WhiteHorse Finance, Inc. 7.875% Notes due 2028 Q4 FY2024 earnings call

• Fourth quarter results were impacted by investment portfolio losses from net realized and unrealized losses.
• Portfolio activity: $35.4M gross capital deployments (6 new originations + add-ons), $46.2M repayments/sales.
• Lending market: Sponsor segments have aggressive underwriting; non-sponsor market is more attractive with better risk returns.
• Economic outlook: Economy is healthy but tariff uncertainty creates borrower uncertainty; Fed cautious on rate cuts.
• Post-quarter-end: 5 new investments and 3 add-ons closed, ~$40M capacity for new assets in BDC and JV.

In the fourth quarter of 2024, WhiteHorse Finance's Q4 GAAP net investment income and core NII was $8 million or $0.34 per share, slightly below Q3's $9.2 million or $0.394 per share. NAV per share at the end of Q4 was $12.31, a ~3.6% decrease from the prior quarter, with half the decline due to a $0.245 special dividend. Portfolio activity included gross capital deployments of $35.4 million, offset by total repayments and sales of $46.2 million, resulting in net repayments of $10.8 million. The JV's portfolio had an aggregate fair value of $295 million at quarter-end with an average effective yield of 11.1%. Nonaccrual investments totaled 7.2% of the debt portfolio.

• Board declared a first-quarter distribution of $0.385 per share, consistent with prior quarter.
• Expect high repayment activity in 2025.
• Pipeline has ~170 deals, with $40M capacity in BDC and $40M in JV for new assets.

• Investment portfolio losses, including $4.9M in net markdowns on American Crafts and Aspect Software.
• Nonaccrual investments increased to 7.2% of the debt portfolio.
• Tariff uncertainty creates borrower uncertainty and potential inflationary pressures.
• Aggressive underwriting in sponsor segments poses credit risks.

Q: Mickey Schleien asks if spreads could widen given market uncertainties.

A: Stuart Aronson says spreads were stable in Q4/Q3 and early 2025, noting a larger economic disruption or M&A flow needed for widening.

Q: Sean-Paul Adams inquires about nonaccruals and mitigation strategy.

A: Stuart Aronson discusses avoiding cyclicals, tariff analysis, and focusing on debt service coverage to mitigate nonaccruals.

Q: Melissa Wedel asks about NII decline, portfolio repricing, deleveraging, and dividend.

A: Joyceann Thomas and Stuart Aronson discuss base rate impact on NII, portfolio reset breakdown, deleveraging outlook, and dividend evaluation based on earnings power and board evaluation.