WhiteHorse Finance(US:WHF)2025-11-10 12:32Financial Performance - Total investment income for Q3 2025 was $17.7 million, down 22.6% from $22.9 million in Q3 2024[300]. - Net investment income for Q3 2025 decreased to $6.1 million, a decline of 33.4% compared to $9.2 million in Q3 2024[301]. - For the nine months ended September 30, 2025, total investment income was $55.3 million, down 22.9% from $71.8 million in the same period of 2024[300]. - Net investment income for the nine months ended September 30, 2025 was $19.5 million, a decrease of 33.4% from $29.3 million in the same period of 2024[301]. - Total investment income decreased by $5.16 million (22.5%) to $17.69 million for the three months ended September 30, 2025, compared to $22.85 million in the same period of 2024[302]. - Interest income other than payment-in-kind (PIK) decreased by $2.83 million (17.3%) for the three months ended September 30, 2025, and by $10.16 million (24.5%) for the nine months ended September 30, 2025, primarily due to lower yields and a smaller portfolio size[302]. - PIK income as a percentage of total investment income significantly decreased to 2.4% for the three months ended September 30, 2025, down from 9.6% in the same period of 2024[304]. Expenses and Losses - Total expenses for Q3 2025 were $11.6 million, a reduction of 15.4% from $13.7 million in Q3 2024[300]. - Performance-based incentive fees decreased by $764,000 (33.4%) for the three months ended September 30, 2025, and by $2.44 million (33.4%) for the nine months ended September 30, 2025, primarily due to lower pre-incentive fee net investment income[310]. - Net realized losses on investments for Q3 2025 were $(1.8) million, compared to a gain of $0.04 million in Q3 2024[300]. - Net realized losses on investments totaled $2.1 million for the three months ended September 30, 2025, compared to no realized gains in the same period of 2024[315]. - The net change in unrealized gains for Q3 2025 was $(4.9) million, an improvement from $(16.1) million in Q3 2024[300]. - Gross unrealized depreciation on investments was $9.9 million for the three months ended September 30, 2025, compared to $20.8 million in the same period of 2024[316]. Debt and Borrowing - The company authorized a stock repurchase program for up to $15.0 million of its common stock[298]. - As of September 30, 2025, the Credit Facility provided for borrowings in an aggregate principal amount up to $100.0 million, reduced from $335.0 million[342]. - The company is required to meet a borrowing base test and a market value test to permit new borrowings under the Credit Facility[343]. - Advances under the Credit Facility are based on SOFR plus an annual spread of 2.25% for USD denominated borrowings[344]. - As of September 30, 2025, there were no outstanding borrowings under the Credit Facility, with approximately $100.0 million available to be drawn[350]. - The company issued $40 million of 5.375% 2025 Notes, which were fully repaid on September 29, 2025[357]. - As of December 31, 2024, the company had $161.5 million in outstanding borrowings under the Credit Facility, with approximately $173.5 million available to be drawn[351]. Investment Portfolio - As of September 30, 2025, the investment portfolio had an aggregate fair value of $568.4 million, consisting of senior secured loans across 125 positions in 66 companies[365]. - The weighted average effective yield of the portfolio was 9.5%, with income-producing debt investments yielding 11.6%[365]. - The investment portfolio primarily consisted of variable-rate loans, with fixed-rate investments representing only 0.9% based on fair value[365]. - As of September 30, 2025, the total portfolio value was $568.4 million, with an average investment size of $4.3 million and a weighted average effective yield of 10.2%[368][380]. - For the nine months ended September 30, 2025, the company invested $112.4 million in new and existing portfolio companies, while repayments and sales totaled $177.3 million[369]. - The investment performance rating distribution as of September 30, 2025, showed 8.8% rated 1, 73.0% rated 2, 12.0% rated 3, 4.4% rated 4, and 1.8% rated 5[380]. Cash and Assets - The company had cash and cash equivalent resources of $45.9 million as of September 30, 2025, including $36.4 million of restricted cash[324]. - Operating activities provided cash and cash equivalents of $76.3 million during the nine months ended September 30, 2025, primarily from realizations and repayments on investments[322]. - STRS JV had total assets of $364.3 million as of September 30, 2025, an increase from $309.1 million as of December 31, 2024[326]. - The weighted average effective yield on STRS JV's total portfolio was 10.3% as of September 30, 2025, down from 11.1% as of December 31, 2024[331]. - The company increased its capital commitment to STRS JV by an additional $15.0 million in February 2023, bringing the total commitment to $115.0 million[327]. Management and Valuation - The company has a management fee of 1.75% on consolidated gross assets, which reduces to 1.25% for assets financed with over 200% asset coverage[388]. - The company actively monitors portfolio performance, with a risk rating system that grades investments on a scale of 1 to 5, where 1 indicates low risk and 5 indicates payment default[378][379]. - The company’s investment adviser conducts frequent discussions with management and sponsors to evaluate performance against business plans[377]. - The quarterly valuation process includes independent valuation reviews for approximately 25% of investments without readily available market quotations[400]. - The company has retained independent valuation firms to review valuations of non-publicly traded investments at least once annually[400]. - The valuation process involves a multi-step approach, including preliminary valuations by investment professionals and reviews by a valuation committee[405]. - The company values its investments according to ASC Topic 820, focusing on fair value measurements based on market-based inputs[395]. Interest Rate and Hedging - Nearly all performing floating rate investments had interest rate floors, impacting the benefit from interest rate increases[421]. - The company expects that many future loans will also have floating interest rates, which may significantly affect net investment income due to interest rate fluctuations[417]. - The impact of hypothetical interest rate changes on interest income and expense is detailed, showing a potential net decrease of $14,915,000 with a 300 basis point decrease in interest rates[419]. - The company may hedge against interest rate fluctuations using standard hedging instruments, although this may limit benefits from lower interest rates[423]. - Interest income is accrued only if it is expected to be collectible, with loans placed on non-accrual status upon default[412].