WhiteHorse Finance Inc Reports Year-End Earnings and Declares Quarterly Distribution
Net Asset Value (NAV): Decreased to $316.8 million or $13.63 per share as of December 31, 2023, from $14.30 per share in 2022.
Investment Portfolio: Valued at $696.2 million with a weighted average effective yield of 13.7% on income-producing debt investments.
Net Investment Income: Reached $42.7 million or $1.838 per share for the full year, a 14.5% increase from the previous year.
Quarterly Distribution: Declared at $0.385 per share for the quarter ending March 31, 2024, payable on April 2, 2024.
Realized and Unrealized Loss: Reported a net loss on investments and foreign currency transactions of $22.3 million for the year.
Liquidity: Cash and cash equivalents stood at $24.5 million, with $138.5 million of undrawn capacity under its revolving credit facility.
On February 29, 2024, WhiteHorse Finance Inc (NASDAQ:WHF) released its 8-K filing, announcing financial results for the fourth quarter and full year of 2023. The company, a non-diversified, closed-end management investment company, focuses on originating senior secured loans to small-cap companies in the United States, aiming to generate attractive risk-adjusted returns for investors.
Performance and Challenges
WhiteHorse Finance reported a Net Asset Value (NAV) of $316.8 million, or $13.63 per share, a decrease from $14.30 per share in the previous year. The investment portfolio was valued at $696.2 million, with a weighted average effective yield of 13.7% on income-producing debt investments. The company's net investment income for the fourth quarter was $10.6 million, or $0.456 per share, and $42.7 million, or $1.838 per share, for the full year. This represents a nearly 15% increase compared to the fourth quarter of 2022 and was well above the regular dividend.
Despite these achievements, WhiteHorse Finance faced challenges, including markdowns on certain assets. However, the company's investments were underwritten at modest leverage levels, positioning them to service debt in a high-interest rate environment. The portfolio is predominantly composed of non-cyclical or lightly cyclical borrowers, which could mitigate some risks associated with economic downturns.
Financial Achievements and Importance
The company's financial achievements are significant in the asset management industry, where consistent and stable returns are key to attracting and retaining investors. The increase in net investment income is particularly important as it reflects the company's ability to generate earnings from its investment portfolio, which is critical for sustaining distributions to shareholders.
Key Financial Metrics
WhiteHorse Finance's annual distributions amounted to $1.55 per share, including a special distribution of $0.07 per share. The company also reported a net increase in net assets resulting from operations of approximately $20.4 million for the year. However, it faced a net realized and unrealized loss on investments and foreign currency transactions of $22.3 million for the year.
Liquidity remains strong with cash and cash equivalents of $24.5 million and $138.5 million of undrawn capacity under its revolving credit facility, providing the company with the flexibility to make new investments or meet other financial obligations.
"I am pleased to report that WhiteHorses core net investment income increased by nearly 15% compared with the fourth quarter of 2022 and was well in excess of our regular dividend," said Stuart Aronson, WhiteHorse Finances Chief Executive Officer. "While we marked down certain assets during the period, the investments in our existing portfolio were underwritten at modest leverage levels and are generally well-positioned to service our debt in a sustained high-interest rate environment."
Analysis of Company's Performance
WhiteHorse Finance's performance in 2023 demonstrates resilience in a challenging economic environment. The company's strategic focus on originating loans to small-cap companies with modest leverage has allowed it to maintain a stable investment income stream. The increase in net investment income is a testament to the company's effective investment strategy and management capabilities.
However, the decrease in NAV and the net loss on investments indicate that the company is not immune to market volatility and the impact of economic factors. The management's cautious outlook and focus on conservative deal selection in the face of prevailing economic conditions suggest a strategic approach to risk management going forward.
For more detailed information on WhiteHorse Finance Inc's financial results, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from WhiteHorse Finance Inc for further details.
This article first appeared on GuruFocus.
