WhiteHorse Finance, Inc. Announces Third Quarter 2015 Earnings Results

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Nov 05, 2015, 07:00 ET

NEW YORK, Nov. 5, 2015 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (NASDAQ: WHF) today announced its financial results for the quarter ended September 30, 2015.

Third Quarter 2015 Summary Highlights

New investments of $27.9 million across three loans in three different sectors
Net investment income increased 40.0% year-over-year to $5.7 million
Third quarter net investment income of $0.378 per share
Third quarter distribution of $0.355 per share

Jay Carvell, WhiteHorse Finance's Chief Executive Officer commented, "We are pleased to report another strong quarter for WhiteHorse Finance. Through our affiliation with H.I.G. Capital, we continue to source attractive investments and manage our portfolio for the long term benefit of our shareholders. H.I.G.'s support was also evidenced this quarter in its affiliate buying program, where H.I.G. funds purchased over $5 million of WHF shares in the secondary market. We are pleased with the forward pipeline and believe opportunities in the credit markets will allow us to continue to achieve our origination strategy."

Portfolio and Investment Activity

As of September 30, 2015, the fair value of WhiteHorse Finance's investment portfolio was $376.1 million, compared with $387.5 million as of June 30, 2015. The portfolio at September 30, 2015 consisted of 32 positions across 26 companies with an average investment size of $11.8 million and a weighted average effective yield of 11.6 %. The majority of the portfolio was comprised of senior secured loans and more than 96.7% of these loans were variable-rate investments (primarily indexed to LIBOR), which should continue to position the portfolio well for a potential rising interest rate environment.

For the three months ended September 30, 2015, WhiteHorse Finance invested $27.9 million across three portfolio companies. Gross proceeds from sales and repayments totaled $35.3 million for the quarter. The Company continued to be highly selective with the deployment of capital into new investments.

Results of Operations

For the three months ended September 30, 2015, net investment income was $5.7 million, compared with $4.0 million for the same period in the prior year, representing an increase of 40.0%. The increase in net investment income was primarily attributable to an increase in the average earning investment balance over the same period in the prior year.

For the three months ended September 30, 2015, WhiteHorse Finance reported realized and unrealized losses on investments of $4.2 million. This compares with realized and unrealized gains on investments of $0.5 million for the three months ended September 30, 2014. The increase in realized and unrealized losses on investments was primarily attributable to fair value adjustments on three investments.

WhiteHorse Finance reported a net increase in net assets of $1.4 million for the three months ended September 30, 2015, which compares with $4.6 million for the three months ended September 30, 2014.

WhiteHorse Finance's NAV was $221.4 million, or $14.77 per share, as of September 30, 2015, as compared with $225.2 million, or $15.03 per share, reported as of June 30, 2015.

Liquidity and Capital Resources

As of September 30, 2015, WhiteHorse Finance had cash and cash equivalents of $25.9 million, as compared with $27.3 million as of June 30, 2015, inclusive of restricted cash. As of September 30, 2015, the Company had $61.5 million of undrawn capacity under its revolving credit facility.

Distributions

On August 20, 2015, the Company declared a distribution of $0.355 per share for the quarter ended September 30, 2015, consistent for the twelfth consecutive quarter since the Company's IPO. The distribution was payable on October 2, 2015 to shareholders of record as of September 21, 2015.

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 third quarter results at 10:00 am ET on Thursday, November 5, 2015. 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#64841910. 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 November 12, 2015. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID#64841910. 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 small-cap companies across a broad range of industries. The Company's investment activities are managed by its investment adviser, H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, L.L.C. ("H.I.G. Capital"). H.I.G. Capital is a leading global alternative asset manager with $19 billion of capital under management* 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.

^*Based on total capital commitments to funds managed by H.I.G. Capital and its affiliates.

(Financial Tables Follow)

WhiteHorse Finance, Inc.
Consolidated Statements of Assets and Liabilities
*(in thousands, except share and per share data)*

	September 30, 2015		December 31, 2014
	(Unaudited)
Assets
Investments, at fair value
Non-controlled/non-affiliate company investments	$	355,888	$	383,500
Non-controlled affiliate company investments		20,200		20,000
Total investments, at fair value (amortized cost $378,201 and $401,062, respectively)		376,088		403,500

Cash and cash equivalents		16,731		11,647
Restricted cash and cash equivalents		9,169		4,495
Interest receivable		2,676		2,702
Deferred financing costs		4,220		4,004
Prepaid expenses and other receivables		216		494
Total assets	$	409,100	$	426,842

Liabilities
Credit facility	$	88,500	$	105,500
Senior notes		30,000		30,000
Unsecured term loan		55,000		55,000
Distributions payable		5,319		5,319
Management fees payable		5,487		5,006
Payable for investments purchased		2,865		—
Accounts payable and accrued expenses		577		659
Total liabilities		187,748		201,484

Commitments and contingencies

Net assets
Common stock, 14,982,857 shares issued and outstanding, par value $0.001 per share and 100,000,000 authorized		15		15
Paid-in capital in excess of par		228,731		228,731
Accumulated overdistributed net investment income		(4,994)		(5,918)
Accumulated realized gains on investments		349		728
Accumulated unrealized (depreciation) appreciation on investments		(2,749)		1,802
Total net assets		221,352		225,358
Total liabilities and total net assets	$	409,100	$	426,842

Number of shares outstanding		14,982,857		14,982,857
Net asset value per share	$	14.77	$	15.04

WhiteHorse Finance, Inc. Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share data)

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Investment income
From non-controlled/non-affiliate company investments
Interest income	$	10,338	$	8,712	$	31,545	$	24,919
Fee income		681		346		1,505		1,407
From non-controlled affiliate company investments
Dividend income		688		207		2,090		207
Total investment income		11,707		9,265		35,140		26,533

Expenses
Interest expense		1,654		1,405		5,028		4,146
Base management fees		2,125		1,871		6,377		5,439
Performance-based incentive fees		1,415		1,011		4,220		2,143
Administrative service fees		255		427		898		1,111
General and administrative expenses		596		508		1,736		2,115
Total expenses, before fees waived		6,045		5,222		18,259		14,954
Base management fees waived		—		—		—		(447)
Total expenses, net of fees waived		6,045		5,222		18,259		14,507
Net investment income		5,662		4,043		16,881		12,026

Realized and unrealized (losses) gains on investments
Net realized losses
Non-controlled/non-affiliate company investments		—		—		(379)		—
Net realized losses		—		—		(379)		—
Net change in unrealized (depreciation) appreciation
Non-controlled/non-affiliate company investments		(4,234)		640		(4,751)		4,044
Non-controlled affiliate company investments		—		(120)		200		(120)
Net change in unrealized (depreciation) appreciation		(4,234)		520		(4,551)		3,924
Net realized and unrealized (losses) gains on investments		(4,234)		520		(4,930)		3,924
Net increase in net assets resulting from operations	$	1,428	$	4,563	$	11,951	$	15,950

Per common share data
Basic and diluted earnings per common share	$	0.10	$	0.31	$	0.80	$	1.06
Dividends and distributions declared per common share	$	0.36	$	0.36	$	1.07	$	1.07
Basic and diluted weighted average common shares outstanding		14,982,857		14,982,857		14,982,857		14,982,815

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited)
September 30, 2015
*(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal Amount		Amortized Cost		Fair Value		Fair Value As A Percentage Of Net Assets
North America
Debt Investments
Advertising
Intersection Acquisition, LLC.
First Lien Secured Term Loan	L+10.00%	11.00%	9/15/20	$	16,566	$	16,400	$	16,400		7.41	%
	(1.00% Floor)
Broadcasting
Multicultural Radio Broadcasting, Inc.
First Lien Secured Term Loan	L+10.50%	11.50%	6/27/19		14,850		14,850		14,806		6.69
	(1.00% Floor)
Consumer Finance
Golden Pear Funding III, LLC⁽⁷⁾
Second Lien Secured Term Loan⁽⁶⁾	L+10.25%	11.25%	6/25/20		25,000		24,720		24,500		11.07
	(1.00% Floor)
Second Lien Secured Revolving Loan	L+10.25%	11.25%	6/25/20		—		(55)		—		—
	(1.00% Floor)
Oasis Legal Finance, LLC ^{(6) (7)}
Second Lien Secured Term Loan	N/A⁽⁵⁾	10.50%	9/30/18		9,000		8,872		8,973		4.05

Sigue Corporation ⁽⁶⁾
Second Lien Secured Term Loan	L+10.00%	11.00%	12/27/18		25,000		24,646		24,750		11.18
	(1.00% Floor)
					59,000		58,183		58,223		26.30
Data Processing & Outsourced Services
Future Payment Technologies, L.P.⁽⁶⁾
Second Lien Secured Term Loan	L+12.00%	13.00%	12/31/18		36,262		35,260		36,262		16.38
	(1.00% Floor)	(2.00% PIK)
Diversified Support Services
Expert Global Solutions, Inc. ⁽⁶⁾
Second Lien Secured Term Loan	L+11.00%	12.50%	10/3/18		7,500		7,434		7,410		3.35
	(1.50% Floor)
Orion Healthcorp, Inc.
First Lien Secured Term Loan	L+9.00%	11.00%	9/30/17		7,495		7,312		7,540		3.40
	(2.00% Floor)
Sitel Worldwide Corporation
Second Lien Secured Term Loan	L+9.50%	10.50%	9/18/22		8,670		8,497		8,575		3.87
	(1.00% Floor)
Smile Brands Group Inc.
First Lien Secured Term Loan	P+5.25%	8.50%	8/16/19		11,760		11,591		10,219		4.62
	(3.25% Floor)
					35,425		34,834		33,744		15.24

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2015
*(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal Amount		Amortized Cost		Fair Value		Fair Value As A Percentage Of Net Assets
Electronic Equipment & Instruments
AP Gaming I, LLC
First Lien Secured Term Loan	L+8.25%	9.25%	12/20/20	$	9,825	$	9,581	$	9,746		4.40	%
	(1.00% Floor)
Food Retail
Crews of California, Inc.
First Lien Secured Term Loan ⁽⁶⁾	L+11.00%	12.00%	11/20/19		15,131		14,837		14,889		6.73
	(1.00% Floor)	(1.00% PIK)
First Lien Secured Revolving Loan	L+11.00%	12.00%	11/20/19		3,507		3,413		3,450		1.56
	(1.00% Floor)	(1.00% PIK)
First Lien Secured Delayed Draw Term	L+11.00%	12.00%	11/20/19		5,021		4,928		4,941		2.23
Loan	(1.00% Floor)	(1.00% PIK)
					23,659		23,178		23,280		10.52
Health Care Distributors
P2 Newco Acquisition, Inc.⁽⁶⁾
Second Lien Secured Term Loan	L+8.50%	9.50%	10/22/21		6,000		5,950		5,994		2.71
	(1.00% Floor)
Health Care Facilities
Coastal Sober Living, LLC ⁽⁶⁾
First Lien Secured Term Loan	L+9.25%	10.25%	6/30/19		41,580		40,948		41,248		18.63
	(1.00% Floor)
Grupo HIMA San Pablo, Inc.
First Lien Secured Term Loan	L+7.00%	8.50%	1/31/18		14,625		14,464		14,625		6.61
	(1.50% Floor)
Second Lien Secured Term Loan	N/A⁽⁵⁾	13.75%	7/31/18		1,000		968		998		0.45
					57,205		56,380		56,871		25.69
Health Care Technology
Client Network Services, Inc.
First Lien Secured Term Loan ⁽⁶⁾	L+13.00%	13.50%	4/24/19		13,588		13,312		13,616		6.15
	(0.50% Floor)
First Lien Secured Revolving Loan	P+12.00%	15.25%	4/24/19		—		—		—		—
	(3.25% Floor)
					13,588		13,312		13,616		6.15
Integrated Telecommunication Services
Securus Technologies Holdings, Inc.
Second Lien Secured Term Loan	L+7.75%	9.00%	4/30/21		9,090		9,058		7,799		3.53
	(1.25% Floor)

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited) (Continued)
September 30, 2015
*(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal Amount		Amortized Cost		Fair Value		Fair Value As A Percentage Of Net Assets

Oil & Gas Drilling
ProPetro Services, Inc.
First Lien Secured Term Loan	L+6.25%	7.25%	9/30/19	$	9,000	$	8,930	$	7,407		3.35	%
	(1.00% Floor)
Oil & Gas Exploration & Production
Caelus Energy Alaska O3, LLC
Second Lien Secured Term Loan	L+7.50%	8.75%	4/15/20		13,000		12,849		11,388		5.14
	(1.25% Floor)
Larchmont Resources, LLC
First Lien Secured Term Loan	L+8.75%	9.75%	8/7/19		1,756		1,789		1,478		0.67
	(1.00% Floor)
					14,756		14,638		12,866		5.81
Other Diversified Financial Services
RCS Capital Corporation⁽⁷⁾
Second Lien Secured Term Loan	L+10.50%	11.50%	4/29/21		20,750		20,689		20,522		9.27
	(1.00% Floor)
The Pay-O-Matic Corp.
First Lien Secured Term Loan	L+11.00%	12.00%	3/31/18		9,875		9,704		9,885		4.47
	(1.00% Floor)
					30,625		30,393		30,407		13.74
Specialized Consumer Services
Pre-Paid Legal Services, Inc. ⁽⁶⁾
Second Lien Secured Term Loan	L+9.00%	10.25%	7/1/20		18,000		17,823		18,108		8.18
	(1.25% Floor)
Specialized Finance
GMT Holdings 1, Ltd. & GMT Holdings 12, Ltd.^{(4) (6) (7)}
First Lien Secured Term Loan	N/A⁽⁵⁾	10.00%	6/30/17		1,860		1,876		1,860		0.84

Trucking
Fox Rent A Car, Inc. ⁽⁶⁾
Second Lien Secured Term Loan	L+12.00%	12.19%	10/31/19		7,500		7,435		7,387		3.34

Total Debt Investments					363,211		358,081		354,776		160.28

Equity Investments
Diversified Support Services
Constellation Health, LLC Warrants ⁽⁶⁾	N/A	N/A	9/30/18		—		—		901		0.41

Food Retail
Crews of California, Inc. Warrants ⁽⁶⁾	N/A	N/A	12/31/24		—		—		128		0.06
Nicholas & Associates, LLC Warrants ⁽⁶⁾	N/A	N/A	12/31/24		—		—		24		0.01
Pinnacle Management Group, LLC Warrants ⁽⁶⁾	N/A	N/A	12/31/24		—		—		46		0.02
RC3 Enterprises, LLC Warrants ⁽⁶⁾	N/A	N/A	12/31/24		—		—		13		0.01
					—		—		211		0.10
Specialized Finance
NMFC Senior Loan Program I LLC Units ^(6)(7)(8)	N/A	N/A	6/10/19		—		20,120		20,200		9.12

Total Equity Investments					—		20,120		21,312		9.63

Total Investments				$	363,211	$	378,201	$	376,088		169.91	%

⁽¹⁾	Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, as amended (the "1940 Act"), and provide collateral for the Company's credit facility.

⁽²⁾	The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate ("LIBOR" or "L") or the Prime Rate ("P"), which resets monthly, quarterly or semiannually.

⁽³⁾	The interest rate is the "all-in-rate" including the current index and spread, the fixed rate, and the payment-in-kind ("PIK") interest rate, as the case may be.

⁽⁴⁾	WhiteHorse Finance, Inc.'s investments in GMT Holdings 1, Ltd. and GMT Holdings 12, Ltd. are held through its subsidiary Bayside Financing S.A.R.L.

⁽⁵⁾	Interest rate is fixed and accordingly the spread above the index is not applicable.

⁽⁶⁾	The investment or a portion of the investment does not provide collateral for the Company's credit facility.

⁽⁷⁾	Not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets. Qualifying assets represent 81% of total assets.

⁽⁸⁾	Investment is a non-controlled/affiliate investment as defined by the 1940 Act.