WHF - Earnings call transcript Q2 2021 | WhiteHorse Finance, Inc.

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ConferenceCall Participants

Bryce Rowe - Hovde Group Robert Dodd - Raymond James Sarkis Sherbetchyan - B. Riley

Operator

Good morning. My name is Brittney, and I'll be your conference operator today. At this time, I will like to welcome everyone to the WhiteHorse Finance Second Quarter 2021 Earnings Conference Call.

call Chief Aronson, Financial today's and Executive for Thomas, Joyson Officer. hosts are Chief Stuart Officer; Our Today's call is for replay being recorded and at P.M. will X beginning be available Eastern Standard Time. is dial-in XXX-XXX-XXXX. replay number The Please is note, no required. there passcode all time, the presentation. and be listen-only will this placed in participants At floor following questions a for opened mode been the have It Instructions] Nick pleasure of Partners. Prosek my Rust the turn [Operator to now is to floor over

Nick Rust

for results. joining second Thank us to you, you, Brittney. Finance's earnings And discuss quarter everyone XXXX thank WhiteHorse today

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

Stuart Aronson

today. you, thank Thank us for and Nick. Good afternoon joining you

and website. $X.XXX second Thomas, which And income below our GAAP to will press per are review core in or hope conditions. by discuss slightly which quarter we I'm Joyson per this share $X.XXX X.X our issued I to our you've then questions. quarter our Chief market second we'll start NII our the In our was after available you're $X.XXX. net As chance dividend performance our the and on investment going also $X share. results addressing was prior or a floor market Financial million to aware, release morning to had open, open million detail, more Officer results, of

last million in recorded per our volume a lower and than When December was large was repayments the was NAV due accretion portfolio highest the balances we dividends NAV prior modest of the gain saw accelerated -- you of quarter in $XX.XX per were prepayment to special as which asset combined at compared that result QX Also, we result got prior activity forma our NII as pro driven higher achieved by of IPO. XXXX end Our $XX.XX in fee share, X quarter. to of This as in We quarter interest during gains income for QX. since generating lower accretion, of this mark-to-market paid that know, lower share is years, that in NAV in adjusting QX. quarter. we our QX quarter in a

million, GFG gains mark-to-market X.X were at Holdings LS at Honors X.X million and highlighted million. Barbecue X.X Holdings Our Buyer at by

sale and was our deals a X.XXx. sponsor end, Of repayments. of non-sponsor increased level this new eight timing, modest for and and companies your before repayments by drive they experienced of partially totaling by us XX level new grow aware origination will number portfolio of XXX were activity to strong We for currently XXX of an Gross capital of we're QX. as attribute million. the also repayment offset originating average from leverage the portfolio had including This one transactions. We deployments period deployments a investment the level the close seven of if that eight million million, enabled are X% were QX of

our end XX% first XX% debt of first compared of XXX% the was to XX% of our second lien. were QX. of deals second At portfolio lien one loans lien senior Sponsor Additionally, security. in was portfolio comprise was these and and quarter seven the

pleased compared average We X.X% yield debt be and the of prior continue our of just first the was QX as to XXXX producing to effective below pace years, on throughout income with weighted the level investments of X.X%. half capital of slightly deployment

represented by bring and value of of Now increased in million X.X% stepping expected only on basis quarter, debt back to June with fair of At to to portfolio, HIMA extend our XXX investment million, QX. status compared the We focus. fair to HIMA this negotiations investment the at our SureFit many end portfolio entire of in of XXX portfolio Grupo Grupo end remain value quarter; a the the accrual at remains will compared second remain This only process XX. into Non-accruals X.X% to end the months. driven the for returning was the as decrease QX. of restructuring our non-accrual

to the with JV we to allocate quarter, and to We which successfully higher $XX shareholders. the additional JV, million which was pleased in an we size JVs of equity continued from remain it for at believe the income million slightly above more XXX net the X.X% the The income contributions supports If was QX. program of returns same unlevered this which use drive was prior million, the income to with X.X We 'XX, for utilize full QX period. continue capacity level interest average an are into in current the the higher or portfolio of of of JV, likely WHF. yield generated year

our of times. a strong momentum one quarter X.XXx to range of result a end and the the of As leverage originations one within at was QX targeted

XX strong, non-sponsor these balance, and QX and the add-ons, XX between of very are sponsor deals split non-sponsor of deals. three our new are originations add-ons. is are and and pipeline mandated new non-sponsor, deals XX deals, with ahead, Looking their

our pipeline are and coverage BDC ramp platform. drive JV and can Given quarter the dividend. through the higher that exceptional growth ultimately of we portfolio confidently lead on and mandated generated we to which growth is This produce deals volume the highest these third ever to pace levels mandates, will say these to origination have our income enabling greater

during expect the Given may times to for balance operate our we at portfolio in activity to higher high the year, prepare leverage than quarter the a choose ratio repayments. expected that and we order targeted one of repayment

have had already one repayment We and QX. in refinancing

current We year. is continue expect closing, of the some course to events in new approach rigorous conditions. additional financing we're to number standards during and M&A for credits This well change in underwriting the early positioned year. remainder repayments In three-tiered executing of due of the of a our sourcing given half to market subject second the

high whole Together healthy. strong a and pipeline as quality of investment a remains with portfolio opportunities. Our very

from capital over fee sourcing continue to person H.I.G the core a portfolio income at includes under of expect said, development mid-market. level the of the should benefit resources interest by We database to the XXX us leveraging Capital's enable and impact and the rates leader asset team which proprietary plus and in rate dedicated second H.I.G to increasing the could origination. lending, This business pick with the of to empowers management prospect a XX covering in shared to That professionals uncertainty professionals XX overall. infections from both investment income. of continue H.I.G direct net new COVID-XX and performance half, creates up us billion hospitalizations dividend XX field

less sourcing New North and than centers investment and team America Our non-gateway deal includes that locations XX markets across competition spans Chicago. large York WhiteHorse face like

With take lending As platform across business. our ultimately Go poised our a ahead, drive the combined to and direct shareholders to questions. believe portfolio our your result, established higher we'll turn Joyson. Joyson, call we that, which to is growth continuing after returns I'll

Joyson Thomas

all Thanks, Stuart. call. joining And thank for today's you

During per $X.XX This fee XXXX. to per investment million of gains Core share in million was per $X.X or after income X.X the million adjusting quarter net or GAAP accrual. capital we $X.XXX incentive NII $X.XXX compares recorded for share share. $X.X QX

to ramp QX. X.X Our investment the after of effects three million and increasing the million add-ons new XX.X total JV in in transferring by for that deals up continued

X.X at aggregate prepayment increase at net of fees XXX.X higher positions QX with JV of the a held earnings, million income JV approximately million, to return of June the the was in compared to the prior compared X.X million. XX. assets on the $XX.X during We fee assets of the in continues positions value net quarter. operations due accretive fair investment resulting as value our quarter. end in in of XX%. million QX million increase approaching the Investment collected from be to We JV As was in to a net $XXX.X from to in in largely was an first XX decline The QX. reported an XX BDC fair resulting

in position QX. showed Our that [indiscernible] XX% two or either carried one XX.X% quarter portfolio rating a compared during our to the of

June Turning we X.X million cash $XX.X credit as our to million XX, undrawn our including facility. $XX.X end, revolving balance of approximately Quarter million restricted sheet, cash. in resources XXXX, under we had approximately had of

We flexibility million increase also accordion XXX to have feature. the under the existing line to

XX, XXXX asset XXX.X%, minimum the XXX%. amounts above coverage Act June was is of asset by of company's XXXX, ratio As defined coverage for as the the borrowed which ratio

points applicable beginning interest and Since effective for of at November more we to net facility. spread adjusting approximately existing non-coop was shots XX, QX million, bank XXXX. historical in this of on be refinancing extend the result We the utilized reinvestment basis our QX from period XXX the have X.X an credit Our quarter, period will levels. The cost line XXXX to debt cash will completed in to XXX our the impact end the anticipate in after on to JPMorgan assuming savings of amendment November hand annual equity X.XXx. continues ratio reduce to

$X.XXX XX, XX, rate December a distribution was with marks on their our million per XX. for to company's distributions consistent the per like and of ended June record I'd since distribution share highlight consecutive XXXX of of per the XXth The declared X, IPO $X.X dividend Next, quarter. in distribution to quarterly May July of XXXX as for stockholders all $X.XXX at we the of quarter XXXX, XXXX share total On aid June distributions. paid

of distribution a quarter third per we morning, announced of To this to $X.XXX as be payable September record stockholders Board XXXX. on Finally, of our October share XX. declared X, of Directors

factors our your that and medium term to earnings other back call based As continue will may the the Operator? within With warrant over addition evaluate for near turn questions. that, distribution in relevant portfolio, to the to on I'll said our of consideration. power now operator we quarterly we core previously,

Operator

Bryce we'll Instructions] from Thank you. Rowe first take Group. [Operator - Hovde question our Now

Bryce Rowe

But that best Stuart, million quarter move quarter you're third as into and for fourth highest originations I guess noted $XXX the back you the expecting the well. was quarter in quarter, ever originations here, looks here the looking you possibly could like to-date.

from then know So if of but repayment help to to kind us, perspective, expect of activity. this hard help the the and I pipeline could you outpace predict repayment year half relative do originations that a frame in you back to to it's

Stuart Aronson

we our something WhiteHorse normally been, right should significant How So, the selling BDC but strange owners it and allocation sale the get because we're ever we a get QX. quarter activity significant, our number our and activity in processes in higher bodes part additions have down to QX now, net will based than a slowest disruptions ends second say, are in of know it's portfolio suitability loans direct well on have that, selling we then across come that lending But probably that for be is net will originations that Again, Absent the that on we have of is I them, of will not QX. them, companies. QX economy which BDC to QX after entire QX. for is in as will origination much or not else, And the the projecting. that up for the repaid what percentages. we're would

with many there. that always in those the in up hoping And XXX to the one ramp try we're assets to potentially downs above originations, we're a end, quarter get times what to quarter around Bryce, about in to be to we expect leverage year a total what of one So going QX. pop repayments can how preparing do and are for leverage and million for in that we get QX, manage or is already are pay There is that those either to the know market that's are to Because loans of made we right about what know that companies visible? market are the if up we QX. -- coming repayments are thing don't different now more

Bryce Rowe

in JV that in here to That's drove try elevated more speak the the good a the me, Maybe quarter. then to was understanding to detail. Joyson jump good might related what not and But that get I one for for dividend Can what I'll income, what the bit back here forward? going a noticed that maybe queue. you be

Joyson Thomas

JVs Yes, to an as flows. our quarter that income, investment, related and investment equity the know, Again, made that. this did company to outside from underlying a of dividend we its primarily the excess dividend owners is related a perspective, receive cash as to dividend some their holdings, some continues dividend, equity recognize to that core out did you portfolio have

Bryce Rowe

Okay.

So and episodic, your your tax more Is distributed it? that's in -- it is cover that's or tax distribution expense? to

Joyson Thomas

to play realization. great future way is taxes Canadian bit of streams at there come look I prior do The a question. your income But is would the envision Yes, a I that's a at to think, company little from there. we

a kind say So what isn’t of this event. one-off is I'd that

Stuart Aronson

generating highlight be. equity to ultimately, distributions. appropriate don't are environment future. flow we a to out that they it'll date flow, be well continue dividending which until call just the cash deem what know well we -- would sell And it be doing operate into, the probably and that in company market Yes, as We is cash will our to

Operator

from And Dodd we Raymond with James. Robert next our will question take

Robert Dodd

really deals the and mean, timing you guess, today, issue and I I I kind third. been what mean, I QX. and on to shift a in thank in that longer non took has market. now, of kind structure over the mix. sponsor about permanent but of come now On historic And a gave the Obviously, non-sponsor is that on kind But a right you outlook portfolio two-thirds whether about are and on non-sponsored sponsored time a for course, when down guess or obviously deals color mix color take the of expect, some of to would in any just some I you not is mean, the mandated you active what that, covering.

Stuart Aronson

say that would broadly. I

While healthy support of it'll are though the harder and non-sponsor that non-sponsor think frankly. as I are the the to of on think But non-sponsor. about get quarter-to-quarter the deals, stay That last sponsor we to new or deals, non-sponsor frequently deals. on a underwrite. likely about opportunities in originations, happened deal underwriting in more couple to or sorry, have a vary deals don't even very add-ons. thirds credit non-sponsor terms we mandated, harder deals XX close deals sponsor doesn't of portfolio non-sponsored our our two- QX them X/X nine quarter, I is mandates, find I either are of pipeline deals, sponsor we on The new highlighted, and of either new

is to makes it given larger could it would XX:XX, be anywhere where XX:XX the but now. typically, number up So quarter, from sponsor the where overall expect portfolio in to similar any to remain

Robert Dodd

it. Got Thank you.

leverage QX, lot leverage year QX, your you going roughly there I just through had XX quarter. half fell comfort at quarter couple obviously, so mandated one level a last deals of are at of parts. point, say How that mean sponsor of to back again. then XXX is on looking what I given moving at you Just yes. you? how just a got sponsor, or up turns a mean, and that said mean, going mean, so are being kind I mandates end, and I down Non-sponsored, that would confident you've --

confidence than are vice repayments, difficult predict, more you've versa. in If got higher which to or originations,

Stuart Aronson

a don't rise greater are we into for handicap of likelihood the at can and a one done. deals mandated because mandated our lot we're QX. And know QX. of to each we more And close. asset the deal are them in will have or QX deal only balances think confidence to total And asset look And that portfolio right we the then, I names of the have QX, million And XXX QX, originations, of likely getting visibility sort be repaying middle deals. in there's it. in I in of yet I now have in

are expect strong comfortably We'd there very dividend, to unless I pipeline marketplace. similarly into yet. know earn to quarter, something this that a second the about develop and and BDC that other QX the portfolio in we the XX with happening QX. to us insight portfolio over would can things and So don't you I historically, look mentioned QX earlier, QX strong, we're up need JV weeks, bode that for But of more hopefully go the as our on the that the slowest is next all well going tell a absent deals core balances set

Robert Dodd

Understood. you. Thank that. I appreciate

quick expenses mean, that housekeeping we tax related to The that? if the bit that some quarter one and mentioned was You tax increased dividend that I tax one elevated. Canadian considerations? just if should or it I to So excise income, income? was up to that Was pop little can. there's dividend unrelated a to expect not tax

Joyson Thomas

Robert, year, about into the of our think listen, the bulk with at way taxable paid I tax out takes any distributions to going all be which are account income, look is it earnings. differences. taxable timing you Ultimately,

run the this we were kind earlier income, also blender of put effectively, of excess year. in you net the in matter, that -- only earnings be estimate a that realizing BDC when our we gains the based excess to rate at investment the on distributions not year year, that but or of of the than currently slightly So higher we're last all a in for some

as large-realized So [indiscernible]. gain have a year-to-date, aware from we you're

So there. came play into also that

Operator

Riley. B with [Operator Instructions] from And next question our we'll Sarkis Sherbetchyan take

Sarkis Sherbetchyan

question. Just a quick

XX it fee remain If impact How expectation? income you does expect to second elevated. repayments half

Stuart Aronson

which NII. to faster accretive being where equal. quarter or in either penalties helped fee prepayment sweeps number be all prepayment last be fee of excess dividend. the There We associated penalties things and more a us We'll more saw generate NII suites repayments that should with

Operator

have will no questions over management further turn closing on for to we And remarks. additional or time, any at I the the call this line back

Stuart Aronson

I appreciate everyone's time and today. attention

the that has there that people questions afternoon. call in are you. can And Thank alert always, with would hope As see prior so if I remarks. the us to everybody like into good please we add to a addressed calls, that, future prepared

Operator

This does for conclude today's program. you participation. Thank your

disconnect at any may You time.

WhiteHorse Finance (WHF) 9 Aug 212021 Q2 Earnings call transcript