WhiteHorse Finance ((WHF)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for WhiteHorse Finance painted a mixed picture of the company’s performance. While the firm demonstrated robust capital deployment and maintained a strong portfolio structure, it faced challenges such as a decline in net asset value (NAV), increased nonaccrual investments, and reduced net investment income and yields. This dual narrative of stability and challenge was a key theme throughout the call.
Successful Capital Deployment
WhiteHorse Finance reported gross capital deployments of $35.4 million in the fourth quarter, which included six new originations totaling $27.4 million and $8 million for add-ons to existing investments. This highlights the company’s ongoing efforts to strategically deploy capital and expand its investment portfolio.
Strong Portfolio Structure
The company maintained a robust portfolio structure, with 98.4% of its debt portfolio being first lien, senior, and secured. The mix of approximately two-thirds sponsor and one-third non-sponsor investments underscores a balanced approach to risk management.
Continued Distribution Stability
WhiteHorse Finance declared a first-quarter distribution of $0.385 per share, maintaining consistency with previous quarters. This stability in distributions is a positive sign for investors seeking reliable returns.
JV Portfolio Stability
The STR SJV’s portfolio held an aggregate fair value of $295 million, with an average effective yield of 11.1%. This stability in the joint venture portfolio reflects the company’s ability to manage its investments effectively.
Cash Resources and Credit Facility
At the end of Q4, WhiteHorse Finance had cash resources of $27.8 million and approximately $173 million of undrawn capacity available under a revolving credit facility. These resources provide the company with significant financial flexibility.
Decline in Net Asset Value
The NAV per share decreased by approximately 3.6% from the prior quarter, impacted by net realized losses and markdowns totaling $4.9 million. This decline highlights some of the financial challenges the company is facing.
Increase in Nonaccrual Investments
Nonaccrual investments rose to 7.2% of the debt portfolio, up from 6.5% in the prior quarter. Significant markdowns in companies like American Crafts and Aspect Software contributed to this increase.
Decrease in Weighted Average Effective Yield
The weighted average effective yield on income-producing debt investments decreased to 12.5% from 13.1% in Q3, and on the overall portfolio from 10.6% to 10.2%. This reduction in yield is a concern for future income generation.
Lower Net Investment Income
The company’s Q4 GAAP net investment income was $8 million or $0.34 per share, down from $9.2 million or $0.394 per share in Q3. This decline in net investment income reflects the broader challenges faced by WhiteHorse Finance.
Forward-Looking Guidance
During the earnings call, WhiteHorse Finance provided detailed financial guidance and performance metrics. The company expects high repayment activity in 2025 and continues to focus on non-sponsor markets due to attractive risk returns and less competition. With a solid pipeline of approximately 170 deals, the company remains optimistic about future opportunities.
In conclusion, the earnings call for WhiteHorse Finance highlighted a mix of stability and challenges. While the company has maintained strong capital deployment and a robust portfolio structure, it faces hurdles such as declining NAV and increased nonaccrual investments. Looking forward, the company remains focused on strategic opportunities in non-sponsor markets, aiming to navigate the challenges and leverage its strong pipeline for future growth.