Company Quick10K Filing
Whitehorse Finance
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-16
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-14
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-09
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10-K 2017-12-31 Filed 2018-03-14
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-10
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
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8-K 2020-08-05 Earnings, Shareholder Vote, Regulation FD, Exhibits
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8-K 2018-01-12

WHF 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Organization
Note 2 - Summary of Significant Accounting Policies
Note 3 - Investments
Note 4 - Fair Value Measurements
Note 5 - Borrowings
Note 6 - Related Party Transactions
Note 7 - Commitments and Contingencies
Note 8 - Financial Highlights
Note 9 - Change in Net Assets Resulting From Operations per Common Share
Note 10 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors -
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 tm1920834d1_ex31-1.htm
EX-31.2 tm1920834d1_ex31-2.htm
EX-32.1 tm1920834d1_ex32-1.htm
EX-32.2 tm1920834d1_ex32-2.htm

Whitehorse Finance Earnings 2019-09-30

Balance SheetIncome StatementCash Flow

10-Q 1 tm1920834d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

Form 10-Q

 

(Mark One)

 

 xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from  ______________ to ______________

 

Commission file number: 814-00967

 

WHITEHORSE FINANCE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 45-4247759
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

 

1450 Brickell Avenue, 31st Floor

Miami, Florida

33131
(Address of Principal Executive Offices) (Zip Code)

 

(305) 381-6999

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act: 

 

Title of Each Class   Trading Symbol(s)   Name of Each Exchange on Which
Registered
Common Stock, par value $0.001 per share   WHF  

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market) 

6.50% Notes due 2025   WHFBZ  

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market) 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x   No   ¨ 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes   ¨   No   ¨ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨  Accelerated filer x 
       
Non-accelerated filer ¨  Smaller reporting company ¨ 
       
    Emerging growth company ¨ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     Yes   ¨  No   x 

 

As of November 12, 2019 the Registrant had 20,546,032 shares of common stock, $0.001 par value, outstanding.

 

 

 

 

 

 

WHITEHORSE FINANCE, INC.

 

TABLE OF CONTENTS

 

    Page
Part I. Financial Information 3
Item 1. Financial Statements 3
  Consolidated Statements of Assets and Liabilities as of September 30, 2019 (Unaudited) and December 31, 2018 3
  Consolidated Statements of Operations for the three and nine months ended September 30, 2019 (Unaudited) and 2018 (Unaudited) 4
  Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2019 (Unaudited) and 2018 (Unaudited) 5
  Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 (Unaudited) and 2018 (Unaudited) 7
  Consolidated Schedules of Investments as of September 30, 2019 (Unaudited) and December 31, 2018 8
  Notes to the Consolidated Financial Statements (Unaudited) 17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41
Item 3. Quantitative and Qualitative Disclosures about Market Risk 55
Item 4. Controls and Procedures 55
Part II. Other Information 56
Item 1. Legal Proceedings 56
Item 1A. Risk Factors 56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 58
Item 3. Defaults Upon Senior Securities 58
Item 4. Mine Safety Disclosures 58
Item 5. Other Information 58
Item 6. Exhibits 58

 

2

 

 

Part I. Financial Information

 

Item 1. Financial Statements 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

   September  30, 2019   December 31, 2018 
   (Unaudited)     
Assets          
Investments, at fair value          
Non-controlled/non-affiliate company investments  $493,460   $459,399 
Non-controlled affiliate company investments   9,673    10,165 
Controlled affiliate company investments   24,410    - 
Total investments, at fair value (amortized cost $535,213 and $477,839, respectively)   527,543    469,564 
Cash and cash equivalents   9,827    24,148 
Restricted cash and cash equivalents   12,335    9,584 
Interest receivable   6,952    4,616 
Amounts receivable on unsettled investment transactions   9,219    5,608 
Prepaid expenses and other receivables   158    575 
Total assets  $566,034   $514,095 
           
Liabilities          
Debt  $231,966   $175,953 
Management and incentive fees payable   7,717    11,193 
Distributions payable   7,294    7,294 
Amounts payable on unsettled investment transactions   -    445 
Accounts payable and accrued expenses   2,417    2,322 
Interest payable   1,067    1,562 
Advances received from unfunded credit facilities   79    30 
Total liabilities   250,540    198,799 
           
Commitments and contingencies (See Note 7)          
           
Net assets          
Common stock 20,546,032 and 20,546,032 shares issued and outstanding, par value $0.001 per share, respectively, and 100,000,000 authorized   21    21 
Paid-in capital in excess of par   301,557    301,557 
Accumulated undistributed earnings   13,916    13,718 
Total net assets   315,494    315,296 
Total liabilities and total net assets  $566,034   $514,095 
           
Number of shares outstanding   20,546,032    20,546,032 
Net asset value per share  $15.36   $15.35 

 

See notes to the consolidated financial statements

 

3

 

 

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, 
   2019   2018   2019   2018 
Investment income                    
From non-controlled/non-affiliate company investments                    
Interest income  $14,865   $13,843   $42,104   $40,871 
Fee income   2,246    875    6,328    3,855 
From non-controlled affiliate company investments                    
Dividend income   301    600    888    1,851 
From controlled affiliate company investments                    
Interest income   343    -    343    - 
Total investment income   17,755    15,318    49,663    46,577 
                     
Expenses                    
Interest expense   3,495    3,283    9,744    8,649 
Base management fees   2,834    2,761    8,240    7,813 
Performance-based incentive fees   1,714    4,865    5,520    10,900 
Administrative service fees   159    175    475    525 
General and administrative expenses   660    572    1,875    1,843 
Total expenses, before fees waived   8,862    11,656    25,854    29,730 
Base management fees waived   -   (115)   (397)   (115)
Total expenses, net of fees waived   8,862    11,541    25,457    29,615 
Net investment income before excise tax   8,893    3,777    24,206    16,962 
Excise tax   238    -    712    - 
Net investment income after excise tax   8,655    3,777    23,494    16,962 
                     
Realized and unrealized gains (losses) on investments                    
Net realized gains (losses)                    
Non-controlled/non-affiliate company investments   (2)   17    (2,020)   90 
Net realized gains (losses)   (2)   17    (2,020)   90 
Net change in unrealized appreciation (depreciation)                    
Non-controlled/non-affiliate company investments   (1,882)   (1,164)   1,042    (2,125)
Non-controlled affiliate company investments   28    16,832    (492)   37,442 
Controlled affiliate company investments   56    -    56    - 
Net change in unrealized appreciation (depreciation)   (1,798)   15,668    606    35,317 
Net realized and unrealized gains on investments   (1,800)   15,685    (1,414)   35,407 
Net increase in net assets resulting from operations  $6,855   $19,462   $22,080   $52,369 
                     
Per Common Share Data                    
Basic and diluted earnings per common share  $0.34   $0.95   $1.08   $2.55 
Dividends and distributions declared per common share  $0.36   $0.36   $1.07   $1.07 
Basic and diluted weighted average common shares outstanding   20,546,032    20,545,726    20,546,032    20,536,591 

 

See notes to the consolidated financial statements

 

4

 

 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Changes in Net Assets (Unaudited)

(in thousands, except share and per share data)

 

   Common Stock  

Paid-in

Capital in

Excess of

  

Accumulated

Undistributed

(Overdistributed)

   Total Net 
   Shares   Par amount   Par   Earnings   Assets 
Balance at June 30, 2018   20,531,948    20    302,292    (2,969)   305,281 
Stock issued in connection with distribution reinvestment plan   14,084    1    206    -    207 
Net increase in net assets resulting from operations:                         
Net investment income after excise tax   -    -    -    3,777    3,777 
Net realized gains (losses) on investments   -    -    -    17    17 
Net change in unrealized appreciation (depreciation) on investments   -    -    -    15,668    15,668 
Distributions declared   -    -    -    (7,296)   (7,296)
Tax reclassification of stockholders’ equity   -    -    -    -    - 
Balance at September 30, 2018   20,546,032    21    302,498    15,135    317,654 
                          
Balance at June 30, 2019   20,546,032    21    301,557    14,354    315,932 
Net increase in net assets resulting from operations:                         
Net investment income after excise tax   -    -    -    8,655    8,655 
Net realized gains (losses) on investments   -    -    -    (2)   (2)
Net change in unrealized appreciation (depreciation) on investments   -    -    -    (1,798)   (1,798)
Distributions declared   -    -    -    (7,293)   (7,293)
Tax reclassification of stockholders’ equity   -    -    -    -    - 
Balance at September 30, 2019   20,546,032    21    301,557    13,916    315,494 

 

See notes to the consolidated financial statements

 

5

 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Changes in Net Assets (Unaudited) - continued

(in thousands, except share and per share data)

 

   Common Stock  

Paid-in

Capital in

Excess of

  

Accumulated

Undistributed

(Overdistributed)

   Total Net 
   Shares   Par amount   Par   Earnings   Assets 
Balance at December 31, 2017   20,531,948   $20   $302,292   $(15,360)  $286,952 
Stock issued in connection with distribution reinvestment plan   14,084    1    206    -    207 
Net increase in net assets resulting from operations:                         
Net investment income after excise tax   -    -    -    16,962    16,962 
Net realized gains (losses) on investments   -    -    -    90    90 
Net change in unrealized appreciation (depreciation) on investments   -    -    -    35,317    35,317 
Distributions declared   -    -    -    (21,874)   (21,874)
Tax reclassification of stockholders’ equity   -    -    -    -    - 
Balance at September 30, 2018   20,546,032    21    302,498   $15,135    317,654 
                          
Balance at December 31, 2018   20,546,032   $21   $301,557   $13,718   $315,296 
Net increase in net assets resulting from operations:                         
Net investment income after excise tax   -    -    -           23,494         23,494 
Net realized gains (losses) on investments   -    -    -    (2,020)   (2,020)
Net change in unrealized appreciation (depreciation) on investments   -    -    -    606    606 
Distributions declared   -    -    -    (21,882)   (21,882)
Tax reclassification of stockholders’ equity   -    -    -    -    - 
Balance at September 30, 2019   20,546,032   $21   $301,557   $13,916    315,494 

 

See notes to the consolidated financial statements

 

6

 

 

WhiteHorse Finance, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

  

Nine months ended

September 30,

 
   2019   2018 
Cash flows from operating activities          
Net increase in net assets resulting from operations  $22,080    52,369 
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:          
Paid-in-kind income     (1,922)   (460)
Net realized (gains) losses on investments   2,020    (90)
Net unrealized appreciation on investments   (606)   (35,317)
Accretion of discount   (3,346)   (3,503)
Amortization of deferred financing costs   746    933 
Acquisition of investments   (207,756)   (209,790)
Proceeds from principal payments and sales of portfolio investments   153,630    180,220 
Net changes in operating assets and liabilities:          
Interest receivable   (1,344)   441)
Prepaid expenses and other receivables   417    (336)
Amounts receivable on unsettled investment transactions   (4,603)   184)
Amounts payable on unsettled investment transactions   (445)   7,780 
Management and incentive fees payable   (3,476)   3,876 
Accounts payable and accrued expenses   95    41 
Interest payable   (495)   372 
Advances received from unfunded credit facilities   49    (50)
Net cash used in operating activities   (44,956)   (3,330)
           
Cash flows from financing activities          
Borrowings   107,400    130,400 
Repayments of debt   (52,100)   (116,900)
Deferred financing costs   (32)   (847)
Distributions paid to common stockholders, net of distributions reinvested   (21,882)   (21,662)
Net cash provided by (used in) financing activities   33,386    (9,009)
           
Net change in cash, cash equivalents and restricted cash   (11,570)   (12,339)
Cash, cash equivalents and restricted cash at beginning of period   33,732    38,936 
Cash, cash equivalents and restricted cash at end of period  $22,162    26,597 
           
Supplemental disclosure of cash flow information:          
Interest paid  $9,492    7,344 
Non-cash exchanges of investments   24,355    - 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated statements of assets and liabilities that sum to the total of the same amounts presented in the consolidated statements of cash flows:

 

   September 30, 
   2019   2018 
Cash and cash equivalents  $9,827    11,481 
Restricted cash   12,335    15,116 
           
Total cash, cash equivalents and restricted cash presented in consolidated statements of cash flows  $22,162    26,597 

 

See notes to the consolidated financial statements

 

7

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited)

September 30, 2019

(in thousands)

 

Investment Type(1)   Spread
Above
Index(2)
  Interest
Rate(3)
  Acquisition Date(10)   Maturity
Date
  Principal/
Share
Amount
    Amortized
Cost
    Fair
Value(11)
    Fair Value
As A
Percentage
of Net
Assets
 
North America                                                
Debt Investments                                                
Advertising                                                
Fluent, LLC                                                
First Lien Secured Term Loan   L+ 7.00%   9.04%   03/26/18   03/27/23     9,727     $ 9,727     $ 9,727       3.08 % 
    (0.50% Floor)                                            
Air Freight & Logistics                                                
Access USA Shipping, LLC                                                
First Lien Secured Term Loan   L+ 8.00%   10.04%   02/08/19   02/08/24     5,724       5,649       5,673       1.80  
    (1.50% Floor)                                            
Application Software                                                
Newscycle Solutions, Inc.                                                
First Lien Secured Term Loan   L+ 7.00%   9.04%   06/14/19   12/29/22     5,330       5,233       5,224       1.66  
    (1.00% Floor)                                            
First Lien Secured Revolving Loan(7)   L+ 7.00%   9.06%   06/14/19   12/29/22     241       238       237       0.08  
    (1.00% Floor)                                            
                      5,571       5,471       5,461       1.74  
Automotive Retail                                                
Team Car Care Holdings, LLC                                                
First Lien Secured Term Loan(12)   base rate+ 7.99%   10.32%   02/26/18   02/23/23     16,837       16,580       16,837       5.34  
    (1.00% Floor)                                            
Broadcasting                                                
Alpha Media, LLC                                                
First Lien Secured Term Loan   L+ 6.00%   8.15%   08/14/18   02/25/22     5,629       5,506       5,623       1.78  
    (1.00% Floor)                                            
Multicultural Radio Broadcasting, Inc.                                                
First Lien Secured Term Loan   L+ 8.00%   10.04%   12/28/17   12/28/22     16,588       16,373       16,588       5.26  
    (1.00% Floor)                                            
Rural Media Group, Inc.                                                
First Lien Secured Term Loan   L+ 7.71%   9.97%   12/29/17   12/29/22     7,133       7,043       7,048       2.23  
    (1.00% Floor)                                            
                      29,350       28,922       29,259       9.27  
Cable & Satellite                                                
Bulk Midco, LLC                                                
First Lien Secured Term Loan   L+ 7.31%   9.68%   06/08/18   06/08/23     15,000       14,834       13,950       4.42  
    (1.00% Floor)                                            
Communications Equipment                                                
Sorenson Communications, LLC                                                
First Lien Secured Term Loan   L+ 6.50%   8.60%   03/15/19   03/15/24     5,119       4,978       5,100       1.62  
    (0.00% Floor)                                            
Construction & Engineering                                                
SFP Holding, Inc.                                                
First Lien Secured Term Loan   L+ 6.25%   8.35%   07/26/19   09/01/22     6,172       6,172       6,172       1.96  
    (1.00% Floor)                                            
First Lien Secured Delayed Draw Loan(7)   L+ 6.25%   8.45%   07/26/19   09/01/22     2,637       2,637       2,637       0.84  
    (6.25% Floor)                                            
First Lien Secured Revolving Loan(7)   L+ 6.25%   8.41%   07/26/19   09/01/22     193       193       193       0.06  
                                                 
                      9,002       9,002       9,002       2.86  
Data Processing & Outsourced Services                                                
FPT Operating Company, LLC/                                                
TLabs Operating Company, LLC                                                
First Lien Secured Term Loan   L+ 8.25%   10.35%   06/07/19   06/07/24     25,063       24,825       24,437       7.75  
    (1.00% Floor)                                            
Department Stores                                                
Mills Fleet Farm Group, LLC                                                
First Lien Secured Term Loan   L+ 7.00%   9.04%   10/24/18   10/24/24     14,888       14,635       14,186       4.50  
    (1.00% Floor)   (0.75% PIK)                                        
Distributors                                                
Crown Brands, LLC                                                
First Lien Secured Term Loan   L+ 8.00%   10.04%   01/28/19   01/25/24     5,801       5,676       5,669       1.80  
    (1.50% Floor)                                            
First Lien Secured Delayed Draw Loan(7)   L+ 8.00%   10.04%   01/28/19   01/25/24     -       -       (1 )     -  
    (1.50% Floor)                                            
                      5,801       5,676       5,668       1.80  
Diversified Support Services                                                
ImageOne Industries, LLC                                                
First Lien Secured Term Loan   L+ 10.00%   12.04%   01/11/18   01/11/23     7,183       7,019       6,824       2.16  
    (1.00% Floor)   (4.00% PIK)                                        
First Lien Secured Revolving Loan(4)(12)   L+ 5.75%   9.33%   07/22/19   12/12/22     787       787       787       0.25  
                                                 
NNA Services, LLC                                                
First Lien Secured Term Loan   L+ 7.00%   9.10%   10/16/18   10/16/23     9,954       9,793       9,894       3.14  
    (1.50% Floor)                                            
                      17,924       17,599       17,505       5.55  

 

See notes to consolidated financial statements

 

8

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2019

(in thousands)

 

Investment Type(1)   Spread
Above
Index(2)
  Interest
Rate(3)
  Acquisition Date(10)   Maturity
Date
  Principal/
Share
Amount
    Amortized
Cost
    Fair
Value(11)
    Fair Value
As A
Percentage
of Net
Assets
 
Food Retail                                                
AG Kings Holdings, Inc.                                                
First Lien Secured Term Loan(8)   L+ 11.95%   14.05%   08/10/16   08/10/21     13,046     $ 12,837     $ 8,480       2.69 %
    (1.00% Floor)   (2.00%PIK)                                        
Crews of California, Inc.                                                
First Lien Secured Term Loan   L+ 11.00%   13.04%   11/20/14   11/20/19     9,313       9,308       9,265       2.94  
    (1.00% Floor)   (1.00%PIK)                                        
First Lien Secured Revolving Loan   L+ 11.00%   13.04%   06/05/15   11/20/19     5,211       5,207       5,184       1.64  
    (1.00% Floor)   (1.00%PIK)                                        
First Lien Secured Delayed Draw Loan   L+ 11.00%   13.04%   03/27/15   11/20/19     2,675       2,673       2,661       0.84  
    (1.00% Floor)   (1.00%PIK)                                        
                      30,245       30,025       25,590       8.11  
Health Care Facilities                                                
Grupo HIMA San Pablo, Inc.                                                
First Lien Secured Term Loan A   L+ 9.00%   11.27%   05/15/19   04/30/19     3,855       3,855       3,276       1.04  
    (1.50% Floor)                                            
First Lien Secured Term Loan B   L+ 9.00%   11.27%   02/01/13   04/30/19     13,511       13,511       11,484       3.64  
    (1.50% Floor)                                            
Second Lien Secured Term Loan(8)   N/A   15.75%   02/01/13   07/31/18     1,028       1,024       -       -  
        (2.00%PIK)                                        
                      18,394       18,390       14,760       4.68  
Health Care Services                                                
CHS Therapy, LLC                                                
First Lien Secured Term Loan A   L+ 8.50%   10.63%   06/14/19   06/14/24     7,663       7,526       7,539       2.39  
    (1.50% Floor)                                            
PMA Holdco, LLC                                                
First Lien Secured Term Loan   L+ 7.75%   9.85%   06/28/18   06/28/23     12,854       12,650       12,785       4.05  
    (1.00% Floor)                                            
                      20,517       20,176       20,324       6.44  
Home Furnishings                                                
Sure Fit Home Products, LLC                                                
First Lien Secured Term Loan   L+ 9.75%   11.86%   10/26/18   07/13/22     5,320       5,240       5,107       1.62  
    (1.00% Floor)                                            
Human Resources & Employment Services                                                
Pluto Acquisition Topco, LLC                                                
First Lien Secured Term Loan   L+ 6.56%   8.81%   01/31/19   01/31/24     12,417       12,202       12,304       3.90  
    (1.50% Floor)                                            
Internet & Direct Marketing Retail                                                
Marlin DTC-LS Midco 2, LLC                                                
First Lien Secured Term Loan   L+ 6.00%   8.04%   07/01/19   07/01/25     966       947       948       0.30  
    (1.00% Floor)                                            
First Lien Secured Revolving Loan(7)   L+ 6.00%   8.04%   07/01/19   07/01/25     -       -       -       -  
    (1.00% Floor)                                            
Potpourri Group, Inc.                                                
First Lien Secured Term Loan   L+ 8.25%   10.35%   07/03/19   07/03/24     18,881       18,480       18,540       5.88  
    (0.00% Floor)                                            
                      19,847       19,427       19,488       6.18  
Internet Services & Infrastructure                                                
London Trust Media Incorporated                                                
First Lien Secured Term Loan   L+ 8.00%   10.26%   02/01/18   02/01/23     10,494       10,389       10,494       3.33  
    (1.00% Floor)                                            
StackPath, LLC & Highwinds Capital, Inc.                                                
First Lien Secured Term Loan   L+ 9.50%   12.14%   04/03/19   02/02/24     15,533       15,314       14,368       4.55  
    (1.00% Floor)   (12.39%PIK)                                        
                      26,027       25,703       24,862       7.88  
Investment Banking & Brokerage                                                
Arcole Acquisition Corp(5)                                                
First Lien Secured Term Loan A   L+ 8.25%   10.37%   11/29/18   11/30/23     5,326       5,244       5,193       1.65  
    (1.00% Floor)                                            
First Lien Secured Term Loan B   L+ 14.50%   16.62%   11/29/18   11/30/23     1,821       1,794       1,803       0.58  
    (1.00% Floor)   (1.50%PIK)                                        
JVMC Holdings Corp. (f/k/a RJO Holdings Corp)                                                
First Lien Secured Term Loan   L+ 6.50%   8.54%   02/28/19   02/28/24     16,407       16,262       16,407       5.20  
    (1.00% Floor)                                            
                      23,554       23,300       23,403       7.42  
IT Consulting & Other Services                                                
AST-Applications Software Technology LLC                                                
First Lien Secured Term Loan   L+ 8.00%   10.04%   01/10/17   01/10/23     4,246       4,193       4,119       1.31  
    (1.00% Floor)   (1.00%PIK)                                        
Leisure Facilities                                                
Honors Holdings, LLC                                                
First Lien Secured Term Loan   L+ 6.88%   8.99%   09/06/19   09/06/24     9,405       9,257       9,254       2.93  
    (0.00% Floor)                                            
First Lien Secured Delayed Draw Loan(7)   L+ 6.88%   8.99%   09/06/19   09/06/24     -       -       (15 )     -  
    (0.00% Floor)                                            
Lift Brands, Inc.                                                
First Lien Secured Term Loan   L+ 7.00%   9.10%   04/16/18   04/16/23     10,776       10,616       10,276       3.26  
    (1.00% Floor)                                            
First Lien Secured Revolving Loan(7)   L+ 6.00%   11.00%   04/16/18   04/16/23     203       200       176       0.06  
    (1.00% Floor)                                            
                      20,384       20,073       19,691     6.25  
Office Services & Supplies                                                
Empire Office, Inc.                                                
First Lien Secured Term Loan   L+ 6.75%   8.79%   04/12/19   04/12/24     12,383       12,158       12,186       3.86  
    (1.50% Floor)                                            
Other Diversified Financial Services                                                
Sigue Corporation(4)                                                
Second Lien Secured Term Loan(4)   L+ 12.00%   14.10%   12/27/13   04/30/20     24,904       24,903       24,655       7.81  
    (1.00% Floor)                                            

 

See notes to consolidated financial statements

 

9

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2019

(in thousands)

 

Investment Type(1)   Spread
Above
Index(2)
  Interest
Rate(3)
  Acquisition Date(10)   Maturity
Date
  Principal/
Share
Amount
    Amortized
Cost
    Fair
Value(11)
    Fair Value
As A
Percentage
of Net
Assets
 
Packaged Foods & Meats                                                
Lenny & Larry's, LLC                                                
First Lien Secured Term Loan   L+ 7.98%   10.01%   05/15/18   05/15/23     12,303     $ 12,126     $ 11,934       3.78 %
    (1.00% Floor)   (1.18%PIK)                                        
Poultry Holdings, LLC                                                
First Lien Secured Term Loan   L+ 5.75%   7.79%   06/28/19   06/28/25     7,827       7,677       7,670       2.43  
    (1.00% Floor)                                            
                      20,130       19,803       19,604       6.21  
Personal Products                                                
Sunless, Inc.                                                
First Lien Secured Term Loan   L+ 6.00%   8.05%   08/13/19   08/13/24     4,877       4,782       4,781       1.52  
    (0.00% Floor)                                            
First Lien Secured Revolving Loan(7)   L+ 6.00%   8.05%   08/13/19   08/13/24     -       -       -       -  
    (0.00% Floor)                                            
                      4,877       4,782       4,781       1.52  
Research & Consulting Services                                                
Nelson Worldwide, LLC                                                
First Lien Secured Term Loan   L+ 8.75%   11.09%   01/09/18   01/09/23     13,692       13,467       13,349       4.23  
    (1.00% Floor)                                            
Restaurants                                                
LS GFG Holdings Inc.                                                
First Lien Secured Term Loan   L+ 6.00%   8.04%   11/30/18   11/19/25     10,262       9,991       9,876       3.13  
    (0.00% Floor)                                            
Specialized Finance                                                
Golden Pear Funding Assetco, LLC(5)                                                
Second Lien Secured Term Loan   L+ 10.50%   12.60%   09/20/18   03/20/24     17,500       17,216       17,441       5.53  
    (1.00% Floor)                                            
Oasis Legal Finance, LLC(5)                                                
Second Lien Secured Term Loan   L+ 10.75%   12.85%   09/09/16   03/09/22     20,000       19,822       20,000       6.34  
    (1.00% Floor)                                            
WHF STRS Ohio Senior Loan Fund LLC                                                
Subordinated Note(4)(5)(7)(13)(14)   L+ 6.50%   8.59%   07/19/19   N/A     19,484       19,484       19,484       6.18  
                                                 
                      56,984       56,522       56,925       18.05  
Trading Companies & Distributors                                                
Vessco Holdings, LLC                                                
First Lien Secured Term Loan   L+ 6.50%   8.65%   08/22/19   08/22/24     14,175       13,902       13,897       4.40  
    (1.50% Floor)                                            
Technology Hardware, Storage & Peripherals                                                
Source Code Midco, LLC                                                
First Lien Secured Term Loan   L+ 8.25%   10.52%   05/04/18   05/04/23     20,531       20,121       20,531       6.51  
    (1.00% Floor)                                            
Trucking                                                
Sunteck / TTS Holdings, LLC                                                
Second Lien Secured Term Loan   L+ 9.00%   11.12%   12/15/16   06/15/22     3,500       3,470       3,500       1.11  
    (1.00% Floor)                                            
Total Debt Investments                     522,395       515,746       505,757       160.35  
                                                 
                                                 
Equity Investments                                                
Advertising                                                
Fluent, Inc. (f/k/a Cogint, Inc.)(4)(9)   N/A   N/A   11/28/17   N/A     187       560       536       0.17  
                                                 
Diversified Support Services                                                
Quest Events, LLC Preferred Units(4)   N/A   N/A   12/28/18   12/08/25     317       317       317       0.10  
ImageOne Industries, LLC Common A Units(4)   N/A   N/A   09/20/19   12/08/25     149       -       -       -  
                      466       317       317       0.10  
                                                 
Food Retail                                                
Crews of California, Inc. Warrants (4)   N/A   N/A   11/20/14   12/31/24     -       -       15       -  
Nicholas & Associates, LLC Warrants(4)   N/A   N/A   11/20/14   12/31/24     3       -       314       0.10  
Pinnacle Management Group, LLC Warrants(4)   N/A   N/A   11/20/14   12/31/24     3       -       314       0.10  
RC3 Enterprises, LLC Warrants(4)   N/A   N/A   11/20/14   12/31/24     3       -       314       0.10  
                      9       -       957       0.30  
                                                 
Health Care Services                                                
PMA Holdco, LLC Warrants(4)   N/A   N/A   06/28/18   06/28/28     8       -       454       0.14  
                                                 
Other Diversified Financial Services                                                
RCS Creditor Trust Class B Units(4)(6)   N/A   N/A   10/01/17   N/A     143       -       -       -  
                                                 
SFS Global Holding Company Warrants(4)   N/A   N/A   06/28/18   12/28/25     -       -       -       -  
                                                 
Sigue Corporation Warrants(4)   N/A   N/A   06/28/18   12/28/25     22       2,890       3,818       1.21  
                      165       2,890       3,818       1.21  
Specialized Finance                                                
NMFC Senior Loan Program I LLC Units (4)(5)(6) N/A   N/A   08/13/14   08/31/21     10,000       10,029       9,673       3.07  
                                                 
WHF STRS Ohio Senior Loan Fund LLC(4)(5)(7)(13) N/A   N/A   07/19/19   08/31/21     4,871       4,871       4,927       1.56  
                    14,871       14,900       14,600       4.63  
                                                 
Trading Companies & Distributors                                                
Vessco Holdings, LLC(4)   N/A   N/A   08/22/19   12/31/22     489       800       800       0.25  
                                                 
Trucking                                                
Fox Rent A Car, Inc. Warrants(4)   N/A   N/A   10/26/16   12/31/22     -       -       304       0.10  
                                                 
Total Equity Investments                     16,195       19,467       21,786       6.90  
                                                 
Total Investments                     538,590     $ 535,213     $ 527,543       167.25 % 

 

See notes to consolidated financial statements

 

10

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments (Unaudited) - (continued)

September 30, 2019

(in thousands)

 

(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”), which resets monthly, quarterly or semiannually, or the U.S. Prime Rate as published by the Wall Street Journal (“Prime” or “P”). The one, three and six-month LIBOR were 2.0%, 2.1% and 2.1%, respectively, as of September 30, 2019. The Prime was 5.0% as of September 30, 2019.

 

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

 

(5) 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 represented 86% of total assets as of the date of the consolidated schedule of investments.

 

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

 

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of September 30, 2019. See Note 7.

 

(8) The investment is on non-accrual status.

 

(9) The fair value of the investment was determined using observable inputs. See Note 4. There are no legal restrictions on sales of the investment.

 

(10) Except as otherwise noted, all of the Company’s portfolio company investments, which as of the date of the consolidated schedule of investments represented 167% of the Company’s net assets or 93% of the Company’s total assets, are subject to legal restrictions on sales.

 

(11) Except as otherwise noted, the fair value of each investment was determined using significant unobservable inputs. See Note 4.

 

(12) The investment was comprised of two contracts, which were indexed to different base rates, L and P, respectively. The Spread Above Index and Interest Rate presented represent the weighted average of both contracts.

 

(13) Investment is a controlled affiliate investment as defined by the 1940 Act. On January 14, 2019, the Company entered into an agreement (as described in Note 3 hereto) with State Teachers Retirement System of Ohio, a public pension fund established under Ohio law (“STRS Ohio”), to create WHF STRS Ohio Senior Loan Fund, LLC (“STRS JV”), a joint venture, which invests primarily in senior secured first and second lien term loans.

 

(14) Security is perpetual in nature with no defined maturity date.

 

See notes to consolidated financial statements

 

11

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments

December 31, 2018

(in thousands)

 

Investment Type(1)    

Spread

Above

Index (2)

   

Interest

Rate (3)

    Acquisition Date (10)    

Maturity

Date

   

Principal/

Share

Amount

   

Amortized

Cost

   

Fair

Value (11)

   

Fair Value

As A

Percentage

of Net

Assets

 
North America                                                          
Debt Investments                                                          
Advertising                                                          
Fluent, LLC                                                          
First Lien Secured Term Loan     L+ 7.00%
(0.50% Floor)
    9.52%     03/26/18     03/27/23       10,771     $ 10,771     $ 10,771       3.42 %
Outcome Health                                                          
First Lien Secured Term Loan     L+ 9.50%
(1.00% Floor)
   

12.31%

(3.00% PIK)

    12/22/16     12/22/21       7,943       7,581       6,408       2.03  
                                18,714       18,352       17,179       5.45  
Automotive Retail                                                          
Team Car Care Holdings, LLC                                                          
First Lien Secured Term Loan  (12)     base rate+ 7.99%
(1.00% Floor)
    10.54%     02/26/18     02/23/23       17,183       16,862       16,840       5.34  
Broadcasting                                                          
Alpha Media, LLC                                                          
First Lien Secured Term Loan     L+ 6.50%
(1.00% Floor)
    9.00%     08/14/18     02/25/22       10,877       10,546       10,493       3.33  
Multicultural Radio Broadcasting, Inc.                                                          
First Lien Secured Term Loan     L+ 8.00%
(1.00% Floor)
    10.52%     12/28/17     12/28/22       17,882       17,597       17,739       5.63  
Rural Media Group, Inc.                                                          
First Lien Secured Term Loan     L+ 7.86%
(1.00% Floor)
    10.38%     12/29/17     12/29/22       7,000       6,888       6,860       2.18  
                                35,759       35,031       35,092       11.14  
Cable & Satellite                                                          
Bulk Midco, LLC                                                          
First Lien Secured Term Loan     L+ 7.33%
(1.00% Floor)
    10.10%     06/08/18     06/08/23       15,000       14,801       14,700       4.66  
Data Processing & Outsourced Services                                                          
FPT Operating Company, LLC/ TLabs Operating Company, LLC                                                          
First Lien Secured Term Loan     L+ 8.25%
(1.00% Floor)
    10.60%     12/23/16     12/23/21       25,394       25,096       24,707       7.84  
Department Stores                                                          
Mills Fleet Farm Group, LLC                                                          
First Lien Secured Term Loan     L+ 6.25%
(1.00% Floor)
    8.77%     10/24/18     10/24/24       15,000       14,708       14,707       4.66  
Diversified Support Services                                                          
Account Control Technology Holdings, Inc.                                                          
First Lien Secured Term Loan     L+ 8.75%
(1.00% Floor)
    11.28%     04/28/17     04/28/22       3,933       3,857       3,920       1.24  
ImageOne Industries, LLC                                                          
First Lien Secured Term Loan     L+ 10.00%
(1.00% Floor)
   

12.52%

(2.00% PIK)

    01/11/18     01/11/23       7,264       7,082       6,683       2.12  
NNA Services, LLC                                                          
First Lien Secured Term Loan     L+ 7.00%     9.80%     10/16/18     10/16/23       10,434       10,234       10,202       3.24  

 

See notes to consolidated financial statements

 

12

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments - (continued)

December 31, 2018

(in thousands)

 

Investment Type(1)    

Spread

Above

Index (2)

   

Interest

Rate (3)

    Acquisition Date (10)    

Maturity

Date

   

Principal/

Share

Amount

   

Amortized

Cost

   

Fair

Value (11)

   

Fair Value

As A

Percentage

of Net

Assets

 
Quest Events, LLC                                                          
First Lien Secured Term Loan     L+ 6.00%     8.81%     12/28/18     12/28/24       10,942     $ 10,724     $ 10,724       3.40 %
First Lien Secured Revolving Loan  (7)     L+ 6.00%     8.81%     12/28/18     12/28/24       -       -       -       -  
                                32,573       31,897       31,529       10.00  
Food Retail                                                          
AG Kings Holdings, Inc.                                                          
First Lien Secured Term Loan     L+ 9.95%
(1.00% Floor)
    12.75%     08/10/16     08/10/21       13,031       12,737       11,076       3.51  
Crews of California, Inc.                                                          
First Lien Secured Term Loan     L+ 11.00%
(1.00% Floor)
   

13.44%

(1.00% PIK)

    11/20/14     11/20/19       10,354       10,320       10,251       3.25  
First Lien Secured Revolving Loan     L+ 11.00%
(1.00% Floor)
   

13.44%

(1.00% PIK)

    06/05/15     11/20/19       5,171       5,148       5,120       1.62  
First Lien Secured Delayed Draw Loan     L+ 11.00%
(1.00% Floor)
   

13.44%

(1.00% PIK)

    03/27/15     11/20/19       2,974       2,961       2,944       0.93  
                                31,530       31,166       29,391       9.31  
Health Care Facilities                                                          
Grupo HIMA San Pablo, Inc.                                                          
First Lien Secured Term Loan     L+ 9.00%
(1.50% Floor)
    11.52%     04/01/18     05/31/19       14,065       14,065       11,955       3.79  
Second Lien Secured Term Loan  (8)     N/A    

15.75%

(2.00% PIK)

    02/01/13     07/31/18       1,028       1,024       103       0.03  
                                15,093       15,089       12,058       3.82  
Health Care Services                                                          
PMA Holdco, LLC                                                          
First Lien Secured Term Loan     L+ 7.50%
(1.00% Floor)
    10.30%     06/28/18     06/28/23       14,875       14,591       14,577       4.62  
Home Furnishings                                                          
Sure Fit Home Products, LLC                                                          
First Lien Secured Term Loan     L+ 9.50%
(1.00% Floor)
    12.31%     10/26/18     07/13/22       5,530       5,424       5,392       1.71  
Internet Retail                                                          
Clarus Commerce, LLC                                                          
First Lien Secured Term Loan     L+ 8.42%
(1.00% Floor)
    10.95%     03/09/18     03/09/23       17,100       16,930       17,100       5.42  
Internet Services & Infrastructure                                                          
London Trust Media Incorporated                                                          
First Lien Secured Term Loan     L+ 8.00%
(1.00% Floor)
    10.53%     02/01/18     02/01/23       10,925       10,791       10,816       3.43  
StackPath, LLC & Highwinds Capital, Inc.                                                          
Second Lien Secured Term Loan     L+ 9.50%
(1.00% Floor)
    12.33%     02/03/17     02/02/24       18,000       17,673       14,760       4.68  
                                28,925       28,464       25,576       8.11  

 

See notes to consolidated financial statements

 

13

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments - (continued)

December 31, 2018

(in thousands)

 

Investment Type(1)    

Spread

Above

Index (2)

   

Interest

Rate (3)

    Acquisition Date (10)    

Maturity

Date

   

Principal/

Share

Amount

   

Amortized

Cost

   

Fair

Value (11)

   

Fair Value

As A

Percentage

of Net

Assets

 
Investment Banking & Brokerage                                                          
Arcole Acquisition Corp(5)                                                          
First Lien Secured Term Loan A     L+ 7.25%
(1.00% Floor)
    9.96%     11/29/18     11/30/23       7,588     $ 7,451     $ 7,448       2.36 %
First Lien Secured Term Loan B     L+ 14.50%
(1.00% Floor)
   

17.21%

(1.50% PIK)

    11/29/18     11/30/23       1,870       1,837       1,836       0.58  
JVMC Holdings Corp.
(f/k/a RJO Holdings Corp)
                                                         
First Lien First Out Secured Term Loan     L+ 8.02%
(1.00% Floor)
    10.54%     05/05/17     05/05/22       12,488       12,300       12,726       4.04  
First Lien Last Out Secured Term Loan     L+ 12.00%
(1.00% Floor)
    14.52%     05/05/17     05/05/22       4,625       4,555       4,713       1.49  
                                26,571       26,143       26,723       8.47  
IT Consulting & Other Services                                                          
AST-Applications Software Technology LLC                                                          
First Lien Secured Term Loan     L+ 8.00%
(1.00% Floor)
   

10.52%

(1.00% PIK)

    01/10/17     01/10/23       4,214       4,148       4,088       1.30  
                                                           
Leisure Facilities                                                          
Planet Fit Indy 10 LLC                                                          
First Lien Incremental Term Loan     L+ 7.25%
(1.00% Floor)
    10.04%     11/30/17     03/07/22       9,892       9,735       9,841       3.12  
First Lien Initial Delayed Draw Loan     L+ 7.25%
(1.00% Floor)
    9.82%     11/30/17     03/07/22       6,183       6,163       6,153       1.95  
First Lien Initial Term Loan     L+ 7.25%
(1.00% Floor)
    10.02%     11/30/17     03/07/22       130       129       130       0.04  
Lift Brands, Inc.                                                          
First Lien Secured Term Loan     L+ 7.00%
(1.00% Floor)
    9.80%     04/16/18     04/16/23       10,858       10,663       10,433       3.31  
First Lien Secured Revolving Loan  (7)     L+ 7.00%
(1.00% Floor)
    9.09%     04/16/18     04/16/23       128       126       110       0.03  
Honors Holdings, LLC                                                          
First Lien Secured Term Loan     L+ 8.94%
(0.00% Floor)
    11.37%     07/17/18     07/17/23       7,500       7,398       7,355       2.33  
                                34,691       34,214       34,022       10.78  
Oil & Gas Exploration & Production                                                          
Caelus Energy Alaska O3, LLC                                                          
Second Lien Secured Term Loan     L+ 7.50%     10.30%     04/04/14     04/15/20       17,342       16,876       17,342       5.50  
                                                           
Other Diversified Financial Services                                                          
Sigue Corporation(4)                                                          
Second Lien Secured Term Loan     L+ 12.00%
(1.00% Floor)
    14.80%     12/27/13     09/30/19       24,904       24,904       24,344       7.72  
                                                           
Packaged Foods & Meats                                                          
Lenny & Larry’s, LLC                                                          
First Lien Secured Term Loan     L+ 6.84%
(1.00% Floor)
    9.29%     05/15/18     05/15/23       13,449       13,214       12,777       4.05  

 

See notes to consolidated financial statements

 

14

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments - (continued)

December 31, 2018

(in thousands)

 

Investment Type(1)    

Spread

Above

Index (2)

   

Interest

Rate (3)

    Acquisition Date (10)    

Maturity

Date

   

Principal/

Share

Amount

   

Amortized

Cost

   

Fair

Value (11)

   

Fair Value

As A

Percentage

of Net

Assets

 
Research & Consulting Services                                                          
Nelson Worldwide, LLC                                                          
First Lien Secured Term Loan     L+ 8.75%
(1.00% Floor)
    11.16%     01/09/18     01/09/23       14,303     $ 14,016     $ 13,903       4.41 %
Restaurants                                                          
LS GFG Holdings Inc.                                                          
First Lien Secured Term Loan     L+ 6.00%     8.47%     11/30/18     11/19/25       10,340       10,033       10,020       3.18  
Specialized Finance                                                          
Golden Pear Funding Assetco, LLC  (5)                                                          
Second Lien Secured Term Loan     L+ 10.50%
(1.00% Floor)
    12.85%     09/20/18     03/20/24       17,500       17,168       17,150       5.44  
Oasis Legal Finance, LLC(5)                                                          
Second Lien Secured Term Loan     L+ 10.75%
(1.00% Floor)
    13.10%     09/09/16     03/09/22       20,000       19,768       20,000       6.34  
                                37,500       36,936       37,150       11.78  
Technology Hardware, Storage & Peripherals                                                          
Source Code Midco, LLC                                                          
First Lien Secured Term Loan     L+ 8.75%
(1.00% Floor)
    11.28%     05/04/18     05/04/23       14,182       13,874       13,898       4.41  
Trucking                                                          
Sunteck / TTS Holdings, LLC                                                          
Second Lien Secured Term Loan     L+ 9.00%
(1.00% Floor)
    11.79%     12/15/16     06/15/22       3,500       3,462       3,468       1.10  
Total Debt Investments                               473,672       466,231       456,583       144.78  
Equity Investments                                                          
Advertising                                                          
Fluent, Inc. (f/k/a Cogint, Inc.) (4)(9)     N/A     N/A     11/28/17     12/08/25       187       560       706       0.22 %
Diversified Support Services                                                          
Quest Events, LLC                                                          
Preferred Units(4)     N/A     N/A     12/28/18     12/08/25       317       317       317       0.10  
Food Retail                                                          
Crews of California, Inc. Warrants  (4)     N/A     N/A     11/20/14     12/31/24       -       -       6       -  
Nicholas & Associates, LLC Warrants  (4)     N/A     N/A     11/20/14     12/31/24       2       -       131       0.04  
Pinnacle Management Group, LLC Warrants  (4)     N/A     N/A     11/20/14     12/31/24       2       -       131       0.04  
RC3 Enterprises, LLC Warrants  (4)     N/A     N/A     11/20/14     12/31/24       2       -       131       0.04  
                                6       -       399       0.12  
Health Care Services                                                          
PMA Holdco, LLC Warrants (4)     N/A     N/A     06/28/18     N/A       8       -       393       0.12  

 

See notes to consolidated financial statements

 

15

 

 

WhiteHorse Finance, Inc.

Consolidated Schedule of Investments - (continued)

December 31, 2018

(in thousands)

 

Investment Type(1)    

Spread

Above

Index (2)

   

Interest

Rate (3)

    Acquisition Date (10)    

Maturity

Date

   

Principal/

Share

Amount

   

Amortized

Cost

   

Fair

Value (11)

   

Fair Value

As A

Percentage

of Net

Assets

 
Other Diversified Financial Services                                                          
RCS Creditor Trust Class B Units  (4)(6)     N/A     N/A     10/01/17     N/A       143     $ -     $ 535       0.17 %
SFS Global Holding Company Warrants  (4)     N/A     N/A     06/28/18     N/A       -       -       -       -  
Sigue Corporation Warrants(4)     N/A     N/A     06/28/18     N/A       7       702       901       0.29  
                                150       702       1,436       0.46  
Specialized Finance                                                          
NMFC Senior Loan Program I LLC Units  (4)(5)(6)     N/A     N/A     08/13/14     06/13/20       10,000       10,029       9,630       3.05  
Trucking                                                          
Fox Rent A Car, Inc. Warrants (4)     N/A     N/A     10/26/16     N/A       -       -       100       0.03  
Total Equity Investments                               10,668       11,608       12,981       4.10  
Total Investments                             $ 484,340     $ 477,839     $ 469,564       148.88 %

 

(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”), which resets monthly, quarterly or semiannually, or the U.S. Prime Rate as published by the Wall Street Journal (“Prime” or “P”). The one, three and six-month LIBOR were 2.5%, 2.8% and 2.9%, respectively, as of December 31, 2018. The Prime was 5.5% as of December 31, 2018.

 

(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 maybe.

 

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

 

(5) 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 represented 89%, of total assets as of the date of the consolidated schedule of investments.

 

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

 

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of December 31, 2018. See Note 7.

 

(8) The investment is on non-accrual status.

 

(9) The fair value of the investment was determined using observable inputs. See Note 4. There are no legal restrictions on sales of the investment.

 

(10) Except as otherwise noted, all of the Company’s portfolio company investments, which as of the date of the consolidated schedule of investments represented 149% of the Company’s net assets or 91% of the Company’s total assets, are subject to legal restrictions on sales.

 

(11) Except as otherwise noted, the fair value of each investment was determined using significant unobservable inputs. See Note 4.

 

(12) The investment was comprised of two contracts, which were indexed to different base rates, L and P, respectively. The Spread Above Index and Interest Rate presented represent the weighted average of both contracts.

 

See notes to consolidated financial statements

 

16

 

 

WhiteHorse Finance, Inc.

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2019

(in thousands, except share and per share data)

 

NOTE 1 - ORGANIZATION

 

WhiteHorse Finance, Inc. (“WhiteHorse Finance” and, together with its subsidiaries, the “Company”) is an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, WhiteHorse Finance elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). WhiteHorse Finance’s common stock trades on the NASDAQ Global Select Market under the symbol “WHF.”

 

The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing lower middle market companies across a broad range of industries that typically carry a floating interest rate based on the London Interbank Offered Rate (“LIBOR”) and have a term of three to six years. While the Company focuses principally on originating senior secured loans to lower middle market companies, it may also opportunistically make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests and may receive warrants to purchase common stock in connection with its debt investments.

 

WhiteHorse Finance’s investment activities are managed by H.I.G. WhiteHorse Advisers, LLC (“WhiteHorse Advisers”). H.I.G. WhiteHorse Administration, LLC (“WhiteHorse Administration”) provides administrative services necessary for the Company to operate.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation: The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of WhiteHorse Finance and its wholly owned subsidiaries, WhiteHorse Finance Credit I, LLC (“WhiteHorse Credit”), and its subsidiary WhiteHorse Finance (CA), LLC (“WhiteHorse California”), and WhiteHorse Finance Warehouse, LLC (“WhiteHorse Warehouse”). The Company meets the definition of an investment company under Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies, and therefore applies the accounting and reporting guidance discussed therein to its consolidated financial statements. All significant intercompany balances and transactions have been eliminated.

 

Additionally, the accompanying consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying the annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. This Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2018. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2019.

 

Reclassifications: Certain reclassifications have been made to prior fiscal year amounts or balances to conform to the industry classifications presented within the Company’s consolidated schedule of investments in the current fiscal year. These reclassifications had no effect on the consolidated results of operations or financial position for any period presented.

   

Principles of Consolidation: Under the investment company rules and regulations pursuant to ASC Topic 946, WhiteHorse Finance is precluded from consolidating any entity other than another investment company. As provided under ASC Topic 946, WhiteHorse Finance generally consolidates any investment company when it owns 100% of its partners’ or members’ capital or equity units. The Company does not consolidate its investment in STRS JV. See further description of STRS JV in Note 3.

 

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments: The Company determines the fair value of its financial instruments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC Topic 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC Topic 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument. Therefore, when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement date. 

 

17

 

 

Investments are measured at fair value as determined in good faith by the Company’s investment committee, generally on a quarterly basis, and such valuations are reviewed by the audit committee of the board of directors and ultimately approved by the board of directors, based on, among other factors, consistently applied valuation procedures on each measurement date. Any changes to the valuation methodology are reviewed by management and the Company’s board of directors to confirm that the changes are justified. The Company continues to review and refine its valuation procedures in response to market changes.

 

The Company engages independent external valuation firms to periodically review material investments. These external reviews are used by the board of directors to review the Company’s internal valuation of each investment over the year.

 

Investment Transactions: The Company records investment transactions on a trade date basis. These transactions may settle subsequent to the trade date depending on the transaction type. Certain expenses related to legal and tax consultation, due diligence, rating fees, valuation expenses and independent collateral appraisals may arise when the Company makes certain investments. These expenses are recognized in the consolidated statements of operations as they are incurred.

 

Revenue Recognition: The Company’s revenue recognition policies are as follows:

 

Sales: Realized gains or losses on the sales of investments are calculated by using the specific identification method.

 

Investment Income: Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. The Company may also receive closing, commitment, prepayment, amendment and other fees from portfolio companies in the ordinary course of business.

 

Dividend income is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

 

Closing fees associated with investments in portfolio companies are deferred and recognized as interest income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any unamortized loan closing fees are recorded as part of interest income. Commitment fees are based upon the undrawn portion committed by the Company and are recorded as interest income on an accrual basis. Prepayment, amendment and other fees are recognized when earned, generally when such fees are receivable, and are included in fee income on the consolidated statements of operations.

 

The Company may invest in loans that contain a payment-in-kind (“PIK”) interest rate provision. PIK interest is accrued at the contractual rates and added to loan principal on the reset dates to the extent such amounts are expected to be collected.

 

Non-accrual loans: Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected. The Company may conclude that non-accrual status is not required if the loan has sufficient collateral value and is in the process of collection. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.

 

Cash and Cash Equivalents: Cash and cash equivalents include cash, deposits with financial institutions, and short-term liquid investments in money market funds with original maturities of three months or less.

 

Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents include amounts that are collected and held by the trustee appointed as custodian of the assets securing the Company’s revolving credit facility. Restricted cash is held by the trustee for the payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets. Restricted cash that represents interest or fee income is transferred to unrestricted cash accounts by the trustee generally once a quarter after the payment of operating expenses and amounts due under the Company’s revolving credit facility.

 

Offering Costs: The Company may incur legal, accounting, regulatory, investment banking and other costs in relation to equity offerings. Offering costs are deferred and charged against paid-in capital in excess of par on completion of the related offering.

 

18

 

 

Deferred Financing Costs: Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These amounts are amortized and are included in interest expense in the consolidated statements of operations over the estimated life of the borrowings. Deferred financing costs are presented in the consolidated statements of assets and liabilities as a direct reduction from the carrying amount of the related debt liability.

 

Income Taxes: The Company elected to be treated as a RIC under Subchapter M of the Code. In order to maintain its status as a RIC, among other requirements, the Company is required to distribute dividends for U.S. federal income tax purposes to its stockholders each taxable year generally of an amount at least equal to 90% of the sum of ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, the Company will incur a nondeductible excise tax equal to 4% of the amount by which (1) 98% of ordinary income for the calendar year (taking into account certain deferrals and elections), (2) 98.2% of capital gains in excess of capital losses, adjusted for certain ordinary losses, for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gain income for preceding years that were not distributed during such years and on which the Company incurred no U.S. federal income tax exceed distributions for the year. The Company accrues estimated excise tax on the amount, if any, that estimated taxable income is expected to exceed the level of stockholder distributions described above.

 

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statement is the largest benefit or expense that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Any tax positions not deemed to satisfy the more likely than not threshold are reversed and recorded as tax benefit or tax expense, as appropriate, in the current year. Management has analyzed the Company’s tax positions, and the Company has concluded that the Company did not have any unrecognized tax benefits or unrecognized tax liabilities related to uncertain tax positions as of September 30, 2019 and December 31, 2018.

 

Penalties or interest that may be assessed related to any income taxes would be classified as general and administrative expenses on the consolidated statements of operations. The Company had no amounts accrued for interest or penalties as of September 30, 2019 or December 31, 2018. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months. The Company’s tax returns are subject to examination by federal, state and local taxing authorities. Because many types of transactions are susceptible to varying interpretations under U.S. federal and state income tax laws and regulations, the amounts reported in the accompanying consolidated financial statements may be subject to change at a later date by the respective taxing authorities. Tax returns for each of the federal tax years since 2015 remain subject to examination by the Internal Revenue Service.

 

As of September 30, 2019 and December 31, 2018, the cost of investments for federal income tax purposes was $538,612 and $481,919, resulting in net unrealized depreciation of $11,069 and net unrealized depreciation of $12,355, respectively. This is comprised of gross unrealized appreciation of $4,982 and $3,598, and gross unrealized depreciation of $16,051 and $15,953, on a tax basis, as of September 30, 2019 and December 31, 2018, respectively.

 

Dividends and Distributions: Dividends and distributions to common stockholders are recorded on the ex-dividend date. Quarterly distribution payments are determined by the board of directors and are paid from taxable earnings estimated by management and may include a return of capital and/or capital gains. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment. 

 

The Company maintains an “opt out” distribution reinvestment plan for common stockholders. As a result, if the Company declares a distribution or other dividend, stockholders’ cash distributions will be automatically reinvested in additional shares of common stock, unless they specifically “opt out” of the distribution reinvestment plan so as to receive cash distributions.

 

Earnings per Share: The Company calculates earnings per share as earnings available to stockholders divided by the weighted average number of shares outstanding during the period.

 

Risks and Uncertainties: In the normal course of business, the Company encounters primarily two significant types of economic risks: credit and market. Credit risk is the risk of default on the Company’s investments that result from an issuer’s, borrower’s or derivative counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of investments due to changes in interest rates, spreads or other market factors, including the value of the collateral underlying investments held by the Company. Management believes that the carrying value of the Company’s investments are fairly stated, taking into consideration these risks along with estimated collateral values, payment histories and other market information.

 

19

 

 

Securities and Exchange Commission Disclosure Update and Simplification: In August 2018, the Securities and Exchange Commission adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification (the “SEC Release”) amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance. The effective date for the SEC Release is effective for all filings on or after November 5, 2018. The Company first adopted the final rule under the SEC Release as of December 31, 2018. The SEC Release requires presentation changes to the Company's consolidated statements of assets and liabilities and consolidated statements of changes in net assets. The Company has evaluated the impact of the amendments and determined the effect of the adoption of the simplification rules on financial statements will be limited to the modification and removal of certain disclosures.

 

Recent Accounting Pronouncements: During March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, to amend the amortization period for certain purchased callable debt securities held at a premium. Under current guidance, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The new guidance shortened the amortization period for the premium to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted the provisions of the ASU 2017-08 effective January 1, 2019 and determined adoption of this standard did not have a material impact as the Company does not hold any material purchased callable debt securities at a premium.

 

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections, which clarifies the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance. As the Company has already adopted the SEC Release, as discussed above, this ASU did not have any impact on the Company’s consolidated financial statements and related disclosures.

 

20

 

 

NOTE 3 - INVESTMENTS

 

The following table shows the Company’s investments as of September 30, 2019 and December 31, 2018:

 

   September 30, 2019   December 31, 2018 
   Amortized Cost   Fair Value   Amortized Cost   Fair Value 
First lien secured loans  $429,827    420,677   $365,356   $359,416 
Second lien secured loans   66,435    65,596    100,875    97,167 
Subordinated Note to STRS JV   19,484    19,484    -    - 
Equity (excluding STRS JV)   14,596    16,859    11,608    12,981 
Equity in STRS JV   4,871    4,927    -    - 
Total  $535,213    527,543   $477,839   $469,564 

 

The following table shows the portfolio composition by industry(1) grouping at fair value:

 

   September 30, 2019   December 31, 2018 
Advertising  $10,263    2.04%  $17,885    3.81%
Air Freight & Logistics   5,673    1.13    -    - 
Application Software   5,461    1.09    -    - 
Automotive Retail   16,837    3.34    16,840    3.59 
Broadcasting   29,259    5.82    35,092    7.47 
Cable & Satellite   13,950    2.77    14,700    3.13 
Communications Equipment   5,100    1.01    -    - 
Construction & Engineering   9,002    1.79    -    - 
Data Processing & Outsourced Services   24,437    4.86    24,707    5.26 
Department Stores   14,186    2.82    14,707    3.13 
Distributors   5,668    1.13    -    - 
Diversified Support Services   17,822    3.54    31,846    6.78 
Food Retail   26,547    5.28    29,790    6.34 
Health Care Facilities   14,760    2.93    12,058    2.57 
Health Care Services   20,778    4.13    14,970    3.19 
Home Furnishings   5,107    1.02    5,392    1.15 
Human Resources & Employment Services   12,304    2.45    -    - 
Internet Retail   19,488    3.87    17,100    3.64 
Internet Services & Infrastructure   24,862    4.94    25,576    5.45 
Investment Banking & Brokerage   23,403    4.65    26,723    5.69 
IT Consulting & Other Services   4,119    0.82    4,088    0.87 
Leisure Facilities   19,691    3.91    34,022    7.25 
Office Service & Supplies   12,186    2.42    -    - 
Oil & Gas Exploration & Production   -    -    17,342    3.69 
Other Diversified Financial Services   28,473    5.66    25,780    5.49 
Packaged Foods & Meats   19,604    3.90    12,777    2.72 
Personal Products   4,781    0.95    -    - 
Research & Consulting Services   13,349    2.65    13,903    2.96 
Restaurants   9,876    1.96    10,020    2.13 
Specialized Finance   47,114    9.36    46,780    9.97 
Technology Hardware, Storage & Peripherals   20,531    4.08    13,898    2.96 
Trading Companies & Distributors   14,697    2.92    -    - 
Trucking   3,804    0.76    3,568    0.76 
Total  $503,132    100.00%  $469,564    100.00%

 

(1)Excludes investments in STRS JV. 

 

The portfolio companies underlying the investments are all located in the United States and its territories, except for Arcole Acquisition Corp (which is located in Canada). As of September 30, 2019 and December 31, 2018, the weighted average remaining term of the Company’s debt investments was approximately 3.7 years and 3.6 years, respectively.

 

As of September 30, 2019 and December 31, 2018, the total fair value of non-accrual loans were $8,480 and $103 as of the end of each respective period. 

 

21

 

 

An affiliated company is generally a portfolio company in which the Company owns 5% or more of its voting securities. A controlled affiliated company is generally a portfolio company in which the Company owns more than 25% of its voting securities or has the power to exercise control over its management or policies (including through a management agreement). The following table presents the schedule of investments in and advances to affiliated and controlled affiliated persons (as defined by the 1940 Act) as of and for the nine months ended September 30, 2019:

 

Affiliated Person(1)  Type of
Asset
   Amount of
dividends and
interest
included in
income
   Beginning
Fair Value at
December 31,
2018
   Purchases   Sales   Net
Realized
Gain (Loss)
   Net Change in
Unrealized
Appreciation
(Depreciation)
   Ending Fair
Value at
September 30,
2019
 
Non-controlled affiliates                                                                                                                                                
NMFC Senior Loan Program I LLC Units   Equity   $888   $9,630   $-   $-   $-   $43   $9,673 
RCS Creditor Trust Class B Units   Equity    -    535    -    -    -    (535)   - 
Total Non-controlled affiliates       $888   $10,165   $-   $-   $-   $(492)  $9,673