WhiteHorse Finance, Inc. Announces Second Quarter 2014 Earnings Results

NEW YORK--()--WhiteHorse Finance, Inc. (“WhiteHorse Finance” or the "Company") (NASDAQ:WHF) today announced its financial results for the quarter ended June 30, 2014.

Second Quarter 2014 Summary Highlights

  • New investments of $90 million – second strongest quarter on record – and $107 million year-to-date
  • Quarterly distribution of $0.355 per share, consistent for the seventh consecutive quarter since the Company’s IPO
  • Appointed Gerhard Lombard as Chief Financial Officer

Jay Carvell, WhiteHorse Finance’s Chief Executive Officer, commented, “Our activity during the second quarter once again reflects our priority of sourcing proprietary, quality investment opportunities in the small and mid cap space across a broad range of industries. This approach allows us to continue to deliver strong results for both our portfolio companies and shareholders. During the quarter, we originated $90 million of new investments, our second highest level of originations as a public company, across seven positions, bringing our total new investments to $107 million for the first half of the year. H.I.G. Capital continues to serve as a premium deal-sourcing network with more than half of this quarter’s investments sourced through our proprietary network. While we anticipate continued quarter-over-quarter lumpiness regarding our origination pace, we believe that we are on track to achieve year-over-year growth.”

Portfolio and Investment Activity

As of June 30, 2014, the fair value of WhiteHorse Finance’s investment portfolio was $347.1 million, compared with $272.4 million as of December 31, 2013. The majority of the portfolio is comprised of senior secured loans. The portfolio consisted of 93.5% variable-rate investments (indexed to LIBOR) which should continue to position the portfolio well for a potential rising interest rate environment. The overall portfolio consisted of 30 positions across 27 companies with an average investment size of $11.6 million and a weighted average yield of 10.6%.

For the three months ended June 30, 2014, WhiteHorse Finance invested $90 million across seven new portfolio companies. Gross proceeds from sales and repayments totaled $30.1 million for the quarter.

Results of Operations

For the three months ended June 30, 2014, net investment income was $4.0 million, compared with $4.9 million for the three months ended June 30, 2013.

For the three months ended June 30, 2014, WhiteHorse Finance recorded unrealized appreciation on investments of $1.0 million, as compared with unrealized depreciation on investments of $1.7 million for the three months ended June 30, 2013.

For the second quarter of 2014, operations resulted in a net increase in net assets of $5.0 million, as compared with a net increase in net assets of $3.2 million for the second quarter of 2013.

WhiteHorse Finance’s NAV was $227.8 million, or $15.21 per share, as of June 30, 2014, as compared with $227.0 million, or $15.16 per share, as of December 31, 2013.

Liquidity and Capital Resources

As of June 30, 2014, WhiteHorse Finance had cash and cash equivalents of $10.8 million, as compared with $96.0 million as of December 31, 2013, inclusive of restricted cash. The decrease in cash on hand was due primarily to the net deployment of cash into attractive investment opportunities. As of June 30, 2014, the Company had $108.0 million of undrawn capacity under its revolving credit facility.

Distributions

On May 28, 2014 the Company declared a distribution of $0.355 per share for the quarter ended June 30, 2014. The distribution was payable on July 3, 2014 to stockholders of record as of June 20, 2014. This marks the seventh consecutive quarter that the Company has declared a distribution at this rate.

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.

Exemptive Relief

On July 8, 2014, the Company received an exemptive order from the SEC that permits it to participate in negotiated investments with funds managed by H.I.G. Capital, subject to certain conditions. The exemptive relief to co-invest with affiliated funds provides stockholders with access to a broader range of investment opportunities.

Conference Call

WhiteHorse Finance will host a conference call to discuss its second quarter earnings results at 10:00 a.m. ET on Wednesday, August 6, 2014. 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# 68696963. Investors may also access the call on the investor relations portion of the Company’s website at www.whitehorsefinance.com/ir.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call’s completion through August 13, 2014. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID# 68696963. A webcast replay will also be available on the investor relations portion of the Company’s website at www.whitehorsefinance.com/ir.

About WhiteHorse Finance, Inc.

WhiteHorse Finance, Inc. 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 is a leading global alternative asset manager managing approximately $15 billion of capital as of June 30, 2014 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.

   

WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 
June 30, 2014 December 31, 2013
(Unaudited)
Assets
Investments, at fair value (amortized cost $343,872 and $272,608, respectively) $ 347,107 $ 272,439
Cash and cash equivalents 6,726 92,905
Restricted cash and cash equivalents 4,041 3,078
Interest receivable 2,026 1,585
Deferred financing costs 3,533 3,827
Prepaid expenses and other receivables   453   319
Total assets $ 363,886 $ 374,153
 
Liabilities
Credit facility $ 42,000 $ 25,000
Senior notes 30,000 30,000
Unsecured term loan 55,000 55,000
Distributions payable 5,319 5,317
Management fees payable 3,296 2,831
Payable for investments purchased - 28,606
Accounts payable and accrued expenses   432   397
Total liabilities   136,047   147,151
 
Net assets

Common stock, 14,982,857 and 14,977,056 shares issued and outstanding, par value $0.001 per share and 100,000,000 authorized

15 15
Paid-in capital in excess of par 228,734 228,646
Accumulated overdistributed net investment income (3,509 ) (854 )
Net unrealized appreciation (depreciation) on investments   2,599   (805 )
Total net assets   227,839   227,002
Total liabilities and total net assets $ 363,886 $ 374,153
 
Number of shares outstanding 14,982,857 14,977,056
Net asset value per share $ 15.21 $ 15.16
 
       

WhiteHorse Finance, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)

 
Three months ended June 30, Six months ended June 30,
2014     2013 2014     2013
Investment income
Interest and fee income $ 9,018 $ 9,498 $ 17,268 $ 17,880
Total investment income 9,018 9,498 17,268 17,880
 
Expenses
Interest expense 1,386 1,304 2,741 2,666
Base management fees 1,678 1,244 3,121 2,321
Performance-based incentive fees 982 1,213 1,132 2,165
Administrative service fees 359 389 684 778
General and administrative expenses   620   498   1,607   1,091
Total expenses   5,025   4,648   9,285   9,021
Net investment income   3,993   4,850   7,983   8,859
 
Realized and unrealized gains (losses) on investments
Net realized gains (losses) on investments - - - -
Net change in unrealized appreciation (depreciation) on investments   1,024   (1,683 )   3,404   (2,184 )
Net realized and unrealized gains (losses) on investments   1,024   (1,683 )   3,404   (2,184 )
Net increase in net assets resulting from operations $ 5,017 $ 3,167 $ 11,387 $ 6,675
Per Common Share Data
Basic and diluted earnings per common share $ 0.34 $ 0.21 $ 0.76 $ 0.45
Dividends and distributions declared per common share $ 0.36 $ 0.36 $ 0.71 $ 0.71
Basic and diluted weighted average common shares outstanding 14,982,857 14,965,624 14,982,793 14,965,624
 
                           

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

June 30, 2014

(in thousands)

 
Investment Type(6)

Spread
Above
Index(1)

Interest
Rate(2)

Maturity
Date
Par /
Shares
Amortized
Cost
Fair
Value
Fair Value
As A
Percentage
Of Net Assets
North America    
Debt Investments
 

Aerospace & Defense

ILC Industries, LLC
First Lien Secured Term Loan L+6.50% 8.00% 7/11/18 $ 4,575 $ 4,564 $ 4,575 2.01
(1.50% Floor)
Second Lien Secured Term Loan L+10.00% 11.50% 7/11/19 5,000 4,889 4,970 2.18
(1.50% Floor)                
  9,575   9,453   9,545   4.19
 

Building Products

TCO Funding Corp.
First Lien Secured Term Loan L+7.50% 9.50% 4/27/15 17,404 17,404 17,404 7.64
(2.00% Floor)
 

Cable & Satellite

Puerto Rico Cable Acquisition Company, Inc.
Second Lien Secured Term Loan L+8.50% 9.50% 5/30/19 5,000 4,926 4,960 2.18
(1.00% Floor)
 

Consumer Finance

Oasis Legal Finance, LLC(7)
Second Lien Secured Term Loan N/A(4) 10.50% 9/30/18 10,000 9,823 10,000 4.39
 
Sigue Corporation
Second Lien Secured Term Loan L+9.50% 10.50% 12/27/18 25,000 24,540 24,950 10.95
(1.00% Floor)                
  35,000   34,363   34,950   15.34
 

Data Processing & Outsourced Services

Future Payment Technologies, L.P.
Second Lien Secured Term Loan L+10.00% 11.00% 12/31/18 35,353 34,059 35,141 15.42
(1.00% Floor) (2.00% PIK)
 

Diversified Support Services

ARSloane Acquisition, LLC
Second Lien Secured Term Loan L+10.50% 11.75% 10/1/20 4,000 3,926 4,000 1.76
(1.25% Floor)
Orion Healthcorp, Inc.
Senior Secured Note L+10.00% 12.00% 3/31/18 10,034 9,749 9,804 4.30
(2.00% Floor) (2.00% PIK)
Smile Brands Group Inc.
First Lien Secured Term Loan L+6.25% 7.50% 8/16/19 11,910 11,698 11,755 5.16
(1.25% Floor)                
  25,944   25,373   25,559   11.22
 
                         

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

June 30, 2014

(in thousands)

 
Investment Type(6) Spread
Above
Index(1)
Interest
Rate(2)
Maturity
Date
Par /
Shares
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 9,950 9,664 9,691 4.25
(1.00% Floor)
 

Health Care Distributors

Comprehensive Decubitus Therapy, Inc.
First Lien Secured Term Loan L+13.50% 15.00% 3/15/18 14,421 14,194 14,392 6.32
(1.50% Floor) (3.00% PIK)
First Lien Secured Revolving Loan L+13.50% 15.00% 3/15/18 - (30 ) - -
(1.50% Floor) (3.00% PIK)
 
P2 Newco Acquisition, Inc.
Second Lien Secured Term Loan L+8.50% 9.50% 10/22/21 10,000 9,905 10,020 4.40
(1.00% Floor)                
  24,421   24,069   24,412   10.72
 

Health Care Facilities

Grupo HIMA San Pablo, Inc
First Lien Secured Term Loan L+9.00% 10.50% 1/31/18 14,813 14,582 14,738 6.47
(1.50% Floor)
Second Lien Secured Term Loan N/A(4) 15.75% 7/31/18 1,000 959 988 0.43
 
Coastal Sober Living, LLC
First Lien Secured Term Loan L+9.25% 10.25% 6/30/19 22,000 21,615 21,626 9.49
(1.00% Floor)                
  37,813   37,156   37,352   16.39
 

Health Care Technology

Client Network Services, Inc.
First Lien Secured Term Loan L+13.00% 13.50% 29,681 29,214 29,740 13.05
(0.50% Floor) (1.00% PIK)
First Lien Secured Revolving Loan L+12.00% 12.50% 1,000 1,000 1,002 0.44
(0.50% Floor)                
  30,681   30,214   30,742   13.49
 

Homebuilding

Orleans Homebuilders, Inc.
First Lien Secured Term Loan L+8.50% 10.50% 2/14/16 16,260 16,312 16,423 7.21
(2.00% Floor)
 

Homefurnishing Retail

BDF Acquisition Corp.
Second Lien Secured Term Loan L+8.00% 9.00% 2/12/22 5,000 4,903 4,890 2.15
(1.00% Floor)
 

Integrated Telecommunication Services

Securus Technologies, Inc.
Second Lien Secured Term Loan L+7.75% 9.00% 4/30/21 8,090 8,016 8,050 3.53
(1.25% Floor)
 
                           

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

June 30, 2014
(in thousands)

 
Investment Type(6) Spread
Above
Index(1)
Interest
Rate(2)
Maturity
Date
Par /
Shares
Amortized
Cost
Fair
Value
Fair Value
As A
Percentage
Of Net Assets

Internet Retail

   
Bluestem Brands, Inc.
First Lien Secured Term Loan L+6.50% 7.50 % 12/6/18 8,222 8,041 8,190 3.59
(1.00% Floor)
 

Metal & Glass Containers

Pelican Products, Inc.
Second Lien Secured Term Loan L+8.25% 9.25 % 4/11/21 3,000 2,978 3,030 1.33
(1.00% Floor)
 

Oil & Gas Drilling

ProPetro Services, Inc.
First Lien Secured Term Loan L+6.25% 7.25 % 9/30/19 9,625 9,535 9,750 4.28
(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 9,000 8,824 8,946 3.93
(1.25% Floor)
 

Other Diversified Financial Services

RCS Capital Corporation
Second Lien Secured Term Loan(7) L+9.50% 10.50 % 4/29/21 9,000 8,867 8,982 3.94
(1.00% Floor)
 

Specialized Consumer Services

Pre-Paid Legal Services, Inc.
Second Lien Secured Term Loan L+8.50% 9.75 % 7/1/20 18,000 17,789 18,144 7.96
(1.25% Floor)
 

Specialized Finance

GMT Holdings 1, Ltd. & GMT Holdings 12, Ltd.(3)(7)
First Lien Secured Term Loan N/A(4) 10.00 % 6/30/17 12,049 12,114 10,905 4.79
 

Trading Companies & Distributors

Distribution International, Inc.
First Lien Secured Term Loan L+6.50% 7.50 % 7/16/19 9,900 9,812 9,811 4.31
(1.00% Floor)                
Total Debt Investments   339,287   333,872   336,877   147.86
 
Equity Investments
 

Diversified Support Services

Constellation Health, LLC
Warrants - - 3/31/18 1 - 230 0.10
 

Specialized Finance

NMFC Senior Loan Program I LLC(7)
LLC Interest - - 6/10/19 10,000 10,000 10,000 4.39
               
Total Equity Investments   10,001   10,000   10,230 4.49
 
Total Investments(5) $ 349,288 $ 343,872 $ 347,107   152.35 %
 

(1)

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

(2)

The interest rate is the “all-in-rate” including the current index and spread, the fixed rate, and the payment-in-kind, or “PIK”, interest rate, as the case may be.
 

(3)

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.
 

(4)

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

(5)

Except for AP Gaming I, LLC, BDF Acquisition Corp., GMT Holdings 1, Ltd. and GMT Holdings 12, Ltd., NMFC Senior Loan Program I LLC, P2 Newco Acquisition, Inc., Pelican Products, Inc., RCS Capital Corporation and Securus Technologies, Inc., the investments provide collateral for the Credit Facility.
 

(6)

All investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, or the 1940 Act.

 

(7)

Not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, WhiteHorse Finance may not be able to acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets.

Contacts

WhiteHorse Finance, Inc.
Jay Carvell, 214-855-2999
jcarvell@higwhitehorse.com
or
Gerhard Lombard, 212-506-0500
glombard@higwhitehorse.com
or
Prosek Partners
Brian Schaffer, 212-279-3115
bschaffer@prosek.com

Contacts

WhiteHorse Finance, Inc.
Jay Carvell, 214-855-2999
jcarvell@higwhitehorse.com
or
Gerhard Lombard, 212-506-0500
glombard@higwhitehorse.com
or
Prosek Partners
Brian Schaffer, 212-279-3115
bschaffer@prosek.com