WHF - Earnings call transcript Q4 2017 | WhiteHorse Finance, Inc.

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Operator

Good morning. My name is Laurie and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Fourth Quarter and Full Year 2017 Earnings Conference Call.

Our host for today's call are Stuart Aronson, Chief Executive Officer; and Ed Giordano, Interim Chief Financial Officer. Today's call is being recorded and will be available for a replay beginning at 1 p.m. Eastern. is the number XXXXXXX. number dial-in replay XXX-XXX-XXXX PIN and is The your presentation. this been floor and for have all will following in open At participants mode placed time, a listen-only be questions the the floor [Operator Instructions] my Sean now It of Partners. over turn Prosek pleasure Silva to to is the

Sean Silva

everyone and XXXX today earnings joining to and discuss you, Laurie, for quarter year Thank WhiteHorse fiscal thank you us Finance's fourth results.

historical and are cause facts, update these like to statements. that during forward-looking remind from WhiteHorse Aronson. that Stuart, uncertainties, allow differ not begin, based materially any we you Because which on deemed statements. factors forward-looking important including obligation financial I would CEO, me call, meaning actual statements Stuart Before to to within Litigation Securities these to of any no expressed guidance, assumes made Reform to begin. or Private risks or be certain this by could XXXX. those may everyone statements are responsibility relating WhiteHorse forward-looking forward-looking the and implied these that, Finance's known statements, statements the results unknown With Act introduce of may involve Finance

Stuart Aronson

for Thanks, Sean. morning joining and us you Good today. thank

also to will our you our and performance, review on As you've take open, which are fiscal and our our Ed prior had review to you're I website. quarter results going questions. your through a aware, morning available we're our issued after this year press which happy then results hope we I'm release to market fourth take chance financial operating to

follow-on likely income recorded had our to during the quarter capital the more and said, per of that once QX. so goal, slightly of and in fourth increase again share. fourth that towards in a from the That quarter due our once offering and far of of interest that pleased $XX.X we quarter from covers expect dividend delay fourth the equity fourth at that generate was last meaningful end quarter, the we During to redeployed our quarter we’re of a share deploying fully to during net $X.XX income and net later. interest dividend quarter on reaching advised this the first I’m XX.XX, call $XX.X progress share per that we’ve made increase below recorded $X.XX XXXX a third the of the We share from XXXX. $X.XX NAV the We

held had for were existing consecutive an and non-sponsored million of yield three Additionally XX.X%. at that refinancing weighted the loans. these four quarter Three fourth position. effective third as new We the originations as to average constant during added XX.X quarter, our the well transactions totaling

loan. million lien The first deal was Planet transaction a a and was sponsored first $X.X Fitness

second The the Rural transaction $X of a loan. the million form in Media first lien Group was

existing position. The second $XX and while lien first to multi-cultural into the third X.X lower transaction Secured leverage a loan radio loan million at prior lien lien from adding loan in a first our refinanced additionally broadcasting America position was million in we’ve

This to compared of acquisition million hold originations downs target to pay our million by recorded Climate million quarter of XX.X million for full during positions. $X these increase on Intersection QX. All of of XX.X fell million and $X repayments recorded within million Pros. range XX.X total driven and We was the sales primarily $XX on

full recorded of companies. exits portfolio we XX.X% year average XX and effective eight companies originated relating XXXX, a at yield the of from new a For million full repayments and portfolio of million including XXX.X million $XXX sales to totaling XX an loans to

to we deals refinancing in with average also average more follow-on syndicated during investments close deals and year. of to are existing place, the of detail The in our approximately I the and close transactions exhibiting. expect XXXX earlier, our added the on opinion by leverage In materially on positions the our better now in million times. we addition to reviewing portfolio mentioned being X on in our market XXXX consistent this about historical provide X.X is broad I’ll for track record closed

end the As at to third of of million fair XXX.X December XXX.X XX, quarter. the XXXX, portfolio reported was value million compared the the of

rate secured million. same that LIBOR. portfolio index to of portfolio investment fair largest to senior value average that our with are based of XX.X As mid-market size investments loans primarily an The XX.X being loan on had the variable consisted borrowers investments lower of million date, primarily

across Within the XX we held positions portfolio, XX companies.

on XX% XX%. deployed of As our on fully in the be for the as BDC which to quarter, leverage far deployment we’ve near accounting target is at QX. that of Leverage of XX range deals of of potentially increased could to four originations new today leverage the fourth the XX% when first thus our net pipeline. based The resulted end closed quarter the mandated in in end

and in assurance in deployment over double a quarter However, percentage higher while in transactions low of I’ll The of all now million. as our any close portfolio quarter the in low no lien address company in pre-restructuring a team $XX.X focused generating on position remains that WhiteHorse prepayment which in financial mostly in spikes originating addition $X.XX QX is concentration always QX. Aretec, in attractive, briefly still first there addition leverage, far QX also and our or been strong up deals basis this $X.XX so any deals positions could have closed marked on first will deals digit lien our cost performance to was returns. of based as these meaningful last have unexpected mostly resulting loan and that prevent to covenants value, full in from

and approximately were can which for WhiteHorse including invest per $X cash income More if investment net the into helps of leverage that with our each like WhiteHorse to us HIG interest remains equity every annual cash. we capital in assets million results lower In redeploy we to create strong is XX% key the I’d general, to million into that share million is convert to $X.XX the of to coverage cash, increases approximately $X.X highlight investments our regards for mid-market. dividend earn As ability broadly, for to able by sourcing which and differentiator the interest $X BDC’s dividend, BDC. when incremental for cash able yield, positions incremental drive earned income a continues the model in of

wealth and professionals architecture from resources XXX bouquet global Specifically, XX,XXX over professionals advantage list our and takes over at at approximately professionals managers, development XX these helped include a proprietary to of HIG investment lawyers, off-the-run source bankers tiered who HIG, business sourcing over XXX three sponsors. investment of accountants, deals

markets. WhiteHorse non-sponsor addition, XX originating a sponsor results. and compression market. continue drive outlook, dedicated covenant now off-the-run very can do who quickly spread optimistic directly business has remain we conditions originators the the are market we about inroads market, reality to I’ll to general and United macro States in strong continue In across how middle our model the into deployed is are cities XX in deals to across Collectively, turn the and aggressive, make like

headwinds. originations of of the our that lower us business installation from provides mid-market in some direct model However, feel these we both

in Company systems coverage much very devalue the and deals because a to pursue we higher ability sponsors debt sponsor leverage, and loan the recycle professional professional also much on much non-sponsored service they bring management, continue through lower support deals sponsored because have focused to We and remained lower loan deals.

differentiator and platform Our it’s is us ability deals, access provides view to optimistic as we’re our about our both optimize the types as between pipeline of now ever to which two robust than been. a more we

in not factors, meaningful not on of the grow acquisitions. we call markets in to recent from equity any in impact seen to seems expect that With make over Ed. desire take an leverage the us. macro volatility other anything turn the tax that, opportunity now will Further, we do or fact if the to have mid-market to recent companies create I for Regarding impact reform the

Edward Giordano

quarter from quarter. $X.XX to million with operations, was or Starting for This share our fourth $X.X in the prior million Stuart. Thanks, compares NII quarter per results $XX.X share. per the $X.X or

Our of investment interest. net the million We cash quarter. fourth assets of $X.X operations consist share to increase reported approximately and resulting net from recurring a primarily income or for continues $X.XX per

December or XX, XXXX, per $XX.XX was net of asset per $XX.XX for $XXX QX. As million reported million or $XXX.X value up as from share, share,

our As the ratings portfolio remained and investment it risk on mostly unchanged. our pertains to portfolio activity,

$XX facility. our balance December XX, XXXX, sheet, $XX.X and resources $X.X Turning cash restricted capacity we under cash million to of our of million of undrawn approximately credit including of million as approximately revolving had

exercising by increase We this also an under by our credit option additional million to facility. the ability capacity accordion have $XX the

feel asset as borrowed end coverage December XXX%. comfortable the was coverage of continue statutory our ratio with asset by monitor the of closely Company's to and defined requirement at well We XXXX. XXX.X amounts, fourth our leverage the Act the as above XXXX of quarter, million The ratio for XX,

quarter December Our total adjusting a Company's per distribution. on for as distribution on $X.X of XXXX. X.XX stockholders to share per effective we $XX.X debt to quarterly million record share XX, marks December hand of Last, IPO highlight quarter. This in all like $XX.X of for declared cash XXst X, per to the the XXXX, at I'd and December since distributions ended a was equity with rate the XX, our The On after distribution distribution, ratio for times. paid stockholders of was XXXX, X. January distribution December to our of

our turn call questions. a be operator continue position to We the Operator? regular expect now for in to distributions. to your I'll the

Operator

question of Thank Ladenburg. comes Schleien you. [Operator Instructions] Mickey line first the from of Your

Mickey Schleien

Health there should question, the about? changes was Or Company in that fundamental down that know quick multiple? to something meaningfully. we Just I one due Outcome is pretty that saw occurring Was marked to

Stuart Aronson

We articles of received on Wall issues. of Health for went were Street in dealing with of issues Outcome resolution in a in a Company. that actively Journal those the series the involved lot very publicity

down are confidential, in by see this Wall the Wall As help significantly down repaid Journal Journal. and has to who that Company I in holders data Street been the doing things been the many par in the that, after mark issues you a what that Street that its the believe are that quarter good you news of to find asset were but could mark I XX% through first we in that part there reported there of is Company public asset say, equity so to the but has in again capitalized get won’t at

a of at conservative, quarter. fourth par to and since level that the again that is been end we of has XX% that marked believe we’ve position appropriate So, repaid and the

Mickey Schleien

the in tax could mentioned to generalized to your borrow that on to that activity. up I impact Or just don’t if not? desire key other borrowers occurred the in follow recently in rates M&A being of general you've or an certain borrowers market And think your about I you a across changes conduct the and have is general? with statement remarks, that that sort expect comment Is impacted portfolio prepaid

Stuart Aronson

can best deals deals pipeline. that our inflow inflow you answer in in we're Mickey we our The At had given to any year XX in week, way I that A point, about we XX pipeline. XX is had last inflow week between ago pipeline. this our talk for to

turned deals I that need growth in the down acquisition can that aggressive that we book high. we’re to So companies have very greater withstand market sure are we’ve what desire that downturn and The mid-market make down. is in strong of market across is to is downturn does working lower are the capital, every that the will turning we and terms percentage a credit ever a that we to economy, a if broadly are or very that appetite deal a seeing conditions of add hard capital occur. of

that we diversity we’re to efforts on ramped continue BDC go XXXX. credit in we through up our the philosophies, our allow to but larger and as pipeline have sticking and increase it's that will origination So, deals to us

Operator

Your of next Kotowski line the from Chris Oppenheimer. question comes of

Chris Kotowski

this clean saw recurring a of just you kind from from Trust. position, is Aretec that additional restructuring? holding position RCS the that you position get the now that additional I’m wondering the under unit little curious just adjustment up was of or I Creditor is

Stuart Aronson

you that Ed, can please? speak to

Edward Giordano

Sure, asset the claim, claim the there estate some that’s within residual and litigation. the related to from is primary a

Chris Kotowski

Aretec on of -- have position in of -- controlling memory has our the of and is refresh the actually influence position And disposition in our what kind who it? what your you

Stuart Aronson

XX% second that So, lien position first lien in We ownership with restructuring the has up in RCS and loan, had us being bankruptcy lenders given company the you the lenders, see. which and Aretec, the ended of the shares resulting with a lenders are in lien the in second aggregate, Company.

significant on imagination have of a a regarding We Company control not holder majority direct the we are not structuring any of holder disposition decision sale or do the by any and but the the at all Company.

appropriately we performance, sold is value which point we we Company believe we will obviously as I will reflecting going cash tracking then into the So for expect cash quarter-to-quarter, Company will be are be was at with and when earlier and convert can’t and be the position predict coverage able some help will which our to us dividend stating reinvested, forward. that sold

Operator

JP Melissa Your line the Instructions] next Morgan. [Operator Ladal of of question comes from

Melissa Ladal

missed so have a far on that made the of know Rick originations investments. XQ Melissa amount to comment I that? related prepared you've believe that about I made said new you remarks I 'XX. you on for four today. dollar follow might Did specify investments in closed in to wanted I up

Stuart Aronson

I me the diligence have can still transactions, for but close We quarter. then appropriately, due all out I for very seeing will on diligence on scheduled minutes that are quarter. don’t front to we whether that the as I'll does to four that already midst closed didn’t that doing transactions are other our There which add with up if close transactions four to don’t itself and few in those will mandates share have or We several pull due have is solid be the close the obviously know and and it to the come market addition will has not and will on. are in deals. in if and in I a any he we it there if of quarter, not you. in Ed talk in see,

to are that the close? closed. We with of close, you would four of done the Ed, the will amount dollar we four the can there more come anticipate And be will and assurance So, able that. deals no hope but on that investments up on

Edward Giordano

I can specific four say the it’s over for that now. XX deals million number

Melissa Ladal

by helpful. follow-on be end you A the possible of potentially also fully end That’s the that deployed you quick here, could by it’s said deployed Okay. QX. -- full

of comfortable cycle Just your guys as where talk about the at a leverage how in reminder, view and And particularly can you you’re environment? targeted stage you range? the this

Stuart Aronson

for risk thesis of is general my So, point booking is assets that low that the have loss. starting conservatives

worth most these still noting are transactions that we think of We deals, speaks on double that are first of digit on that. focused far which and fact QX is to origination power lien to for the a first doing yields so QX even eight all the that the closed though are lien part that I testimony or in And our it’s achieving the model. they transactions, in

double that levels All who digit yielding a not X.X who about lien are are desk. syndicated broader level you the know buying markets at of of you cover of a leverage times loans people first or

again are quarter exactly forward and quarter is the originally are first having of conservative lien mandated strong In to ad will that, what in origination feel loan raised slower I’d to than that been deployment we of finding planned believe transactions BBC. which onto we portfolio, between comfortable but we levers, accretive direct these our the to not what continue. leverage deals levels it's with will trend and finish add if our these close this the XX since that have ability earn some return. planned is also in supposed on leverage quarter-to-quarter. model under do XX% dividend to was a, so performing phase also that XX% high be of which the having of the We’ve we that close this assets to obviously that to low doing intend value equity range So would are all transactions quarter

Melissa Ladal

I that e-payments meaningful have for in quarter? Thanks have or follow-up. and this you one that exit any Do to clarification it. Got visibility a

Stuart Aronson

thinking There Ed if that one, at the and you one with I more any than repayment quarter of. we’re of end is between others can only think now that I’m share know me. that I’m one if now we can aware number moment. expecting is that expecting are you and of

Operator

Instructions] [Operator

Edward Giordano

Sorry, your three I Stuart just It's minute. to a on for note. known there follow likely up was to and it's XX million. mute are under

Stuart Aronson

you, Thank Ed. Okay.

Operator

and At this questions. Finance fourth XXXX participating time, quarter call. there in earnings full are conference Thank no further WhiteHorse you the for year

disconnect. now may You

WhiteHorse Finance (WHF) 2 Mar 182017 Q4 Earnings call transcript