Classified in: Business, Covid-19 virus
Subjects: ERN, CCA, DIV

WhiteHorse Finance, Inc. Announces First Quarter 2020 Earnings Results

NEW YORK, May 11, 2020 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (Nasdaq: WHF) today announced its financial results for the quarter ended March 31, 2020.

First Quarter 2020 Summary Highlights

• Net Asset Value of $284.7 million, or $13.86 per share
• Investment portfolio⁽¹⁾ totaling $557.1 million
• STRS JV investment portfolio totaling $123.0 million
• Gross investment additions⁽²⁾ of $26.8 million, including new originations of $26.1 million and $0.7 million of fundings for add-ons to existing investments
• Net investment income of $6.1 million, or $0.297 per share
• Core net investment income of $5.5 million, or $0.267 per share⁽³⁾
• First 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 $42.1 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, "The COVID-19 pandemic drove a correction within the debt markets that saw lower debt levels, tighter deal terms, and increased pricing. As a result, we are taking a very conservative view towards adding new assets, having originated 4 first lien loans during the quarter. Our liquidity position remains strong, and we have been working hand in hand to support our borrowers through this difficult time. Over the years we've taken deliberate action to build our portfolio upon rigorous underwriting, diversification in our underwriting strategy, a focus on first lien credits, selective sourcing that avoids aggressive credit terms, a focus on the lower middle market, and diligent management of our liquidity position. We are confident that staying true to these longstanding principles has prepared us to navigate the current volatility and deliver for our stakeholders."

Portfolio and Investment Activity

As of March 31, 2020, the fair value of WhiteHorse Finance's investment portfolio was $557.1 million, compared with $589.7 million as of December 31, 2019. The portfolio at March 31, 2020 consisted of 65 positions across 52 companies with a weighted average effective yield of 9.9% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV) was $9.3 million with the overall portfolio comprised of approximately 80% first lien secured loans, 10% second lien secured loans, 2% equity and 8% in investments in STRS JV.  All loans were substantially variable-rate investments (primarily indexed to LIBOR), with nearly all performing floating rate investments having interest rate floors.

WhiteHorse Finance made investments in four new portfolio companies totaling $26.1 million. Also, the Company added $0.7 million to an existing portfolio company. Proceeds from sales and repayments, including $0.1 million of net repayments on revolvers, totaled approximately $16.9 million for the quarter, driven by a partial paydowns from Oasis Legal Finance, LLC of $7.5 million. 

In addition to the transactions above, during the three months ended March 31, 2020, WhiteHorse Finance transferred assets to the STRS JV totaling $28.5 million in exchange for a net investment in STRS JV of $12.7 million as well as cash proceeds of $15.8 million.

WHF STRS Ohio Senior Loan Fund LLC

As of March 31, 2020, STRS JV's portfolio totaled $123.0 million, consisted of 14 portfolio companies and had a weighted average effective yield of 7.8% on its portfolio.

Results of Operations

For the three months ended March 31, 2020, net investment income was approximately $6.1 million, compared with approximately $7.6 million for the same period in the prior year, representing a decrease of approximately 19.8%. The decrease in net investment income for the year-over-year period is primarily attributable to lower non-recurring fee and accelerated interest accretion income in the current quarter as well as an increase in interest expense and management fees recognized for the quarter ended March 31, 2020. The decrease in fee and accretion income as compared to the prior year is a result of a reduced level of prepayment activity as well as lower volume in nonrecurring, fee-generating events in the quarter ended March 31, 2020 as compared to the same period in the prior year. The increase in interest expense was driven by higher borrowing balances and the increase in management fees was due to an increase in the average gross assets for the first quarter 2020.

For the three months ended March 31, 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 $5.5 million, compared with $7.5 million for the same period in the prior year, representing a decrease of approximately 26.9%.

For the three months ended March 31, 2020, WhiteHorse Finance reported a net realized and unrealized loss on investments and foreign currency transactions of $27.1 million. This compares with a net realized and unrealized loss on investments and foreign currency transactions of $0.6 million for the three months ended March 31, 2019. The decrease in the year-over-year period was primarily attributable to markdowns in the portfolio as a result of market disruptions caused by the COVID-19 pandemic in the quarter ended March 31, 2020.

WhiteHorse Finance reported a net decrease in net assets resulting from operations of approximately $21.0 million for the three months ended March 31, 2020, which compares with a net increase of $7.0 million for the three months ended March 31, 2019.

WhiteHorse Finance's NAV was $284.7 million, or $13.86 per share, as of March 31, 2020, as compared with $313.0 million, or $15.23 per share, as of December 31, 2019.

Liquidity and Capital Resources

As of March 31, 2020, WhiteHorse Finance had cash and cash equivalents of $28.1 million, as compared with $27.5 million as of December 31, 2019, inclusive of restricted cash. As of March 31, 2020, the Company also had $19.1 million of undrawn capacity under its revolving credit facility.

Distributions

On March 17, 2020, the Company declared a distribution of $0.355 per share for the quarter ended March 31, 2020, consistent for the thirtieth consecutive quarter since the Company's IPO. The distribution was paid on April 3, 2020 to shareholders of record as of March 27, 2020.

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 first quarter results at 2:30 p.m. ET on Monday, May 11, 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 # 5258636. 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 May 18, 2020. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID #5258636. 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 $37 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 March 31, 2020 and March 31, 2019.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended March 31, 2020 and March 31, 2019 (in thousands, except per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A summary of outstanding financial instruments at March 31, 2020 is as follows:

Forward Currency Contracts

 

 

 

Contacts

Stuart Aronson
WhiteHorse Finance, Inc.
212-506-0500
[email protected]  

or

Joyson Thomas
WhiteHorse Finance, Inc.
305-379-2322
[email protected]

or

Sean Silva
Prosek Partners
646-818-9122
[email protected]

SOURCE WhiteHorse Finance, Inc.

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