Item 1. Financial Statements
WhiteHorse Finance, Inc.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Investments, at fair value
|
|
|
|
|
|
|
|
|
Non-controlled/non-affiliate
company investments
|
|
$
|
535,387
|
|
|
$
|
546,744
|
|
Non-controlled affiliate company
investments
|
|
|
9,520
|
|
|
|
9,651
|
|
Controlled
affiliate company investments
|
|
|
50,388
|
|
|
|
33,293
|
|
Total investments, at fair value (amortized cost
$598,477 and $597,725, respectively)
|
|
|
595,295
|
|
|
|
589,688
|
|
Cash and cash equivalents
|
|
|
8,863
|
|
|
|
4,294
|
|
Restricted cash and cash equivalents
|
|
|
13,830
|
|
|
|
23,252
|
|
Restricted foreign currency (cost of $233)
|
|
|
231
|
|
|
|
—
|
|
Interest and dividend receivable
|
|
|
6,145
|
|
|
|
6,010
|
|
Amounts receivable on unsettled investment transactions
|
|
|
815
|
|
|
|
360
|
|
Prepaid expenses and other receivables
|
|
|
627
|
|
|
|
7,620
|
|
Total assets
|
|
$
|
625,806
|
|
|
$
|
631,224
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
291,924
|
|
|
$
|
298,924
|
|
Distributions payable
|
|
|
7,294
|
|
|
|
7,294
|
|
Management fees payable
|
|
|
3,069
|
|
|
|
3,060
|
|
Incentive fees payable
|
|
|
7,029
|
|
|
|
5,230
|
|
Interest payable
|
|
|
853
|
|
|
|
1,674
|
|
Accounts payable and accrued expenses
|
|
|
1,035
|
|
|
|
1,944
|
|
Advances received from unfunded
credit facilities
|
|
|
39
|
|
|
|
143
|
|
Total liabilities
|
|
|
311,243
|
|
|
|
318,269
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (See Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
300,744
|
|
|
|
300,744
|
|
Accumulated earnings
|
|
|
13,798
|
|
|
|
12,190
|
|
Total net assets
|
|
|
314,563
|
|
|
|
312,955
|
|
Total liabilities and total
net assets
|
|
$
|
625,806
|
|
|
$
|
631,224
|
|
|
|
|
|
|
|
|
|
|
Number of shares outstanding
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
Net asset value per share
|
|
$
|
15.31
|
|
|
$
|
15.23
|
|
See notes to the consolidated financial
statements
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,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From non-controlled/non-affiliate company investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
14,222
|
|
|
$
|
14,865
|
|
|
$
|
39,506
|
|
|
$
|
42,104
|
|
Fee income
|
|
|
741
|
|
|
|
2,246
|
|
|
|
1,571
|
|
|
|
6,328
|
|
Dividend income
|
|
|
21
|
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
From non-controlled affiliate company investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
|
263
|
|
|
|
301
|
|
|
|
800
|
|
|
|
888
|
|
From controlled affiliate company investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
682
|
|
|
|
343
|
|
|
|
1,913
|
|
|
|
343
|
|
Dividend income
|
|
|
568
|
|
|
|
-
|
|
|
|
961
|
|
|
|
-
|
|
Total investment income
|
|
|
16,497
|
|
|
|
17,755
|
|
|
|
44,852
|
|
|
|
49,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,770
|
|
|
|
3,495
|
|
|
|
9,661
|
|
|
|
9,744
|
|
Base management fees
|
|
|
3,069
|
|
|
|
2,834
|
|
|
|
9,110
|
|
|
|
8,240
|
|
Performance-based incentive fees
|
|
|
3,819
|
|
|
|
1,714
|
|
|
|
5,571
|
|
|
|
5,520
|
|
Administrative service fees
|
|
|
171
|
|
|
|
159
|
|
|
|
512
|
|
|
|
475
|
|
General and administrative expenses
|
|
|
601
|
|
|
|
660
|
|
|
|
2,212
|
|
|
|
1,875
|
|
Total expenses, before fees waived
|
|
|
10,430
|
|
|
|
8,862
|
|
|
|
27,066
|
|
|
|
25,854
|
|
Base management fee waived
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(397
|
)
|
Total expenses, net of fees waived
|
|
|
10,430
|
|
|
|
8,862
|
|
|
|
27,066
|
|
|
|
25,457
|
|
Net investment income before excise tax
|
|
|
6,067
|
|
|
|
8,893
|
|
|
|
17,786
|
|
|
|
24,206
|
|
Excise tax
|
|
|
137
|
|
|
|
238
|
|
|
|
513
|
|
|
|
712
|
|
Net investment income after excise tax
|
|
|
5,930
|
|
|
|
8,655
|
|
|
|
17,273
|
|
|
|
23,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and unrealized gains (losses) on
investments and foreign currency transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlled/non-affiliate company investments
|
|
|
635
|
|
|
|
(2
|
)
|
|
|
1,069
|
|
|
|
(2,020
|
)
|
Foreign currency transactions
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
66
|
|
|
|
-
|
|
Foreign currency forward contracts
|
|
|
(25
|
)
|
|
|
-
|
|
|
|
(25
|
)
|
|
|
-
|
|
Net realized gains (losses)
|
|
|
609
|
|
|
|
(2
|
)
|
|
|
1,110
|
|
|
|
(2,020
|
)
|
Net change in unrealized appreciation (depreciation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlled/non-affiliate company investments
|
|
|
12,659
|
|
|
|
(1,882
|
)
|
|
|
6,303
|
|
|
|
1,042
|
|
Non-controlled affiliate company investments
|
|
|
999
|
|
|
|
28
|
|
|
|
(131
|
)
|
|
|
(492
|
)
|
Controlled affiliate company investments
|
|
|
1,526
|
|
|
|
56
|
|
|
|
(1,316
|
)
|
|
|
56
|
|
Translation of assets and liabilities in foreign currencies
|
|
|
(92
|
)
|
|
|
-
|
|
|
|
251
|
|
|
|
-
|
|
Foreign currency forward contracts
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
15,095
|
|
|
|
(1,798
|
)
|
|
|
5,107
|
|
|
|
606
|
|
Net realized and unrealized gains (losses) on investments
|
|
|
15,704
|
|
|
|
(1,800
|
)
|
|
|
6,217
|
|
|
|
(1,414
|
)
|
Net increase in net assets
resulting from operations
|
|
$
|
21,634
|
|
|
$
|
6,855
|
|
|
$
|
23,490
|
|
|
$
|
22,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share
|
|
$
|
1.06
|
|
|
$
|
0.34
|
|
|
$
|
1.15
|
|
|
$
|
1.08
|
|
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
|
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Statements of Changes in
Net Assets (Unaudited)
(in thousands, except share and per
share data)
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Undistributed
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
(Overdistributed)
|
|
|
Total Net
|
|
|
|
Shares
|
|
|
Par amount
|
|
|
Par
|
|
|
Earnings
|
|
|
Assets
|
|
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
|
)
|
Balance at September 30, 2019
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
301,557
|
|
|
$
|
13,916
|
|
|
$
|
315,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
300,744
|
|
|
$
|
(543
|
)
|
|
$
|
300,222
|
|
Net increase in net assets resulting from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income after excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,930
|
|
|
|
5,930
|
|
Net realized gains (losses) on investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
609
|
|
|
|
609
|
|
Net
change in unrealized appreciation (depreciation) on investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,095
|
|
|
|
15,095
|
|
Distributions declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,293
|
)
|
|
|
(7,293
|
)
|
Balance at September 30, 2020
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
300,744
|
|
|
$
|
13,798
|
|
|
$
|
314,563
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Statements of Changes in
Net Assets (Unaudited)
(in thousands, except share and per
share data)
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
Undistributed
|
|
|
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
(Overdistributed)
|
|
|
Total Net
|
|
|
|
Shares
|
|
|
Par amount
|
|
|
Par
|
|
|
Earnings
|
|
|
Assets
|
|
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
|
)
|
Balance at September 30, 2019
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
301,557
|
|
|
$
|
13,916
|
|
|
$
|
315,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
300,744
|
|
|
$
|
12,190
|
|
|
$
|
312,955
|
|
Net increase in net assets resulting from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income after excise tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,273
|
|
|
|
17,273
|
|
Net realized gains (losses) on investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,110
|
|
|
|
1,110
|
|
Net change in unrealized
appreciation (depreciation) on investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,107
|
|
|
|
5,107
|
|
Distributions declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,882
|
)
|
|
|
(21,882
|
)
|
Balance at September 30, 2020
|
|
|
20,546,032
|
|
|
$
|
21
|
|
|
$
|
300,744
|
|
|
$
|
13,798
|
|
|
|
314,563
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net increase in net assets resulting from
operations
|
|
$
|
23,490
|
|
|
$
|
22,080
|
|
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Paid-in-kind income
|
|
|
(681
|
)
|
|
|
(1,922
|
)
|
Net realized (gains) losses on investments
|
|
|
(1,069
|
)
|
|
|
2,020
|
|
Net unrealized (appreciation) depreciation
on investments
|
|
|
(4,856
|
)
|
|
|
(606
|
)
|
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies
|
|
|
(251
|
)
|
|
|
-
|
|
Accretion of discount
|
|
|
(2,169
|
)
|
|
|
(3,346
|
)
|
Amortization of deferred financing
costs
|
|
|
767
|
|
|
|
746
|
|
Acquisition of investments
|
|
|
(126,255
|
)
|
|
|
(207,756
|
)
|
Proceeds from principal payments
and sales of portfolio investments
|
|
|
81,438
|
|
|
|
121,619
|
|
Proceeds for sales of portfolio
investments to STRS JV
|
|
|
47,985
|
|
|
|
32,011
|
|
Net changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Interest and dividend receivable
|
|
|
(135
|
)
|
|
|
(1,344
|
)
|
Prepaid expenses and other receivables
|
|
|
6,993
|
|
|
|
417
|
|
Amounts receivable on unsettled
investment transactions
|
|
|
(455
|
)
|
|
|
(4,603
|
)
|
Amounts payable on unsettled investment
transactions
|
|
|
-
|
|
|
|
(445
|
)
|
Management fees payable
|
|
|
1,808
|
|
|
|
(3,765
|
)
|
Incentive fees payable
|
|
|
(725
|
)
|
|
|
289
|
|
Accounts payable and accrued expenses
|
|
|
-
|
|
|
|
95
|
|
Interest payable
|
|
|
(821
|
)
|
|
|
(495
|
)
|
Advances received
from unfunded credit facilities
|
|
|
(104
|
)
|
|
|
49
|
|
Net cash provided
by (used in) operating activities
|
|
|
24,960
|
|
|
|
(44,956
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
133,695
|
|
|
|
107,400
|
|
Repayments of debt
|
|
|
(141,393
|
)
|
|
|
(52,100
|
)
|
Deferred financing costs
|
|
|
-
|
|
|
|
(32
|
)
|
Distributions paid to common stockholders,
net of distributions reinvested
|
|
|
(21,882
|
)
|
|
|
(21,882
|
)
|
Net cash provided
by (used in) financing activities
|
|
|
(29,580
|
)
|
|
|
33,386
|
|
Effect of exchange rate changes on cash
|
|
|
(2
|
)
|
|
|
-
|
|
Net change in cash, cash equivalents and restricted
cash
|
|
|
(4,622
|
)
|
|
|
(11,570
|
)
|
Cash, cash equivalents and
restricted cash at beginning of period
|
|
|
27,546
|
|
|
|
33,732
|
|
Cash, cash equivalents and
restricted cash at end of period
|
|
$
|
22,924
|
|
|
$
|
22,162
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
9,728
|
|
|
$
|
9,492
|
|
Non-cash exchanges of investments
|
|
|
18,411
|
|
|
|
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,
|
|
|
|
2020
|
|
|
2019
|
|
Cash and cash equivalents
|
|
$
|
8,863
|
|
|
$
|
9,827
|
|
Restricted cash and restricted foreign currency
|
|
|
14,061
|
|
|
|
12,335
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash presented in consolidated statements of cash flows
|
|
$
|
22,924
|
|
|
$
|
22,162
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
(Unaudited)
September 30, 2020
(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%
|
|
7.50%
|
|
03/26/18
|
|
03/27/23
|
|
7,609
|
|
$
|
7,609
|
|
$
|
7,609
|
|
2.42
|
%
|
|
|
(0.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SmartSign Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.50%
|
|
8.50%
|
|
08/21/20
|
|
10/11/24
|
|
7,763
|
|
|
7,612
|
|
|
7,763
|
|
2.47
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
15,372
|
|
|
15,221
|
|
|
15,372
|
|
4.89
|
|
Agricultural & Farm Machinery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad Boy Mowers Acquisition, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 5.75%
|
|
6.75%
|
|
12/19/19
|
|
12/06/25
|
|
10,307
|
|
|
10,037
|
|
|
10,152
|
|
3.23
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air Freight & Logistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Access USA Shipping, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.00%
|
|
02/08/19
|
|
02/08/24
|
|
5,432
|
|
|
5,378
|
|
|
5,398
|
|
1.72
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Connexity, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.50%
|
|
10.00%
|
|
05/21/20
|
|
05/21/25
|
|
10,931
|
|
|
10,627
|
|
|
10,771
|
|
3.42
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newscycle Solutions, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
8.00%
|
|
06/14/19
|
|
12/29/22
|
|
5,114
|
|
|
5,050
|
|
|
4,774
|
|
1.52
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 7.00%
|
|
8.00%
|
|
06/14/19
|
|
12/29/22
|
|
301
|
|
|
298
|
|
|
281
|
|
0.09
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
16,346
|
|
|
15,975
|
|
|
15,826
|
|
5.03
|
|
Automotive Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Team Car Care Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(12)
|
|
base rate+ 7.99%
|
|
9.01%
|
|
02/26/18
|
|
02/23/23
|
|
16,330
|
|
|
16,154
|
|
|
15,953
|
|
5.07
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BW Gas & Convenience Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.25%
|
|
6.40%
|
|
11/15/19
|
|
11/18/24
|
|
8,181
|
|
|
7,908
|
|
|
8,181
|
|
2.60
|
|
|
|
(0.00% Floor)
|
|
|
|
|
|
|
|
24,511
|
|
|
24,062
|
|
|
24,134
|
|
7.67
|
|
Broadcasting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alpha Media, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
P+ 7.50%
|
|
10.75%
|
|
08/14/18
|
|
02/25/22
|
|
5,075
|
|
|
5,010
|
|
|
4,849
|
|
1.54
|
|
|
|
(2.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LHS Borrower, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.75%
|
|
7.75%
|
|
09/30/20
|
|
09/30/25
|
|
19,499
|
|
|
19,063
|
|
|
19,062
|
|
6.06
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving
Loan(7)
|
|
L+ 6.75%
|
|
7.75%
|
|
09/30/20
|
|
09/30/25
|
|
-
|
|
|
-
|
|
|
-
|
|
-
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
19,499
|
|
|
19,063
|
|
|
19,062
|
|
6.06
|
|
Cable & Satellite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Midco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(15)
|
|
L+7.19%
|
|
8.19%
|
|
06/08/18
|
|
06/08/23
|
|
15,000
|
|
|
14,879
|
|
|
14,250
|
|
4.53
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ribbon Communications Operating Company, Inc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.50%
|
|
7.65%
|
|
08/14/20
|
|
03/03/26
|
|
12,469
|
|
|
12,011
|
|
|
12,011
|
|
3.82
|
|
|
|
(0.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sorenson Communications, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
6.72%
|
|
03/15/19
|
|
04/29/24
|
|
3,971
|
|
|
3,886
|
|
|
3,950
|
|
1.26
|
|
|
|
(0.00% Floor)
|
|
|
|
|
|
|
|
16,440
|
|
|
15,897
|
|
|
15,961
|
|
5.08
|
|
Construction & Engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlas Intermediate Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.25%
|
|
7.25%
|
|
05/26/20
|
|
02/13/26
|
|
15,269
|
|
|
14,404
|
|
|
14,810
|
|
4.71
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Processing & Outsourced Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FPT Operating Company, LLC/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLabs Operating Company, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.75%
|
|
9.75%
|
|
12/23/16
|
|
06/07/24
|
|
24,441
|
|
|
24,200
|
|
|
23,431
|
|
7.45
|
|
|
|
(1.00% Floor)
|
|
(0.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geo Logic Systems Ltd. (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan (13)
|
|
C +6.25%
|
|
7.25%
|
|
12/19/19
|
|
12/19/24
|
|
6,752
|
|
|
5,062
|
|
|
4,903
|
|
1.56
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan (7)(13)
|
|
C +6.25%
|
|
7.25%
|
|
12/19/19
|
|
12/19/24
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
-
|
|
|
|
(1.00% Floor)
|
|
`
|
|
|
|
|
|
31,193
|
|
|
29,262
|
|
|
28,330
|
|
9.01
|
|
Department Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mills Fleet Farm Group, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.25%
|
|
7.25%
|
|
10/24/18
|
|
10/24/24
|
|
13,543
|
|
|
13,280
|
|
|
13,272
|
|
4.22
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Brands, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.50%
|
|
01/28/19
|
|
01/25/24
|
|
5,727
|
|
|
5,632
|
|
|
4,868
|
|
1.55
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
L+ 8.00%
|
|
9.50%
|
|
06/10/20
|
|
01/25/24
|
|
850
|
|
|
850
|
|
|
723
|
|
0.23
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
6,577
|
|
|
6,482
|
|
|
5,591
|
|
1.78
|
|
Diversified Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sklar Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
8.00%
|
|
11/13/19
|
|
05/13/23
|
|
8,903
|
|
|
8,726
|
|
|
8,790
|
|
2.79
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
(Unaudited) - (continued)
September 30, 2020
(in thousands)
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ImageOne Industries, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 10.00%
|
|
11.00%
|
|
01/11/18
|
|
01/11/23
|
|
6,497
|
|
$
|
6,355
|
|
$
|
6,444
|
|
2.05
|
%
|
|
|
(1.00% Floor)
|
|
(4.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan(4)(7)
|
|
L+ 10.00%
|
|
11.00%
|
|
07/22/19
|
|
12/12/22
|
|
731
|
|
|
731
|
|
|
731
|
|
0.23
|
|
|
|
(1.00% Floor)
|
|
(4.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NNA Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
8.50%
|
|
10/16/18
|
|
10/16/23
|
|
13,442
|
|
|
13,249
|
|
|
13,308
|
|
4.23
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
20,670
|
|
|
20,335
|
|
|
20,483
|
|
6.51
|
|
Education Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EducationDynamics, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.75%
|
|
8.75%
|
|
11/26/19
|
|
11/26/24
|
|
13,936
|
|
|
13,697
|
|
|
13,936
|
|
4.43
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AG Kings Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(4)(8)
|
|
P+ 11.00%
|
|
14.25%
|
|
08/10/16
|
|
08/10/21
|
|
21,644
|
|
|
8,612
|
|
|
8,541
|
|
2.72
|
|
|
|
(0.75% Floor)
|
|
(2.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superpriority Secured Debtor-In-Possession Term Loan(4)(18)
|
|
L+ 10.00%
|
|
11.00%
|
|
08/26/20
|
|
08/10/21
|
|
14,222
|
|
|
5,663
|
|
|
14,222
|
|
4.52
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
35,866
|
|
|
14,275
|
|
|
22,763
|
|
7.24
|
|
Health Care Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grupo HIMA San Pablo, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 9.00%
|
|
9.25%
|
|
05/15/19
|
|
04/30/19
|
|
3,855
|
|
|
3,855
|
|
|
2,621
|
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
L+ 9.00%
|
|
10.50%
|
|
02/01/13
|
|
04/30/19
|
|
13,511
|
|
|
13,511
|
|
|
9,188
|
|
2.92
|
|
|
|
(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
|
|
|
11,809
|
|
3.75
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHS Therapy, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 7.75%
|
|
9.25%
|
|
06/14/19
|
|
06/14/24
|
|
7,470
|
|
|
7,365
|
|
|
7,470
|
|
2.37
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lab Logistics, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
7.50%
|
|
10/16/19
|
|
09/25/23
|
|
106
|
|
|
105
|
|
|
106
|
|
0.03
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
L+ 6.50%
|
|
7.73%
|
|
10/16/19
|
|
09/25/23
|
|
5,249
|
|
|
5,219
|
|
|
5,249
|
|
1.67
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
12,825
|
|
|
12,689
|
|
|
12,825
|
|
4.07
|
|
Home Furnishings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sure Fit Home Products, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(8)
|
|
L+ 9.75%
|
|
10.75%
|
|
10/26/18
|
|
07/13/22
|
|
5,228
|
|
|
5,111
|
|
|
3,778
|
|
1.20
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive Media & Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
What If Media Group, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
7.50%
|
|
10/02/19
|
|
10/02/24
|
|
12,675
|
|
|
12,472
|
|
|
12,675
|
|
4.03
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet & Direct Marketing Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBQ Buyer, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.50%
|
|
08/28/20
|
|
08/28/25
|
|
10,696
|
|
|
10,434
|
|
|
10,432
|
|
3.32
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan (7)
|
|
L+ 8.00%
|
|
9.50%
|
|
08/28/20
|
|
02/28/21
|
|
-
|
|
|
-
|
|
|
-
|
|
-
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potpourri Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.25%
|
|
9.75%
|
|
07/03/19
|
|
07/03/24
|
|
18,034
|
|
|
17,732
|
|
|
17,855
|
|
5.68
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
28,730
|
|
|
28,166
|
|
|
28,287
|
|
9.00
|
|
Investment Banking & Brokerage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arcole Acquisition Corp(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A(4)(8)(19)
|
|
L+ 10.25%
|
|
11.25%
|
|
11/29/18
|
|
11/30/23
|
|
5,231
|
|
|
5,159
|
|
|
4,708
|
|
1.50
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B(4)(8)(19)
|
|
L+ 16.50%
|
|
17.50%
|
|
11/29/18
|
|
11/30/23
|
|
1,826
|
|
|
1,785
|
|
|
1,643
|
|
0.52
|
|
|
|
(1.00% Floor)
|
|
(1.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Unsecured Term
Loan(4)
|
|
L+ 9.00%
|
|
10.00%
|
|
07/31/20
|
|
10/31/20
|
|
291
|
|
|
291
|
|
|
291
|
|
0.09
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JVMC Holdings Corp. (f/k/a RJO Holdings Corp)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
7.50%
|
|
02/28/19
|
|
02/28/24
|
|
13,815
|
|
|
13,721
|
|
|
13,815
|
|
4.39
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
21,163
|
|
|
20,956
|
|
|
20,457
|
|
6.50
|
|
IT Consulting & Other Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AST-Applications Software Technology LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.00%
|
|
01/10/17
|
|
01/10/23
|
|
4,034
|
|
|
3,999
|
|
|
4,034
|
|
1.28
|
|
|
|
(1.00% Floor)
|
|
(1.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leisure Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Honors Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan (16)
|
|
L+ 7.97%
|
|
8.97%
|
|
09/06/19
|
|
09/06/24
|
|
9,414
|
|
|
9,265
|
|
|
8,284
|
|
2.63
|
|
|
|
(1.00% Floor)
|
|
(0.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Delayed Draw Loan(16)
|
|
L+ 7.61%
|
|
8.61%
|
|
09/06/19
|
|
09/06/24
|
|
4,638
|
|
|
4,591
|
|
|
4,081
|
|
1.30
|
|
|
|
(1.00% Floor)
|
|
(0.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lift Brands, Inc. (aka Snap Fitness Holdings,
Inc.)
|
|
|
|
`
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 3.25%
|
|
4.25%
|
|
06/29/20
|
|
06/29/25
|
|
5,659
|
|
|
5,576
|
|
|
5,571
|
|
1.77
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
N/A
|
|
9.50%
|
|
06/29/20
|
|
06/29/25
|
|
1,136
|
|
|
1,109
|
|
|
1,107
|
|
0.35
|
|
|
|
|
|
(9.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan C (9)
|
|
N/A
|
|
9.50%
|
|
06/29/20
|
|
N/A
|
|
1,268
|
|
|
1,265
|
|
|
1,265
|
|
0.40
|
|
|
|
|
|
(9.50%PIK)
|
|
|
|
|
|
22,115
|
|
|
21,806
|
|
|
20,308
|
|
6.45
|
|
Office Services & Supplies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Empire Office, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.75%
|
|
8.25%
|
|
04/12/19
|
|
04/12/24
|
|
10,895
|
|
|
10,741
|
|
|
10,644
|
|
3.38
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaged Foods & Meats
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lenny & Larry's, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(17)
|
|
L+ 7.94%
|
|
8.94%
|
|
05/15/18
|
|
05/15/23
|
|
11,271
|
|
|
11,155
|
|
|
10,779
|
|
3.43
|
|
|
|
(1.00% Floor)
|
|
(1.17%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy Services Company, LLC (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.00%
|
|
03/06/20
|
|
05/31/24
|
|
6,256
|
|
|
5,983
|
|
|
6,131
|
|
1.95
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
(Unaudited) - (continued)
September 30, 2020
(in thousands)
Research & Consulting Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nelson Worldwide, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 9.25%
|
|
10.25%
|
|
01/09/18
|
|
01/09/23
|
|
12,708
|
|
$
|
12,563
|
|
$
|
12,453
|
|
3.96
|
%
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALM Media, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
7.50%
|
|
11/25/19
|
|
11/25/24
|
|
15,159
|
|
|
14,908
|
|
|
14,401
|
|
4.58
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
27,867
|
|
|
27,471
|
|
|
26,854
|
|
8.54
|
|
Restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LS GFG Holdings Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
P+ 5.00%
|
|
8.25%
|
|
11/30/18
|
|
11/19/25
|
|
10,159
|
|
|
9,934
|
|
|
8,534
|
|
2.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialized Consumer Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
True Blue Car Wash, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.12%
|
|
8.12%
|
|
10/17/19
|
|
10/17/24
|
|
4,377
|
|
|
4,306
|
|
|
4,377
|
|
1.39
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
L+ 7.12%
|
|
8.12%
|
|
10/17/19
|
|
10/17/24
|
|
2,018
|
|
|
2,000
|
|
|
2,018
|
|
0.64
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
6,395
|
|
|
6,306
|
|
|
6,395
|
|
2.03
|
|
Specialized Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golden Pear Funding Assetco, LLC(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Secured Term Loan
|
|
L+ 10.50%
|
|
11.50%
|
|
09/20/18
|
|
03/20/24
|
|
17,500
|
|
|
17,279
|
|
|
17,500
|
|
5.56
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Legal Finance, LLC(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Secured Term Loan
|
|
L+ 10.75%
|
|
11.75%
|
|
09/09/16
|
|
03/09/22
|
|
12,500
|
|
|
12,435
|
|
|
12,500
|
|
3.97
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHF STRS Ohio Senior Loan Fund LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
Note(4)(5)(7)(9)(14)
|
|
L+ 6.50%
|
|
6.66%
|
|
07/19/19
|
|
N/A
|
|
41,073
|
|
|
41,073
|
|
|
41,073
|
|
13.06
|
|
|
|
|
|
|
|
|
|
|
|
71,073
|
|
|
70,787
|
|
|
71,073
|
|
22.59
|
|
Specialty Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flexitallic Group SAS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
7.50%
|
|
10/28/19
|
|
10/29/26
|
|
11,662
|
|
|
11,407
|
|
|
10,846
|
|
3.45
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vero Parent, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.00%
|
|
11/06/19
|
|
08/16/24
|
|
16,428
|
|
|
15,061
|
|
|
16,267
|
|
5.17
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology Hardware, Storage & Peripherals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source Code Midco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.25%
|
|
9.25%
|
|
05/04/18
|
|
05/04/23
|
|
22,634
|
|
|
22,295
|
|
|
22,633
|
|
7.19
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessco Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.25%
|
|
8.75%
|
|
08/22/19
|
|
08/22/24
|
|
8,835
|
|
|
8,696
|
|
|
8,922
|
|
2.84
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt Investments
|
|
|
|
|
|
|
|
|
|
602,578
|
|
|
569,408
|
|
|
566,230
|
|
180.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quest Events, LLC Preferred Units(4)
|
|
N/A
|
|
N/A
|
|
12/28/18
|
|
12/08/25
|
|
317
|
|
|
317
|
|
|
-
|
|
-
|
|
ImageOne Industries, LLC Common A Units(4)
|
|
N/A
|
|
N/A
|
|
09/20/19
|
|
N/A
|
|
225
|
|
|
-
|
|
|
169
|
|
0.05
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lab Logistics Preferred Units (4)
|
|
N/A
|
|
N/A
|
|
10/29/19
|
|
N/A
|
|
2
|
|
|
857
|
|
|
857
|
|
0.27
|
|
Internet & Direct Marketing Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBQ Buyer, LLC Shares(4)
|
|
N/A
|
|
N/A
|
|
08/28/20
|
|
N/A
|
|
1,100
|
|
|
1,100
|
|
|
1,199
|
|
0.38
|
|
Leisure Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lift Brands, Inc. (aka Snap Fitness Holdings,
Inc.) Class A Common Stock (4)
|
|
N/A
|
|
N/A
|
|
06/29/20
|
|
N/A
|
|
2
|
|
|
1,955
|
|
|
282
|
|
0.09
|
|
Lift Brands, Inc. (aka Snap
Fitness Holdings, Inc.) Warrants(4)
|
|
N/A
|
|
N/A
|
|
06/29/20
|
|
06/28/28
|
|
1
|
|
|
793
|
|
|
114
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
2,748
|
|
|
396
|
|
0.13
|
|
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
|
|
|
3,490
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
|
2,890
|
|
|
3,490
|
|
1.11
|
|
Specialized Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NMFC Senior Loan Program I LLC Units (4)(5)(6)
|
|
N/A
|
|
N/A
|
|
08/13/14
|
|
08/31/22
|
|
10,000
|
|
|
10,029
|
|
|
9,520
|
|
3.03
|
|
WHF STRS Ohio Senior Loan Fund LLC Interests (4)(5)(7)(14)
|
|
N/A
|
|
N/A
|
|
07/19/19
|
|
N/A
|
|
10,268
|
|
|
10,268
|
|
|
9,315
|
|
2.96
|
|
|
|
|
|
|
|
|
|
|
|
20,268
|
|
|
20,297
|
|
|
18,835
|
|
5.99
|
|
Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessco Holdings, LLC Units(4)
|
|
N/A
|
|
N/A
|
|
08/22/19
|
|
N/A
|
|
506
|
|
|
860
|
|
|
4,090
|
|
1.30
|
|
Trucking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europcar Mobility Group Earnout (4)(5)
|
|
N/A
|
|
N/A
|
|
10/31/19
|
|
12/31/22
|
|
-
|
|
|
-
|
|
|
29
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity Investments
|
|
|
|
|
|
|
|
|
|
22,586
|
|
|
29,069
|
|
|
29,065
|
|
9.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
|
|
|
|
|
|
|
|
625,164
|
|
$
|
598,477
|
|
$
|
595,295
|
|
189.24
|
%
|
See notes to the consolidated financial
statements
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
(Unaudited) - (continued)
September 30,
2020
(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, the Canadian Dollar Offered Rate (“CDOR” or “C”)
or the U.S. Prime Rate as published by the Wall Street Journal (“Prime” or “P”). The one, three and six-month
LIBOR were 0.1%, 0.2% and 0.3%, respectively, as of September 30, 2020. The Prime was 3.25% as of September 30, 2020.
The CDOR was 0.5% as of September 30, 2020.
|
|
(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 81% 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, 2020. See Note 8.
|
|
(8)
|
The investment is on non-accrual status.
|
|
(9)
|
Security is perpetual with no defined maturity date.
|
|
(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 189% of the Company’s net assets or 95% of the Company’s total assets, are subject
to legal restrictions on sales.
|
|
(11)
|
The fair value of each investment was determined using
significant unobservable inputs. See Note 5.
|
|
(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)
|
Principal amount is denominated in Canadian dollars.
|
|
(14)
|
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 4 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.
|
|
(15)
|
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an
additional interest amount of 2.75% on its “last out” tranche of the
portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out”
tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect
to payments of principal, interest and any other amounts due thereunder.
|
|
(16)
|
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an
additional interest amount of 3.50% on its “last out” tranche of the
portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out”
tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect
to payments of principal, interest and any other amounts due thereunder.
|
|
(17)
|
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an
additional interest amount of 3.00% on its “last out” tranche of the
portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out”
tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect
to payments of principal, interest and any other amounts due thereunder.
|
|
(18)
|
In August 2020, in conjunction with the AG Kings Holdings, Inc. bankruptcy, the Company converted approximately $14.2
million of its existing first lien secured term loan into a new superpriority secured debtor-in-possession term loan.
|
|
(19)
|
On October 1, 2020, as part of a restructuring agreement
between the Company and Arcole Acquisition Corp, the Company’s investments in first lien secured term loans to Arcole Acquisition
Corp were equitized into common shares of Arcole Holding Corp.
|
See notes to consolidated financial statements
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 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%
|
|
8.80
|
%
|
03/26/18
|
|
03/26/24
|
|
9,337
|
|
$
|
9,337
|
|
$
|
9,337
|
|
2.98
|
%
|
|
|
(0.50%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
& Farm Machinery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad
Boy Mowers Acquisition, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
5.75%
|
|
7.38
|
%
|
12/19/19
|
|
12/06/25
|
|
10,385
|
|
10,073
|
|
10,073
|
|
3.22
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air
Freight & Logistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Access
USA Shipping, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
8.00%
|
|
9.80
|
%
|
02/08/19
|
|
02/08/24
|
|
5,651
|
|
5,581
|
|
5,600
|
|
1.79
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application
Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newscycle
Solutions, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
7.00%
|
|
8.80
|
%
|
06/14/19
|
|
12/29/22
|
|
5,263
|
|
5,174
|
|
5,136
|
|
1.64
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Revolving Loan(7)
|
|
L+
6.50%
|
|
9.77
|
%
|
06/14/19
|
|
12/29/22
|
|
265
|
|
262
|
|
259
|
|
0.08
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,528
|
|
5,436
|
|
5,395
|
|
1.72
|
|
Automotive
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Team
Car Care Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan(12)
|
|
base
rate+
|
|
10.05
|
%
|
02/26/18
|
|
02/26/23
|
|
16,722
|
|
16,485
|
|
16,722
|
|
5.34
|
|
|
|
7.99%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BW
Gas & Convenience Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
6.25%
|
|
8.00
|
%
|
11/15/19
|
|
11/18/24
|
|
8,500
|
|
8,164
|
|
8,168
|
|
2.61
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,222
|
|
24,649
|
|
24,890
|
|
7.95
|
|
Broadcasting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alpha
Media, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
6.00%
|
|
7.87
|
%
|
08/14/18
|
|
02/25/22
|
|
5,405
|
|
5,299
|
|
5,405
|
|
1.73
|
|
|
|
(1.50%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural
Media Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
7.71%
|
|
9.64
|
%
|
12/29/17
|
|
12/29/22
|
|
7,133
|
|
7,050
|
|
6,991
|
|
2.23
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,538
|
|
12,349
|
|
12,396
|
|
3.96
|
|
Cable
& Satellite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk
Midco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
P+
6.27%
|
|
11.02
|
%
|
06/08/18
|
|
06/08/23
|
|
15,000
|
|
14,845
|
|
14,250
|
|
4.45
|
|
|
|
(2.25%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sorenson
Communications, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
6.50%
|
|
8.44
|
%
|
03/15/19
|
|
04/29/24
|
|
4,875
|
|
4,749
|
|
4,857
|
|
1.55
|
|
|
|
(0.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data
Processing & Outsourced Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FPT
Operating Company, LLC/ TLabs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Company, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan
|
|
L+
8.25%
|
|
9.94
|
%
|
06/07/19
|
|
06/07/24
|
|
24,907
|
|
24,685
|
|
24,284
|
|
7.76
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geo
Logic Systems Ltd.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Term Loan(13)
|
|
C+
6.25%
|
|
8.26
|
%
|
12/19/19
|
|
12/19/24
|
|
21,718
|
|
16,231
|
|
16,415
|
|
5.25
|
|
|
|
(1.00%
Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Secured Revolving Loan(7)(13)
|
|
C+
6.25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.00%
Floor)
|
|
8.26
|
%
|
12/19/19
|
|
12/19/24
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
46,625
|
|
40,916
|
|
40,699
|
|
13.01
|
|
See notes to consolidated financial statements
Whitehorse Finance, Inc.
Consolidated Schedule of Investments
- (Continued)
December 31, 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
|
|
Department Stores
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mills Fleet Farm Group, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
9.04%
|
|
10/24/18
|
|
10/24/24
|
|
14,883
|
|
$
|
14,591
|
|
$
|
13,544
|
|
4.33
|
%
|
|
|
(1.00% Floor)
|
|
(0.75%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crown Brands, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.80%
|
|
01/28/19
|
|
01/25/24
|
|
5,727
|
|
5,610
|
|
5,596
|
|
1.79
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan(7)
|
|
L+ 8.00%
|
|
9.80%
|
|
01/28/19
|
|
01/25/24
|
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,727
|
|
5,610
|
|
5,594
|
|
1.79
|
|
Diversified Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sklar Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.99%
|
|
11/13/19
|
|
05/13/23
|
|
8,902
|
|
8,731
|
|
8,731
|
|
2.79
|
|
|
|
(1.00% Floor)
|
|
(1.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan(7)
|
|
L+ 6.00%
|
|
7.99%
|
|
11/13/19
|
|
05/13/20
|
|
—
|
|
—
|
|
2
|
|
—
|
|
|
|
(1.00% Floor)
|
|
(1.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,902
|
|
8,731
|
|
8,733
|
|
2.79
|
|
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ImageOne Industries, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 10.00%
|
|
11.80%
|
|
01/11/18
|
|
01/11/23
|
|
7,261
|
|
7,097
|
|
6,898
|
|
2.20
|
|
|
|
(1.00% Floor)
|
|
(4.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan(4)
|
|
L+ 10.00%
|
|
11.94%
|
|
07/22/19
|
|
12/12/22
|
|
525
|
|
525
|
|
525
|
|
0.17
|
|
|
|
(1.00% Floor)
|
|
(4.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NNA Services, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
8.84%
|
|
10/16/18
|
|
10/16/23
|
|
9,889
|
|
9,739
|
|
9,889
|
|
3.16
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,675
|
|
17,361
|
|
17,312
|
|
5.53
|
|
Education Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EducationDynamics, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.50%
|
|
9.42%
|
|
11/26/19
|
|
11/26/24
|
|
11,750
|
|
11,520
|
|
11,519
|
|
3.68
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental & Facilities Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WH Lessor Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.79%
|
|
12/26/19
|
|
12/26/24
|
|
6,458
|
|
6,330
|
|
6,329
|
|
2.02
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan(7)
|
|
L+ 6.00%
|
|
7.79%
|
|
12/26/19
|
|
12/26/24
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,458
|
|
6,330
|
|
6,329
|
|
2.02
|
|
Food Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AG Kings Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(8)
|
|
P+ 11.00%
|
|
15.75%
|
|
08/10/16
|
|
08/10/21
|
|
13,250
|
|
12,837
|
|
7,668
|
|
2.45
|
|
|
|
(2.25% Floor)
|
|
(2.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grupo HIMA San Pablo, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 9.00%
|
|
10.94%
|
|
05/15/19
|
|
04/30/19
|
|
3,855
|
|
3,855
|
|
3,276
|
|
1.05
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
L+ 9.00%
|
|
10.94%
|
|
02/01/13
|
|
04/30/19
|
|
13,511
|
|
13,511
|
|
11,484
|
|
3.67
|
|
|
|
(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
|
|
4.72
|
|
See notes to consolidated financial statements
Whitehorse Finance, Inc.
Consolidated Schedule of Investments
- (Continued)
December 31, 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
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHS Therapy, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 8.50%
|
|
10.44%
|
|
06/14/19
|
|
06/14/24
|
|
7,615
|
|
$
|
7,486
|
|
$
|
7,615
|
|
2.43
|
%
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lab Logistics, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
8.56%
|
|
10/16/19
|
|
09/25/23
|
|
107
|
|
106
|
|
106
|
|
0.03
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw
|
|
L+ 6.50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan(7)
|
|
(1.00% Floor)
|
|
8.44%
|
|
10/16/19
|
|
09/25/23
|
|
5,289
|
|
5,251
|
|
5,251
|
|
1.68
|
|
PMA Holdco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.75%
|
|
9.69%
|
|
06/28/18
|
|
06/28/23
|
|
12,784
|
|
12,595
|
|
12,720
|
|
4.06
|
|
|
|
(1.00% Floor)
|
|
(2.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,795
|
|
25,438
|
|
25,692
|
|
8.20
|
|
Home Furnishings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sure Fit Home Products, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 9.75%
|
|
11.70%
|
|
10/26/18
|
|
07/13/22
|
|
5,250
|
|
5,178
|
|
5,040
|
|
1.61
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Human Resources & Employment Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pluto Acquisition Topco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.31%
|
|
8.23%
|
|
01/31/19
|
|
01/31/24
|
|
12,354
|
|
12,152
|
|
12,354
|
|
3.95
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interactive Media & Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
What If Media Group, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
8.80%
|
|
10/02/19
|
|
10/02/24
|
|
12,919
|
|
12,673
|
|
12,673
|
|
4.05
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet & Direct Marketing Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potpourri Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.25%
|
|
9.94%
|
|
07/03/19
|
|
07/03/24
|
|
18,763
|
|
18,385
|
|
18,424
|
|
5.89
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Banking & Brokerage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arcole Acquisition Corp(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan A
|
|
L+ 8.25%
|
|
10.16%
|
|
11/29/18
|
|
11/30/23
|
|
5,231
|
|
5,156
|
|
4,968
|
|
1.59
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
L+ 14.50%
|
|
16.41%
|
|
11/29/18
|
|
11/30/23
|
|
1,805
|
|
1,779
|
|
1,777
|
|
0.57
|
|
|
|
(1.00% Floor)
|
|
(1.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JVMC Holdings Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f/k/a RJO Holdings Corp)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
8.30%
|
|
02/28/19
|
|
02/28/24
|
|
16,190
|
|
16,055
|
|
16,190
|
|
5.17
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,226
|
|
22,990
|
|
22,935
|
|
7.33
|
|
IT Consulting & Other Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AST-Applications Software Technology LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
9.80%
|
|
01/10/17
|
|
01/10/23
|
|
4,236
|
|
4,187
|
|
4,236
|
|
1.35
|
|
|
|
(1.00% Floor)
|
|
(1.00%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leisure Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Honors Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.86%
|
|
8.74%
|
|
09/06/19
|
|
09/06/24
|
|
9,405
|
|
9,264
|
|
9,305
|
|
2.97
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw
|
|
L+ 6.00%
|
|
7.90%
|
|
09/06/19
|
|
09/06/24
|
|
4,662
|
|
4,616
|
|
4,612
|
|
1.47
|
|
Loan
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lift Brands, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.50%
|
|
9.44%
|
|
04/16/18
|
|
04/16/23
|
|
10,532
|
|
10,387
|
|
10,038
|
|
3.21
|
|
|
|
(1.00% Floor)
|
|
(0.50%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving
|
|
P+ 6.00%
|
|
10.75%
|
|
04/16/18
|
|
04/16/23
|
|
158
|
|
156
|
|
131
|
|
0.04
|
|
Loan(7)
|
|
(2.76% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,757
|
|
24,423
|
|
24,086
|
|
7.69
|
|
See notes to consolidated financial statements
Whitehorse Finance, Inc.
Consolidated Schedule of Investments - (Continued)
December 31, 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
|
|
Office Services & Supplies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Empire Office, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.75%
|
|
8.55%
|
|
04/12/19
|
|
04/12/24
|
|
12,224
|
|
$
|
12,015
|
|
$
|
12,029
|
|
3.84
|
%
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Diversified Financial Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sigue Corporation(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Secured Term
|
|
L+ 12.00%
|
|
13.94%
|
|
12/27/13
|
|
05/01/20
|
|
24,904
|
|
24,905
|
|
24,655
|
|
7.88
|
|
Loan(4)
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaged Foods & Meats
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lenny & Larry’s, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.97%
|
|
9.71%
|
|
05/15/18
|
|
05/15/23
|
|
12,293
|
|
12,128
|
|
11,924
|
|
3.81
|
|
|
|
(1.00% Floor)
|
|
(1.18%PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research & Consulting Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nelson Worldwide, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 9.25%
|
|
11.23%
|
|
01/09/18
|
|
01/09/23
|
|
13,603
|
|
13,397
|
|
13,263
|
|
4.24
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALM Media, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
8.44%
|
|
11/25/19
|
|
11/25/24
|
|
15,750
|
|
15,441
|
|
15,441
|
|
4.93
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,353
|
|
28,838
|
|
28,704
|
|
9.17
|
|
Restaurants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LS GFG Holdings Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.80%
|
|
11/30/18
|
|
11/19/25
|
|
10,237
|
|
9,977
|
|
9,717
|
|
3.10
|
|
|
|
(0.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialized Consumer Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
True Blue Car Wash, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.12%
|
|
9.91%
|
|
10/17/19
|
|
10/17/24
|
|
4,461
|
|
4,375
|
|
4,375
|
|
1.40
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving
|
|
L+ 8.12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan(7)
|
|
(1.00% Floor)
|
|
9.91%
|
|
10/17/19
|
|
10/17/24
|
|
-
|
|
-
|
|
(20
|
)
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
4,461
|
|
4,375
|
|
4,355
|
|
1.39
|
|
Specialty Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flexitallic Group SAS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
8.44%
|
|
10/28/19
|
|
10/29/26
|
|
11,750
|
|
11,461
|
|
11,463
|
|
3.66
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialized Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golden Pear Funding Assetco,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LLC(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Secured Term Loan
|
|
L+ 10.50%
|
|
12.19%
|
|
09/20/18
|
|
03/20/24
|
|
17,500
|
|
17,232
|
|
17,500
|
|
5.59
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Legal Finance, LLC(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Secured Term Loan
|
|
L+ 10.75%
|
|
12.44%
|
|
09/09/16
|
|
03/09/22
|
|
20,000
|
|
19,841
|
|
20,000
|
|
6.39
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHF STRS Ohio Senior Loan Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Note(4)(5)(7)(14)(15)
|
|
L+ 6.50%
|
|
8.16%
|
|
07/19/19
|
|
NA
|
|
26,344
|
|
26,344
|
|
26,344
|
|
8.42
|
|
|
|
|
|
|
|
|
|
|
|
63,844
|
|
63,417
|
|
63,844
|
|
20.40
|
|
Systems Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vero Parent, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
7.91%
|
|
11/06/19
|
|
08/16/24
|
|
20,000
|
|
18,014
|
|
19,025
|
|
6.08
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessco Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
8.41%
|
|
08/22/19
|
|
08/22/24
|
|
19,067
|
|
18,713
|
|
18,696
|
|
5.97
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
Whitehorse Finance, Inc.
Consolidated Schedule of Investments
- (Continued)
December 31, 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
|
|
Technology Hardware, Storage & Peripherals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source Code Midco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.25%
|
|
10.18%
|
|
05/04/18
|
|
05/04/23
|
|
23,566
|
|
$
|
23,112
|
|
$
|
23,566
|
|
7.53
|
%
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt Investments
|
|
|
|
|
|
|
|
|
|
591,199
|
|
575,686
|
|
566,374
|
|
180.94
|
|
Equity Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluent, Inc. (f/k/a Cogint, Inc.)(4)(9)
|
|
N/A
|
|
N/A
|
|
11/28/17
|
|
N/A
|
|
187
|
|
560
|
|
467
|
|
0.15
|
|
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quest Events, LLC Preferred Units(4)
|
|
N/A
|
|
N/A
|
|
12/28/18
|
|
12/08/25
|
|
317
|
|
317
|
|
276
|
|
0.09
|
|
ImageOne Industries, LLC Common A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units(4)
|
|
N/A
|
|
N/A
|
|
09/20/19
|
|
N/A
|
|
149
|
|
-
|
|
48
|
|
0.02
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lab Logistics Preferred Units
|
|
N/A
|
|
N/A
|
|
10/29/19
|
|
N/A
|
|
2
|
|
857
|
|
857
|
|
0.27
|
|
PMA Holdco, LLC Warrants(4)
|
|
N/A
|
|
N/A
|
|
06/28/18
|
|
06/28/28
|
|
8
|
|
-
|
|
461
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
857
|
|
1,318
|
|
0.42
|
|
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
|
|
3,721
|
|
1.19
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
2,890
|
|
3,721
|
|
1.19
|
|
Specialized Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NMFC Senior Loan Program I LLC Units(4)(5)(6)
|
|
N/A
|
|
N/A
|
|
08/13/14
|
|
08/31/22
|
|
10,000
|
|
10,029
|
|
9,651
|
|
3.08
|
|
WHF STRS Ohio Senior Loan Fund LLC(4)(5)(7)(14)
|
|
N/A
|
|
N/A
|
|
07/19/19
|
|
N/A
|
|
6,586
|
|
6,586
|
|
6,949
|
|
2.22
|
|
Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessco Holdings, LLC(4)
|
|
N/A
|
|
N/A
|
|
08/22/19
|
|
N/A
|
|
489
|
|
800
|
|
800
|
|
0.26
|
|
Trucking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europcar Mobility Group(5)
|
|
N/A
|
|
N/A
|
|
10/31/19
|
|
12/31/22
|
|
-
|
|
-
|
|
84
|
|
0.03
|
|
Total Equity Investments
|
|
|
|
|
|
|
|
|
|
17,903
|
|
22,039
|
|
23,314
|
|
7.46
|
|
Total Investments
|
|
|
|
|
|
|
|
|
|
609,102
|
|
$
|
597,725
|
|
$
|
589,688
|
|
188.40
|
%
|
See notes to consolidated financial statements
Whitehorse Finance, Inc.
Consolidated Schedule of Investments
- (Continued)
December 31, 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, the Canadian Dollar Offered Rate (“CDOR” or “C”)
or the U.S. Prime Rate as published by the Wall Street Journal (“Prime” or “P”). The one, three and six-month
LIBOR were 1.8%, 1.9% and 1.9%, respectively, as of December 31, 2019. The Prime was 4.75% as of December 31, 2019. The
CDOR was 2.1% as of December 31, 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 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 84%, 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, 2019. See Note 8.
|
|
(8)
|
The investment is on non-accrual status.
|
|
(9)
|
The fair value of the investment was determined using observable inputs. See Note 5. 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 188% 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
5.
|
|
(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)
|
Principal amount is denominated in Canadian dollars.
|
|
(14)
|
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 4 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.
|
|
(15)
|
Security is perpetual with no defined maturity date.
|
See notes to consolidated financial statements
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2020
(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 a risk-free index rate such as 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.
Engaging in commodity interest transactions
such as swap transactions or futures contracts for the Company may cause WhiteHorse Advisers to fall within the definition
of “commodity pool operator” under the Commodity Exchange Act (“CEA”), and related regulations promulgated
by the U.S. Commodity Futures Trading Commission (the “CFTC”). On January 23, 2020, WhiteHorse Advisers claimed
an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection
with its management of the Company and, therefore, is not subject to CFTC registration or regulation under the CEA as a commodity
pool operator with respect to its management of the Company.
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 quarterly report on Form 10-Q should be read in conjunction with
the Company’s annual report on Form 10-K for the year ended December 31, 2019. 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,
2020.
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 in Note 4.
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.
Investments are measured at fair
value as determined in good faith by WhiteHorse Advisers’ 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.
Foreign currency translation: The Company’s
books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following
basis:
|
(1)
|
cash and cash equivalents, restricted cash and cash equivalents, fair value of investments, interest receivable, and other
assets and liabilities — at the spot exchange rate on the last business day of the period; and
|
|
(2)
|
purchases and sales of investments, income and expenses — at the exchange rates prevailing on the respective dates of
such transactions.
|
Although net assets and fair values are
presented based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results
of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair
values of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Fluctuations arising from the translation of assets other than investments and liabilities are included with the net change in
unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies on the consolidated statements
of operations.
Foreign security and currency transactions
may involve certain considerations and risks not typically associated with investing in U.S. companies. These risks include, but
are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which
could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or
U.S. government securities.
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 Credit Facility (as defined in Note 6). 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 Credit Facility (as defined in Note 6).
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.
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, 2020 and December 31, 2019.
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, 2020 or December 31, 2019. 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 2016 remain subject to examination by the Internal Revenue Service.
As of September 30, 2020 and December 31,
2019, the cost of investments for federal income tax purposes was $609,762 and $601,862 resulting in net unrealized depreciation
of $14,467 and $12,174, respectively. This is comprised of gross unrealized appreciation of $17,190 and $5,223, and gross unrealized
depreciation of $31,657 and $17,397, on a tax basis, as of September 30, 2020 and December 31, 2019, 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. Refer to the “COVID-19 Developments” section in Note 8. 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.
Reclassifications: Certain
amounts in the consolidated financial statements as of December 31, 2019 and for the nine months ended
September 30, 2019 have been reclassified. These reclassifications had no material impact on the Company’s
consolidated financial position, results of operations or cash flows as previously reported.
Recent Accounting Pronouncements:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging
relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference
rate reform on financial reporting if certain criteria are met. The guidance is effective from March 12, 2020 through December 31,
2022. As of September 30, 2020, the guidance did not have a material impact on the consolidated financial statements.
NOTE 3 - FORWARD CURRENCY CONTRACTS
The Company may enter into foreign currency
forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies
and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s
investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between
the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation
or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential
inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing
with well-known counterparties.
The Company utilizes forward foreign currency
exchange contracts to protect itself against fluctuations in exchange rates. During the three and nine months ended September 30,
2020, the Company recognized realized losses of $25 and $25, respectively, and unrealized gains of $3 and $0, respectively, in the
statement of operations relating to forward currency exchange contracts held during the year. The Company may choose to renew contracts
quarterly unless otherwise settled by the Company or the counterparty. There were no open contracts at September 30, 2020.
Realized gain (loss) on forward currency contracts recognized in income
|
|
For the three
|
|
|
For the nine
|
|
|
|
months ended
|
|
|
months ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
Risk exposure category
|
|
2020
|
|
|
2020
|
|
Foreign exchange
|
|
$
|
(25
|
)
|
|
$
|
(25
|
)
|
Change in unrealized appreciation (depreciation) on forward currency contracts recognized in income
|
|
For the three
|
|
|
For the nine
|
|
|
|
months ended
|
|
|
months ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
Risk exposure category
|
|
2020
|
|
|
2020
|
|
Foreign exchange
|
|
$
|
3
|
|
|
$
|
-
|
|
The foreign currency forward contracts open at the
end of the period are generally indicative of the volume of activity during the period.
NOTE 4 - INVESTMENTS
Investments consisted of the following:
|
|
September 30,
2020
|
|
|
December 31, 2019
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
First lien secured loans
|
|
$
|
497,306
|
|
|
$
|
494,866
|
|
|
$
|
486,340
|
|
|
$
|
477,875
|
|
Second lien secured loans
|
|
|
30,738
|
|
|
|
30,000
|
|
|
|
63,002
|
|
|
|
62,155
|
|
Subordinated unsecured loans
|
|
|
291
|
|
|
|
291
|
|
|
|
-
|
|
|
|
-
|
|
Subordinated Note to STRS JV
|
|
|
41,073
|
|
|
|
41,073
|
|
|
|
26,344
|
|
|
|
26,344
|
|
Equity (excluding STRS JV)
|
|
|
18,801
|
|
|
|
19,750
|
|
|
|
15,453
|
|
|
|
16,365
|
|
Equity in STRS JV
|
|
|
10,268
|
|
|
|
9,315
|
|
|
|
6,586
|
|
|
|
6,949
|
|
Total
|
|
$
|
598,477
|
|
|
|
595,295
|
|
|
$
|
597,725
|
|
|
$
|
589,688
|
|
The following table
shows the portfolio composition by industry(1) grouping at fair value:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Advertising
|
|
$
|
15,372
|
|
|
|
2.82
|
%
|
|
$
|
9,804
|
|
|
|
1.76
|
%
|
Agricultural & Farm Machinery
|
|
|
10,152
|
|
|
|
1.86
|
|
|
|
10,073
|
|
|
|
1.81
|
|
Air Freight & Logistics
|
|
|
5,398
|
|
|
|
0.99
|
|
|
|
5,600
|
|
|
|
1.01
|
|
Application Software
|
|
|
15,826
|
|
|
|
2.90
|
|
|
|
5,395
|
|
|
|
0.97
|
|
Automotive Retail
|
|
|
24,134
|
|
|
|
4.43
|
|
|
|
24,890
|
|
|
|
4.47
|
|
Broadcasting
|
|
|
4,849
|
|
|
|
0.89
|
|
|
|
12,396
|
|
|
|
2.23
|
|
Building Products
|
|
|
19,062
|
|
|
|
3.50
|
|
|
|
-
|
|
|
|
-
|
|
Cable & Satellite
|
|
|
14,250
|
|
|
|
2.61
|
|
|
|
14,250
|
|
|
|
2.56
|
|
Communications Equipment
|
|
|
15,961
|
|
|
|
2.93
|
|
|
|
4,857
|
|
|
|
0.87
|
|
Construction & Engineering
|
|
|
14,810
|
|
|
|
2.72
|
|
|
|
-
|
|
|
|
-
|
|
Data Processing & Outsourced Services
|
|
|
28,330
|
|
|
|
5.20
|
|
|
|
40,699
|
|
|
|
7.32
|
|
Department Stores
|
|
|
13,272
|
|
|
|
2.43
|
|
|
|
13,544
|
|
|
|
2.43
|
|
Distributors
|
|
|
5,591
|
|
|
|
1.03
|
|
|
|
5,594
|
|
|
|
1.01
|
|
Diversified Chemicals
|
|
|
8,790
|
|
|
|
1.61
|
|
|
|
8,733
|
|
|
|
1.57
|
|
Diversified Support Services
|
|
|
20,652
|
|
|
|
3.79
|
|
|
|
17,636
|
|
|
|
3.17
|
|
Education Services
|
|
|
13,936
|
|
|
|
2.56
|
|
|
|
11,519
|
|
|
|
2.07
|
|
Environmental & Facilities Services
|
|
|
-
|
|
|
|
-
|
|
|
|
6,329
|
|
|
|
1.14
|
|
Food Retail
|
|
|
22,763
|
|
|
|
4.18
|
|
|
|
7,668
|
|
|
|
1.38
|
|
Health Care Facilities
|
|
|
11,809
|
|
|
|
2.17
|
|
|
|
14,760
|
|
|
|
2.65
|
|
Health Care Services
|
|
|
13,682
|
|
|
|
2.51
|
|
|
|
27,010
|
|
|
|
4.85
|
|
Home Furnishings
|
|
|
3,778
|
|
|
|
0.69
|
|
|
|
5,040
|
|
|
|
0.91
|
|
Human Resource & Employment Services
|
|
|
-
|
|
|
|
-
|
|
|
|
12,354
|
|
|
|
2.22
|
|
Interactive Media & Services
|
|
|
12,675
|
|
|
|
2.33
|
|
|
|
12,673
|
|
|
|
2.28
|
|
Internet & Direct Marketing Retail
|
|
|
29,486
|
|
|
|
5.41
|
|
|
|
18,424
|
|
|
|
3.31
|
|
Investment Banking & Brokerage
|
|
|
20,457
|
|
|
|
3.75
|
|
|
|
22,935
|
|
|
|
4.12
|
|
IT Consulting & Other Services
|
|
|
4,034
|
|
|
|
0.74
|
|
|
|
4,236
|
|
|
|
0.76
|
|
Leisure Facilities
|
|
|
20,704
|
|
|
|
3.80
|
|
|
|
24,086
|
|
|
|
4.33
|
|
Office Services & Supplies
|
|
|
10,644
|
|
|
|
1.95
|
|
|
|
12,029
|
|
|
|
2.16
|
|
Other Diversified Financial Services
|
|
|
3,490
|
|
|
|
0.64
|
|
|
|
28,376
|
|
|
|
5.10
|
|
Packaged Foods & Meats
|
|
|
10,779
|
|
|
|
1.98
|
|
|
|
11,924
|
|
|
|
2.14
|
|
Property & Casualty Insurance
|
|
|
6,131
|
|
|
|
1.13
|
|
|
|
-
|
|
|
|
-
|
|
Research & Consulting Services
|
|
|
26,854
|
|
|
|
4.93
|
|
|
|
28,704
|
|
|
|
5.16
|
|
Restaurants
|
|
|
8,534
|
|
|
|
1.57
|
|
|
|
9,717
|
|
|
|
1.75
|
|
Specialized Consumer Services
|
|
|
6,395
|
|
|
|
1.17
|
|
|
|
4,355
|
|
|
|
0.78
|
|
Specialized Finance
|
|
|
39,520
|
|
|
|
7.25
|
|
|
|
47,151
|
|
|
|
8.47
|
|
Specialty Chemicals
|
|
|
10,846
|
|
|
|
1.99
|
|
|
|
11,463
|
|
|
|
2.06
|
|
Systems Software
|
|
|
16,267
|
|
|
|
2.99
|
|
|
|
19,025
|
|
|
|
3.42
|
|
Technology Hardware, Storage & Peripherals
|
|
|
22,633
|
|
|
|
4.15
|
|
|
|
23,566
|
|
|
|
4.24
|
|
Trading Companies & Distributors
|
|
|
13,012
|
|
|
|
2.39
|
|
|
|
19,496
|
|
|
|
3.50
|
|
Trucking
|
|
|
29
|
|
|
|
0.01
|
|
|
|
84
|
|
|
|
0.02
|
|
Total
|
|
$
|
544,907
|
|
|
|
100.00
|
%
|
|
$
|
556,395
|
|
|
|
100.00
|
%
|
(1) Excludes investments in STRS JV.
As of September 30, 2020 the
portfolio companies underlying the Company’s investments are all located in the United States and its territories,
except for Arcole Acquisition Corp and Geo Logic Systems Ltd. (which are located in Canada). As of September 30, 2020
and December 31, 2019, the weighted average remaining terms of the Company’s debt investments were approximately
3.5 years and 3.4 years, respectively.
As of September 30, 2020 and December 31,
2019, the total fair value of non-accrual loans were $18,670 and $7,668, respectively.
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 persons (as defined by the 1940 Act) as of and for the nine months ended September 30, 2020:
|
|
|
|
Amount
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends
and
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
Net
Change in
|
|
|
Ending
Fair
|
|
|
|
|
|
interest
|
|
|
Fair
Value at
|
|
|
|
|
|
|
|
|
Net
|
|
|
Unrealized
|
|
|
Value
at
|
|
|
|
Type
of
|
|
included
in
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Appreciation
|
|
|
September 30,
|
|
Affiliated
Person(1)
|
|
Asset
|
|
income
|
|
|
2019
|
|
|
Purchases
|
|
|
Sales
|
|
|
Gain
(Loss)
|
|
|
(Depreciation)
|
|
|
2020
|
|
Non-controlled
affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NMFC
Senior Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program
I LLC Units
|
|
Equity
|
|
$
|
800
|
|
|
$
|
9,651
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(131
|
)
|
|
$
|
9,520
|
|
Total
Non-controlled affiliates
|
|
|
|
$
|
800
|
|
|
$
|
9,651
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(131
|
)
|
|
$
|
9,520
|
|
|
|
|
|
Amount
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends
and
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
Net
Change in
|
|
|
Ending
Fair
|
|
|
|
|
|
interest
|
|
|
Fair
Value at
|
|
|
|
|
|
|
|
|
Net
|
|
|
Unrealized
|
|
|
Value
at
|
|
|
|
Type
of
|
|
included
in
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Appreciation
|
|
|
September 30,
|
|
Affiliated
Person(1)
|
|
Asset
|
|
income
|
|
|
2019
|
|
|
Purchases
|
|
|
Sales
|
|
|
Gain
(Loss)
|
|
|
(Depreciation)
|
|
|
2020
|
|
Controlled affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHF STRS Ohio Senior Loan
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund LLC*
|
|
Note
|
|
$
|
1,913
|
|
|
$
|
26,344
|
|
|
$
|
14,729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41,073
|
|
WHF STRS Ohio Senior Loan Fund
LLC*
|
|
Equity
|
|
|
961
|
|
|
|
6,949
|
|
|
|
3,682
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,316
|
)
|
|
|
9,315
|
|
Total Controlled affiliates
|
|
|
|
$
|
2,874
|
|
|
$
|
33,293
|
|
|
$
|
18,411
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,316
|
)
|
|
$
|
50,388
|
|
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 year
ended December 31, 2019:
|
|
|
|
Amount
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends
and
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
Net
Change in
|
|
|
Ending
Fair
|
|
|
|
|
|
interest
|
|
|
Fair
Value at
|
|
|
|
|
|
|
|
|
Net
|
|
|
Unrealized
|
|
|
Value
at
|
|
|
|
Type
of
|
|
included
in
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Appreciation
|
|
|
December 31,
|
|
Affiliated
Person(1)
|
|
Asset
|
|
income
|
|
|
2018
|
|
|
Purchases
|
|
|
Sales
|
|
|
Gain
(Loss)
|
|
|
(Depreciation)
|
|
|
2019
|
|
Non-controlled
affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NMFC
Senior Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program
I LLC Units
|
|
Equity
|
|
$
|
1,173
|
|
|
$
|
9,630
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
9,651
|
|
UnitsRCS
Creditor Trust Class B
|
|
Equity
|
|
|
—
|
|
|
|
535
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(535
|
)
|
|
|
—
|
|
Total
Non-controlled affiliates
|
|
|
|
$
|
1,173
|
|
|
$
|
10,165
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(514
|
)
|
|
$
|
9,651
|
|
|
|
|
|
Amount
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends
and
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
Net
Change in
|
|
|
Ending
Fair
|
|
|
|
|
|
interest
|
|
|
Fair
Value at
|
|
|
|
|
|
|
|
|
Net
|
|
|
Unrealized
|
|
|
Value
at
|
|
|
|
Type
of
|
|
included
in
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Appreciation
|
|
|
December 31,
|
|
Affiliated
Person(1)
|
|
Asset
|
|
income
|
|
|
2018
|
|
|
Purchases
|
|
|
Sales
|
|
|
Gain
(Loss)
|
|
|
(Depreciation)
|
|
|
2019
|
|
Controlled
affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHF
STRS Ohio Senior Loan
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
LLC *
|
|
Note
|
|
$
|
936
|
|
|
$
|
—
|
|
|
$
|
26,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,344
|
|
WHF
STRS Ohio Senior Loan
Fund
LLC*
|
|
Equity
|
|
|
—
|
|
|
|
—
|
|
|
|
6,586
|
|
|
|
—
|
|
|
|
—
|
|
|
|
363
|
|
|
|
6,949
|
|
Total Controlled affiliates
|
|
|
|
$
|
936
|
|
|
$
|
—
|
|
|
$
|
32,930
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
363
|
|
|
$
|
33,293
|
|
|
*
|
The Company and STRS Ohio are the members of STRS JV, a joint venture formed as a Delaware limited liability company that is
not consolidated by either member for financial reporting purposes. The members make investments in STRS JV in the form of limited
liability company (“LLC”) equity interests and interest-bearing subordinated notes as STRS JV makes investments, and
all portfolio and other material decisions regarding STRS JV must be submitted to STRS JV’s board of managers which is comprised
of an equal number of members appointed by each of the Company and STRS Ohio. Because management of STRS JV is shared equally between
the Company and STRS Ohio, the Company does not believe it controls STRS JV for purposes of the 1940 Act or otherwise.
|
|
(1)
|
Refer to the consolidated schedule of investments for the principal amount, industry classification
and other security detail of each portfolio company.
|
WHF STRS Ohio Senior Loan Fund LLC
On January 14, 2019, the Company entered
into an LLC operating agreement with STRS Ohio to co-manage a newly formed joint venture investment company,
STRS JV, a Delaware LLC. STRS Ohio and the Company have committed to provide up to $125,000 of subordinated
notes and equity to STRS JV, with STRS Ohio providing up to $50,000 and the Company providing up to $75,000. STRS
JV will invest primarily in lower middle market, senior secured debt facilities, to performing lower middle market companies across
a broad range of industries that typically carry a floating interest rate based on a risk-free index rate such as LIBOR and have
a term of three to six years.
In July 2019, STRS JV formally launched
operations. As of September 30, 2020, STRS JV had total assets of $170,818. STRS JV’s portfolio consisted of debt investments
in 18 portfolio companies as of September 30, 2020. As of September 30, 2020, the largest investment by aggregate principal
amount (including any unfunded commitments) in a single portfolio company in STRS JV’s portfolio was $14,628. The five largest
investments in portfolio companies by fair value in STRS JV totaled $61,266. STRS JV invests in portfolio companies in the same
industries in which the Company may directly invest.
The Company provides capital to STRS JV
in the form of LLC equity interests and through interest-bearing subordinated notes. As of September 30, 2020, the Company
and STRS Ohio owned 60% and 40%, respectively, of the LLC equity interests of STRS JV. The Company’s investment in STRS JV
consisted of equity contributions of $10,268 and advances of the subordinated notes of $41,073 as of September 30, 2020. As
of September 30, 2020, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and
$60,000, of which $4,732 and $18,927 were unfunded, respectively.
The Company and STRS Ohio each appoint
two members to STRS JV’s four-person board of managers. All material decisions with respect to STRS JV, including those involving
its investment portfolio, require unanimous approval of a quorum of the board of managers. Quorum is defined as (i) the presence
of two members of the board of managers; provided that at least one individual is present that was elected, designated or appointed
by each member; (ii) the presence of three members of the board of managers; provided that the individual that was elected,
designated or appointed by the member with only one individual present shall be entitled to cast two votes on each matter; or (iii) the
presence of four members of the board of managers; provided that two individuals are present that were elected, designated or appointed
by each member.
On July 19, 2019, STRS JV entered
into a $125,000 credit and security agreement (the “STRS JV Credit Facility”) with JPMorgan Chase Bank, National Association
(“JPMorgan”). As of September 30, 2020, the STRS JV Credit Facility had $125,000 of commitments subject to leverage
and borrowing base restrictions with an interest rate based on a risk-free index rate such as LIBOR plus 2.55%. The final maturity
date of the STRS JV Credit Facility is July 19, 2024. As of September 30, 2020, STRS JV had $86,755 of outstanding borrowings
under the STRS JV Credit Facility. At September 30, 2020, the effective interest rate on the STRS JV Credit Facility was 2.84%
per annum.
Below is a listing
of STRS JV’s individual investments as of September 30, 2020:
Investment Type(1)
|
|
Spread
Above
Index(2)
|
|
Interest
Rate(3)
|
|
|
Acquisition
Date(4)
|
|
|
Maturity
Date
|
|
Principal/
Share
Amount
|
|
|
Amortized
Cost
|
|
|
Fair
Value(5)
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SmartSign Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
10/21/19
|
|
|
10/11/24
|
|
|
8,775
|
|
|
$
|
8,632
|
|
|
$
|
8,582
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
10/21/19
|
|
|
10/11/24
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,775
|
|
|
|
8,632
|
|
|
|
8,577
|
|
Construction & Engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFP Holding, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.25%
|
|
|
7.25%
|
|
|
|
12/13/19
|
|
|
09/01/22
|
|
|
6,499
|
|
|
|
6,497
|
|
|
|
6,330
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan (6)
|
|
L+ 6.25%
|
|
|
7.25%
|
|
|
|
12/13/19
|
|
|
09/01/22
|
|
|
4,287
|
|
|
|
4,284
|
|
|
|
4,119
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 6.25%
|
|
|
7.25%
|
|
|
|
12/13/19
|
|
|
09/01/22
|
|
|
1,134
|
|
|
|
1,129
|
|
|
|
1,105
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
11,920
|
|
|
|
11,910
|
|
|
|
11,554
|
|
Data Processing & Outsourced Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geo Logic Systems Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan (7)
|
|
L+ 6.24%
|
|
|
7.25%
|
|
|
|
01/22/20
|
|
|
12/19/24
|
|
|
14,558
|
|
|
|
10,951
|
|
|
|
10,572
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan(7)
|
|
L+ 6.24%
|
|
|
7.25%
|
|
|
|
01/22/20
|
|
|
12/19/24
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
14,558
|
|
|
|
10,951
|
|
|
|
10,564
|
|
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quest Events, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
07/19/19
|
|
|
12/28/24
|
|
|
11,403
|
|
|
|
11,235
|
|
|
|
9,271
|
|
|
|
(1.00% Floor)
|
|
|
(3.50% PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
07/19/19
|
|
|
12/28/24
|
|
|
935
|
|
|
|
921
|
|
|
|
760
|
|
|
|
(1.00% Floor)
|
|
|
(3.50% PIK)
|
|
|
|
|
|
|
|
|
|
12,338
|
|
|
|
12,156
|
|
|
|
10,031
|
|
Environmental & Facilities Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WH Lessor Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
01/22/20
|
|
|
12/26/24
|
|
|
5,244
|
|
|
|
5,154
|
|
|
|
5,219
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
01/22/20
|
|
|
12/26/24
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
5,244
|
|
|
|
5,154
|
|
|
|
5,225
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Akumin Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.00%
|
|
|
9.00%
|
|
|
|
07/19/19
|
|
|
05/31/24
|
|
|
13,619
|
|
|
|
13,357
|
|
|
|
13,347
|
|
|
|
(1.00% Floor)
|
|
|
(2.00% PIK)
|
|
|
|
|
|
|
|
|
|
13,619
|
|
|
|
13,357
|
|
|
|
13,347
|
|
Human Resource & Employment Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pluto Acquisition Topco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan(8)
|
|
L+ 6.31%
|
|
|
7.81%
|
|
|
|
05/19/20
|
|
|
01/31/24
|
|
|
11,834
|
|
|
|
11,674
|
|
|
|
11,834
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
11,834
|
|
|
|
11,674
|
|
|
|
11,834
|
|
Industrial Machinery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FR Flow Control CB LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
07/19/19
|
|
|
06/28/26
|
|
|
7,288
|
|
|
|
7,167
|
|
|
|
7,102
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan C
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
07/19/19
|
|
|
06/28/26
|
|
|
2,870
|
|
|
|
2,823
|
|
|
|
2,797
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
10,158
|
|
|
|
9,990
|
|
|
|
9,899
|
|
Insurance Brokers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SelectQuote, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
11/05/19
|
|
|
11/05/24
|
|
|
7,838
|
|
|
|
7,710
|
|
|
|
7,838
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
7,838
|
|
|
|
7,710
|
|
|
|
7,838
|
|
Internet & Direct Marketing Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marlin DTC-LS Midco 2, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 5.50%
|
|
|
6.50%
|
|
|
|
07/19/19
|
|
|
07/01/25
|
|
|
13,612
|
|
|
|
13,395
|
|
|
|
13,475
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 5.50%
|
|
|
6.50%
|
|
|
|
07/19/19
|
|
|
07/01/25
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
13,612
|
|
|
|
13,395
|
|
|
|
13,481
|
|
Investment Banking & Brokerage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOUR Intermediate Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.00%
|
|
|
8.00%
|
|
|
|
05/19/20
|
|
|
05/15/25
|
|
|
8,299
|
|
|
|
8,155
|
|
|
|
8,175
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
L+ 7.00%
|
|
|
8.00%
|
|
|
|
05/19/20
|
|
|
05/15/25
|
|
|
2,919
|
|
|
|
2,895
|
|
|
|
2,875
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
11,218
|
|
|
|
11,050
|
|
|
|
11,050
|
|
Packaged Foods & Meats
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mikawaya Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 5.75%
|
|
|
7.00%
|
|
|
|
02/18/20
|
|
|
01/29/25
|
|
|
3,065
|
|
|
|
3,011
|
|
|
|
3,065
|
|
|
|
(1.25% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Poultry Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 5.75%
|
|
|
6.75%
|
|
|
|
10/21/19
|
|
|
06/28/25
|
|
|
7,748
|
|
|
|
7,619
|
|
|
|
7,283
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westrock Coffee Company, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 8.25%
|
|
|
9.75%
|
|
|
|
03/20/20
|
|
|
02/28/25
|
|
|
9,233
|
|
|
|
9,130
|
|
|
|
9,049
|
|
|
|
(1.50% Floor)
|
|
|
(1.00% PIK)
|
|
|
|
|
|
|
|
|
|
20,046
|
|
|
|
19,760
|
|
|
|
19,397
|
|
Personal Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunless, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.50%
|
|
|
7.50%
|
|
|
|
10/21/19
|
|
|
08/13/24
|
|
|
4,834
|
|
|
|
4,740
|
|
|
|
4,350
|
|
|
|
(1.00% Floor)
|
|
|
(0.50% PIK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
L+ 6.50%
|
|
|
7.50%
|
|
|
|
10/21/19
|
|
|
08/13/24
|
|
|
-
|
|
|
|
-
|
|
|
|
(112
|
)
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
4,834
|
|
|
|
4,740
|
|
|
|
4,238
|
|
Systems Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arcserve (USA) LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.00%
|
|
|
7.00%
|
|
|
|
07/19/19
|
|
|
05/01/24
|
|
|
8,163
|
|
|
|
8,045
|
|
|
|
8,081
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,163
|
|
|
|
8,045
|
|
|
|
8,081
|
|
Technology Hardware, Storage & Peripherals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PS Lightwave, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 6.75%
|
|
|
8.25%
|
|
|
|
05/19/20
|
|
|
03/10/25
|
|
|
7,673
|
|
|
|
7,531
|
|
|
|
7,538
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
L+ 6.75%
|
|
|
8.25%
|
|
|
|
05/19/20
|
|
|
03/10/25
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
7,673
|
|
|
|
7,531
|
|
|
|
7,539
|
|
Trading Companies & Distributors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessco Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
L+ 7.25%
|
|
|
8.75%
|
|
|
|
04/22/20
|
|
|
08/22/24
|
|
|
9,874
|
|
|
|
9,697
|
|
|
|
9,972
|
|
|
|
(1.50% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,874
|
|
|
|
9,697
|
|
|
|
9,972
|
|
Total Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,704
|
|
|
$
|
165,752
|
|
|
$
|
162,627
|
|
|
(1)
|
Except
as noted, all investments provide collateral for the STRS JV Credit Facility.
|
|
(2)
|
The
investments bear interest at a rate that may be determined by reference to LIBOR, which
resets monthly, quarterly or semiannually, or CDOR. The one, three and six-month LIBOR
were 0.1%, 0.2% and 0.3%, respectively, as of September 30, 2020. The CDOR was 0.5%
as of September 30, 2020.
|
|
(3)
|
The
interest rate is the “all-in-rate” including the current index and spread,
the fixed rate, and the PIK interest rate, as the case may be.
|
|
(4)
|
Except
as otherwise noted, all of the STRS JV’s portfolio company investments, which as
of the date of the portfolio represented 1,048% of STRS JV’s net assets or 95%
of STRS JV’s total assets, are subject to legal restrictions on sales.
|
|
(5)
|
The
fair value of each investment was determined using significant unobservable inputs.
|
|
(6)
|
The
investment or a portion of the investment does not provide collateral for the STRS JV
Credit Facility.
|
|
(7)
|
Principal
is denominated in Canadian dollars.
|
|
(8)
|
In
addition to the interest earned based on the stated interest rate of this security, STRS
JV is entitled to receive an additional interest amount of 3.00% on its “last out”
tranche of the portfolio company’s senior term debt, which was previously syndicated
into “first out” and “last out” tranches, whereby the “first
out” tranche will have priority as to the “last out” tranche with respect
to payments of principal, interest and any other amounts due thereunder.
|
Below is a listing of STRS JV’s
individual investments as of December 31, 2019:
|
|
Spread
|
|
|
|
|
|
|
|
|
|
|
|
Principal/
|
|
|
|
|
|
|
|
|
|
Above
|
|
|
Interest
|
|
|
Acquisition
|
|
|
Maturity
|
|
|
Share
|
|
|
Amortized
|
|
|
Fair
|
|
Investment Type(1)
|
|
Index(2)
|
|
|
Rate(3)
|
|
|
Date(4)
|
|
|
Date
|
|
|
Amount
|
|
|
Cost
|
|
|
Value(5)
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SmartSign Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
10.19
|
%
|
|
|
10/21/19
|
|
|
|
10/11/24
|
|
|
|
8,841
|
|
|
$
|
8,672
|
|
|
$
|
8,672
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
|
L+ 6.00%
|
|
|
|
10.19
|
%
|
|
|
10/21/19
|
|
|
|
10/11/24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,841
|
|
|
|
8,672
|
|
|
|
8,672
|
|
Construction & Engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFP Holding, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.25%
|
|
|
|
8.14
|
%
|
|
|
12/13/19
|
|
|
|
09/01/22
|
|
|
|
9,932
|
|
|
|
9,927
|
|
|
|
9,932
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
|
L+ 6.25%
|
|
|
|
8.14
|
%
|
|
|
12/13/19
|
|
|
|
09/01/22
|
|
|
|
85
|
|
|
|
84
|
|
|
|
85
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Delayed Draw Loan
|
|
|
L+ 6.25%
|
|
|
|
8.14
|
%
|
|
|
12/13/19
|
|
|
|
12/14/20
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
|
L+ 6.25%
|
|
|
|
8.41
|
%
|
|
|
12/13/19
|
|
|
|
09/01/22
|
|
|
|
61
|
|
|
|
61
|
|
|
|
68
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,078
|
|
|
|
10,072
|
|
|
|
10,132
|
|
Diversified Support Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quest Events, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.94
|
%
|
|
|
07/19/19
|
|
|
|
12/28/24
|
|
|
|
10,833
|
|
|
|
10,634
|
|
|
|
10,508
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
|
L+ 6.00%
|
|
|
|
7.94
|
%
|
|
|
07/19/19
|
|
|
|
12/28/24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,833
|
|
|
|
10,634
|
|
|
|
10,497
|
|
Health Care Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Akumin Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.80
|
%
|
|
|
07/19/19
|
|
|
|
05/31/24
|
|
|
|
13,632
|
|
|
|
13,392
|
|
|
|
13,482
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,632
|
|
|
|
13,392
|
|
|
|
13,482
|
|
Industrial Machinery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FR Flow Control CB LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan B
|
|
|
L+ 6.00%
|
|
|
|
7.94
|
%
|
|
|
07/19/19
|
|
|
|
06/28/26
|
|
|
|
7,343
|
|
|
|
7,206
|
|
|
|
7,183
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan C
|
|
|
L+ 6.00%
|
|
|
|
7.94
|
%
|
|
|
07/19/19
|
|
|
|
06/28/26
|
|
|
|
2,870
|
|
|
|
2,816
|
|
|
|
2,807
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,213
|
|
|
|
10,022
|
|
|
|
9,990
|
|
Insurance Brokers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SelectQuote, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.70
|
%
|
|
|
11/05/19
|
|
|
|
11/05/24
|
|
|
|
10,250
|
|
|
|
10,051
|
|
|
|
10,051
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,250
|
|
|
|
10,051
|
|
|
|
10,051
|
|
Internet & Direct
Marketing Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marlin DTC-LS Midco 2, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.80
|
%
|
|
|
07/19/19
|
|
|
|
07/01/25
|
|
|
|
13,715
|
|
|
|
13,463
|
|
|
|
13,644
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
|
L+ 6.00%
|
|
|
|
7.80
|
%
|
|
|
07/19/19
|
|
|
|
07/01/25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,715
|
|
|
|
13,463
|
|
|
|
13,657
|
|
Packaged Foods & Meats
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Poultry Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 5.75%
|
|
|
|
7.55
|
%
|
|
|
10/21/19
|
|
|
|
06/28/25
|
|
|
|
7,807
|
|
|
|
7,656
|
|
|
|
7,688
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,807
|
|
|
|
7,656
|
|
|
|
7,688
|
|
Personal Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunless, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.79
|
%
|
|
|
10/21/19
|
|
|
|
08/13/24
|
|
|
|
4,864
|
|
|
|
4,773
|
|
|
|
4,779
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Revolving Loan
|
|
|
L+ 6.00%
|
|
|
|
7.79
|
%
|
|
|
10/21/19
|
|
|
|
08/13/24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,864
|
|
|
|
4,773
|
|
|
|
4,781
|
|
Systems Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arcserve (USA) LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Secured Term Loan
|
|
|
L+ 6.00%
|
|
|
|
7.91
|
%
|
|
|
07/19/19
|
|
|
|
05/01/24
|
|
|
|
8,321
|
|
|
|
8,175
|
|
|
|
8,310
|
|
|
|
|
(1.00% Floor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,321
|
|
|
|
8,175
|
|
|
|
8,310
|
|
Total Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,554
|
|
|
$
|
96,910
|
|
|
$
|
97,260
|
|
|
(1)
|
All
investments provide collateral for the STRS JV Credit Facility.
|
|
(2)
|
The
investments bear interest at a rate that may be determined by reference to LIBOR, which
resets monthly, quarterly or semiannually. The one, three and six-month LIBOR were 1.8%,
1.9% and 1.9%, respectively, as of December 31, 2019.
|
|
(3)
|
The
interest rate is the “all-in-rate” including the current index and spread,
the fixed rate, and the PIK interest rate, as the case may be.
|
|
(4)
|
Except
as otherwise noted, all of the STRS JV’S portfolio company investments, which as
of the date of the portfolio represented 840% of STRS JV’S net assets or 98% of
STRS JV’S total assets or 98% of STRS JV’S total assets, are subject to legal
restrictions on Sales.
|
|
(5)
|
The
fair value of each investment was determined using significant unobservable inputs.
|
As of September 30, 2020, and December 31,
2019, STRS JV had no investments on non-accrual status. STRS JV had outstanding commitments to fund investments totaling $8,420
and $8,592 under undrawn revolvers as of September 30, 2020 and December 31, 2019, respectively.
Below is certain summarized financial information for STRS
JV as of September 30, 2020 and December 31, 2019 and for the three and nine month periods ended September 30,
2020 and for the period July 19, 2019 (commencement of operations) through September 30, 2019 (dollars in
thousands):
Selected Balance Sheet Information
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investments, at fair value (amortized cost of $165,752, $96,910, respectively)
|
|
$
|
162,627
|
|
|
$
|
97,260
|
|
Cash and cash equivalents
|
|
|
7,444
|
|
|
|
1,552
|
|
Other assets
|
|
|
747
|
|
|
|
726
|
|
Total assets
|
|
$
|
170,818
|
|
|
$
|
99,538
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Credit facility
|
|
$
|
85,226
|
|
|
$
|
42,773
|
|
Note payable to members
|
|
|
68,456
|
|
|
|
43,907
|
|
Interest payable on credit facility
|
|
|
160
|
|
|
|
179
|
|
Interest payable on notes to members
|
|
|
1,140
|
|
|
|
850
|
|
Other liabilities
|
|
|
311
|
|
|
|
248
|
|
Total liabilities
|
|
|
155,293
|
|
|
|
87,957
|
|
Members’ equity
|
|
|
15,525
|
|
|
|
11,581
|
|
Total liabilities and members’ equity
|
|
$
|
170,818
|
|
|
$
|
99,538
|
|
|
|
Three Months Ended
|
|
|
Nine months Ended
|
|
Selected Statement of Operations Information
|
|
September 30, 2020
|
|
|
September 30, 2020
|
|
Interest income
|
|
$
|
3,402
|
|
|
$
|
8,948
|
|
Total investment income
|
|
$
|
3,402
|
|
|
$
|
8,948
|
|
Interest expense on credit facility
|
|
|
806
|
|
|
|
2,407
|
|
Interest expense on notes to members
|
|
|
1,140
|
|
|
|
3,328
|
|
Administrative fee
|
|
|
84
|
|
|
|
219
|
|
Other expenses
|
|
|
40
|
|
|
|
314
|
|
Total expenses
|
|
$
|
2,070
|
|
|
$
|
6,268
|
|
Net investment income
|
|
|
1,332
|
|
|
|
2,680
|
|
Net realized gains (losses) on investments
|
|
|
(2
|
)
|
|
|
(17
|
)
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
2,158
|
|
|
|
(3,254
|
)
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
3,488
|
|
|
$
|
(591
|
)
|
|
|
For the period July 19, 2019
(commencement of operations)
|
|
Selected Statement of Operations Information
|
|
through
September 30, 2019
|
|
Interest income
|
|
$
|
1,022
|
|
Total investment income
|
|
$
|
1,022
|
|
|
|
|
|
|
Interest expense on credit facility
|
|
|
378
|
|
Interest expense on notes to members
|
|
|
572
|
|
Administrative fee
|
|
|
24
|
|
Other expenses
|
|
|
58
|
|
Total expenses
|
|
$
|
1,032
|
|
|
|
|
|
|
Net investment income
|
|
|
(10
|
)
|
Net realized gains (losses) on investments
|
|
|
12
|
|
Net change in unrealized appreciation (depreciation) on investments
|
|
|
91
|
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
93
|
|
NOTE 5 - FAIR VALUE MEASUREMENTS
Accounting standards establish a fair value
hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical
assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that
reflect a reporting entity’s own assumptions about what market participants would use in pricing an asset or liability.
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s categorization
within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s
assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers
factors specific to the financial instrument.
A review of the fair value hierarchy classifications
is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain
financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or
out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. During the nine months ended
September 30, 2020 and 2019, there were no changes in the observability of valuation inputs that would have resulted in a
reclassification of assets between any levels.
Fair value for each investment is derived
using a combination of valuation methodologies that, in the judgment of the investment committee of WhiteHorse Advisers are most
relevant to such investment, including, without limitation, being based on one or more of the following: (i) market prices
obtained from market makers for which the investment committee has deemed there to be enough breadth (number of quotes) and depth
(firm bids) to be indicative of fair value, (ii) the price paid or realized in a completed transaction or binding offer received
in an arm’s-length transaction, (iii) a discounted cash flow analysis, (iv) the guideline public company method,
(v) the similar transaction method or (vi) the option pricing method.
The following table presents investments
(as shown on the consolidated schedule of investments) that were measured at fair value as of September 30, 2020:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
First lien secured loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
494,866
|
|
|
|
494,866
|
|
Second lien secured loans
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Subordinated unsecured loans
|
|
|
—
|
|
|
|
—
|
|
|
|
291
|
|
|
|
291
|
|
Subordinated Note to STRS JV
|
|
|
—
|
|
|
|
—
|
|
|
|
41,073
|
|
|
|
41,073
|
|
Equity (excluding STRS JV)
|
|
|
—
|
|
|
|
—
|
|
|
|
19,750
|
|
|
|
19,750
|
|
Equity in STRS JV(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,315
|
|
Total investments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
585,980
|
|
|
|
595,295
|
|
The following table presents investments
(as shown on the consolidated schedule of investments) that were measured at fair value as of December 31, 2019:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
First lien secured loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
477,875
|
|
|
$
|
477,875
|
|
Second lien secured loans
|
|
|
—
|
|
|
|
—
|
|
|
|
62,155
|
|
|
|
62,155
|
|
Subordinated Note to STRS JV
|
|
|
—
|
|
|
|
—
|
|
|
|
26,344
|
|
|
|
26,344
|
|
Equity (excluding STRS JV)
|
|
|
467
|
|
|
|
—
|
|
|
|
15,898
|
|
|
|
16,365
|
|
Equity in STRS JV(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,949
|
|
Total investments
|
|
$
|
467
|
|
|
$
|
—
|
|
|
$
|
582,272
|
|
|
$
|
589,688
|
|
|
(1)
|
The Company’s equity investment in STRS JV is measured using the net asset value per share as a practical expedient for
fair value, and thus has not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended
to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statements of assets and liabilities.
|
The following table presents the changes in investments
measured at fair value using Level 3 inputs for the three months ended September 30, 2020:
|
|
First Lien
|
|
|
Second Lien
|
|
|
Subordinated
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
Secured
|
|
|
Unsecured
|
|
|
Notes to STRS
|
|
|
|
|
|
Total
|
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
JV
|
|
|
Equity
|
|
|
Investments
|
|
Fair value, beginning of period
|
|
$
|
453,721
|
|
|
|
29,968
|
|
|
|
-
|
|
|
|
41,073
|
|
|
|
14,846
|
|
|
|
539,608
|
|
Funding of investments
|
|
|
57,920
|
|
|
|
-
|
|
|
|
291
|
|
|
|
-
|
|
|
|
1,100
|
|
|
|
59,311
|
|
Non-cash interest income
|
|
|
198
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
198
|
|
Accretion of discount
|
|
|
680
|
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
708
|
|
Proceeds from paydowns and sales
|
|
|
(27,507
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(632
|
)
|
|
|
(28,139
|
)
|
Realized gains
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
632
|
|
|
|
636
|
|
Net unrealized (depreciation) appreciation
|
|
|
9,850
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,804
|
|
|
|
13,658
|
|
Fair value, end of period
|
|
$
|
494,866
|
|
|
|
30,000
|
|
|
|
291
|
|
|
|
41,073
|
|
|
|
19,750
|
|
|
|
585,980
|
|
Change in unrealized appreciation (depreciation) on investments still held as of September 30, 2020
|
|
$
|
9,980
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,804
|
|
|
|
13,788
|
|
The following table presents the changes in investments
measured at fair value using Level 3 inputs for the nine months ended September 30, 2020:
|
|
First Lien
|
|
|
Second Lien
|
|
|
Subordinated
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
Secured
|
|
|
Unsecured
|
|
|
Notes to STRS
|
|
|
|
|
|
Total
|
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
JV
|
|
|
Equity
|
|
|
Investments
|
|
Fair value, beginning of period
|
|
$
|
477,875
|
|
|
|
62,155
|
|
|
|
-
|
|
|
|
26,344
|
|
|
|
15,898
|
|
|
|
582,272
|
|
Funding of investments
|
|
|
122,057
|
|
|
|
-
|
|
|
|
291
|
|
|
|
14,729
|
|
|
|
3,908
|
|
|
|
140,985
|
|
Non-cash interest income
|
|
|
681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
681
|
|
Accretion of discount
|
|
|
2,009
|
|
|
|
142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
|
|
2,169
|
|
Proceeds from paydowns and sales
|
|
|
(114,065
|
)
|
|
|
(32,404
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(650
|
)
|
|
|
(147,119
|
)
|
Realized gains
|
|
|
281
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
632
|
|
|
|
913
|
|
Net unrealized (depreciation) appreciation
|
|
|
6,028
|
|
|
|
107
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(56
|
)
|
|
|
6,079
|
|
Fair value, end of period
|
|
$
|
494,866
|
|
|
|
30,000
|
|
|
|
291
|
|
|
|
41,073
|
|
|
|
19,750
|
|
|
|
585,980
|
|
Change in unrealized appreciation (depreciation) on investments still held as of September 30, 2020
|
|
$
|
6,090
|
|
|
|
109
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(56
|
)
|
|
|
6,143
|
|
The following table presents the changes in investments
measured at fair value using Level 3 inputs for the three months ended September 30, 2019:
|
|
First Lien
|
|
|
Second Lien
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
Secured
|
|
|
Notes to STRS
|
|
|
|
|
|
Total
|
|
|
|
Loans
|
|
|
Loans
|
|
|
JV
|
|
|
Equity
|
|
|
Investments
|
|
Fair value, beginning of period
|
|
$
|
453,080
|
|
|
|
65,700
|
|
|
|
-
|
|
|
|
15,040
|
|
|
|
533,820
|
|
Funding of investments
|
|
|
79,498
|
|
|
|
-
|
|
|
|
19,484
|
|
|
|
1,480
|
|
|
|
100,462
|
|
Non-cash interest income
|
|
|
605
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
605
|
|
Accretion of discount
|
|
|
1,359
|
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,394
|
|
Proceeds from paydowns and sales
|
|
|
(112,825
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(112,825
|
)
|
Realized gains
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
Net unrealized (depreciation) appreciation
|
|
|
(1,038
|
)
|
|
|
(139
|
)
|
|
|
-
|
|
|
|
(197
|
)
|
|
|
(1,374
|
)
|
Fair value, end of period
|
|
$
|
420,677
|
|
|
|
65,596
|
|
|
|
19,484
|
|
|
|
16,323
|
|
|
|
522,080
|
|
Change in unrealized appreciation (depreciation) on investments still held as of September 30, 2019
|
|
$
|
(1,042
|
)
|
|
|
(138
|
)
|
|
|
-
|
|
|
|
(195
|
)
|
|
|
(1,374
|
)
|
The following table presents the changes in investments
measured at fair value using Level 3 inputs for the nine months ended September 30, 2019:
|
|
First Lien
|
|
|
Second Lien
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
Secured
|
|
|
Notes to STRS
|
|
|
|
|
|
Total
|
|
|
|
Loans
|
|
|
Loans
|
|
|
JV
|
|
|
Equity
|
|
|
Investments
|
|
Fair value, beginning of period
|
|
$
|
359,416
|
|
|
|
97,167
|
|
|
|
-
|
|
|
|
12,275
|
|
|
|
468,858
|
|
Funding of investments
|
|
|
204,180
|
|
|
|
-
|
|
|
|
19,484
|
|
|
|
2,990
|
|
|
|
226,654
|
|
Non-cash interest income
|
|
|
1,350
|
|
|
|
567
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,917
|
|
Accretion of discount
|
|
|
2,694
|
|
|
|
657
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,351
|
|
Proceeds from paydowns and sales
|
|
|
(156,209
|
)
|
|
|
(21,190
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(177,399
|
)
|
Lien priority conversion
|
|
|
14,472
|
|
|
|
(14,472
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Realized gains
|
|
|
(2,020
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,020
|
)
|
Net unrealized (depreciation) appreciation
|
|
|
(3,206
|
)
|
|
|
2,867
|
|
|
|
-
|
|
|
|
1,058
|
|
|
|
719
|
|
Fair value, end of period
|
|
$
|
(3,736
|
)
|
|
|
3,335
|
|
|
|
-
|
|
|
|
1,060
|
|
|
|
659
|
|
Change in unrealized appreciation (depreciation) on investments still held as of September 30, 2019
|
|
$
|
(3,736
|
)
|
|
|
3,335
|
|
|
|
-
|
|
|
|
1,060
|
|
|
|
659
|
|
The significant unobservable
inputs used in the fair value measurement of the Company’s investments are the discount rate, market quotes and exit multiples.
An increase or decrease in the discount rate in isolation would result in significantly lower or higher fair value measurement,
respectively. An increase or decrease in the market quote for an investment would in isolation result in significantly higher or
lower fair value measurement, respectively.
An increase or decrease in the exit multiple would in isolation
result in significantly higher or lower fair value measurement, respectively. As the fair value of a debt investment diverges from
par, which would generally be the case for non-accrual loans, the fair value measurement of that investment is more susceptible
to volatility from changes in exit multiples as a significant unobservable input.
Quantitative information about Level 3 fair value
measurements is as follows:
Investment Type
|
|
Fair Value at
September 30, 2020
|
|
Valuation
Techniques
|
|
Unobservable
Inputs
|
|
Range
(Weighted Average)
|
First lien secured loans
|
|
$
|
346,304
|
|
Discounted cash flows
|
|
Discount rate
|
|
7.3% – 29.0% (10.6%)
|
|
|
|
|
|
|
|
Exit EBITDA multiple
|
|
3.0x – 15.0x (7.4x)
|
|
|
|
40,923
|
|
Guideline public companies
|
|
LTM EBITDA multiple
|
|
1.8x – 6.3x (3.6x)
|
|
|
|
27,984
|
|
Recent transaction
|
|
Transaction price
|
|
97.8
|
|
|
|
|
|
|
|
Exit EBITDA multiple
|
|
14.3x
|
|
|
|
78,924
|
|
Discounted cash flows, recent transaction and consensus market pricing
|
|
Discount rate
|
|
8.1% – 10.7% (9.1%)
|
|
|
|
|
|
|
|
Market pricing
|
|
96.5 – 100.9 (98.7)
|
|
|
|
|
|
|
|
Transaction price
|
|
96.3 – 100.3 (98.5)
|
|
|
|
|
|
|
|
Exit EBITDA multiple
|
|
6.0x – 11.0x (8.9x)
|
|
|
|
731
|
|
Asset coverage
|
|
-
|
|
-
|
|
|
$
|
494,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second lien secured loans
|
|
$
|
30,000
|
|
Discounted cash flows
|
|
Discount rate
|
|
11.9% – 12.2% (12.0%)
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Note to STRS JV
|
|
$
|
41,073
|
|
Enterprise value
|
|
-
|
|
-
|
|
|
$
|
41,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated unsecured loan
|
|
$
|
291
|
|
Guideline public companies
|
|
LTM EBITDA multiple
|
|
6.3x
|
|
|
$
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Equity
|
|
$
|
857
|
|
Similar transactions
|
|
LTM EBITDA multiple
|
|
8.0x
|
|
|
$
|
857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity
|
|
$
|
9,831
|
|
Discounted cash flows
|
|
Discount rate
|
|
0.2% - 18.4% (12.3%)
|
|
|
|
|
|
|
|
Exit EBITDA Multiple
|
|
8.6x
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
2.0%
|
|
|
|
1,199
|
|
Guideline public companies
|
|
LTM EBITDA multiple
|
|
6.7x
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
35.0%
|
|
|
|
4,259
|
|
Similar transactions
|
|
LTM EBITDA multiple
|
|
6.0x – 14.3x (14.0x)
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
15.0%
|
|
|
$
|
15,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
$
|
3,604
|
|
Discounted cash flows and
|
|
Discount rate
|
|
18.4% - 20.3% (20.2%)
|
|
|
|
|
|
Option-pricing method
|
|
Exit EBITDA multiple
|
|
5.5x – 8.6x (5.6x)
|
|
|
|
|
|
|
|
Volatility
|
|
3.0% - 7.5% (3.2%)
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
10.0% - 15.0% (10.2%)
|
|
|
$
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Level 3 Investments
|
|
$
|
585,980
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
|
|
|
Range (Weighted
|
Investment Type
|
|
|
December 31, 2019
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Average)
|
First lien secured loans
|
|
$
|
204,908
|
|
Discounted cash flows
|
|
Discount rate
|
|
8.8% – 20.0% (10.9)%
|
|
|
|
|
|
|
|
Exit multiple
|
|
4.8x – 9.0x (7.3x)
|
|
|
|
525
|
|
Asset coverage and Recent transaction
|
|
Transaction price
|
|
100.0
|
|
|
|
184,636
|
|
Discounted cash flows and consensus market pricing or recent transaction
|
|
Discount rate
|
|
6.2% – 11.2% (9.1)%
|
|
|
|
|
|
|
|
Market quotes or
|
|
|
|
|
|
|
|
|
|
transaction price
|
|
97.1 – 99.7 (98.2)
|
|
|
|
|
|
|
|
Exit multiple
|
|
7.0x – 10.0x (8.2x)
|
|
|
|
22,429
|
|
Guideline public companies
|
|
Exit multiple
|
|
4.0x – 5.0x (4.6x)
|
|
|
|
5,405
|
|
Expected repayment
|
|
Repayment price
|
|
100.0
|
|
|
|
59,972
|
|
Consensus market pricing or recent transaction
|
|
Market quotes or transaction price
|
|
95.1 – 98.0 (96.6)
|
|
|
$
|
477,875
|
|
|
|
|
|
|
Second lien secured loans
|
|
$
|
62,155
|
|
Discounted cash flows
|
|
Discount rate
|
|
12.0% – 1 8.5% (14.9)%
|
|
|
|
|
|
|
|
Exit multiple
|
|
6.0x
|
|
|
$
|
62,155
|
|
|
|
|
|
|
Subordinated Note to STRS JV
|
|
$
|
26,344
|
|
Enterprise value
|
|
—
|
|
—
|
|
|
$
|
26,344
|
|
|
|
|
|
|
Preferred Equity
|
|
$
|
1,133
|
|
Similar transactions
|
|
Transaction multiple
|
|
9.4x – 9.5x (9.5x)
|
|
|
$
|
1,133
|
|
|
|
|
|
|
Common Equity
|
|
$
|
9,650
|
|
Discounted cash flows
|
|
Discount rate
|
|
9.1%
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
2.0%
|
|
|
$
|
849
|
|
Similar transactions
|
|
Transaction multiple
|
|
6.0x – 6.8x (6.8x)
|
|
|
$
|
10,499
|
|
|
|
|
|
|
Warrant
|
|
$
|
4,182
|
|
Discounted cash flows and
|
|
Discount rate
|
|
23.0% – 30.0% (23.8)%
|
|
|
|
|
|
Option-pricing method
|
|
Exit multiple
|
|
5.5x – 8.0x (5.8x)
|
|
|
|
|
|
|
|
Volatility
|
|
1.3% – 2.2% (2.1)%
|
|
|
|
|
|
|
|
Discount for lack of marketability
|
|
10.0% – 13.0% (10.3)%
|
|
|
$
|
4,182
|
|
|
|
|
|
|
Earnout and Holdback
|
|
$
|
84
|
|
Discounted cash flows
|
|
Discount rate
|
|
1.6%
|
|
|
$
|
84
|
|
|
|
|
|
|
Total Level 3 Investments
|
|
$
|
582,272
|
|
|
|
|
|
|
Valuation of investments may be determined
by weighting various valuation techniques. Significant judgment is required in selecting the assumptions used to determine the
fair values of these investments. The valuation methods selected for a particular investment are based on the circumstances and
on the sufficiency of data available to measure fair value. If more than one valuation method is used to measure fair value, the
results are evaluated and weighted, as appropriate, considering the reasonableness of the range indicated by those results. A fair
value measurement is the point within that range that is most representative of fair value in the circumstances.
The availability of observable inputs can
vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the nature of
the instrument, whether the instrument is traded on an active exchange or in the secondary market and the current market conditions.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires a greater degree of judgment. Accordingly, the degree of judgment exercised by the Company in determining
fair value is greatest for financial instruments classified as Level 3.
The determination of fair value using the
selected methodologies takes into consideration a range of factors including the price at which the investment was acquired, the
nature of the investment, local market conditions, trading values on public and private exchanges for comparable securities, current
and projected operating performance and financing transactions subsequent to the acquisition of the investment, compliance with
agreed upon terms and covenants, and assessment of credit ratings of an underlying borrower. These valuation methodologies involve
a significant degree of judgment to be exercised.
As it relates to investments
which do not have an active public market, there is no single standard for determining the estimated fair value. Valuations of
privately held investments are inherently uncertain, and they may fluctuate over short periods of time and may be based on estimates.
The determination of fair value may differ materially from the values that would have been used if a ready market for these investments
existed.
In some cases, fair value for such investments
is best expressed as a range of values derived utilizing different methodologies from which a single estimate may then be determined.
Consequently, fair value for each investment may be derived using a combination of valuation methodologies that, in the judgment
of the investment professionals, are most relevant to such investment. The selected valuation methodologies for a particular investment
are consistently applied on each measurement date. However, a change in a valuation methodology or its application from one measurement
date to another is possible if the change results in a measurement that is equally or more representative of fair value in the
circumstances.
The following table presents the
amortized cost and fair value of the Company’s borrowings as of September 30, 2020 and December 31, 2019. The
amortized cost disclosed below excludes debt issuance costs. The fair value of the Credit Facility (as defined in Note 6) was
estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the
measurement date, if available. The fair value of the Company’s 6.0% private notes due 2023 (the “2023 Private
Notes”) was estimated using discounted future cash flows to the valuation date. The fair value of the 6.5% notes due
2025, (the “2025 Notes”) was estimated using the trailing 10-day volume weighted average quoted price as of the
valuation date.
|
|
Fair
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Value Level
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
JPM Credit Facility
|
|
3
|
|
|
$
|
231,150
|
|
|
$
|
231,567
|
|
|
$
|
238,917
|
|
|
$
|
243,435
|
|
2023 Private Notes
|
|
3
|
|
|
|
30,000
|
|
|
|
30,950
|
|
|
|
30,000
|
|
|
|
31,558
|
|
2025 Notes
|
|
2
|
|
|
|
35,000
|
|
|
|
35,419
|
|
|
|
35,000
|
|
|
|
36,722
|
|
|
|
|
|
|
$
|
296,150
|
|
|
$
|
297,936
|
|
|
$
|
303,917
|
|
|
$
|
311,715
|
|
NOTE 6 - BORROWINGS
Historically, the 1940 Act has permitted
the Company to issue “senior securities,” including borrowing money from banks or other financial institutions, only
in amounts such that its asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance. In
March 2018, the Small Business Credit Availability Act (the “SBCAA”) was enacted into law. The SBCAA, among other
things, amended the 1940 Act to reduce the asset coverage requirements applicable to business development companies from 200% to
150% so long as the business development company meets certain disclosure requirements and obtains certain approvals. At the Company’s
annual meeting of stockholders held on August 1, 2018, the Company’s stockholders approved the reduced asset coverage
ratio from 200% to 150%, such that the Company’s maximum debt-to-equity ratio increased from a prior maximum of 1.0x (equivalent
of $1 of debt outstanding for each $1 of equity) to a maximum of 2.0x (equivalent to $2 of debt outstanding for each $1 of equity).
As a result, the Company’s asset coverage requirements applicable to senior securities decreased from 200% to 150%, effective
August 2, 2018. As of September 30, 2020, the Company’s asset coverage for borrowed amounts was 206.2%.
Total borrowings outstanding and available as of
September 30, 2020 were as follows:
|
|
Maturity
|
|
|
Rate
|
|
|
Face Amount
|
|
|
Available
|
|
JPM Credit Facility
|
|
|
2024
|
|
|
|
L+2.50
|
%
|
|
$
|
231,150
|
|
|
|
18,850
|
|
2023 Private Notes
|
|
|
2023
|
|
|
|
6.0
|
%
|
|
|
30,000
|
|
|
|
—
|
|
2025 Notes
|
|
|
2025
|
|
|
|
6.5
|
%
|
|
|
35,000
|
|
|
|
—
|
|
Total debt
|
|
|
|
|
|
|
|
|
|
|
296,150
|
|
|
$
|
18,850
|
|
Debt issuance cost
|
|
|
|
|
|
|
|
|
|
|
(4,226
|
)
|
|
|
|
|
Total debt net issuance cost
|
|
|
|
|
|
|
|
|
|
$
|
291,924
|
|
|
|
|
|
Total borrowings outstanding and available as of
December 31, 2019 were as follows:
|
|
Maturity
|
|
|
Rate
|
|
|
Face Amount
|
|
|
Available
|
|
JPM Credit Facility
|
|
|
2024
|
|
|
|
L+2.50
|
%
|
|
$
|
238,917
|
|
|
$
|
11,083
|
|
2023 Private Notes
|
|
|
2023
|
|
|
|
6.0
|
%
|
|
|
30,000
|
|
|
|
—
|
|
2025 Notes
|
|
|
2025
|
|
|
|
6.5
|
%
|
|
|
35,000
|
|
|
|
—
|
|
Total debt
|
|
|
|
|
|
|
|
|
|
|
303,917
|
|
|
$
|
11,083
|
|
Debt issuance cost
|
|
|
|
|
|
|
|
|
|
|
(4,993
|
)
|
|
|
|
|
Total debt net issuance cost
|
|
|
|
|
|
|
|
|
|
$
|
298,924
|
|
|
|
|
|
Credit Facility: On
December 23, 2015, WhiteHorse Credit entered into a $200,000 revolving credit and security agreement with JPMorgan Chase
Bank, National Association (“JPMorgan”), as administrative agent and lender (the “Credit Facility”).
On June 27, 2016, the Credit Facility was amended and restated to clarify certain terms. On June 29, 2017,
WhiteHorse Credit and JPMorgan again amended and restated the terms of the Credit Facility to, among other things,
(i) extend the maturity date to December 29, 2021, (ii) increase the amount contained within the accordion
feature which allows for the expansion of the borrowing limit from $220,000 to $235,000 and (iii) reduce the interest
rate spread applicable on outstanding borrowings to 2.75%. On May 15, 2018, the terms of the Credit Facility were again
amended and restated to, among other things, permit the financing of certain assets to be held by WhiteHorse California, a
wholly owned subsidiary of WhiteHorse Credit. In November 2018, the Company entered into an amendment to the Credit
Facility, which, among other things, allows for a temporary reduction in the required minimum outstanding borrowings. On
November 22, 2019, the terms of the Credit Facility were again amended and restated to, among other things,
(i) extend the maturity date from December 29, 2021 to November 22, 2024; (ii)
increase the size of the facility from $200,000 to $250,000 with an additional $100,000 accordion feature, which allows for
the expansion of the borrowing limit, exercisable in increments of at least $35,000 (the “Commitment”);
(iii) reduce the interest rate spread applicable on outstanding borrowings from 2.75% to 2.50%; (iv) change the
minimum borrowing amount from 77.5% to 70.0% of the Commitment; (v) increase the advance rate from 57% to 60%; and
(vi) extend the non-call period from October 29, 2019 to November 22, 2021.
The Credit Facility bears interest at
LIBOR plus 2.50% on outstanding borrowings. The Company is required to pay a non-usage fee which accrues at 0.75% per annum
on the average daily unused amount of the financing commitments to the extent the aggregate principal amount available under
the Credit Facility has not been borrowed. Through May 19, 2019, the required minimum outstanding borrowings was
$115,000 and then was increased to $135,000 until August 20, 2019. Between August 20, 2019 and November 22,
2019, the required minimum outstanding borrowings was $155,000. Subsequent to November 22, 2019 the minimum borrowing
requirement is $175,000. In connection with the Credit Facility, WhiteHorse Credit pledged securities with a fair value of
approximately $503,556 as of September 30, 2020 as collateral. The Credit Facility has a final maturity date of
November 22, 2024.
Under the Credit Facility, the
Company has made certain customary representations and warranties and is required to comply with various covenants, including
leverage restrictions, reporting requirements and other customary requirements for similar credit facilities. As of
September 30, 2020, the Company had $231,150 in outstanding borrowings and $18,850 undrawn under the Credit Facility.
Weighted average outstanding borrowings were $191,666 and $207,941 at a weighted average interest rate of 2.80% and 3.51%
for the three and nine months ended September 30, 2020, respectively. At September 30, 2020, the interest rate in effect on
outstanding borrowings was 2.75%. The Company’s ability to draw down undrawn funds under the Credit Facility is
determined by collateral and portfolio quality requirements stipulated in the credit and security agreement. At
September 30, 2020, approximately $18,850 was available to be drawn by the Company based on these requirements.
2023 Private Notes: On
July 13, 2018, the Company entered into an agreement (the “2023 Note Purchase Agreement”) to sell in a
private offering $30,000 aggregate principal amount of senior unsecured 2023 Private Notes to qualified institutional
investors in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”). Interest on the 2023 Private Notes is payable semiannually on February 7 and August 7, at a fixed,
annual rate of 6.00%. This interest rate is subject to increase (up to 6.50%) in the event that, subject to certain
exceptions, the 2023 Private Notes cease to have an investment grade rating. The 2023 Private Notes will mature on
August 7, 2023, unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance
with their terms. The 2023 Private Notes are general unsecured obligations of the Company that rank pari passu with all
outstanding and future unsecured unsubordinated indebtedness issued by the Company. The closing of the transaction occurred
on August 7, 2018.
2025 Notes: On
November 13, 2018, the Company completed a public offering of $35,000 of aggregate principal amount of 2025 Notes, the
net proceeds of which were used to fund investments in debt and equity securities and repay outstanding indebtedness under
its revolving credit facility. Interest on the 2025 Notes is paid quarterly on February 28, May 31, August 31
and November 30 each year, at an annual rate of 6.50%. The 2025 Notes will mature on November 30, 2025 and may be
redeemed in whole or in part at any time, or from time to time, at the Company’s option on or after November 30,
2021. The 2025 Notes are direct unsecured obligations and are structurally subordinate to borrowings under the Credit
Facility and will rank equally in right of payment with the Company’s other outstanding and future unsecured,
unsubordinated indebtedness, including the 2023 Private Notes. The 2025 Notes are listed on the Nasdaq Global Select Market
under the trading symbol “WHFBZ.”
NOTE 7 - RELATED PARTY TRANSACTIONS
Investment Advisory Agreement:
WhiteHorse Advisers serves as the Company’s investment adviser in accordance with the terms of an investment advisory
agreement (the “Investment Advisory Agreement”). On November 1, 2018, at an in-person meeting, the
Company’s board of directors approved an amended and restated Investment Advisory Agreement. The Investment Advisory
Agreement was amended and restated to reduce the base management fee on assets financed using leverage over 200% asset
coverage (over 1.0x debt to equity) as further discussed below. The Company’s board of directors most recently
re-approved the Investment Advisory Agreement on August 5, 2020. Subject to the overall supervision of the
Company’s board of directors, WhiteHorse Advisers manages the day-to-day operations of, and provides investment
management services to, the Company. Under the terms of the Investment Advisory Agreement, WhiteHorse Advisers:
|
•
|
determines the composition of the investment portfolio, the nature and timing of the changes to the portfolio and the manner
of implementing such changes;
|
|
•
|
identifies, evaluates and negotiates the structure of the investments the Company makes (including performing due diligence
on the Company’s prospective portfolio companies); and
|
|
•
|
closes, monitors and administers the investments the Company makes, including the exercise of any voting or consent rights.
|
In addition, WhiteHorse Advisers provides
the Company with access to personnel and an investment committee. Under the Investment Advisory Agreement, the Company pays WhiteHorse
Advisers a fee for investment management services consisting of a base management fee and an incentive fee. The Investment Advisory
Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.
Base Management Fee
Prior to November 1, 2018, the
base management fee was calculated at an annual rate of 2.0% of the average carrying value of consolidated gross assets,
including cash and cash equivalents and assets purchased with borrowed funds, at the end of the two most recently completed
calendar quarters. Effective November 1, 2018, the base management fee is calculated at an annual rate equal to 2.0% of
the Company’s consolidated gross assets (including cash and cash equivalents and assets purchased with borrowed funds);
provided, however, the base management fee will be calculated at an annual rate equal to 1.25% of the Company’s
consolidated gross assets (including cash and cash equivalents and assets purchased with borrowed funds), that exceed the
product of (i) 200% and (ii) the value of the Company’s total net assets, at the end of the two most recently
completed calendar quarters. Base management fees are payable quarterly in arrears and are appropriately pro-rated for any
partial month or quarter.
During the three and nine months
ended September 30, 2020, the Company incurred base management fees of $3,069 and $9,110, respectively. During the
three and nine months ended September 30, 2019, the Company incurred base management fees of $2,834 and $7,843, net of
fees waived, respectively. WhiteHorse Advisers has agreed to waive that portion of the base management fee payable with
respect to cash and cash equivalents and restricted cash and cash equivalents to which it would otherwise be entitled under
the Investment Advisory Agreement for the fiscal quarters ended September 30, 2018, December 31, 2018,
March 31, 2019 and June 30, 2019; and for the fiscal quarter ended September 30, 2019 only to the extent that
the determination of base management fees would otherwise include June 30, 2019 cash and cash equivalents and restricted
cash and cash equivalents for the purpose of calculating the average carrying value of consolidated gross assets.
Performance-Based Incentive Fee
The performance-based incentive fee consists
of two components that are independent of each other, except as provided by the Incentive Fee Cap and Deferral Mechanism discussed
below.
The calculations of these two components
have been structured to include a fee limitation such that no incentive fee will be paid to the investment adviser for any quarter
if, after such payment, the cumulative incentive fees paid to the investment adviser for the period that includes the current fiscal
quarter and the 11 full preceding fiscal quarters, referred to as the “Incentive Fee Look-back Period,” would exceed
20.0% of the Cumulative Pre-Incentive Fee Net Return (as defined below) during the Incentive Fee Look-back Period.
Each quarterly incentive fee is subject
to the Incentive Fee Cap (as defined below) and a deferral mechanism through which the investment adviser may recap a portion of
such deferred incentive fees, which is referred to together as the “Incentive Fee Cap and Deferral Mechanism.”
This limitation is accomplished by subjecting
each incentive fee payable to a cap, which is referred to as the “Incentive Fee Cap.” The Incentive Fee Cap in any
quarter is equal to (a) 20.0% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative
incentive fees of any kind paid to the investment adviser during the Incentive Fee Look-back Period. To the extent the Incentive
Fee Cap is zero or a negative value in any quarter, the Company will pay no incentive fee to its investment adviser in that quarter.
The Company will only pay incentive fees to the extent allowed by the Incentive Fee Cap and Deferral Mechanism. To the extent that
the payment of incentive fees is limited by the Incentive Fee Cap and Deferral Mechanism, the payment of such fees may be deferred
and paid in subsequent quarters up to three years after their date of deferment, subject to applicable limitations included in
the Investment Advisory Agreement. The deferral component of the Incentive Fee Cap and Deferral Mechanism may cause incentive fees
that accrued during one fiscal quarter to be paid to the investment adviser at any time during the 11 full fiscal quarters following
such initial full fiscal quarter.
The “Cumulative
Pre-Incentive Fee Net Return” refers to the sum of (a) Pre-Incentive Fee Net Investment Income (as defined below) for
each period during the Incentive Fee Look-back Period and (b) the sum of cumulative realized capital gains, cumulative realized
capital losses, cumulative unrealized capital depreciation and cumulative unrealized capital appreciation during the applicable
Incentive Fee Look-back Period.
The first component, which is income-based
(the “Income Incentive Fee”), is calculated and payable quarterly in arrears and is determined based on Pre-Incentive
Fee Net Investment Income for the immediately preceding calendar quarter, subject to the Incentive Fee Cap and Deferral Mechanism.
For this purpose, “Pre-Incentive Fee Net Investment Income” means, in each case on a consolidated basis, interest income,
distribution income and any other income (including any other fees (other than fees for providing managerial assistance), such
as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies) accrued
during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses
payable under the administration agreement (the “Administration Agreement”), any interest expense and any dividends
paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income does
not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
The operation of the first component of the incentive
fee for each quarter is as follows:
|
•
|
no incentive fee is payable to the Company’s investment adviser in any calendar quarter in which Pre-Incentive Fee Net
Investment Income does not exceed the “Hurdle Rate” of 1.75% (7.00% annualized);
|
|
•
|
100% of Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income,
if any, that exceeds the Hurdle Rate but is less than 2.1875% in any calendar quarter (8.75% annualized) is payable to the Company’s
investment adviser. This portion of the Company’s Pre-Incentive Fee Net Investment Income (which exceeds the Hurdle Rate
but is less than 2.1875%) is referred to as the “catch-up.” The effect of the catch-up is that, if such Pre-Incentive
Fee Net Investment Income exceeds 2.1875% in any calendar quarter, the investment adviser will receive 20% of such Pre-Incentive
Fee Net Investment Income as if the Hurdle Rate did not apply; and
|
|
•
|
20% of the amount of such Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter (8.75%
annualized) is payable to the Company’s investment adviser (once the Hurdle Rate is reached and the catch-up is achieved,
20% of all Pre-Incentive Fee Net Investment Income).
|
The portion of such
incentive fee that is attributable to deferred interest (such as PIK interest or original issue discount) will be paid to the investment
adviser, together with interest from the date of deferral to the date of payment, only if and to the extent that the Company actually
receives such interest in cash, and any accrual will be reversed if and to the extent such interest is reversed in connection with
any write-off or similar treatment of the investment giving rise to any deferred interest accrual. Any reversal of such amounts
would reduce net income for the quarter by the net amount of the reversal (after taking into account the reversal of incentive
fees payable) and would result in a reduction and possibly elimination of the incentive fees for such quarter.
There is no accumulation
of amounts on the Hurdle Rate from quarter to quarter and, accordingly, there is no clawback of amounts previously paid if subsequent
quarters are below the quarterly Hurdle Rate and there is no delay of payment if prior quarters are below the quarterly Hurdle
Rate. Since the Hurdle Rate is fixed, as interest rates rise, it will be easier for the investment adviser to surpass the Hurdle
Rate and receive an incentive fee based on Pre-Incentive Fee Net Investment Income.
Net investment income used to calculate
this component of the incentive fee is also included in the amount of consolidated gross assets used to calculate the base management
fee. These calculations will be appropriately prorated for any period of less than three months and adjusted for any share issuances
or repurchases during the current quarter.
The second component, the capital gains
component of the incentive fee (the “Capital Gains Incentive Fee”), which is determined and payable in arrears as of
the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), commenced
on January 1, 2013, and equals 20% of cumulative aggregate realized capital gains from January 1 through the end of each
calendar year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation
through the end of each year (the “Capital Gains Incentive Fee Base”), less the aggregate amount of any previously
paid capital gains incentive fees and subject to the Incentive Fee Cap and Deferral Mechanism. If such amount is negative, then
no capital gains incentive fee will be payable for the year. Additionally, if the Investment Advisory Agreement is terminated as
of a date that is not a calendar year end, the termination date will be treated as though it were a calendar year end for purposes
of calculating and paying the capital gains incentive fee. The capital gains component of the incentive fee is not subject to any
minimum return to stockholders.
In
accordance with GAAP, the Company is also required to include the aggregate unrealized capital appreciation on investments in the
calculation and accrue a capital gains incentive fee on a quarterly basis if such unrealized capital appreciation were realized,
even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under
the Investment Advisory Agreement. If the Capital Gains Incentive Fee Base, adjusted as required by GAAP to include unrealized
capital appreciation, is positive at the end of a reporting period, then GAAP requires the Company to accrue a Capital Gains Incentive
Fee equal to 20% of such amount, less the aggregate amount of any Capital Gains Incentive Fees previously paid and Capital Gains
Incentive Fees accrued under GAAP in all prior periods. If such amount is negative, then there is no accrual for such period. The
resulting accrual under GAAP in a given period may result in either additional expense (if such cumulative amount is greater than
in the prior period) or a reversal of previously recorded expense (if such cumulative amount is less than in the prior period).
There can be no assurance that such unrealized capital appreciation will be realized in the future. For the three and nine months
ended September 30, 2020, the Company accrued Capital Gains Incentive Fees of $1,870 and $1,243, respectively. For the three
and nine months ended September 30, 2019, the Company accrued a Capital Gains Incentive Fee reversal of $(360) and $(283),
respectively, which accruals are included in performance-based incentive fees in the consolidated statements of operations.
As of September 30, 2020 and December 31, 2019,
included in management and incentive fees payable on the consolidated statements of assets and liabilities were $1,870 and $626,
respectively, for cumulative accruals of Capital Gains Incentive Fees under GAAP, including any amounts payable pursuant to the
Investment Advisory Agreement as described above.
Because of the structure
of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where it incurs a loss subject to the
Incentive Fee Cap and Deferral Mechanism. For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess
of the Hurdle Rate, it will pay the applicable Income Incentive Fee even after incurring a loss in that quarter due to realized
and unrealized capital losses.
During the three and
nine months ended September 30, 2020, the Company incurred total performance-based incentive fees of $3,819 and $5,571, respectively.
During the three and nine months ended September 30, 2019, the Company incurred total performance-based incentive fees of
$1,741 and $5,520, respectively.
Administration Agreement: Pursuant
to the Administration Agreement, WhiteHorse Administration furnishes the Company with office facilities, equipment and clerical,
bookkeeping and record keeping services to enable the Company to operate. Under the Administration Agreement, WhiteHorse Administration
performs, or oversees the performance of, the Company’s required administrative services, which include being responsible
for the financial records which the Company is required to maintain and preparing reports to its stockholders and reports filed
with the U.S. Securities and Exchange Commission. In addition, WhiteHorse Administration assists the Company in determining and
publishing its net asset value, oversees the preparation and filing of its tax returns and the printing and dissemination of reports
to its stockholders and generally oversees the payment of the Company’s expenses and the performance of administrative and
professional services rendered to the Company by others. Payments under the Administration Agreement equal an amount based upon
the Company’s allocable portion of WhiteHorse Administration’s overhead in performing its obligations under the Administration
Agreement, including rent and the Company’s allocable portion of the cost of its chief financial officer and chief compliance
officer along with their respective staffs. Under the Administration Agreement, WhiteHorse Administration also provides on the
Company’s behalf managerial assistance to those portfolio companies to which the Company is required to provide such assistance.
The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other
party. To the extent that WhiteHorse Administration outsources any of its functions, the Company will pay the fees associated with
such functions on a direct basis without any profit to WhiteHorse Administration.
Substantially all the Company’s payments
of operating expenses to third parties were made by a related party, for which such third party received reimbursement from the
Company.
During the three and nine months ended
September 30, 2020, the Company incurred allocated administrative service fees of $171 and $513, respectively. During
the three and nine months ended September 30, 2019, the Company incurred allocated administrative service fees of $159
and $475, respectively.
Co-investments with Related Parties:
At September 30, 2020 and December 31, 2019, officers or employees affiliated with or employed by WhiteHorse Advisers
and its related entities maintained no co-investments in the Company’s investments.
At September 30, 2020 and December 31,
2019, certain funds affiliated with WhiteHorse Advisers and its related entities maintained co-investments in the Company’s
investments of $2,631,300 and $2,241,494, respectively.
STRS JV: For the three and nine
month period ended September 30, 2020, the Company sold $1,335 and $66,397 of investments to STRS JV at fair value and recognized
$0 and $(3) of net realized loss, respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Commitments: In the normal course
of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its borrowers.
These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the consolidated statement of assets and liabilities. The Company attempts to limit its credit risk
by conducting extensive due diligence and obtaining collateral where appropriate.
The balance of unfunded commitments to
extend credit was approximately $2,306 and $9,056 as of September 30, 2020 and December 31, 2019, respectively. Commitments
to extend credit consist principally of the unused portions of commitments that obligate the Company to extend credit, such as
revolving credit arrangements or similar transactions. These commitments are often subject to financial or non-financial milestones
and other conditions to borrow that must be achieved before the commitment can be drawn. In addition, the commitments generally
have fixed expiration dates or other termination clauses. Since commitments may expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The following table summarizes the Company’s unfunded commitments
as of September 30, 2020 and December 31, 2019:
|
|
Unfunded Commitment as of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revolving Loan Commitments:
|
|
|
|
|
|
|
|
|
BBQ Buyer, LLC
|
|
$
|
823
|
|
|
$
|
—
|
|
Geo Logic Systems Ltd.
|
|
|
306
|
|
|
|
1,288
|
|
ImageOne Industries, LLC
|
|
|
56
|
|
|
|
—
|
|
LHS Borrower, LLC
|
|
|
1,121
|
|
|
|
—
|
|
Lift Brands, Inc.
|
|
|
—
|
|
|
|
594
|
|
Newscycle Solutions, Inc.
|
|
|
—
|
|
|
|
36
|
|
WH Lessor Corp.
|
|
|
—
|
|
|
|
646
|
|
|
|
|
2,306
|
|
|
|
2,564
|
|
Delayed Draw Loan Commitments:
|
|
|
|
|
|
|
|
|
Crown Brands LLC
|
|
|
—
|
|
|
|
850
|
|
Lab Logistics, LLC
|
|
|
—
|
|
|
|
572
|
|
Sklar Holdings, Inc.
|
|
|
—
|
|
|
|
3,039
|
|
True Blue Car Wash, LLC
|
|
|
—
|
|
|
|
2,031
|
|
|
|
|
—
|
|
|
|
6,492
|
|
Total Unfunded Commitments
|
|
$
|
2,306
|
|
|
$
|
9,056
|
|
As of September 30, 2020, the Company
had commitments to fund equity interests and subordinated notes in STRS JV of $15,000 and $60,000, of which $4,732 and $18,927
was unfunded, respectively. The capital commitments cannot be drawn without an affirmative vote by both the Company’s and
STRS Ohio’s representatives on STRS JV’s board of managers.
Indemnification: In the normal course
of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide
general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future
claims that may be made against the Company that have not occurred. The Company expects the risk of any future obligation under
these indemnifications to be remote.
Legal
Proceedings: In the normal course of business, the Company, WhiteHorse Advisers and WhiteHorse Administration may be
subject to legal and regulatory proceedings that are generally incidental to its ongoing operations. While there can be no
assurance of the ultimate disposition of any such proceedings, the Company does not believe any such disposition will have a
material adverse effect on the Company’s consolidated financial statements.
COVID-19 Developments: In
addition, during the three and nine months ended September 30, 2020 and subsequent to September 30, 2020, the
current pandemic caused by the novel coronavirus (commonly known as “ COVID-19”) has had a significant impact on
the U.S. economy. Certain of the Company's portfolio companies have been adversely impacted by the effects of the COVID-19
pandemic, which had an adverse impact on the Company’s results of operations and may continue to have an adverse impact
on the Company’s future net investment income, the fair value of its portfolio investments, its financial condition and
the results of operations and financial condition of the Company’s portfolio companies.
NOTE 9 - FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights:
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Per
share data:(1)
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
15.23
|
|
|
$
|
15.35
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.84
|
|
|
|
1.14
|
|
Net realized and unrealized (losses) gains on investments
|
|
|
0.31
|
|
|
|
(0.06
|
)
|
Net increase in net assets resulting from
operations
|
|
|
1.15
|
|
|
|
1.08
|
|
|
|
|
|
|
|
|
|
|
Distributions declared from net investment income
|
|
|
(1.07
|
)
|
|
|
(1.07
|
)
|
Net asset value, end of period
|
|
$
|
15.31
|
|
|
$
|
15.36
|
|
|
|
|
|
|
|
|
|
|
Total annualized return based on market value(2)
|
|
|
(38.12
|
)%
|
|
|
12.72
|
%
|
Total annualized return based on net asset value
|
|
|
10.37
|
%
|
|
|
9.27
|
%
|
Net assets, end of period
|
|
$
|
314,563
|
|
|
$
|
315,494
|
|
Per share market value at end of period
|
|
$
|
9.79
|
|
|
$
|
13.93
|
|
Shares outstanding end of period
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental data:(3)
|
|
|
|
|
|
|
|
|
Ratio of expenses before incentive fees to average net assets(4)(5)
|
|
|
12.18
|
%
|
|
|
8.67
|
%
|
Ratio of incentive fees to average net assets(4)
|
|
|
2.46
|
%
|
|
|
2.32
|
%
|
Ratio of total expenses to average net assets(4)(5)
|
|
|
9.72
|
%
|
|
|
10.99
|
%
|
Ratio of net investment income to average net assets(4)(5)
|
|
|
7.63
|
%
|
|
|
9.86
|
%
|
Portfolio turnover ratio
|
|
|
22.06
|
%
|
|
|
30.72
|
%
|
|
(1)
|
Calculated using the average shares outstanding method.
|
|
(2)
|
Total return is based on the change in market price per share during the period and takes into account distributions, if any,
reinvested in accordance with the distribution reinvestment plan.
|
|
(3)
|
With the exception of the portfolio turnover rate, ratios are reported on an annualized basis.
|
|
(4)
|
WhiteHorse Advisers did not waive any base management fees during the nine months ended September 30, 2020. During the
nine months ended September 30, 2019, WhiteHorse Advisers irrevocably waived $397 of base management fees. Excluding these
management fee waivers, the ratios to average net assets consisting of the ratio of expenses before incentive fees, ratio of incentive
fees, ratio of total expenses and ratio of net investment income would have been 8.84%, 2.28%, 11.12% and 9.73%, respectively,
for the nine months ended September 30, 2019.
|
|
(5)
|
Calculated using total expenses, including income tax provision.
|
Financial highlights are calculated for
each securities class taken as a whole. An individual stockholder’s return and ratios may vary based on the timing of capital
transactions.
NOTE 10 - CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
PER COMMON SHARE
The following information sets forth the computation
of the basic and diluted per share net increase in net assets resulting from operations:
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net increase in net assets resulting from operations
|
|
$
|
21,634
|
|
|
$
|
6,855
|
|
|
$
|
23,490
|
|
|
$
|
22,080
|
|
Weighted average shares outstanding
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
|
|
20,546,032
|
|
Basic and diluted per share net increase in net assets resulting from operations
|
|
$
|
1.06
|
|
|
$
|
0.34
|
|
|
$
|
1.15
|
|
|
$
|
1.08
|
|
NOTE 11 - SUBSEQUENT EVENTS
The Company has evaluated events that
have occurred after the balance sheet date but before the consolidated financial statements are issued and has determined that,
other than the item disclosed below, there were no additional subsequent events requiring adjustment or disclosure in the consolidated
financial statements.
On October 9, 2020, the Company declared
a special distribution of $0.125 per share, which will be payable on December 10, 2020 to stockholders of record as of October
30, 2020.
On October 20, 2020, the Company entered into a Note Purchase Agreement (the “2025 Note Purchase Agreement”)
governing the issuance of $40,000 in aggregate principal amount of unsecured notes (the “2025 Private Notes ”) to
qualified institutional investors in a private placement. The 2025 Private Notes have a fixed interest rate of 5.375% and are
due on October 20, 2025, unless redeemed, purchased or prepaid prior to such date by the Company or its affiliates in accordance
with their terms. Interest on the 2025 Private Notes will be due semiannually. This interest rate is subject to increase (up to
6.375%) in the event that, subject to certain exceptions, the 2025 Private Notes cease to have an investment grade rating. In
addition, the Company is obligated to offer to repay the 2025 Private Notes at par if certain change in control events occur.
The 2025 Private Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future
unsecured unsubordinated indebtedness issued by the Company. The 2025 Private Notes were delivered and paid for on October 20,
2020. The Company intends to use the net proceeds from this offering to refinance and/or redeem existing debt and/or for general
corporate purposes.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The information contained in this section
should be read in conjunction with our Consolidated Financial Statements appearing elsewhere in this quarterly report on Form 10-Q.
In this quarterly report on Form 10-Q, the “Company”, "we", "us", "our" and "WhiteHorse
Finance" refer to WhiteHorse Finance, Inc. and its consolidated subsidiaries.
Forward-Looking Statements
Some of the statements
in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance
or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties,
including statements as to:
|
•
|
our future operating results;
|
|
•
|
our ability to consummate new investments and the impact of such investments;
|
|
•
|
our ability to continue to effectively manage our business due to the significant disruptions caused by the current pandemic
caused by the novel coronavirus (commonly known as “COVID-19”);
|
|
•
|
our business prospects and the prospects of our prospective portfolio companies, including as a result of the current COVID-19
pandemic;
|
|
•
|
the ability of our portfolio companies to achieve their objectives;
|
|
•
|
our contractual arrangements and relationships with third parties;
|
|
•
|
changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial
and capital markets, which could result in changes to the value of our assets, including changes from the impact of the current
COVID-19 pandemic;
|
|
•
|
the dependence of our future success on the general economy and its impact on the industries in which we invest;
|
|
•
|
the impact of increased competition;
|
|
•
|
the ability of our investment adviser to locate suitable investments for us and to monitor our investments;
|
|
•
|
our expected financings and investments and the rate at which our investments are refunded by portfolio companies;
|
|
•
|
our ability to pay dividends or make distributions;
|
|
•
|
the adequacy of our cash resources and working capital;
|
|
•
|
the timing of cash flows, if any, from the operations of our prospective portfolio companies; and
|
|
•
|
the impact of future acquisitions and divestitures.
|
We use words such as “may,”
“might,” “will,” “intends,” “should,” “could,” “can,” “would,”
“expects,” “believes,” “estimates,” “anticipates,” “predicts,” “potential,”
“plan” and similar expressions to identify forward-looking statements. Our actual results could differ materially from
those projected in the forward-looking statements for any reason, including the factors set forth in “Item 1A-Risk Factors”
in our annual report on Form 10-K and elsewhere in this quarterly report on Form 10-Q.
We have based the forward-looking statements
included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q,
and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update
any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult
any additional disclosures that we may make directly to you or through reports that we may file with the U.S. Securities and Exchange
Commission, or the SEC, in the future, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K.
You should understand that under Sections
27A(b)(2)(B) and (D) of the Securities Act of 1933, as amended, or the Securities Act, and Sections 21E(b) (2)(B) and
(D) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995, as amended, do not apply to statements made in connection with this quarterly
report on Form 10-Q or any periodic reports we file under the Exchange Act.
Overview
We are 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, or the 1940 Act. In addition, for tax purposes, we elected to be treated as a regulated investment
company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.
We were formed on December 28, 2011
and commenced operations on January 1, 2012. We were originally capitalized with approximately $176.3 million of contributed
assets from H.I.G. Bayside Debt & LBO Fund II, L.P. and H.I.G. Bayside Loan Opportunity Fund II, L.P., each of which is
an affiliate of H.I.G. Capital, L.L.C., or H.I.G. Capital. These assets were contributed as of January 1, 2012 in exchange
for 11,752,383 units in WhiteHorse Finance, LLC. On December 4, 2012, we converted from a Delaware limited liability company
into a Delaware corporation and elected to be treated as a business development company under the 1940 Act.
On December 4, 2012, we priced
our initial public offering, or the IPO, selling 6,666,667 shares of common stock. Concurrent with the IPO, certain of our
directors and officers, the managers of H.I.G. WhiteHorse Advisers, LLC, or WhiteHorse Advisers, and their immediate family
members or entities owned by, or family trusts for the benefit of, such persons, purchased an additional 472,673 shares
through a private placement exempt from registration under the Securities Act. Our shares are listed on the Nasdaq Global
Select Market under the symbol “WHF.”
We are a direct lender targeting debt investments
in privately held, lower middle market companies located in the United States. We define the lower middle market as those companies
with enterprise values between $50 million and $350 million. Our 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. Such loans typically carry a floating interest rate based on
a risk-free index rate such as the London Interbank Offered Rate, or LIBOR, plus a spread and typically have a term of three to
six years. While we focus principally on originating senior secured loans to lower middle market companies, we may also opportunistically
make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests, and in
companies outside of the lower middle market, to the extent we believe the investment presents an opportunity to achieve an attractive
risk-adjusted return. We also may receive warrants to purchase common stock in connection with our debt investments. We expect
to generate current income through the receipt of interest payments, as well as origination and other fees, capital appreciation
and dividends.
Our investment activities are managed by
WhiteHorse Advisers and are supervised by our board of directors, a majority of whom are independent of us, WhiteHorse Advisers
and its affiliates. Under our investment advisory agreement with WhiteHorse Advisers, or the Investment Advisory Agreement, we
have agreed to pay WhiteHorse Advisers an annual base management fee based on our average consolidated gross assets as well as
an incentive fee based on our investment performance. We have also entered into an administration agreement, or the Administration
Agreement, with H.I.G. WhiteHorse Administration, LLC, or WhiteHorse Administration. Under our Administration Agreement, we have
agreed to reimburse WhiteHorse Administration for our allocable portion (subject to the review and approval of our independent
directors) of overhead and other expenses incurred by WhiteHorse Administration in performing its obligations under the Administration
Agreement.
COVID-19 Developments
The rapid spread of COVID-19 and the
related effect on the U.S. and world economy has had adverse consequences on the business operations of some of our portfolio
companies and has adversely affected, and will likely continue to adversely affect, our operations and the operations of our
investment adviser (including those relating to us). Our investment adviser has been monitoring the COVID-19 pandemic and its
impact on our business and the business of our portfolio companies and has been focused on proactively engaging with our
portfolio companies in order to collaborate with the management teams of certain portfolio companies to assess and evaluate
the steps each portfolio company can take in response to the impacts of COVID-19.
We cannot predict the full impact of
COVID-19, including its duration in the United States and worldwide and the extent of the economic impact of the outbreak,
including with respect to the travel restrictions, business closures and other quarantine measures imposed on service
providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S.
governmental authorities. As such, the extent to which COVID-19 and/or other disease pandemics may continue to negatively
affect our and our portfolio companies’ operating results and financial condition, or the duration of any potential
business or supply-chain disruption for us, our investment adviser and/or our portfolio companies, is uncertain, especially
in light of the resurgence of the virus in various cities in the United States and throughout the world. Due to the ongoing
business disruptions caused by COVID-19, some of our portfolio companies have experienced financial distress and have
defaulted on their financial obligations to us and their other capital providers. Some of our portfolio companies have
curtailed their business operations, furloughed or laid off employees, terminated relationships with service providers and
deferred capital expenditures and may continue to do so for a prolonged period of time if another wave of the virus occurs.
Such developments could permanently impair the business operations of our portfolio companies and likely result in a decrease
in the value of our investment in any such portfolio company.
The COVID-19 pandemic and the related disruption
and financial distress experienced by our portfolio companies have already had adverse effects on our results of operations, which
are described in further detail below, and we expect that such adverse effects will continue for the duration of the pandemic and
potentially for some time thereafter. In connection with the adverse effects of the COVID-19 pandemic, we have restructured and
may need to restructure additional investments in some of our portfolio companies, which has resulted in and could result in additional
diminished interest payments or in permanent impairments on our investments. The effects of the COVID-19 pandemic discussed above
increase the risk that more of our portfolio investments may be placed on non-accrual status in the future. Any decreases in our
net investment income would increase the portion of our cash flows dedicated to distribution payments to stockholders and to servicing
our existing debt under our revolving credit facility, or the Credit Facility, with JPMorgan Chase Bank, National Association,
as administrative agent and lender, or the Lender.
As of September 30, 2020, we are permitted
under the 1940 Act, as a business development company, to borrow amounts such that our asset coverage, as defined in the 1940 Act,
equals at least 150% after such borrowing. While we are in compliance with our asset coverage requirements under the 1940 Act as
of September 30, 2020, we are required to comply with various covenants pursuant to the Credit Facility. If we fail to satisfy
the covenants of the Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender,
it could result in foreclosure by the lenders under the Credit Facility, which would accelerate our repayment obligations under
the Credit Facility and thereby resulting in a material adverse effect on our business, liquidity, financial condition, results
of operations and ability to pay distributions to our stockholders. As of September 30, 2020, we were in compliance with all
covenants and other requirements of the Credit Facility.
We are also subject to financial risks,
including changes in market interest rates. As of September 30, 2020, nearly all of our debt investments at fair value were
at floating rates, which are generally based on a risk-free index rate such as LIBOR, and many of which are subject to certain
floors. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest
rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result
in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread
over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses or a decrease in the interest rate of
our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market
Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.
Over the past four years, our management
team has sought strategies that will help us weather periods of economic decline. We have attempted to avoid deeply cyclical sectors
and have only made loans where we believed a repeat of the Great Recession would allow us to recover 100% of our loans. We have
focused on moderate leverage, first lien lending and have not extended a new second lien loan since 2018. Additionally, we have
taken a conservative position on the Company’s liquidity, making sure we have a top-tier leverage partner and very significant
cushion against default.
Over the past several months, the
WhiteHorse Advisers credit team has been in close contact with the owners and management teams of each of our portfolio
companies. With the rapid onset of the crisis, these owners and management teams have been actively assessing the likely
impacts to their businesses and are continuing to coordinate with us to guide their companies through the fallout. In dealing
with the economic decline that is occurring now and in the coming quarters, we are operating under a philosophy that we will
work hand in hand with our borrowers to support them. We expect owners to support their firms with additional equity where
possible, and we will react to this by showing flexibility in our terms as appropriate.
We will continue to monitor the rapidly
evolving situation relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state
and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there
may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this
situation, we cannot reasonably quantify the full effect of COVID-19 on our financial condition, results of operations or cash
flows in the future. However, we do expect that it will continue to have a negative impact on cash flows earned by us during the fourth quarter of 2020, which would result in a material adverse effect on our future net investment income, the fair
value of our portfolio investments, and the results of operations and financial condition of our portfolio companies.
Revenues
We generate revenue in the form of interest
payable on the debt securities that we hold and capital gains and distributions, if any, on the portfolio company investments that
we originate or acquire. Our debt investments, whether in the form of senior secured loans or mezzanine loans, typically have terms
of three to six years and bear interest at a fixed or floating rate based on a spread over LIBOR or an equivalent risk-free index
rate. Interest on debt securities is generally payable monthly or quarterly, with the amortization of principal generally being
deferred for several years from the date of the initial investment. In some cases, we may also defer payments of interest for the
first few years after our investment. The principal amount of the debt securities and any accrued but unpaid interest generally
becomes due at the maturity date. In addition, we generate revenue in the form of commitment, origination, structuring or diligence
fees, fees for providing managerial assistance and possibly consulting fees. We capitalize loan origination fees, original issue
discount and market discount, and we then amortize such amounts as interest income. Upon the prepayment of a loan or debt security,
we record any unamortized loan origination fees as interest income. We record prepayment premiums on loans and debt securities
as fee income when earned. Dividend income is recorded on the record date for private portfolio companies or on the ex-dividend
date for publicly traded portfolio companies.
Expenses
Our primary operating expenses include
(1) investment advisory fees to WhiteHorse Advisers; (2) the allocable portion of overhead under the Administration Agreement;
(3) the interest expense on our outstanding debt; and (4) other operating costs as detailed below. Our investment advisory
fees compensate our investment adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments.
We bear all other costs and expenses of our operations
and transactions, including:
|
•
|
calculating our net asset value and net asset value per share (including the costs and expenses of independent valuation firms);
|
|
•
|
fees and expenses, including travel expenses, incurred by WhiteHorse Advisers or payable to third parties in performing due
diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;
|
|
•
|
the costs of all future offerings of common shares and other securities, and other incurrences of debt;
|
|
•
|
the base management fee and any incentive fee;
|
|
•
|
distributions on our shares;
|
|
•
|
transfer agent and custody fees and expenses;
|
|
•
|
amounts payable to third parties relating to, or associated with, evaluating, making and disposing of investments;
|
|
•
|
brokerage fees and commissions;
|
|
•
|
independent directors’ fees and expenses;
|
|
•
|
costs associated with our reporting and compliance obligations under the 1940 Act and applicable U.S. federal and state securities
laws;
|
|
•
|
the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;
|
|
•
|
costs of holding stockholder meetings;
|
|
•
|
directors and officers/errors and omissions liability insurance and any other insurance premiums;
|
|
•
|
litigation, indemnification and other non-recurring or extraordinary expenses;
|
|
•
|
direct costs and expenses of administration and operation, including audit and legal costs;
|
|
•
|
fees and expenses associated with marketing efforts, including deal sourcing and marketing to financial sponsors;
|
|
•
|
dues, fees and charges of any trade association of which we are a member; and
|
|
•
|
all other expenses reasonably incurred by us or WhiteHorse Administration in connection with administering our business, including
rent and our allocable portion of the costs and expenses of our chief financial officer and chief compliance officer along with
their respective staffs.
|
WhiteHorse Advisers and WhiteHorse
Administration may pay for certain expenses that we incur, which are subject to reimbursement by us.
Recent Developments
Subsequent to September 30, 2020,
market disruptions caused by the COVID-19 pandemic have continued to adversely affect the business operations of some, if not
all, of our portfolio companies and have adversely affected, and may continue to adversely affect, our operations and the operations
of our investment adviser. While we are closely monitoring this situation, we cannot predict the impact of COVID-19 on our future
financial condition, results of operations or cash flows with any level of certainty. However, we do expect that the COVID-19
pandemic will continue to have a material adverse impact on our future net investment income, the fair value of our portfolio
investments, and the results of operations and financial condition of our portfolio companies. For more information, see “COVID-19
Developments” above.
On October 9, 2020, we declared a special
distribution of $0.125 per share, which will be payable on December 10, 2020 to stockholders of record as of October 30, 2020.
On
October 20, 2020, we entered into an agreement governing the issuance of $40 million in aggregate principal amount of unsecured
notes, or the 2025 Private Notes, to qualified institutional investors in a private placement. The 2025 Private Notes have a fixed
interest rate of 5.375% and are due on October 20, 2025, unless redeemed, purchased or prepaid prior to such date by us or our
affiliates in accordance with their terms. Interest on the 2025 Private Notes will be due semiannually. This interest rate is
subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 2025 Private Notes cease to have an investment
grade rating. In addition, we are obligated to offer to repay the 2025 Private Notes at par if certain change in control events
occur. The 2025 Private Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured
unsubordinated indebtedness issued by us. The 2025 Private Notes were delivered and paid for on October 20, 2020. We
used the net proceeds from this offering to repay a portion of the debt outstandings under the JPM Credit Facility.
Consolidated Results of Operations
The consolidated results of operations
described below may not be indicative of the results we report in future periods. Net investment income and net increase in net
assets can vary substantially from period to period due to various reasons, including the level of new investments and the recognition
of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net increases
in net assets resulting from operations may not be meaningful.
Investment Income
Investment income for the three and nine
months ended September 30, 2020 totaled $16.5 million and $44.9 million. respectively, and was primarily attributable to interest,
dividends and fees earned from investments in portfolio companies. This compares to investment income for the three and nine months
ended September 30, 2019 of $17.8 million and $49.7 million, respectively. Investment income decreased primarily as a result
of a decrease in non-recurring fee income, increase in non-accrual loans, as well as the decrease in LIBOR from September 30,
2019 to September 30, 2020. Investment income for the three and nine months ended September 30, 2020 included $0.6 million
and $1.3 million of non-recurring fee income, respectively. Included in investment income for the three and nine months ended September 30,
2019 was $2.1 million and $6.0 million, respectively, of non-recurring fee income. We expect to generate some level of non-recurring
fee income during most quarters from prepayments, amendments and other sources.
Operating Expenses
Expenses, excluding excise tax, totaled
$10.4 million and $27.1 million for the three and nine months ended September 30, 2020, respectively. This compares to expenses
of $8.9 million and $25.5 million for the three and nine months ended September 30, 2019, respectively.
Interest expense totaled
$2.8 million and $9.7 million for the three and nine months ended September 30, 2020, respectively, and $3.5 million and $9.7
million for the three and nine months ended September 30, 2019, respectively. The decrease in interest expense was primarily
due to lower interest rates resulting from a decrease in LIBOR, partially offset by a higher borrowing base.
Base management fees totaled (net of fees
waived, if any) $3.1 million and $9.1 million for the three and nine months ended September 30, 2020, respectively, and $2.8
million and $7.8 million for the three and nine months ended September 30, 2019, respectively. For the three and nine months
ended September 30, 2020, there were no base management fees waived. For the three and nine months ended September 30,
2019, WhiteHorse Advisers waived approximately $0.0 and $0.4 million in base management fees, respectively.
Performance-based incentive fees
totaled $3.8 million and $5.6 million for the three and nine months ended September 30, 2020, respectively and $1.7
million and $5.5 million for the three and nine months ended September 30, 2019, respectively. The increase in
performance-based incentive fees was mainly attributable to a $1.9 million accrual of the capital gains incentive fee
component, which was driven by gains recognized in the portfolio in the current period.
Administrative service fees for the three
and nine months ended September 30, 2020 totaled $0.2 million and $0.5 million, respectively. This compares to administrative
fees of $0.2 million and $0.5 million for the three and nine months ended September 30, 2019, respectively.
General and administrative expenses were
$0.6 million and $2.2 million for the three and nine months ended September 30, 2020, respectively and $0.7 million and $1.9
million for the three and nine months ended September 30, 2019, respectively.
Excise Tax Expense
We have elected to be treated as a RIC
under Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. In order to be
subject to tax as a RIC, we are required to meet certain source of income and asset diversification requirements, as well as timely
distribute to our stockholders dividends for U.S. federal income tax purposes of an amount generally at least equal to 90% of investment
company taxable income, as defined by the Code, and determined without regard to any deduction for dividends paid for each tax
year. We have made and intend to continue to make the requisite distributions to our stockholders that will generally relieve us
from U.S. federal income taxes.
Depending on the level of taxable income
earned in a tax year, we may choose to retain taxable income in excess of current year distributions into the next tax year in
an amount less than what would trigger payments of U.S. federal income tax under Subchapter M of the Code. We may then be required
to incur a 4% excise tax on such income. To the extent that we determine that our estimated current year annual taxable income
may exceed estimated current year distributions, we accrue excise tax, if any, on estimated excess taxable income as taxable income
is earned. For the three and nine months ended September 30, 2020 and 2019, we accrued a net excise tax expense of $0.1 million
and $0.5 million, and $0.2 million and $0.7 million, respectively, for U.S. federal excise tax.
Net Realized and Unrealized Gains (Losses) on
Investments
For the three and nine months ended September 30,
2020, we incurred a net realized gains on investments of approximately $0.6 million and $1.1 million, respectively, which was
primarily driven by sales or paydowns of portions of our positions in PMA Holdco, LLC, Fluent, LLC and Vero Parent, Inc.
For the three and nine months ended September 30, 2019, we incurred a net realized loss of approximately $0.0 million and
$2.0 million, respectively, which was driven by the sale of our remaining position in Outcome Health.
For the three and nine months ended
September 30, 2020, we recorded net unrealized appreciation of $15.2 million and $4.9 million, respectively. For the
three and nine months ended September 30, 2019, we recorded net unrealized depreciation of $1.8 million and unrealized
appreciation of $0.6 million, respectively. Unrealized appreciation and depreciation generally arise from credit-related
adjustments and the reversal of unrealized depreciation or appreciation due to repayments or disposals. Net unrealized
appreciation during the three and nine months ended September 30, 2020 was primarily attributable to fair value
increases on our investment in AG King Holdings Inc., Vessco Holdings, and Mills Fleet Farm Group LLC.
Financial Condition, Liquidity and Capital Resources
This “Liquidity and Capital Resources”
section should be read in conjunction with the “COVID-19 Developments” section above.
As a business development company, we distribute
substantially all of our net income to our stockholders. We generate cash primarily from offerings of securities, borrowings under
the Credit Facility, and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government
securities and other high-quality debt investments that mature in one year or less. We expect to fund a portion of our investments
through future borrowings. In the future, we may obtain borrowings under other credit facilities and from issuances of senior securities
to the extent permitted by the 1940 Act. We may also borrow funds to the extent we determine that additional capital would allow
us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt
financing opportunities or if our board of directors determines that leveraging our portfolio would be in our best interest and
the best interests of our stockholders.
Our board of directors may decide to issue
common stock, such as through at-the-market offerings, direct placements or otherwise, to finance our operations rather than issuing
debt or other senior securities. Any decision to sell shares below the then-current net asset value per share of our common stock
is subject to stockholder approval and a determination by our board of directors that such issuance and sale is in our and our
stockholders’ best interests. Any sale or other issuance of shares of our common stock at a price below net asset value per
share results in immediate dilution to our stockholders’ interests in our common stock and a reduction in our net asset value
per share. If we were to issue additional shares of our common stock during the next 12 months, we do not intend to issue shares
below the then-current net asset value per share.
Restricted cash and cash equivalents include
amounts that are collected and held by the trustee appointed as custodian of the assets securing the 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 Credit Facility.
Our operating activities provided cash
and cash equivalents of $25.0 million during the nine months ended September 30, 2020, primarily from the net proceeds received
from realizations and repayments on our investments as well as cash provided from the net change in working capital. Our financing
activities used cash and cash equivalents of $30.0 million during the nine months ended September 30, 2020, primarily due
to repayments on the Credit Facility and the payment of distributions to stockholders.
Our operating activities used cash and
cash equivalents of $45.0 million during the nine months ended September 30, 2019, primarily due to the net acquisition of
investments. Our financing activities provided cash and cash equivalents of $33.4 million during the nine months ended September 30,
2019, primarily from net borrowings under the Credit Facility, partially offset by the payment of distributions to stockholders.
As of
September 30, 2020, we had cash and cash equivalent resources of $22.9 million, including $14.1 million of restricted
cash. As of the same date, we had approximately $18.9 million undrawn and available to be drawn under the Credit Facility
based on the collateral and portfolio quality requirements stipulated in the related credit agreement.
As of December 31, 2019, we had cash
and cash equivalent resources of $27.5 million, including $23.2 million of restricted cash. As of the same date, we had $11.1 million
undrawn under the Credit Facility based on the collateral and portfolio quality requirements stipulated in the related credit and
security agreement.
STRS JV
In January 2019, we and STRS Ohio,
formed a joint venture, STRS JV, which invests primarily 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 LIBOR or an equivalent risk-free index rate and have a term of three to six years. STRS JV was formed as a Delaware limited
liability company and is not consolidated by either us or STRS Ohio for financial reporting purposes. On July 19, 2019, STRS
JV formally launched operations. As of September 30, 2020, STRS JV had total assets of $170.8 million. STRS JV’s portfolio
consisted of debt investments in 18 portfolio companies as of September 30, 2020. As of September 30, 2020, the five
largest investments in portfolio companies in STRS JV’s portfolio totaled $61.3 million. STRS JV invests in portfolio companies
in the same industries in which we may directly invest.
We provide capital
to STRS JV in the form of limited liability company, or LLC, equity interests and subordinated notes. As of September 30,
2020, we and STRS Ohio owned 60% and 40%, respectively, of the LLC equity interests of STRS JV. Our investment in STRS JV consisted
of equity contributions and subordinated note advances of $10.3 million and $41.1 million as of September 30, 2020, respectively.
As of the same date, we had commitments to fund equity interests and subordinated notes in STRS JV of $15 million and $60 million,
of which $4.7 million and $18.9 million were unfunded, respectively. STRS JV is managed by a four-person board of managers, two
of whom are selected by us and two of whom are selected by STRS Ohio.
All material decisions with respect to
STRS JV, including those involving its investment portfolio, require unanimous approval of a quorum of the board of managers. Quorum
is defined as (i) the presence of two members of the board of managers; provided that at least one individual is present that
was elected, designated or appointed by each member; (ii) the presence of three members of the board of managers; provided
that the individual that was elected, designated or appointed by the member with only one individual present is entitled to cast
two votes on each matter; or (iii) the presence of four members of the board of managers; provided that two individuals are
present that were elected, designated or appointed by each member.
Below is a summary of STRS JV's portfolio as of September 30, 2020 and December 31, 2019:
|
|
September
30, 2020
|
|
|
December 31,
2019
|
|
Total
investments(1)
|
|
$
|
162,627
|
|
|
$
|
97,260
|
|
Weighted
average effective yield on total portfolio(2)
|
|
|
8.1
|
%
|
|
|
8.5
|
%
|
Number
of portfolio companies in STRS JV
|
|
|
18
|
|
|
|
10
|
|
Largest
portfolio company investment(1)
|
|
$
|
13,481
|
|
|
$
|
13,657
|
|
Total
of five largest portfolio company investments(1)
|
|
$
|
61,266
|
|
|
$
|
57,819
|
|
|
(2)
|
Weighted average effective yield is computed by dividing (a) annualized interest income (including interest income resulting
from the amortization of fees and discounts) by (b) the weighted average cost of investment.
|
Investments consisted of the following:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
First lien secured loans
|
|
$
|
165,752
|
|
|
$
|
162,627
|
|
|
$
|
96,910
|
|
|
$
|
97,260
|
|
Total
|
|
$
|
165,752
|
|
|
$
|
162,627
|
|
|
$
|
96,910
|
|
|
$
|
97,260
|
|
The following table shows the portfolio composition by industry
grouping at fair value:
|
|
September 30,
2020
|
|
|
December 31, 2019
|
|
Advertising
|
|
$
|
8,577
|
|
|
|
5.3
|
%
|
|
$
|
8,672
|
|
|
|
8.9
|
%
|
Construction & Engineering
|
|
|
11,554
|
|
|
|
7.1
|
|
|
|
10,132
|
|
|
|
10.4
|
|
Data Processing & Outsourced Services
|
|
|
10,564
|
|
|
|
6.5
|
|
|
|
-
|
|
|
|
-
|
|
Diversified Support Services
|
|
|
10,031
|
|
|
|
6.2
|
|
|
|
10,497
|
|
|
|
10.8
|
|
Environmental & Facilities Services
|
|
|
5,225
|
|
|
|
3.2
|
|
|
|
-
|
|
|
|
-
|
|
Health Care Services
|
|
|
13,347
|
|
|
|
8.2
|
|
|
|
13,482
|
|
|
|
13.9
|
|
Human Resource & Employment Services
|
|
|
11,834
|
|
|
|
7.3
|
|
|
|
-
|
|
|
|
-
|
|
Industrial Machinery
|
|
|
9,899
|
|
|
|
6.1
|
|
|
|
9,990
|
|
|
|
10.3
|
|
Insurance Brokers
|
|
|
7,838
|
|
|
|
4.8
|
|
|
|
10,051
|
|
|
|
10.3
|
|
Internet & Direct Marketing Retail
|
|
|
13,481
|
|
|
|
8.3
|
|
|
|
13,657
|
|
|
|
14.1
|
|
Investment Banking & Brokerage
|
|
|
11,050
|
|
|
|
6.8
|
|
|
|
-
|
|
|
|
-
|
|
Packaged Foods & Meats
|
|
|
19,397
|
|
|
|
11.9
|
|
|
|
7,688
|
|
|
|
7.9
|
|
Personal Products
|
|
|
4,238
|
|
|
|
2.6
|
|
|
|
4,781
|
|
|
|
4.9
|
|
Systems Software
|
|
|
8,081
|
|
|
|
5.0
|
|
|
|
8,310
|
|
|
|
8.5
|
|
Technology Hardware, Storage & Peripherals
|
|
|
7,539
|
|
|
|
4.6
|
|
|
|
-
|
|
|
|
-
|
|
Trading Companies & Distributors
|
|
|
9,972
|
|
|
|
6.1
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
162,627
|
|
|
|
100.00
|
%
|
|
$
|
97,260
|
|
|
|
100.00
|
%
|
See Note 4 to our consolidated financial statements for
further discussion on STRS JV’s portfolio and selected balance sheet information as of September 30, 2020 and
December 31, 2019 and selected statement of operations information for the three and nine months ended
September 30, 2020 and for the period July 19, 2019 (commencement of operations) through September 30, 2019.
Credit Facility
On December 23, 2015, our wholly owned
subsidiary, WhiteHorse Finance Credit I, LLC, or WhiteHorse Credit, entered into the $200 million Credit Facility with the Lender.
On June 27, 2016, the Credit Facility was amended and restated to clarify certain terms. On June 29, 2017, the Credit
Facility was again amended and restated to, among other things, (i) extend the maturity date to December 29, 2021, (ii) increase
the amount contained within the accordion feature which allows for the expansion of the borrowing limit from $220 million to $235
million and (iii) reduce the interest rate spread applicable on outstanding borrowings to 2.75%. On May 15, 2018, the
terms of the Credit Facility were again amended and restated to, among other things, permit the financing of certain assets to
be held by WhiteHorse Finance (CA), LLC, or WhiteHorse California, a wholly owned subsidiary of WhiteHorse Credit. On November 19,
2018, we entered into an amendment, which, among other things, allows for an increase in the advance rate and a temporary reduction,
through August 19, 2019, in the required minimum outstanding borrowings under the Credit Facility.
On November 22, 2019, the terms of
the Credit Facility were again amended and restated to, among other things, (i) extend the maturity date from December 29,
2021 to November 22, 2024; (ii) increase the size of the facility from $200 million to $250 million with an additional
$100 million accordion feature, which allows for the expansion of the borrowing limit, exercisable in increments of at least $35
million, or the Commitment; (iii) reduce the interest rate spread applicable on outstanding borrowings from 2.75% to 2.50%;
(iv) change the minimum borrowing amount from 77.5% to 70.0% of the Commitment; (v) increase the advance rate from 57%
to 60%; and (vi) extend the non-call period from October 29, 2019 to November 22, 2021.
As of September 30, 2020, there was
$231.2 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated
in the Credit Facility agreement, approximately $18.9 million was available to be drawn on such date. The Credit Facility is secured
by all of the assets of WhiteHorse Credit, which included loans with a fair value of $503.6 million as of September 30, 2020.
As of December 31, 2019, there was
$238.9 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated
in the Credit Facility agreement, approximately $11.1 million was available to be drawn on such date. The Credit Facility is secured
by all of the assets of WhiteHorse Credit, which included loans with a fair value of $394.9 million as of December 31, 2019.
The Credit Facility provides for borrowings
in an aggregate principal amount up to $250 million with an accordion feature which allows for the expansion of the borrowing limit
up to $350 million, subject to consent from the Lender and other customary conditions. The required minimum outstanding borrowings
under the Credit Facility are $175 million, unless the accordion feature is exercised, at which time the required minimum outstanding
borrowings will be $245 million.
Under the Credit Facility, there are two
coverage tests that WhiteHorse Credit must meet on specified compliance dates in order to permit WhiteHorse Credit to make new
borrowings and to make distributions in the ordinary course - a borrowing base test and a market value test. The borrowing base
test compares, at any given time, the aggregate outstanding amount of all Lender advances under the Credit Facility less the amount
of principal proceeds in respect of the collateral on deposit in the accounts to the net asset value of the collateral, as set
forth in the credit agreement and related documentation. To meet the borrowing base test, this ratio must be less than or equal
to 50%, as set forth in the credit agreement and related documentation. To meet the market value test, the value of WhiteHorse
Credit’s portfolio investments must exceed a minimum of 165% of the aggregate outstanding amount of all Lender advances as
set forth in the credit agreement and related documentation.
Advances under the Credit Facility are
based on the three-month LIBOR plus an annual spread of 2.50%. Interest is payable quarterly in arrears. WhiteHorse Credit is required
to pay a non-usage fee which accrues at 0.75% per annum on the average daily unused amount of the financing commitments, to the
extent the aggregate principal amount available under the Credit Facility has not been borrowed. WhiteHorse Credit paid an upfront
fee and incurred certain other customary costs and expenses in connection with obtaining the Credit Facility. Any amounts borrowed
under the Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on November 22,
2024.
The Credit Facility and the related documents
require WhiteHorse Finance and WhiteHorse Credit to, among other things, agree to make certain customary representations and to
comply with customary affirmative and negative covenants. The Credit Facility also includes customary events of default for credit
facilities of this nature, including breaches of representations, warranties or covenants by WhiteHorse Finance or WhiteHorse Credit,
the occurrence of a change in control, or failure to maintain certain required ratios.
If we fail to perform our obligations under
the credit agreement or the related agreements, an event of default may occur, which could cause the Lender to accelerate all of
the outstanding debt and other obligations under the Credit Facility or to exercise other remedies under the credit agreement.
Any such developments could have a material adverse effect on our financial condition and results of operations.
If any of our contractual
obligations discussed above is terminated, our costs under new agreements that we enter into may increase. In addition, we will
likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our
Investment Advisory Agreement and our Administration Agreement. Any new investment management agreement would also be subject to
approval by our stockholders.
2023 Private Notes
On July 13, 2018, we entered
into an agreement, or the 2023 Note Purchase Agreement, to sell in a private offering $30 million of aggregate principal
amount of unsecured notes, or the 2023 Private Notes, to qualified institutional investors in reliance on
Section 4(a)(2) of the Securities Act. Interest on the 2023 Private Notes is payable semiannually on
February 7 and August 7, at a fixed, annual rate of 6.00%. This interest rate is subject to increase (up to 6.50%)
in the event that, subject to certain exceptions, the 2023 Private Notes cease to have an investment grade rating. The 2023
Private Notes mature on August 7, 2023, unless redeemed, purchased or prepaid prior to such date by us or our affiliates
in accordance with their terms. The 2023 Private Notes are general unsecured obligations that rank pari passu with all
outstanding and future unsecured unsubordinated indebtedness that we may issue, including the 2025 Notes and the 2025 Private
Notes. The closing of the transaction occurred on August 7, 2018.
2025 Notes
On
November 13, 2018, we completed a public offering of $35.0 million of aggregate principal amount of unsecured notes due
2025, or the 2025 Notes, the net proceeds of which were used to fund investments in debt and equity securities and repay
outstanding indebtedness under our revolving credit facility. Interest on the 2025 Notes is paid quarterly on
February 28, May 31, August 31 and November 30 each year, at a fixed, annual rate of 6.50%. The 2025
Notes will mature on November 30, 2025 and may be redeemed in whole or in part at any time, or from time to time, at our
option on or after November 30, 2021. The 2025 Notes will rank equally in right of payment with our other outstanding
and future unsecured, unsubordinated indebtedness, including the 2023 Private Notes and the 2025 Private Notes. The 2025
Notes will effectively rank behind all of our existing and future secured indebtedness (including indebtedness that is
initially unsecured in respect of which we subsequently grant security) in right of payment, to the extent of the value of
the assets securing such indebtedness, including our Credit Facility. The 2025 Notes are listed on the Nasdaq Global Select
Market under the trading symbol “WHFBZ.”
Portfolio Investments and Yield
As of September 30, 2020, our investment
portfolio consisted primarily of senior secured loans across 73 positions in 54 companies with an aggregate fair value of $595.3
million. As of that date, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers
and nearly all of those loans were variable-rate investments (primarily indexed to LIBOR) with fixed-rate loan investments representing
0.4% based on fair value. As of September 30, 2020, our portfolio had an average investment size of $7.7 million based on
fair value (average debt investment size of $8.8 million), with investment sizes ranging from zero to $23.4 million and a weighted
average effective yield of 9.2% (and a weighted average effective yield on income-producing debt investments of 9.9%).
As of December 31, 2019, our investment
portfolio consisted primarily of senior secured loans across 66 positions in 51 companies with an aggregate fair value of $589.7
million. As of that date, the majority of our portfolio was comprised of senior secured loans to lower middle market borrowers
and nearly all of those loans were variable-rate investments (primarily indexed to LIBOR) with the single fixed-rate loan investment
representing 0% based on fair value. As of December 31, 2019, our portfolio had an average investment size of $8.7 million
(average debt investment size of $10.2 million), with investment sizes ranging from zero to $26.3 million and a weighted average
effective yield of 9.9% (and a weighted average effective yield on income-producing debt investments of 10.4%).
For the nine months ended September 30,
2020, we invested $126.3 million in new and existing portfolio companies, offset by repayments and sales of $129.4 million. Proceeds
from sales totaled $54.2 million while repayments included $9.8 million of scheduled repayments
and $65.4 million of unscheduled repayments.
For the nine months ended September 30,
2019, we invested $207.8 million in new and existing portfolio companies, offset by repayments and sales of $153.6 million. Proceeds
from sales totaled $37.5 million while repayments included $17.1 million of scheduled repayments and $99 million of unscheduled
repayments.
We actively monitor and manage our portfolio
with regard to individual company performance as well as general market conditions. Investment decisions on new originations generally
include an analysis of the impact of the new loan on our broader portfolio, including a “top-down” assessment of portfolio
diversification and risk exposure. This assessment includes a review of portfolio concentration by issuer, industry, geography
and type of credit as well as an evaluation of our portfolio’s exposure to macroeconomic factors and cyclical trends.
We believe that consistent,
active monitoring of individual companies and the broader market is integral to portfolio management and a critical component of
our investment process. Our investment adviser uses several methods to evaluate and monitor the performance and fair value of our
investments, which may include the following:
|
•
|
frequent discussions with management and sponsors, including board observation rights where possible;
|
|
•
|
comparing/analyzing financial performance to the portfolio company’s business plan, as well as our internal projections
developed at underwriting;
|
|
•
|
tracking portfolio company compliance with covenants as well as other metrics identified at initial investment stage, such
as acquisitions, divestitures, product development and specified management hires; and
|
|
•
|
periodic review by the investment committee of each asset in the portfolio and more rigorous monitoring of “watch list”
positions.
|
As part of the monitoring process, our
investment adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment
on a risk scale of 1 to 5. This risk rating system is intended to identify and assess risks relative to when we initially made
the investment and could be impacted by such factors as company-specific performance, changes in collateral, changes in potential
exit opportunities or macroeconomic conditions.
All investments are initially assigned
a rating of 2, as this grade represents a company that is meeting initial expectations with regard to performance and outlook.
A rating may be improved to a 1 if, in the opinion of our investment adviser, a portfolio company’s risk of loss has been
reduced relative to initial expectations. An investment will be assigned a rating of 3 if the risk of loss has increased relative
to initial expectations and will be assigned a rating of 4 if our investment principal is at a material risk of not being fully
repaid. A rating of 5 indicates an investment is in payment default and has significant risk of not receiving full repayment.
The following table shows the distribution of our
investments on the 1 to 5 investment performance rating scale at fair value:
Investment
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Performance
Rating
|
|
Investments at Fair Value
(Dollars
in Millions)
|
|
Percentage of
Total Portfolio
|
|
|
Investments at Fair Value
(Dollars in Millions)
|
|
|
Percentage of
Total Portfolio
|
|
1
|
|
$
|
85.9
|
|
|
14.4
|
%
|
|
|
13.4
|
|
|
2.3
|
%
|
2
|
|
|
369.4
|
|
|
62.1
|
|
|
|
491.4
|
|
|
83.3
|
|
3
|
|
|
127.7
|
|
|
21.5
|
|
|
|
77.2
|
|
|
13.1
|
|
4
|
|
|
3.8
|
|
|
0.6
|
|
|
|
-
|
|
|
-
|
|
5
|
|
|
8.5
|
|
|
1.4
|
|
|
|
7.7
|
|
|
1.3
|
|
Total Portfolio
|
|
$
|
595.3
|
|
|
100.0
|
%
|
|
$
|
589.7
|
|
|
100.0
|
%
|
During the nine months ended September 30,
2020, thirteen investment positions moved from a rating of 2 to a rating of 3 or 4, largely due to the economic impact of the
COVID-19 pandemic. See the “COVID-19 Developments” section in Note 8 to our consolidated financial statements.
Inflation
Inflation has not had a significant effect
on our results of operations in any of the reporting periods presented in our consolidated financial statements. However, from
time to time, inflation may impact the operating results of our portfolio companies.
Off-Balance Sheet Arrangements
We may become a party to financial instruments
with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These
instruments may include commitments to extend credit and involve elements of liquidity and credit risk in excess of the amount
recognized on the consolidated statements of assets and liabilities. As of September 30, 2020 and December 31, 2019,
we had commitments to fund approximately $2.3 million and $9.1 million, respectively, of revolving lines of credit or delayed draw
facilities to our portfolio companies. We reasonably believe that we have sufficient assets to adequately cover and allow us to
satisfy our outstanding unfunded commitments.
Distributions
In order to maintain our status as a RIC
and to avoid the imposition of corporate-level tax on income, we must distribute dividends to our stockholders each taxable year
of an amount generally at least equal to the sum of 90% of our ordinary income and realized net short-term capital gains in excess
of realized net long-term capital losses out of the assets legally available for distribution. In order to avoid the imposition
of certain excise taxes imposed on RICs, we must distribute dividends in respect of each calendar year of an amount at least equal
to the sum of (1) 98% of our ordinary income (taking into account certain deferrals and elections) for the calendar year,
(2) 98.2% of our capital gains in excess of capital losses, or capital gain net income, 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 net income
for preceding years that were not distributed during such years on which we incurred no U.S. federal income tax.
During both three and nine months ended
September 30, 2020 and September 30, 2019, we declared to stockholders distributions of $0.355 and $1.065 per share,
respectively for total distributions of $7.3 million and $21.9 million, respectively.
The timing and amount of our quarterly
distributions, if any, are determined by our board of directors. While we intend to make distributions on a quarterly basis to
our stockholders out of assets legally available for distribution, we may not be able to achieve operating results that will allow
us to make distributions at a specific level or to increase the amount of our distributions from time to time. In addition, we
may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development
company under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences,
including the possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive
any distributions.
To the extent our taxable earnings fall
below the total amount of our distributions paid for that fiscal year, a portion of those distributions may be deemed a return
of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may
be the original capital invested by the stockholder rather than our income or gains. During the nine months ended September 30,
2020, we estimate that distributions to stockholders included $21.9 million of ordinary income, for tax purposes, based on earnings
for the fiscal year ended December 31, 2019 and current earnings for the nine months ended September 30, 2020. The specific
tax characteristics of the distribution will be reported to stockholders on or after the end of the calendar year 2020 and in
our periodic reports with the SEC. Stockholders should read any written disclosure accompanying a distribution payment carefully
and should not assume that the source of any distribution is only ordinary income or gains.
In addition, in order to satisfy the annual
distribution requirement applicable to RICs, we may declare a significant portion of our dividends in shares of our common stock
instead of in cash. As long as a portion of such dividend is paid in cash (which portion may be as low as 10% of such dividend,
for dividends declared on or before December 31, 2020 and after that, 20% of such dividend under published guidance from the
Internal Revenue Service) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal
income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend
on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend
was paid in shares of our common stock.
We have adopted an “opt out”
distribution reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’
cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically
“opts out” of our distribution reinvestment plan. If a stockholder opts out, that stockholder receives cash distributions.
Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state
and local taxes in the same manner as cash distributions, stockholders participating in our distribution reinvestment plan will
not receive any corresponding cash distributions with which to pay any such applicable taxes.
Contractual Obligations
A summary of our significant contractual payment
obligations as of September 30, 2020 is as follows:
|
|
|
Payments Due by Period (Dollars in millions)
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
|
|
|
More Than 5
|
|
|
|
|
Total
|
|
|
|
1 Year
|
|
|
|
1 - 3 Years
|
|
|
|
3 - 5 Years
|
|
|
|
Years
|
|
Credit Facility
|
|
$
|
231.2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
231.2
|
|
|
$
|
-
|
|
2023 Private Notes
|
|
|
30.0
|
|
|
|
-
|
|
|
|
30.0
|
|
|
|
-
|
|
|
|
-
|
|
2025 Notes
|
|
|
35.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35.0
|
|
Total contractual obligations
|
|
$
|
296.2
|
|
|
$
|
-
|
|
|
$
|
30.0
|
|
|
$
|
231.2
|
|
|
$
|
35.0
|
|
As of September 30, 2020, we had $18.9 million
of unused borrowing capacity under the Credit Facility.
We entered into the Investment
Advisory Agreement with WhiteHorse Advisers in accordance with the 1940 Act on December 4, 2012, which was most recently
amended on November 1, 2018. Under the Investment Advisory Agreement, WhiteHorse Advisers manages our day-to-day
investment operations and provides us with access to personnel and an investment committee and certain other resources so
that we may fulfill our obligation to act as a portfolio manager of WhiteHorse Credit under the Credit Facility. Payments
under the Investment Advisory Agreement in future periods will be equal to (1) a
management fee equal to 2% of the value of our consolidated gross assets; provided, however, that the management fee on
consolidated gross assets financed using leverage over 200% asset coverage (in other words, over 1.0x debt to equity) will be
equal to 1.25% and (2) an incentive fee based on our performance. See “Investment Advisory Agreement” in
Note 7 to the consolidated financial statements.
We also entered into the Administration
Agreement with WhiteHorse Administration on December 4, 2012. Pursuant to the Administration Agreement, WhiteHorse Administration
furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. WhiteHorse Administration
also furnishes us with resources necessary for us to act as portfolio manager to WhiteHorse Credit under the Credit Facility. If
requested to provide managerial assistance to our portfolio companies, WhiteHorse Administration will be paid an additional amount
based on the services provided, which amount will not, in any case, exceed the amount we receive from the portfolio companies for
such services. Payments under the Administration Agreement will be based upon our allocable portion of WhiteHorse Administration’s
overhead expenses in performing its obligations under the Administration Agreement, including rent and our allocable portion of
the costs of our chief financial officer and chief compliance officer along with their respective staffs.
Related Party Transactions
We have entered into a number of business relationships
with affiliated or related parties, including the following:
|
•
|
WhiteHorse Advisers manages our day-to-day operations and provides investment management services to us pursuant to the Investment
Advisory Agreement.
|
|
•
|
WhiteHorse Administration and certain of its affiliates provide us with the office facilities and administrative services,
including access to the resources necessary for us to perform our obligations towards certain portfolio companies, pursuant to
the Administration Agreement.
|
|
•
|
We have entered into a license agreement with an affiliate of H.I.G. Capital pursuant to which we have been granted a non-exclusive,
royalty-free license to use the “WhiteHorse” name.
|
WhiteHorse Advisers, WhiteHorse Administration
or their respective affiliates may have other clients with similar, different or competing investment objectives. In serving in
these multiple capacities, WhiteHorse Advisers, WhiteHorse Administration or their respective affiliates may have obligations to
other clients or investors in those entities, the fulfillment of which may not be in the best interests of us or our stockholders.
Such persons may face conflicts in the allocation of investment opportunities among us and other investment funds or accounts advised
by or affiliated with WhiteHorse Advisers or WhiteHorse Administration. WhiteHorse Advisers or its affiliates will seek to allocate
investment opportunities among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation
policy. However, we can offer no assurance that such opportunities will be allocated to us fairly or equitably in the short-term
or over time.
We depend on the communications
and information systems and policies of WhiteHorse Advisers and its affiliates as well as certain third-party service providers
to monitor and prevent cybersecurity incidents. Our board of directors and management periodically review and assess the effectiveness
of such communications and information systems and policies.
Critical Accounting Policies
The preparation of our financial statements
in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial
markets and any other parameters used in determining such estimates could cause actual results to differ. We have identified the
following as critical accounting policies.
Principles of Consolidation
Under the investment company financial
accounting guidance, as formally codified in Accounting Standards Codification, or ASC, Topic 946, Financial Services - Investment
Companies, we are precluded from consolidating any entity other than another investment company. As provided under ASC Topic
946, we generally consolidate any investment company when we own 100% of its partners’ or members’ capital or equity
units. We own a 100% equity interest in each of WhiteHorse Credit and WhiteHorse Finance Warehouse, LLC, or WhiteHorse Warehouse,
which are investment companies for accounting purposes. As such, we have consolidated the accounts of WhiteHorse Credit and WhiteHorse
Warehouse into our financial statements. As a result of this consolidation, the amount outstanding under the Credit Facility is
treated as our indebtedness.
Valuation of Portfolio Investments
We value our investments in accordance
with ASC Topic 820 - Fair Value Measurements and Disclosures. ASC Topic 820 defines fair value, establishes a framework
for measuring fair value and expands disclosures about assets and liabilities measured at fair value. ASC Topic 820’s definition
of fair value focuses on exit price in the principal, or most advantageous, market and prioritizes the use of market-based inputs
over entity-specific inputs within a measurement of fair value.
Our portfolio consists primarily of debt
investments. These investments are valued at their bid quotations obtained from unaffiliated market makers or other financial institutions
that trade in similar investments or based on prices provided by independent third party pricing services. For investments where
there are no available bid quotations, fair value is derived using proprietary models that consider the analyses of independent
valuation agents as well as credit risk, liquidity, market credit spreads and other applicable factors for similar transactions.
Due to the nature of our strategy, our
portfolio includes relatively illiquid investments that are privately held. Valuations of privately held investments are inherently
uncertain, may fluctuate over short periods of time and may be based on estimates. The determination of fair value may differ materially
from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially
affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that
we ultimately realize upon the disposal of such investments.
Our board of directors is ultimately responsible
for determining the fair value of the portfolio investments that are not publicly traded, whose market prices are not readily available
on a quarterly basis in good faith or any other situation where portfolio investments require a fair value determination. Our board
of directors has retained one or more independent valuation firms to review the valuation of each portfolio investment that does
not have a readily available market quotation at least once during each 12-month period. Independent valuation firms retained by
our board of directors provide a valuation review on approximately 25% of our investments for which market quotations are not readily
available each quarter to ensure that the fair value of each investment for which a market quote is not readily available is reviewed
by an independent valuation firm at least once during each 12-month period. However, our board of directors does not intend to
have de minimis investments of less than 1.5% of our total assets (up to an aggregate of 10% of our total assets) independently
reviewed.
The valuation process is conducted at the
end of each fiscal quarter, with a portion of our valuations of portfolio companies without market quotations subject to review
by one or more independent valuation firms each quarter. When an external event occurs with respect to one of our portfolio companies,
such as when a purchase transaction, public offering or subsequent equity sale occurs, we expect to use the pricing indicated by
such external event to corroborate our valuation.
With respect to investments for which market
quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described
below:
|
•
|
Our quarterly valuation process begins with each portfolio company or investment being initially valued by investment professionals
of our investment adviser responsible for credit monitoring in accordance with our valuation procedures.
|
|
•
|
Preliminary valuation conclusions are then documented and discussed with our investment committee and our investment adviser.
|
|
•
|
The audit committee of the board of directors reviews these preliminary valuations, and on a quarterly basis, reviews the bases
of the valuations by our investment adviser and the independent valuation firms.
|
|
•
|
At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm.
|
|
•
|
The board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith.
|
Fair value of publicly traded instruments
is generally based on quoted market prices. Fair value of non-publicly traded instruments, and of publicly traded instruments for
which quoted market prices are not readily available, may be determined based on other relevant factors, including without limitation,
quotations from unaffiliated market makers or independent third party pricing services, the price activity of equivalent instruments
and valuation pricing models. For those investments valued using quotations, the bid price is generally used unless we determine
that it is not representative of an exit price.
Fair value is the price that would be received
in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters.
Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of
management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and
the instruments’ complexity. Our fair value analysis includes an analysis of the value of any unfunded loan commitments.
Financial investments recorded at fair value in the consolidated financial statements are categorized for disclosure purposes based
upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based
upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined
as follows:
Level 1: Quoted prices (unadjusted) for identical
assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that
reflect a reporting entity’s own assumptions about what market participants would use in pricing an asset or liability.
Investments for which fair value is determined
using inputs defined above as Level 3 are fair valued using the income and market approaches, which may include the discounted
cash flow method, reference to performance statistics of industry comparables, relative comparable yield analysis and, in certain
cases, third party valuations performed by independent valuation firms. The valuation methods can reference various factors and
use various inputs such as assumed growth rates, capitalization rates and discount rates, loan-to-value ratios, liquidation value,
relative capital structure priority, market comparables, compliance with applicable loan, covenant and interest coverage performance,
book value, market derived multiples, reserve valuation, assessment of credit ratings of an underlying borrower, review of ongoing
performance, review of financial projections as compared to actual performance, review of interest rate and yield risk. Such factors
may be given different weighting depending on our assessment of the underlying investment, and we may analyze apparently comparable
investments in different ways.
In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s
categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers
factors specific to the financial instrument.
Fair value for each investment is
derived using a combination of valuation methodologies that, in the judgment of the investment committee of the investment
adviser are most relevant to such investment, including being based on one or more of the following: (i) market prices
obtained from market makers for which the investment committee has deemed there to be enough breadth (number of quotes) and
depth (firm bids) to be indicative of fair value, (ii) the
price paid or realized in a completed transaction or binding offer received in an arm’s-length transaction,
(iii) a discounted cash flow analysis, (iv) the guideline public company method, (v) the similar transaction
method or (vi) the option pricing method.
Investment Transactions and Related Investment
Income and Expense
We record our investment transactions on
a trade date basis, which is the date when we have determined that all material terms have been defined for the transactions. These
transactions could possibly settle on a subsequent date depending on the transaction type. All related revenue and expenses attributable
to these transactions are reflected on our consolidated statements of operations commencing on the trade date unless otherwise
specified by the transaction documents. Realized gains and losses on investment transactions are recorded on the specific identification
method.
We accrue interest income if we expect
that ultimately we will be able to collect it. Generally, when an interest payment default occurs on a loan in our portfolio, or
if our management otherwise believes that the issuer of the loan will not be able to service the loan and other obligations, we
place the loan on non-accrual status and will cease recognizing interest income on that loan until all principal and interest is
current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible. However, we
remain contractually entitled to this interest. We may make exceptions to this policy if the loan has sufficient collateral value
and is in the process of collection. Accrued interest is written off when it becomes probable that such interest will not be collected
and the amount of uncollectible interest can be reasonably estimated. Any original issue discount, as well as any other market
purchase discount or premium on debt investments, are accreted or amortized to interest income or expense, respectively, over the
maturity periods of the investments. Dividend income is recorded on the record date for private portfolio companies or on the ex-dividend
date for publicly traded portfolio companies.
Interest expense is recorded on an accrual
basis. Certain expenses related to legal and tax consultation, due diligence, rating fees, valuation expenses and independent collateral
appraisals may arise when we make certain investments. These expenses are recognized in the consolidated statements of operations
as they are incurred.
Loan Origination, Facility, Commitment and Amendment
Fees
We may receive fees in addition to interest
income from the loans during the life of the investment. We may receive origination fees upon the origination of an investment.
We defer these origination fees and deduct them from the cost basis of the investment and subsequently accrete them into income
over the term of the loan. We may receive facility, commitment and amendment fees, which are paid to us on an ongoing basis. We
accrue facility fees, sometimes referred to as asset management fees, as a percentage periodic fee on the base amount (either the
funded facility amount or the committed principal amount). Commitment fees are based upon the undrawn portion committed by us and
we record them on an accrual basis. Amendment fees are paid in connection with loan amendments and waivers and we account for them
upon completion of the amendments or waivers, generally when such fees are receivable. We include any such fees in fee income on
the consolidated statements of operations.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements,
which discusses recent accounting pronouncements applicable to us, if any.