,032 and 20,546,032 shares issued and outstanding, par value $0.001 per share, respectively, and 100,000,000 authorized



21




21


Paid-in capital in excess of par



300,744




300,744


Accumulated earnings (deficit)



(543)




12,190


Total net assets



300,222




312,955


Total liabilities and total net assets


$

574,944



$

631,224











Number of shares outstanding



20,546,032




20,546,032


Net asset value per share


$

14.61



$

15.23


 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)




Three months ended June 30,



Six months ended June 30,




2020



2019



2020



2019


Investment income

















From non-controlled/non-affiliate company investments

















   Interest income


$

12,145



$

12,746



$

25,284



$

27,238


   Fee income



539




2,926




830




4,083


   Dividend income



30




-




79




-


From non-controlled affiliate company investments

















   Dividend income



263




312




538




587


From controlled affiliate company investments

















   Interest income



606




-




1,231




-


   Dividend income



240




-




393




-


Total investment income



13,823




15,984




28,355




31,908



















Expenses

















Interest expense



3,223




3,176




6,891




6,249


Base management fees



2,950




2,818




6,042




5,407


Performance-based incentive fees



1,311




2,055




1,752




3,806


Administrative service fees



171




159




...

342




317


General and administrative expenses



730




532




1,610




1,214


Total expenses, before fees waived



8,385




8,740




16,637




16,993


Base management fee waived



-




(220)




-




(397)


Total expenses, net of fees waived



8,385




8,520




16,637




16,596


Net investment income before excise tax



5,438




7,464




11,718




15,312


Excise tax



198




238




376




475


Net investment income after excise tax



5,240




7,226




11,342




14,837



















Realized and unrealized gains (losses) on
investments and foreign currency
transactions

















Net realized gains (losses)

















Non-controlled/non-affiliate company investments



(77)




-




433




(2,018)


Non-controlled-affiliate company investments



-




-




-




-


Foreign currency transactions



70




-




67




-


Foreign currency forward contracts



(6)




-




-




-


Net realized gains (losses)



(13)




-




500




(2,018)


Net change in unrealized appreciation (depreciation)

















Non-controlled/non-affiliate company investments



15,841




937




(6,355)




2,925


Non-controlled affiliate company investments



871




56




(1,130)




(520)


Controlled affiliate company investments



1,111




-




(2,842)




-


Translation of assets and liabilities in foreign currencies



(237)




-




343




-


Foreign currency forward contracts



(2)




-




(3)




-


Net change in unrealized appreciation (depreciation)



17,584




993




(9,987)




2,405


Net realized and unrealized gains (losses) on investments



17,571




993




(9,487)




387


Net increase in net assets resulting from operations


$

22,811



$

8,219



$

1,855



$

15,224



















Per Common Share Data

















Basic and diluted earnings per common share


$

1.11



$

0.41



$

0.09



$

0.74


Dividends and distributions declared per common share


$

0.36



$

0.36



$

0.71



$

0.71


Basic and diluted weighted average common shares outstanding



20,546,032




20,546,032




20,546,032




20,546,032


WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

June 30, 2020

(in thousands)


Investment Type(1)


Spread
Above
Index(2)

Interest
Rate(3)


Acquisition Date(10)


Maturity
Date


Principal/
Share
Amount


Amortized
Cost


Fair
Value(11)


Fair Value
As A
Percentage
of Net
Assets


North America




















Debt Investments




















Advertising




















Fluent, LLC




















First Lien Secured

Term Loan


L+ 7.00%


7.50%


03/26/18


03/27/23


8,645


$

8,645


$

8,619


2.87

%



(0.50% Floor)


















Connexity, Inc.




















First Lien Secured Term Loan


L+ 8.50%


10.00%


05/21/20


05/21/25


11,000



10,678



10,675


3.56




(1.50% Floor)




























19,645



19,323



19,294


6.43


Agricultural & Farm Machinery




















Bad Boy Mowers Acquisition, LLC




















First Lien Secured Term Loan


L+ 5.75%


6.75%


12/19/19


12/06/25


10,333



10,049



9,816


3.27




(1.00% Floor)


















Air Freight & Logistics




















Access USA Shipping, LLC




















First Lien Secured Term Loan


L+ 8.00%


9.50%


02/08/19


02/08/24


5,505



5,446



5,441


1.81




(1.50% Floor)


















Application Software




















Newscycle Solutions, Inc.




















First Lien Secured Term Loan


L+ 7.00%


8.00%


06/14/19


12/29/22


5,195



5,122



4,832


1.61




(1.00% Floor)


















First Lien Secured Revolving Loan


L+ 7.00%


8.00%


06/14/19


12/29/22


301



298



280


0.09




(1.00% Floor)




























5,496



5,420



5,112


1.70


Automotive Retail




















Team Car Care Holdings, LLC




















First Lien Secured Term Loan(12)


base rate+ 7.99%


9.40%


02/26/18


02/23/23


16,491



16,295



15,900


5.30




(1.00% Floor)


















BW Gas & Convenience Holdings, LLC




















First Lien Secured Term Loan


L+ 6.25%


6.43%


11/15/19


11/18/24


8,288



7,993



8,039


2.68




(0.00% Floor)




























24,779



24,288



23,939


7.98


Broadcasting




















Alpha Media, LLC




















First Lien Secured Term Loan


L+ 6.00%


7.00%


08/14/18


02/25/22


5,155



5,077



4,923


1.64




(1.00% Floor)


















Rural Media Group, Inc.




















First Lien Secured Term Loan


L+ 8.75%


9.75%


12/29/17


12/29/22


3,391



3,358



3,391


1.13




(1.00% Floor)




























8,546



8,435



8,314


2.77


Cable & Satellite




















Bulk Midco, LLC




















First Lien Secured Term Loan(15)


P+ 6.23%


9.48%


06/08/18


06/08/23


15,000



14,868



13,725


4.57




(0.75% Floor)


















Communications Equipment




















Sorenson Communications, LLC




















First Lien Secured Term Loan


L+ 6.50%


6.81%


03/15/19


04/29/24


4,319



4,220



4,153


1.38




(0.00% Floor)


















Construction & Engineering




















Atlas Intermediate Holdings LLC




















First Lien Secured Term Loan


L+ 6.25%


7.25%


05/26/20


02/14/26


15,464



14,547



14,553


4.85




(1.00% Floor)


















Data Processing & Outsourced Services




















FPT Operating Company, LLC/




















TLabs Operating Company, LLC




















First Lien Secured Term Loan


L+ 8.25%


9.25%


12/23/16


06/07/24


24,595



24,401



23,120


7.70




(1.00% Floor)


















Geo Logic Systems Ltd. (5)




















First Lien Secured Term Loan (13)


C +6.25%


7.25%


12/19/19


12/19/24


6,795



5,089



4,701


1.57




(1.00% Floor)


















First Lien Secured Revolving Loan (7)(13)


C +6.25%


7.25%


12/19/19


12/19/24


-



-



(12)


-




(1.00% Floor)




























31,390



29,490



27,809


9.27


Department Stores




















Mills Fleet Farm Group, LLC




















First Lien Secured Term Loan


L+ 7.00%


8.59%


10/24/18


10/24/24


13,964



13,690



12,567


4.19




(1.00% Floor)


(0.75%PIK)
















Distributors




















Crown Brands, LLC




















First Lien Secured Term Loan


L+ 8.00%


9.50%


01/28/19


01/25/24


5,727



5,625



5,164


1.72




(1.50% Floor)


















First Lien Secured Delayed Draw Loan


L+ 8.00%


9.50%


06/10/20


01/25/24


850



850



766


0.26




(1.50% Floor)




























6,577



6,475



5,930


1.98


Diversified Capital Markets




















TOUR Intermediate Holdings, LLC




















First Lien Secured Delayed Draw Loan


L+ 7.00%


8.00%


06/30/20


05/15/25


1,360



1,334



1,335


0.44




(1.00% Floor)


















Diversified Chemicals




















Sklar Holdings, Inc.




















First Lien Secured Term Loan


L+ 7.00%


9.00%


11/13/19


05/13/23


8,903



8,713



8,643


2.88




(1.00% Floor)


(1.00%PIK)
















WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

June 30, 2020

(in thousands)


Diversified Support Services



















ImageOne Industries, LLC



















First Lien Secured Term Loan


L+ 10.00%


11.00%


01/11/18


01/11/23


7,218



$

7,058



$

7,073


2.36

%



(1.00% Floor)


(4.00%PIK)


















First Lien Secured Revolving Loan(4)(7)


L+ 10.00%


11.00%


07/22/19


12/12/22


5




5




(11)


-




(1.00% Floor)


(4.00%PIK)


















NNA Services, LLC






















First Lien Secured Term Loan


L+ 7.00%


8.50%


10/16/18


10/16/23


9,757




9,629




9,635


3.21




(1.50% Floor)






























16,980




16,692




16,697


5.57


Education Services






















EducationDynamics, LLC






















First Lien Secured Term Loan


L+ 7.50%


8.50%


11/26/19


11/26/24


11,406




11,205




11,349


3.78




(1.00% Floor)




















Food Retail






















AG Kings Holdings, Inc.






















First Lien Secured Term Loan(4)(8)


P+ 11.00%


14.25%


08/10/16


08/10/21


35,693




17,737




21,280


7.09




(0.75% Floor)


(2.00%PIK)


















Health Care Facilities






















Grupo HIMA San Pablo, Inc.






















First Lien Secured Term Loan A


L+ 9.00%


9.69%


05/15/19


04/30/19


3,855




3,855




2,891


0.96
























First Lien Secured Term Loan B


L+ 9.00%


10.50%


02/01/13


04/30/19


13,511




13,511




10,133


3.38




(1.50% Floor)




















Second Lien Secured Term Loan(8)


N/A


15.75%


02/01/13


07/31/18


1,028




1,024




-


-






(2.00%PIK)




























18,394




18,390




13,024


4.34


Health Care Services






















CHS Therapy, LLC






















First Lien Secured Term Loan A


L+ 8.50%


10.00%


06/14/19


06/14/24


7,518




7,406




7,302


2.43




(1.50% Floor)




















Lab Logistics, LLC






















First Lien Secured Term Loan


L+ 6.50%


7.56%


10/16/19


09/25/23


106




105




104


0.03




(1.00% Floor)




















First Lien Secured Delayed Draw Loan


L+ 6.50%


7.73%


10/16/19


09/25/23


5,262




5,230




5,157


1.72




(1.00% Floor)




















PMA Holdco, LLC






















First Lien Secured Term Loan


L+ 10.00%


11.00%


06/28/18


06/28/23


12,841




12,616




12,713


4.23




(1.00% Floor)






























25,727




25,357




25,276


8.41


Home Furnishings






















Sure Fit Home Products, LLC






















First Lien Secured Term Loan(8)


L+ 9.75%


10.75%


10/26/18


07/13/22


5,215




5,157




4,206


1.40




(1.00% Floor)




















Interactive Media & Services






















What If Media Group, LLC






















First Lien Secured Term Loan


L+ 6.50%


7.50%


10/02/19


10/02/24


12,756




12,539




12,692


4.23




(1.00% Floor)




















Internet & Direct Marketing Retail






















Potpourri Group, Inc.






















First Lien Secured Term Loan


L+ 8.25%


9.75%


07/03/19


07/03/24


18,525




18,194




17,784


5.92




(1.50% Floor)




















Investment Banking & Brokerage






















Arcole Acquisition Corp(5)






















First Lien Secured Term Loan A(4)(8)


L+ 10.25%


11.25%


11/29/18


11/30/23


5,231




5,159




4,185


1.39




(1.00% Floor)




















First Lien Secured Term Loan B(4)(8)


L+ 16.50%


17.50%


11/29/18


11/30/23


1,819




1,785




1,455


0.48




(1.00% Floor)


(1.50%PIK)


















JVMC Holdings Corp. (f/k/a RJO Holdings Corp)






















First Lien Secured Term Loan


L+ 6.50%


7.50%


02/28/19


02/28/24


14,032




13,930




13,892


4.63




(1.00% Floor)






























21,082




20,874




19,532


6.50


IT Consulting & Other Services






















AST-Applications Software Technology LLC