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

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