WhiteHorse Finance ((WHF)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for WhiteHorse Finance painted a challenging picture for the company, with a mix of negative and positive developments. The call highlighted disappointing financial results, including a reset of the quarterly distribution and net losses. However, there were also some positive steps taken, such as a reduction in incentive fees and a share buyback program, which provided a glimmer of hope amidst the challenges. Despite these efforts, the overall sentiment of the call was overshadowed by the negative aspects.
Incentive Fee Reduction
The company announced a voluntary reduction in the incentive fee on net investment income from 20% to 17.5% for the next two fiscal quarters. This move is intended to provide additional financial support for quarterly distributions to shareholders, reflecting the company’s commitment to maintaining shareholder value during challenging times.
Share Buyback Program
The Board of WhiteHorse Finance approved a share buyback program of up to $15 million. This decision comes as the company’s stock is trading at a more than 40% discount to its book value. The buyback is expected to be accretive and demonstrates confidence in the company’s long-term prospects.
Improvement in Nonaccrual Investments
There has been a notable improvement in nonaccrual investments, which now represent 2.7% of the debt portfolio at fair value. This is a significant improvement from the 4.9% reported in the previous quarter, indicating better management of the company’s investment portfolio.
Disappointing Third Quarter Results
The third quarter results were disappointing, with GAAP net investment income falling to $6.1 million from $6.6 million in the second quarter. Additionally, the net asset value (NAV) per share decreased by 3.6% from the prior quarter, reflecting the challenging market conditions.
Distribution Reset
Due to ongoing market challenges and lower interest rates, the Board of Directors decided to reset the quarterly base distribution to $0.25 per share. This represents an 8.8% annualized yield based on the company’s ending NAV, and is a strategic move to align distributions with current financial realities.
Net Realized and Unrealized Losses
The company reported net realized and unrealized losses totaling $6.7 million in the third quarter. These losses were primarily driven by write-downs in investments such as Alvaria and Camarillo Fitness, highlighting the volatility in the company’s investment portfolio.
Decreased Portfolio Value
WhiteHorse Finance’s total investments decreased by $60.9 million to $568.4 million, down from $629.3 million at the end of the second quarter. This decline was attributed to elevated repayments and sales, reflecting the company’s strategic adjustments in response to market conditions.
Forward-Looking Guidance
Looking ahead, WhiteHorse Finance provided several key metrics and guidance updates. The company reported a decrease in Q3 GAAP net investment income and core NII, with a reset in the quarterly base distribution to $0.25 per share. The adviser has agreed to reduce the incentive fee for the next two fiscal quarters, and a $15 million share buyback program has been announced. Despite these measures, the company continues to face challenges, with net realized and unrealized losses impacting the portfolio.
In summary, the WhiteHorse Finance earnings call highlighted a mix of challenges and strategic responses. While the company is taking steps to support shareholder value through incentive fee reductions and a share buyback program, the overall sentiment remains cautious due to disappointing financial results and market conditions. Investors will be watching closely to see how these strategies impact the company’s future performance.