f
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from ______________ to ______________
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) | |
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(Address of Principal Executive Offices) | (Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which |
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| (Nasdaq Global Select Market) |
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| (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | ☒ | |
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Non-accelerated filer | ☐ | Smaller reporting company | |
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes
As of August 4, 2025 the Registrant had
WHITEHORSE FINANCE, INC.
TABLE OF CONTENTS
2
Part I. Financial Information
Item 1. Financial Statements
WhiteHorse Finance, Inc.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
| June 30, 2025 |
| December 31, 2024 | |||
(Unaudited) | ||||||
Assets |
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Investments, at fair value |
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Non-controlled/non-affiliate company investments | $ | | $ | | ||
Non-controlled affiliate company investments | | | ||||
Controlled affiliate company investments | | | ||||
Total investments, at fair value (amortized cost $ | | | ||||
Cash and cash equivalents | | | ||||
Restricted cash and cash equivalents | | | ||||
Restricted foreign currency (cost of $ | | | ||||
Interest and dividend receivable | | | ||||
Amounts receivable on unsettled investment transactions | | | ||||
Prepaid expenses and other receivables | | | ||||
Unrealized appreciation on foreign currency forward contracts | | | ||||
Total assets | $ | | $ | | ||
Liabilities |
| |||||
Debt (net of unamortized debt issuance costs of $ | $ | | $ | | ||
Distributions payable | | | ||||
Management fees payable | | | ||||
Incentive fees payable | | | ||||
Amounts payable on unsettled investment transactions | — | | ||||
Interest payable | | | ||||
Accounts payable and accrued expenses | | | ||||
Advances received from unfunded credit facilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (See Note 8) |
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Net assets |
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Common stock, | | | ||||
Paid-in capital in excess of par | | | ||||
Accumulated earnings (losses) | ( | ( | ||||
Total net assets | | | ||||
Total liabilities and total net assets | $ | | $ | | ||
Number of shares outstanding | | | ||||
Net asset value per share | $ | | $ | |
See notes to the consolidated financial statements
3
WhiteHorse Finance, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2025 | 2024 |
| 2025 | 2024 | |||||||
Investment income | ||||||||||||
From non-controlled/non-affiliate company investments |
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Interest income | $ | | $ | | $ | | $ | | ||||
Payment-in-kind income | | | | | ||||||||
Fee income | | | | | ||||||||
Dividend income | | | | | ||||||||
From non-controlled affiliate company investments | ||||||||||||
Interest income | | | | | ||||||||
Payment-in-kind income | | | | | ||||||||
Dividend income | — | — | — | — | ||||||||
From controlled affiliate company investments | ||||||||||||
Interest income | | | | | ||||||||
Payment-in-kind income | — | | — | | ||||||||
Dividend income | | | | | ||||||||
Total investment income | | | | | ||||||||
Expenses |
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Interest expense | | | | | ||||||||
Base management fees | | | | | ||||||||
Performance-based incentive fees | | | | | ||||||||
Administrative service fees | | | | | ||||||||
General and administrative expenses | | | | | ||||||||
Total expenses | | | | | ||||||||
Net investment income before excise tax | | | | | ||||||||
Excise tax | | | | | ||||||||
Net investment income after excise tax | | | | | ||||||||
Realized and unrealized gains (losses) on investments and foreign currency transactions |
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Net realized gains (losses) |
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Non-controlled/non-affiliate company investments | ( | ( | ( | ( | ||||||||
Non-controlled affiliate company investments | — | — | — | — | ||||||||
Controlled affiliate company investments | ( | — | ( | — | ||||||||
Foreign currency transactions | ( | ( | ( | | ||||||||
Foreign currency forward contracts | — | | | — | ||||||||
Net realized gains (losses) | ( | ( | ( | ( | ||||||||
Net change in unrealized appreciation (depreciation) |
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Non-controlled/non-affiliate company investments | ( | ( | ( | | ||||||||
Non-controlled affiliate company investments | ( | | ( | ( | ||||||||
Controlled affiliate company investments | | | | | ||||||||
Translation of assets and liabilities in foreign currencies | ( | | | | ||||||||
Foreign currency forward contracts | | ( | | | ||||||||
Net change in unrealized appreciation (depreciation) | | ( | | ( | ||||||||
Net realized and unrealized gains (losses) on investments and foreign currency transactions | ( | ( | ( | ( | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | | $ | | $ | | $ | | ||||
Per Common Share Data | ||||||||||||
Basic and diluted earnings (losses) per common share | $ | | $ | | $ | | $ | | ||||
Dividends and distributions declared per common share | $ | | $ | | $ | | $ | | ||||
Basic and diluted weighted average common shares outstanding | | | | | ||||||||
See notes to the consolidated financial statements
4
WhiteHorse Finance, Inc.
Consolidated Statements of Changes in Net Assets (Unaudited)
(in thousands, except share and per share data)
Common Stock | ||||||||||||||
| Shares |
| Par amount |
| Paid-in Capital in Excess of Par |
| Accumulated Earnings (Losses) |
| Total Net Assets | |||||
Balance as of December 31, 2024 |
| | $ | | $ | | $ | ( | $ | | ||||
Net increase in net assets resulting from operations: |
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Net investment income after excise tax |
| — | — | — | | | ||||||||
Net realized gains (losses) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Distributions declared |
| — | — | — | ( | ( | ||||||||
Balance as of March 31, 2025 |
| | $ | | $ | | $ | ( | $ | | ||||
Net increase in net assets resulting from operations: |
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Net investment income after excise tax |
| — | — | — | | | ||||||||
Net realized gains (losses) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |
| — | — | — | | | ||||||||
Distributions declared |
| — | — | — | ( | ( | ||||||||
Balance as of June 30, 2025 |
| | $ | | $ | | $ | ( | $ | | ||||
5
WhiteHorse Finance, Inc.
Consolidated Statements of Changes in Net Assets (Unaudited)
(in thousands, except share and per share data)
Common Stock | ||||||||||||||
| Shares |
| Par amount |
| Paid-in Capital in Excess of Par |
| Accumulated Earnings (Losses) |
| Total Net Assets | |||||
Balance as of December 31, 2023 |
| | $ | | $ | | $ | ( | $ | | ||||
Net increase in net assets resulting from operations: |
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Net investment income after excise tax |
| — | — | — | | | ||||||||
Net realized gains (losses) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |
| — | — | — | | | ||||||||
Distributions declared |
| — | — | — | ( | ( | ||||||||
Balance as of March 31, 2024 |
| | $ | | $ | | $ | ( | $ | | ||||
Net increase in net assets resulting from operations: |
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Net investment income after excise tax |
| — | — | — | | | ||||||||
Net realized gains (losses) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |
| — | — | — | ( | ( | ||||||||
Distributions declared |
| — | — | — | ( | ( | ||||||||
Balance as of June 30, 2024 |
| | $ | | $ | | $ | ( | $ | | ||||
See notes to the consolidated financial statements
6
WhiteHorse Finance, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six months ended June 30, | ||||||
| 2025 |
| 2024 | |||
Cash flows from operating activities | ||||||
Net increase in net assets resulting from operations | $ | | $ | | ||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by / (used in) operating activities: |
| |||||
Payment-in-kind income | ( | ( | ||||
Net realized (gains) losses on investments | | | ||||
Net realized loss on foreign currency translation | | — | ||||
Net unrealized (appreciation) depreciation on investments | ( | | ||||
Net unrealized (appreciation) depreciation on translation of assets and liabilities in foreign currencies | ( | ( | ||||
Net unrealized (appreciation) depreciation on foreign currency forward contracts | ( | ( | ||||
Accretion of discount | ( | ( | ||||
Amortization of deferred financing costs | | | ||||
Acquisition of investments | ( | ( | ||||
Proceeds from principal payments and sales of portfolio investments | | | ||||
Proceeds from sales of portfolio investments to STRS JV | | | ||||
Net changes in operating assets and liabilities: |
| |||||
Interest and dividend receivable | ( | | ||||
Prepaid expenses and other receivables | | | ||||
Amounts receivable on unsettled investment transactions | ( | ( | ||||
Amounts payable on unsettled investment transactions | ( | — | ||||
Management fees payable | ( | ( | ||||
Incentive fees payable | ( | | ||||
Accounts payable and accrued expenses | ( | | ||||
Interest payable | ( | ( | ||||
Advances received from unfunded credit facilities | | | ||||
Net cash provided by / (used in) operating activities | | | ||||
Cash flows from financing activities |
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Proceeds from notes issued | | — | ||||
Borrowings | | | ||||
Repayments of debt | ( | ( | ||||
Deferred financing costs | ( | — | ||||
Distributions paid to common stockholders, net of distributions reinvested | ( | ( | ||||
Net cash provided by / (used in) financing activities | ( | ( | ||||
Effect of exchange rate changes on cash | | — | ||||
Net change in cash, cash equivalents and restricted cash | | ( | ||||
Cash, cash equivalents and restricted cash at beginning of period | | | ||||
Cash, cash equivalents and restricted cash at end of period | $ | | $ | | ||
Supplemental and non-cash disclosure of cash flow information: |
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Interest paid | $ | | $ | | ||
See notes to the consolidated financial statements
7
WhiteHorse Finance, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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:
As of June 30, | |||||||
| 2025 |
| 2024 |
| |||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash and cash equivalents | | | |||||
Restricted foreign currency | | | |||||
Total cash and cash equivalents, restricted cash and cash equivalents and restricted foreign currency presented in consolidated statements of cash flows | $ | | $ | | |||
See notes to the consolidated financial statements
8
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Debt Investments
Advertising
$
$
%
Air Freight & Logistics
Application Software
—
Asset Management & Custody Banks
Broadcasting
—
—
—
Broadline Retail
Building Products
9
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Construction & Engineering
$
$
%
—
—
—
—
—
—
—
—
—
Construction Materials
Data Processing & Outsourced Services
Distributors
—
Diversified Chemicals
N/A
N/A
12.00%
3,384
3,384
3,384
1.2
Diversified Support Services
Education Services
Environmental & Facilities Services
—
Health Care Facilities
10
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
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
$
$
%
—
—
(
—
Health Care Supplies
Heavy Electrical Equipment
Home Furnishings
—
—
—
Household Appliances
Household Products
—
—
(
—
Human Resource & Employment Services
—
—
—
—
11
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Industrial Machinery & Supplies & Components
$
$
%
—
—
—
Integrated Telecommunication Services
Interactive Media & Services
—
—
—
IT Consulting & Other Services
—
Leisure Facilities
N/A
N/A
N/A
N/A
Leisure Products
Packaged Foods & Meats
—
Paper Products
12
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Real Estate Services
$
$
%
Research & Consulting Services
—
—
—
Security & Alarm Services
Specialized Consumer Services
—
—
—
Specialized Finance
N/A
N/A
Systems Software
N/A
N/A
N/A
N/A
—
—
—
—
—
—
Technology Hardware, Storage & Peripherals
—
—
—
Transaction & Payment Processing Services
—
—
—
—
Total Debt Investments
$
$
%
13
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread |
| Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value |
| ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity Investments(12) | |||||||||||||||||||||||||
Advertising | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | $ | | $ | | | % | ||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | — | — | |||||||||||||||||
| | | |||||||||||||||||||||||
Air Freight & Logistics | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | — | — | |||||||||||||||||
| — | — | |||||||||||||||||||||||
Broadline Retail | |||||||||||||||||||||||||
N/A | N/A | N/A | | | | | |||||||||||||||||||
| | | |||||||||||||||||||||||
Building Products | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | — | — | |||||||||||||||||
| — | — | |||||||||||||||||||||||
Construction & Engineering | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Diversified Chemicals | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | — | — | — | — | |||||||||||||||||
N/A | N/A | N/A | — | | | | |||||||||||||||||||
| | | |||||||||||||||||||||||
Diversified Support Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Education Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | — | |||||||||||||||||
N/A | N/A | N/A | | | — | — | |||||||||||||||||||
| | — | |||||||||||||||||||||||
Environmental & Facilities Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Food Distributors | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Household Appliances | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Industrial Machinery & Supplies & Components | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Interactive Media & Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
IT Consulting & Other Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
N/A | N/A | N/A | N/A | N/A | — | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
14
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread |
| Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value |
| ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Leisure Facilities | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | — | $ | — | $ | — | — | % | ||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Leisure Products | |||||||||||||||||||||||||
N/A | N/A | N/A | | | — | — | |||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | — | — | |||||||||||||||||
| — | — | |||||||||||||||||||||||
Paper & Plastic Packaging Products & Materials | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | — | — | |||||||||||||||||
| — | — | |||||||||||||||||||||||
Real Estate Services | |||||||||||||||||||||||||
N/A | N/A | N/A | | | | — | |||||||||||||||||||
| | — | |||||||||||||||||||||||
Research & Consulting Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Specialized Consumer Services | |||||||||||||||||||||||||
N/A | N/A | N/A | | | | | |||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | — | |||||||||||||||||
| | | |||||||||||||||||||||||
Specialized Finance | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Systems Software | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | — | — | — | |||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Technology Hardware, Storage & Peripherals | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Total Equity Investments | $ | | $ | | | % | |||||||||||||||||||
Total Investments | $ | | $ | | | % | |||||||||||||||||||
Money market funds (included in cash and cash equivalents and restricted cash and cash equivalents) | |||||||||||||||||||||||||
Goldman Sachs Financial Square Treasury Obligations Fund(16) | Share class: Administration (CUSIP: 38141W315) |
|
|
|
|
|
| $ | | $ | | | % | ||||||||||||
Invesco Treasury Portfolio(16) | Share class: Institutional (CUSIP: 825252406) |
|
|
|
|
|
| | | | |||||||||||||||
Dreyfus Treasury Obligations Cash Management Fund(16) | Share class: Institutional (CUSIP: 261908107) | | | | |||||||||||||||||||||
Total Money Market Funds | | | | ||||||||||||||||||||||
Total investments and money market funds | $ | | $ | | | % | |||||||||||||||||||
15
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
Forward Currency Contracts
Counterparty |
| Currency to be sold |
| Currency to be purchased |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | CAD | $ | USD | 8/6/25 | $ | | $ | — | |||||||
Total | $ | | $ | — | ||||||||||||
| (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 are domiciled in the United States. |
| (2) | The investments bear interest at a rate that may be determined by reference to the Secured Overnight Financing Rate (“SOFR”), the Canadian Overnight Repo Rate Average (“CORRA”), the Sterling Overnight Index Average (“SONIA”), or the U.S. Prime Rate (“Prime”), all of which may reset monthly, quarterly or semiannually. The one, three and six-month SOFR were |
| (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 and the 2025 CLO Securitization (see Note 2 to the consolidated financial statements). |
| (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 |
| (6) | Investment is a non-controlled/affiliate investment as defined by the 1940 Act. See Note 4. |
| (7) | The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of June 30, 2025. See Note 8. |
| (8) | Preferred equity investment is a non-income producing security. |
| (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 |
| (11) | The fair value of each investment was determined using significant unobservable inputs. See Note 5. |
| (12) | Ownership of certain equity investments may occur through a holding company or partnership. |
| (13) | Principal amount is non-USD denominated and is based in Canadian dollars. |
| (14) | Investment is a controlled affiliate investment as defined by the 1940 Act. See Note 4. |
| (15) | Investment is structured as a unitranche loan in which the Company may receive additional interest 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) | The rate shown is the annualized seven-day yield as of June 30, 2025. |
| (17) | The investment is on non-accrual status. |
| (18) | On January 14, 2019, the Company entered into an agreement 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. |
| (19) | On January 24, 2022, as part of a restructuring agreement between the Company and PlayMonster LLC, the Company’s first lien secured term loan and delayed draw loan investments to PlayMonster LLC were converted into a new first lien secured term loan, preferred stock and common stock of Playmonster Group LLC. See Note 4. |
16
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
June 30, 2025
(in thousands)
| (20) | In June 2025, as part of a restructuring agreement between the Company and Telestream Holdings Corporation, the Company’s first lien secured term loan and revolver investments to Telestream Holdings Corporation were converted into a new first lien secured term loan of Telestream 2 LLC (d/b/a Telestream Holdings Corporation) and common equity of Telestream Topco 2 LLC (d/b/a Telestream Holdings Corporation). See Note 4. |
| (21) | In March 2023, as part of a restructuring agreement between the Company and Sklar Holdings, Inc (d/b/a Starco), the Company’s first lien secured term loan investment was converted into a new second lien secured term loan to Chase Products Co. (f/k/a Starco) and preferred units and common units of Pressurized Holdings, LLC (f/k/a Starco). See Note 4. |
| (22) | In January 2024, as part of a restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), the Company’s first lien secured term loan and priority first lien delayed draw loan investments in Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), converted into a new first lien secured delayed draw loan and unsecured notes in Arcserve Cayman Opco LP (d/b/a Arcserve (USA), LLC) and common equity of Arcserve Cayman GP LLC (d/b/a Arcserve (USA), LLC), and Arcserve Cayman Topco LP (d/b/a Arcserve (USA), LLC). See Note 4. |
| (23) | As part of the restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), fair value on the first lien secured delayed draw loan includes a preferred return that is earned on capital funded. |
| (24) | In September 2024, as part of a restructuring agreement between the Company and Honors Holdings, LLC (d/b/a Orange Theory), the Company’s first lien secured term loan, delayed draw loan and revolver investments to Honors Holdings, LLC (d/b/a Orange Theory) were converted into a new first lien secured term loan of Camarillo Fitness Holdings, LLC (f/k/a Honors Holdings, LLC) and common equity of H.I.G. Camarillo, L.P. (f/k/a Honors Holdings, LLC). See Note 4. |
| (25) | The issuer is domiciled in Canada. |
| (26) | The issuer is domiciled in Cayman Islands. |
| (27) | Security or portion of the security pledged as collateral for the Company’s credit facility and the 2025 CLO Securtization. |
| (28) | Security or portion of the security pledged as collateral for the 2025 CLO Securitization. |
| (29) | Security or portion of the security pledged as collateral for the Company’s credit facility. |
| (30) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (1M). |
| (31) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (3M). |
| (32) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (6M). |
| (33) | The investment was comprised of two contracts, which were indexed to SOFR (1M) and SOFR (3M). |
17
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Debt Investments
Advertising
$
$
%
—
—
—
—
—
—
—
—
Air Freight & Logistics
Application Software
—
Broadcasting
—
—
—
Broadline Retail
Building Products
18
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Commodity Chemicals
$
$
%
Construction & Engineering
—
—
—
—
Construction Materials
Data Processing & Outsourced Services
Distributors
Diversified Chemicals
N/A
N/A
Diversified Support Services
—
—
(
—
Electric Utilities
Health Care Facilities
19
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
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
$
$
%
—
—
—
Health Care Supplies
Heavy Electrical Equipment
Home Furnishings
—
—
—
Household Appliances
Household Products
Industrial Machinery & Supplies & Components
—
—
—
Integrated Telecommunication Services
Interactive Media & Services
—
—
—
20
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Leisure Facilities
$
$
%
N/A
N/A
N/A
N/A
N/A
Leisure Products
—
—
—
—
—
—
—
—
—
—
—
—
—
Life Sciences Tools & Services
Packaged Foods & Meats
—
Paper Products
Real Estate Services
Research & Consulting Services
—
—
—
Security & Alarm Services
21
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Specialized Consumer Services
$
$
%
—
—
—
Specialized Finance
N/A
N/A
Systems Software
N/A
N/A
N/A
N/A
—
—
—
—
—
—
—
Technology Hardware, Storage & Peripherals
Transaction & Payment Processing Services
—
—
(
—
—
—
—
—
Total Debt Investments
$
$
%
Equity Investments(27)
Advertising
N/A
N/A
N/A
N/A
N/A
$
$
%
N/A
N/A
N/A
N/A
N/A
—
Air Freight & Logistics
N/A
N/A
N/A
N/A
N/A
—
—
—
—
Broadline Retail
N/A
N/A
N/A
Building Products
N/A
N/A
N/A
N/A
N/A
—
—
—
—
Construction & Engineering
N/A
N/A
N/A
N/A
N/A
22
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(10)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(11)
Fair Value
As A
Percentage
of Net
Assets
Diversified Chemicals
N/A
N/A
N/A
N/A
N/A
—
$
—
$
—
—
%
N/A
N/A
N/A
—
Diversified Support Services
N/A
N/A
N/A
N/A
N/A
Education Services
N/A
N/A
N/A
N/A
N/A
—
N/A
N/A
N/A
—
—
—
Environmental & Facilities Services
N/A
N/A
N/A
N/A
N/A
Food Distributors
N/A
N/A
N/A
N/A
N/A
Household Appliances
N/A
N/A
N/A
N/A
N/A
Industrial Machinery & Supplies & Components
N/A
N/A
N/A
N/A
N/A
Interactive Media & Services
N/A
N/A
N/A
N/A
N/A
IT Consulting & Other Services
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
—
Leisure Facilities
N/A
N/A
N/A
N/A
N/A
—
—
—
—
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
—
Leisure Products
N/A
N/A
N/A
N/A
—
—
—
—
N/A
N/A
N/A
N/A
N/A
—
—
—
N/A
N/A
N/A
—
—
N/A
N/A
N/A
N/A
N/A
—
—
—
—
23
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread |
| Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value |
| ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Paper & Plastic Packaging Products & Materials | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | $ | | $ | — | — | % | ||||||||||||||
| — | — | |||||||||||||||||||||||
Real Estate Services | |||||||||||||||||||||||||
N/A | N/A | N/A | | | | | |||||||||||||||||||
| | | |||||||||||||||||||||||
Research & Consulting Services | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Specialized Consumer Services | |||||||||||||||||||||||||
N/A | N/A | N/A | | | | | |||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | — | |||||||||||||||||
| | | |||||||||||||||||||||||
Specialized Finance | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Systems Software | |||||||||||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | — | — | — | |||||||||||||||||
N/A | N/A | N/A | N/A | N/A | | | | | |||||||||||||||||
| | | |||||||||||||||||||||||
Total Equity Investments | $ | | $ | | | % | |||||||||||||||||||
Total Investments | $ | | $ | | | % | |||||||||||||||||||
Money market funds (included in cash and cash equivalents and restricted cash and cash equivalents) | |||||||||||||||||||||||||
Goldman Sachs Money Market Fund (CUSIP: 38141W315)(16) |
|
|
|
|
|
|
| $ | | $ | | | % | ||||||||||||
Invesco Treasury Money Market Fund (CUSIP: 825252406)(16) |
|
|
|
|
|
|
| | | | |||||||||||||||
Total Money Market Funds | | | | ||||||||||||||||||||||
Total investments and money market funds | $ | | $ | | | % | |||||||||||||||||||
Forward Currency Contracts
Counterparty |
| Currency to be sold |
| Currency to be purchased |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | CAD | $ | USD | 2/4/2025 | $ | | $ | — | |||||||
Total | $ | | $ | — | ||||||||||||
| (1) | Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined by the 1940 Act, provide collateral for the Company’s credit facility, and are domiciled in the United States. |
| (2) | The investments bear interest at a rate that may be determined by reference to SOFR, CORRA, SONIA or Prime, all of which may reset monthly, quarterly or semiannually. |
| (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) | The investment or a portion of the investment does not provide collateral for the Company’s credit facility. |
24
WhiteHorse Finance, Inc.
Consolidated Schedule of Investments
December 31, 2024
(in thousands)
| (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 |
| (6) | Investment is a non-controlled/affiliate investment as defined by the 1940 Act. See Note 4. |
| (7) | The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of December 31, 2024. See Note 8. |
| (8) | Preferred equity investment is a non-income producing security. |
| (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 |
| (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 Prime and a different base rate, SOFR, SONIA or CORRA. |
| (13) | Principal amount is non-USD denominated and is based in Canadian dollars. |
| (14) | Investment is a controlled affiliate investment as defined by the 1940 Act. See Note 4. |
| (15) | Investment is structured as a unitranche loan in which the Company may receive additional interest 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) | The rate shown is the annualized seven-day yield as of December 31, 2024. |
| (17) | The investment is on non-accrual status. |
| (18) | On January 14, 2019, the Company entered into an agreement with STRS Ohio to create STRS JV. |
| (19) | On January 24, 2022, as part of a restructuring agreement between the Company and PlayMonster LLC, the Company’s first lien secured term loan and delayed draw loan investments to PlayMonster LLC were converted into a new first lien secured term loan, preferred stock and common stock of Playmonster Group LLC. See Note 4. |
| (20) | In March 2023, as a result of a restructuring agreement between the Company and American Crafts, LC, the Company’s investments are controlled affiliate investments, as defined by the 1940 Act. See Note 4. |
| (21) | In March 2023, as part of a restructuring agreement between the Company and Sklar Holdings, Inc (d/b/a Starco), the Company’s first lien secured term loan investment was converted into a new second lien secured term loan to Chase Products Co. (f/k/a Starco) and preferred units and common units of Pressurized Holdings, LLC (f/k/a Starco). See Note 4. |
| (22) | In January 2024, as part of a restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), the Company’s first lien secured term loan and priority first lien delayed draw loan investments in Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), converted into a new first lien secured delayed draw loan and unsecured notes in Arcserve Cayman Opco LP (d/b/a Arcserve (USA), LLC) and common equity of Arcserve Cayman GP LLC (d/b/a Arcserve (USA), LLC), and Arcserve Cayman Topco LP (d/b/a Arcserve (USA), LLC). See Note 4. |
| (23) | As part of the restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), LLC), fair value on the first lien secured delayed draw loan includes a preferred return that is earned on capital funded. |
| (24) | In September 2024, as part of a restructuring agreement between the Company and Honors Holdings, LLC (d/b/a Orange Theory), the Company’s first lien secured term loan, delayed draw loan and revolver investments to Honors Holdings, LLC (d/b/a Orange Theory) were converted into a new first lien secured term loan of Camarillo Fitness Holdings, LLC (f/k/a Honors Holdings, LLC) and common equity of H.I.G. Camarillo, L.P. (f/k/a Honors Holdings, LLC). See Note 4. |
| (25) | The issuer is domiciled in Canada. |
| (26) | The issuer is domiciled in Cayman Islands. |
| (27) | Ownership of certain equity investments may occur through a holding company or partnership. |
25
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(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 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 are based on a floating interest rate such as SOFR plus a spread and typically have a term of to
WhiteHorse Finance’s investment activities are managed by H.I.G. WhiteHorse Advisers, LLC (“WhiteHorse Advisers” or the “Investment Adviser”). H.I.G. WhiteHorse Administration, LLC (“WhiteHorse Administration” or the “Administrator”) provides administrative services necessary for the Company to operate.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of WhiteHorse Finance and its wholly owned subsidiaries, WhiteHorse Finance Credit I, LLC (“WhiteHorse Credit”), and its subsidiary WhiteHorse Finance (CA), LLC (“WhiteHorse California”), WHF American Craft Blocker, LLC, WhiteHorse RCKC Holdings, LLC, WhiteHorse Finance Holdings, LLC and WhiteHorse Finance CLO I, LLC (“WHF CLO”). 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. The classifications included in the consolidated schedule of investments represent, in management’s opinion, as to the most meaningful presentation of the Company’s investment portfolio. 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. In the opinion of management, the consolidated financial statements reflect all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial results as of and for the periods presented.
26
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
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.
The Company values its investments in accordance with the 1940 Act and Rule 2a-5 thereunder, which sets forth the requirements for determining fair value in good faith. Pursuant to Rule 2a-5, the board of directors has designated the Investment Adviser to determine the fair value of the Company’s investments. The board of directors oversees the Investment Adviser’s performance of its valuation responsibilities, and in support of this oversight, the Investment Adviser provides periodic reports to the Company’s board of directors related to the fair valuation process. The Investment Adviser carries out its responsibilities as valuation designee primarily through its valuation committee (the “Valuation Committee”), assisted by third-party valuation firms, administrative personnel, and other service providers, as appropriate. The Valuation Committee consists of a number of representatives from different functions of the Investment Adviser. The Investment Adviser conducts the fair valuation process on a quarterly basis, subject to the oversight of the Company’s board of directors through the audit committee, using consistently applied valuation procedures. In accordance with the Company’s valuation procedures, the Investment Adviser performs periodic testing of the appropriateness and accuracy of fair value methodologies, and has established a process for approving, monitoring, and evaluating independent pricing service providers. Effective September 8, 2022, the board of directors designated the Investment Adviser as the Company’s valuation designee.
Investments that are not publicly traded or for which market prices are not readily available are valued based on the input of the Investment Adviser and independent third-party valuation firms engaged to review Company investments. These external reviews are used by the Company’s Investment Adviser, subject to the oversight of the board of directors, to review the Company’s internal valuation of investments during 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.
27
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
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 to be 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 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 and Restriced Foreign Currency: Restricted cash and cash equivalents and restricted foreign currency include amounts that are collected and held by the custodians or trutees who have been appointed as custodian of the assets securing certain of the Company’s financing transactions including the Credit Facility (as defined in Note 6) and 2025 CLO Securitization (as defined in Note 6). Restricted cash and cash equivalents and restricted foreign currency are held by the trustee for the payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets. Restricted amounts that represent interest or fee income are transferred to unrestricted cash accounts by the trustees generally once a quarter after the payment of operating expenses and other amounts due under the respective credit, indenture or other governing agreements for the Company’s financing transactions as more fully discussed 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.
28
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
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
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
As of June 30, 2025 and December 31, 2024, the cost of investments for federal income tax purposes was $
Dividends and Distributions: Dividends and distributions to common stockholders are recorded on the ex-dividend date. Quarterly distribution payments are determined by the Company’s 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” dividend reinvestment plan (“DRIP”) 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 DRIP 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.
29
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Risks and Uncertainties: In the normal course of business, the Company generally encounters two significant types of economic risks, including credit and market. Credit risk is the risk of default on the Company’s investments that result from an issuer’s, borrower’s or derivative counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of investments due to changes in interest rates, spreads or other market factors, including the value of the collateral underlying investments held by the Company. Management believes that the carrying value of the Company’s investments are fairly stated, taking into consideration these risks along with estimated collateral values, payment histories and other market information.
Reclassifications: Certain amounts in the consolidated financial statements 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.
Segment Reporting: In accordance with ASC Topic 280, Segment Reporting, or ASC 280, the Company has determined that it has a single operating and reporting segment. As a result, the Company’s segment accounting policies are the same as described herein and the Company does not have any intra-segment sales and transfers of assets.
Recent Accounting Pronouncements: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently assessing the impact of this guidance, however, the Company does not expect a material impact on its consolidated financial statements.
In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The objective of this guidance is to enhance transparency and comparability by providing more detailed disaggregation of expenses presented in the income statement. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on its 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. The Company may choose to renew contracts quarterly unless otherwise settled by the Company or the counterparty.
30
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
The following table provides a breakdown of our forward currency contracts for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | |||||||||||
($ in thousands) | 2025 | 2024 |
| 2025 | 2024 | |||||||
Realized gain (loss) on forward currency contracts | $ | — | $ | | $ | | $ | — | ||||
Unrealized appreciation (depreciation) on forward currency contracts | | ( | | | ||||||||
Total net realized and unrealized gains (losses) on forward currency contracts | $ | | $ | | $ | | $ | | ||||
The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities. Open contracts as of June 30, 2025 were as follows:
Counterparty |
| Currency to be sold |
| Currency to be purchased |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | CAD | $ | USD | 8/6/25 | $ | | $ | — | |||||||
Total | $ | | $ | — | ||||||||||||
The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities. Open contracts as of December 31, 2024 were as follows:
Counterparty |
| Currency to be sold |
| Currency to be purchased |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | CAD | $ | USD | 2/4/2025 | $ | | $ | — | |||||||
Total | $ | | $ | — | ||||||||||||
The following table is a summary of the average USD notional exposure to foreign currency forward contracts for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | |||||||||||
Average USD notional outstanding |
| 2025 | 2024 |
| 2025 | 2024 | ||||||
Forward currency contracts | $ | | $ | | $ | | $ | | ||||
The foreign currency forward contracts open at the end of the period are generally indicative of the volume of activity during the period. The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities.
31
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Offsetting of Derivative Instruments
The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation or depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of June 30, 2025 and December 31, 2024.
As of June 30, 2025 | |||||||||||||||||||||||||||
Counterparty ($ in thousands) |
| Derivative Assets |
| Derivative |
| Derivatives |
| Non-cash |
| Non-cash |
| Cash Collateral |
| Cash Collateral |
| Net Amount of |
| Net Amount of | |||||||||
Morgan Stanley (CAD) | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | |||||||||
Total | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | |||||||||
| (1) | In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (2) | Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default. |
| (3) | Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default. |
As of December 31, 2024 | |||||||||||||||||||||||||||
Counterparty ($ in thousands) |
| Derivative Assets |
| Derivative |
| Derivatives |
| Non-cash |
| Non-cash |
| Cash Collateral |
| Cash Collateral |
| Net Amount of |
| Net Amount of | |||||||||
Morgan Stanley (CAD) | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | |||||||||
Total | $ | | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | | $ | — | |||||||||
| (1) | In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (2) | Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default. |
| (3) | Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default. |
32
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
NOTE 4 - INVESTMENTS
Investments consisted of the following:
As of June 30, 2025 | As of December 31, 2024 | |||||||||||
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
First lien secured loans | $ | |
| | $ | | $ | | ||||
Second lien secured loans |
| |
| |
| |
| | ||||
Unsecured loans | |
| | |
| | ||||||
Subordinated Note to STRS JV |
| |
| |
| |
| | ||||
Equity (excluding STRS JV) |
| |
| |
| |
| | ||||
Equity in STRS JV |
| |
| |
| |
| | ||||
Total | $ | | $ | | $ | | $ | | ||||
33
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
The following table shows the portfolio composition by industry grouping at fair value:
Industry ($ in thousands) | As of June 30, 2025 | As of December 31, 2024 | |||||||||
Advertising |
| $ | |
| | % | $ | |
| | % |
Air Freight & Logistics | |
| | | | ||||||
Application Software | |
| | | | ||||||
Asset Management & Custody Banks | |
| | — | — | ||||||
Broadcasting | |
| | | | ||||||
Broadline Retail | |
| | | | ||||||
Building Products | |
| | | | ||||||
Commodity Chemicals | — |
| — | | | ||||||
Construction & Engineering | |
| | | | ||||||
Construction Materials | |
| | | | ||||||
Data Processing & Outsourced Services | |
| | | | ||||||
Distributors | |
| | | | ||||||
Diversified Chemicals | |
| | | | ||||||
Diversified Support Services | |
| | | | ||||||
Education Services | |
| | | | ||||||
Electric Utilities | — |
| — | | | ||||||
Environmental & Facilities Services | |
| | | | ||||||
Food Distributors | |
| | | | ||||||
Health Care Facilities | |
| | | | ||||||
Health Care Services | |
| | | | ||||||
Health Care Supplies | |
| | | | ||||||
Heavy Electrical Equipment | |
| | | | ||||||
Home Furnishings | |
| | | | ||||||
Household Appliances | |
| | | | ||||||
Household Products | |
| | | | ||||||
Human Resource & Employment Services | |
| | — | — | ||||||
Industrial Machinery & Supplies & Components | |
| | | | ||||||
Integrated Telecommunication Services | |
| | | | ||||||
Interactive Media & Services | |
| | | | ||||||
IT Consulting & Other Services | |
| | | | ||||||
Leisure Facilities | |
| | | | ||||||
Leisure Products | |
| | | | ||||||
Life Sciences Tools & Services | — |
| — | | | ||||||
Packaged Foods & Meats | |
| | | | ||||||
Paper Products | |
| | | | ||||||
Real Estate Services | |
| | | | ||||||
Research & Consulting Services | |
| | | | ||||||
Security & Alarm Services | |
| | | | ||||||
Specialized Consumer Services | |
| | | | ||||||
Specialized Finance(1) | — |
| — | — | — | ||||||
Systems Software | |
| | | | ||||||
Technology Hardware, Storage & Peripherals | |
| | | | ||||||
Transaction & Payment Processing Services | |
| | | | ||||||
Total(1) | $ | | | % | $ | | | % | |||
| (1) | Excludes investments in STRS JV. |
34
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
As of June 30, 2025, the portfolio companies underlying the investments are all located in the United States and its territories, except for Arcserve Cayman Opco LP, Arcserve Cayman GP LLC, Arcserve Cayman Topco LP, and Alvaria Holdco (Cayman), which are domiciled in Cayman Islands and Trimlite Buyer, LLC, which is domiciled in Canada. As of June 30, 2025 and December 31, 2024, the weighted average remaining term of the Company’s debt investments, excluding non-accrual investments, was approximately
As of June 30, 2025 the total cost basis of non-accrual loans was $
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).
35
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
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 six months ended June 30, 2025:
Dividends, | Beginning | Net Change in | Ending Fair | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
interest and PIK | Fair Value as of | Net | Unrealized | Value as of | |||||||||||||||||||
Type of | included in | December 31, | Gross | Gross | Realized | Appreciation | June 30, | ||||||||||||||||
Affiliated Person(1) | Asset |
| income |
| 2024 |
| Additions(2) |
| Reductions(3) |
| Gain (Loss) |
| (Depreciation) |
| 2025 | ||||||||
Non-controlled affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
$ | | $ | | $ | | $ | — | $ | — | $ | ( | $ | | ||||||||||
|
| |
| |
| — |
| — |
| ( |
| | |||||||||||
|
| |
| |
| — |
| — |
| ( |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
— |
| |
| — |
| — |
| — |
| |
| | |||||||||||
( |
| |
| ( |
| — |
| — |
| ( |
| | |||||||||||
— |
| — |
| |
| — |
| — |
| ( |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
|
| |
| |
| — |
| — |
| |
| | |||||||||||
| — |
| |
| — |
| — |
| — |
| |
| | ||||||||||
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
|
| |
| |
| ( |
| — |
| — |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
— |
| |
| — |
| — |
| — |
| |
| | |||||||||||
Total Non-controlled affiliates | $ | | $ | | $ | | $ | ( | $ | — | $ | ( | $ | | |||||||||
36
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Dividends, | Beginning | Net Change in | Ending Fair | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
interest and PIK | Fair Value as of | Net | Unrealized | Value as of | |||||||||||||||||||
Type of | included in | December 31, | Gross | Gross | Realized | Appreciation | June 30, | ||||||||||||||||
Affiliated Person(1) | Asset |
| income |
| 2024 |
| Additions(2) |
| Reductions(3) |
| Gain (Loss) |
| (Depreciation) |
| 2025 | ||||||||
Controlled affiliates | |||||||||||||||||||||||
$ | — | $ | | $ | — | $ | — | $ | ( | $ | | $ | — | ||||||||||
— | — | — | — | ( | | — | |||||||||||||||||
— | — | — | — | ( | | — | |||||||||||||||||
— | — | — | — | ( | | — | |||||||||||||||||
— | — | — | — | ( | | — | |||||||||||||||||
— | — | — | — | ( | | — | |||||||||||||||||
— | — | — | — | — | — | — | |||||||||||||||||
— | — | — | — | — | — | — | |||||||||||||||||
| | | — | — | — | — | | ||||||||||||||||
|
| |
| |
| — |
| — |
| — |
| ( |
| | |||||||||
Total Controlled affiliates |
|
| $ | | $ | | $ | — | $ | — | $ | ( | $ | | $ | | |||||||
* | The Company and STRS Ohio are the members of STRS JV, a joint venture formed as a limited liability company (“LLC”) in Delaware that is not consolidated by either member for financial reporting purposes. The members make investments in STRS JV in the form 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. This note shall be referred to hereinafter as Management of the STRS JV (“Management of the STRS JV”). |
37
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
| (1) | Refer to the consolidated schedule of investments for the principal amount, industry classification and other security detail of each portfolio company. |
| (2) | Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK, an exchange of existing investments for new investments and the transfers of an existing portfolio company into this category from a different category. |
| (3) | Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, an exchange of existing investments for new investments and the transfers of an existing portfolio company into this category from a different category. |
38
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
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 year ended December 31, 2024:
Dividends, | Beginning | Net Change in | Ending Fair | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
interest and PIK | Fair Value as of | Net | Unrealized | Value as of | |||||||||||||||||||
Type of | included in | December 31, | Gross | Gross | Realized | Appreciation | December 31, | ||||||||||||||||
Affiliated Person(1) | Asset |
| income |
| 2023 |
| Additions(2) |
| Reductions(3) |
| Gain (Loss) |
| (Depreciation) |
| 2024 | ||||||||
Non-controlled affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
$ | | $ | — | $ | | $ | — | $ | — | $ | | $ | | ||||||||||
|
| — |
| |
| — |
| — |
| |
| | |||||||||||
|
| — |
| |
| — |
| — |
| |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
— |
| — |
| |
| — |
| — |
| ( |
| | |||||||||||
|
| — |
| |
| — |
| — |
| |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
|
| |
| |
| — |
| — |
| — |
| | |||||||||||
| — |
| |
| — |
| — |
| — |
| |
| | ||||||||||
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
| — |
| — |
| — |
| — |
| — |
| — |
| — | ||||||||||
|
| |
| |
| — |
| — |
| |
| | |||||||||||
— |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||
— |
| |
| — |
| — |
| — |
| |
| | |||||||||||
Total Non-controlled affiliates | $ | | $ | | $ | | $ | — | $ | — | $ | ( | $ | | |||||||||
39
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Dividends, | Beginning | Net Change in | Ending Fair | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
interest and PIK | Fair Value as of | Net | Unrealized | Value as of | |||||||||||||||||||
Type of | included in | December 31, | Gross | Gross | Realized | Appreciation | December 31, | ||||||||||||||||
Affiliated Person(1) | Asset |
| income |
| 2023 |
| Additions(2) |
| Reductions(3) |
| Gain (Loss) |
| (Depreciation) |
| 2024 | ||||||||
Controlled affiliates | |||||||||||||||||||||||
$ | | $ | — | $ | | $ | — | $ | — | $ | ( | $ | | ||||||||||
| — | | — | — | ( | — | |||||||||||||||||
| | | — | — | ( | — | |||||||||||||||||
( | | — | — | — | ( | — | |||||||||||||||||
— | | — | — | — | ( | — | |||||||||||||||||
— | | — | — | — | ( | — | |||||||||||||||||
— | — | — | — | — | — | — | |||||||||||||||||
— | — | — | — | — | — | — | |||||||||||||||||
| | | — | — | — | — | | ||||||||||||||||
|
| |
| |
| — |
| — |
| — |
| ( |
| | |||||||||
Total Controlled affiliates |
|
| $ | | $ | | $ | | $ | — | $ | — | $ | ( | $ | | |||||||
* | For more information, see “Management of the STRS JV.” |
| (1) | Refer to the consolidated schedule of investments for the principal amount, industry classification and other security detail of each portfolio company. |
| (2) | Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK, an exchange of existing investments for new investments and the transfers of an existing portfolio company into this category from a different category. |
| (3) | Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, an exchange of existing investments for new investments and the transfers of an existing portfolio company into this category from a different category. |
40
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
In January 2024, as part of a restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), the Company’s first lien secured term loan and priority first lien delayed draw loan investments in Arcstor Midco, LLC (d/b/a Arcserve (USA), converted into a new first lien secured delayed draw loan and unsecured notes in Arcserve Cayman Opco LP (d/b/a Arcserve (USA), LLC) and common equity of Arcserve Cayman GP LLC (d/b/a Arcserve (USA), LLC) and Arcserve Cayman Topco LP (d/b/a Arcserve (USA), LLC).
In September 2024, as part of a restructuring and partial foreclosure agreement between the Company and Honors Holdings, LLC (d/b/a Orange Theory), the Company’s first lien secured term loan, first lien delayed draw loan and revolver investments in Honors Holdings, LLC, which had a historical cost basis of $
In June 2025, as part of a restructuring agreement between the Company and Telestream Holdings Corporation, the Company’s first lien secured term loan and revolver investments to Telestream Holdings Corporation, which had a cost basis of $
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 committed to provide up to $
In February 2023, the Company increased its commitment to the STRS JV in the amount of an additional $
In February 2022, the Company increased its capital commitment to the STRS JV in the amount of an additional $
As of June 30, 2025 and December 31, 2024, STRS JV had total assets of $
The Company provides capital to STRS JV in the form of LLC equity interests and through interest-bearing subordinated notes. As of both June 30, 2025 and December 31, 2024, the Company and STRS Ohio owned approximately
41
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Company had commitments to fund equity interests and subordinated notes in STRS JV of $
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 $
On March 11, 2022, the terms of the STRS JV Credit Facility were further amended to (i) permanently increase STRS Credit’s availability under the STRS JV Credit Facility from $
On January 13, 2023, the terms of the STRS JV Credit Facility were further amended to (i) permanently increase STRS Credit’s availability under the STRS JV Credit Facility from $
On May 18, 2023, the terms of the STRS JV Credit Facility were further amended to (i) effective June 6, 2023 apply an annual interest rate equal to applicable SOFR plus
On May 8, 2024, the terms of the STRS JV Credit Facility were further amended to (i) effective May 8, 2024 apply an annual interest rate equal to applicable base rate plus
On November 26, 2024, the terms of the STRS JV Credit Facility were further amended to, among other things, (i) reduce the spread from
As of June 30, 2025, the STRS JV Credit Facility had $
As of December 31, 2024, the STRS JV Credit Facility had $
42
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Below is a listing of STRS JV’s individual investments as of June 30, 2025:
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread | Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value As A | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Debt Investments | |||||||||||||||||||||||||
Advertising | |||||||||||||||||||||||||
| $ | | $ | | | % | |||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | | — | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | ( | — | ||||||||||||||||||||||
— | — | ( | — | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Air Freight & Logistics | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | | — | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Broadline Retail | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | ( | ( | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Building Products | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | | — | ||||||||||||||||||||||
— | — | | — | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Commodity Chemicals | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
43
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Construction & Engineering
$
$
%
—
—
(
—
—
—
(
—
—
—
—
—
Data Processing & Outsourced Services
—
—
—
Distributors
—
—
—
—
—
—
—
—
—
—
Diversified Support Services
—
—
—
Electrical Components & Equipment
—
—
—
—
44
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Environmental & Facilities Services
$
$
%
Food Distributors
Health Care Facilities
—
—
—
Health Care Services
—
—
—
Health Care Supplies
—
—
—
Health Care Technology
—
—
—
—
—
—
—
Human Resource & Employment Services
—
—
—
—
Household Appliances
45
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
IT Consulting & Other Services
$
$
%
—
—
—
—
—
—
Packaged Foods & Meats
Paper & Plastic Packaging Products & Materials
—
—
—
—
—
(
—
Personal Care Products
—
—
—
—
—
—
—
46
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Pharmaceuticals
$
$
%
Real Estate Services
Research & Consulting Services
—
—
(
—
Technology Hardware, Storage & Peripherals
Water Utilities
—
—
—
Wireless Telecommunication Services
—
—
—
Total Investments
$
$
%
47
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread | Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value As A | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Money market funds (included in cash and cash equivalents and restricted cash and cash equivalents) | |||||||||||||||||||||||||
Goldman Sachs Financial Square Treasury Obligations Fund(11) | Share class: Administration (CUSIP: 38141W315) |
| $ | | $ | | | % | |||||||||||||||||
JPMorgan U.S. Treasury Plus Money Market Fund(11) | Share class: Agency (CUSIP: 4812C2742) |
| | | | ||||||||||||||||||||
Total Money Market Funds | | | | ||||||||||||||||||||||
Total Investments and Money Market Funds | $ | | $ | | | % | |||||||||||||||||||
Forward Currency Contracts
Counterparty |
| Currency to be sold (purchased) |
| Currency to be purchased (sold) |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | | CAD | $ | | USD | 8/6/25 | $ | — | $ | ( | |||||
Morgan Stanley | € | | EUR | $ | | USD | 8/6/25 | — | ( | |||||||
Total | $ | — | $ | ( | ||||||||||||
| (1) | Except as noted, all investments provide collateral for the STRS JV Credit Facility and are domiciled in the United States. |
| (2) | The investments bear interest at a rate that may be determined by reference to SOFR, CORRA, SONIA, Prime, or EurIBOR, which resets monthly, quarterly or semiannually. The one, three and six-month SOFR were |
| (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 STRS JV’s portfolio company investments, which as of the date of the portfolio represented |
| (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) | The issuer is domiciled in Canada. |
| (8) | Principal amount is denominated in GBP and the issuer is domiciled in the United Kingdom. |
| (9) | Principal amount is denominated in EUR. |
| (10) | Principal amount is denominated in CAD. |
| (11) | The rate shown is the annualized seven-day yield as of June 30, 2025. |
| (12) | Investment is structured as a unitranche loan in which the STRS JV may receive additional interest 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. |
48
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
| (13) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (1M). |
| (14) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (3M). |
| (15) | The investment was comprised of two contracts, which were indexed to Prime and SOFR (6M). |
| (16) | The investment was comprised of two contracts, which were indexed to SOFR (3M) and SOFR (6M). |
| (17) | The investment was comprised of two contracts, which were indexed to CAD Prime and CORRA (3M). |
49
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Below is a listing of STRS JV’s individual investments as of December 31, 2024:
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Debt Investments
Advertising
$
$
%
—
—
—
Aerospace & Defense
—
—
—
Air Freight & Logistics
—
—
—
Broadline Retail
—
—
(
(
Building Products
Construction & Engineering
—
—
—
—
—
—
Data Processing & Outsourced Services
—
—
—
50
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Distributors
$
$
%
—
—
—
—
—
—
—
—
—
—
Diversified Support Services
—
—
—
Electrical Components & Equipment
—
—
—
—
Environmental & Facilities Services
Food Distributors
Health Care Facilities
—
—
—
Health Care Services
—
—
—
51
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer
Investment Type(1)
Floor
Reference Rate(2)
Spread
Above
Index
Interest
Rate(3)
Acquisition
Date(4)
Maturity
Date
Principal/
Share
Amount
Amortized
Cost
Fair
Value(5)
Fair Value As A
Percentage of Members' Equity
Health Care Supplies
$
$
%
—
—
—
—
—
—
Household Appliances
IT Consulting & Other Services
—
—
—
—
—
—
—
—
—
Packaged Foods & Meats
Paper & Plastic Packaging Products & Materials
—
—
—
—
—
(
—
Pharmaceuticals
52
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Issuer |
| Investment Type(1) |
| Floor |
| Reference Rate(2) |
| Spread | Interest |
| Acquisition |
| Maturity |
| Principal/ |
| Amortized |
| Fair |
| Fair Value As A | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Real Estate Services | |||||||||||||||||||||||||
| $ | | $ | | | % | |||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Research & Consulting Services | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | ( | — | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Technology Hardware, Storage & Peripherals | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Wireless Telecommunication Services | |||||||||||||||||||||||||
| | | | ||||||||||||||||||||||
— | — | | — | ||||||||||||||||||||||
| | | |||||||||||||||||||||||
Total Investments | $ | | $ | | | % | |||||||||||||||||||
Money market funds (included in cash and cash equivalents and restricted cash and cash equivalents) | |||||||||||||||||||||||||
Goldman Sachs Money Market Fund (CUSIP: 38141W315)(12) | $ | | $ | | | % | |||||||||||||||||||
JPMORGAN U.S. Treas Plus Money Market Fund (Ticker: AJTXX)(12) | | | | ||||||||||||||||||||||
Total Money Market Funds | | | | ||||||||||||||||||||||
Total Investments and Money Market Funds | $ | | $ | | | % | |||||||||||||||||||
Forward Currency Contracts
Counterparty |
| Currency to be sold (purchased) |
| Currency to be purchased (sold) |
| Settlement date |
| Unrealized |
| Unrealized | ||||||
Morgan Stanley | C$ | | CAD | $ | | USD | 2/4/25 | $ | — | $ | | |||||
Morgan Stanley | € | | EUR | $ | | USD | 2/4/25 | — | | |||||||
Total | $ | — | $ | | ||||||||||||
| (1) | Except as noted, all investments provide collateral for the STRS JV Credit Facility and are domiciled in the United States. |
| (2) | The investments bear interest at a rate that may be determined by reference to SOFR, CORRA, SONIA, Prime, or EurIBOR, which resets monthly, quarterly or semiannually. |
53
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
| (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 |
| (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) | The issuer is domiciled in Canada. |
| (8) | Principal amount is denominated in GBP and the issuer is domiciled in the United Kingdom. |
| (9) | Principal amount is denominated in Euros. |
| (10) | Principal amount is denominated in CAD. |
| (11) | The investment was comprised of two contracts, which were indexed to Prime and a different base rate, SOFR, SONIA or CORRA. The Floor, Spread Above Index and Interest Rate presented represent the weighted average of both contracts. |
| (12) | The rate shown is the annualized seven-day yield as of December 31, 2024. |
| (13) | Investment is structured as a unitranche loan in which the STRS JV may receive additional interest 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. |
As of June 30, 2025 and December 31, 2024, the portfolio companies underlying the STRS JV investments are all located in the United States and its territories except for Geo Logic Systems Ltd., which is domiciled in Canada, and Cennox Holdings Limited and Solar Holdings Bidco Limited, which are domiciled in the United Kingdom. As of June 30, 2025 and December 31, 2024, STRS JV had
54
WhiteHorse Finance, Inc.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
(in thousands, except share and per share data)
Below is certain summarized financial information for STRS JV as of June 30, 2025 and December 31, 2024 and for the three and six months ended June 30, 2025 and 2024:
Selected Balance Sheet Information ($ in thousands) | As of June 30, 2025 | As of December 31, 2024 | ||||
Assets |
|
|
|
| ||
Investments, at fair value (amortized cost of $ | $ | | $ | | ||
Cash and cash equivalents |
| |
| | ||
Interest receivable | | | ||||
Amounts receivable on unsettled investment transactions | | | ||||
Unrealized appreciation on foreign currency forward contracts | — | | ||||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities |
|
|
|
| ||
Credit facility (net of unamortized debt issuance costs of $ | $ | | $ | | ||
Note payable to members |
| |
| | ||
Interest payable on credit facility |
| |
| | ||
Interest payable on notes to members |
| |
| | ||
Unrealized depreciation on foreign currency forward contracts | | — | ||||
Other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Members’ equity |
| |
| | ||
Total liabilities and members’ equity | $ | | $ | | ||
Three Months Ended | Six Months Ended | |||||||||||
Selected Statement of Operations Information ($ in thousands) |
| June 30, 2025 |
| June 30, 2024 |
| June 30, 2025 |
| June 30, 2024 | ||||
Interest and fee income | $ | | $ | | $ | | $ | | ||||
Total investment income | $ | | $ | | $ | | $ | | ||||
Interest expense on credit facility |
| |
| |
| |
| | ||||
Interest expense on notes to members |
| |
| |
| |
| | ||||
Administrative fee |
| |
| |
| |
| | ||||
Other expenses |
| |
| |
| |
| | ||||
Total expenses | $ | | $ | | $ | | $ | | ||||
Net investment income |
| |
| |
| |
| | ||||
Net realized gains (losses) on investments and foreign currency transactions |
| ( |
| |
| |
| ( | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions |
| ( |
| |
| ( |
| | ||||
Net increase in members’ equity resulting from operations | $ | | $ | | $ | | $ | | ||||
55
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 six months ended June 30, 2025 and year ended December 31, 2024, 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 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.
56
The following table presents investments (as shown on the consolidated schedule of investments) that were measured at fair value as of June 30, 2025:
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
First lien secured loans | $ | — | $ | — | $ | | $ | | ||||
Second lien secured loans |
| — |
| — |
| |
| | ||||
Unsecured loans | — |
| — |
| |
| | |||||
Subordinated Note to STRS JV |
| — |
| — |
| |
| | ||||
Equity (excluding STRS JV) |
| — |
| — |
| |
| | ||||
Equity in STRS JV(1) |
| — |
| — |
| — |
| | ||||
Total investments | $ | — | $ | — | $ | | $ | | ||||
| (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 Company’s money market funds (included in cash and cash equivalents and restricted cash and cash equivalents), which were valued at $
The Company’s forward currency contracts, which were valued at $
The following table presents investments (as shown on the consolidated schedule of investments) that were measured at fair value as of December 31, 2024:
| Level 1 |
| Level 2 |
| Level 3 | Total | ||||||
First lien secured loans | $ | — | $ | — | $ | | $ | | ||||
Second lien secured loans |
| — |
| — |
| |
| | ||||
Unsecured loans | — |
| — |
| |
| | |||||
Subordinated Note to STRS JV |
| — |
| — |
| |
| | ||||
Equity (excluding STRS JV) |
| — |
| — |
| |
| | ||||
Equity in STRS JV(1) |
| — |
| — |
| — |
| | ||||
Total investments | $ | — | $ | — | $ | | $ | | ||||
| (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 Company’s money market funds (included in cash and cash equivalents and restricted cash and cash equivalents), which were valued at $
The Company’s forward currency contracts, which were valued at $
57
The following table presents the changes in investments measured at fair value using Level 3 inputs for the three and six months ended June 30, 2025:
| First Lien |
| Second Lien |
|
| Subordinated |
|
| ||||||||||
Secured | Secured | Unsecured | Notes to STRS | Total | ||||||||||||||
Three months ended June 30, 2025 | Loans | Loans | Loans | JV | Equity | Investments | ||||||||||||
Fair value, beginning of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Funding of investments |
| |
|
| — |
| — |
|
| — |
|
| — |
| | |||
Non-cash interest income |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Accretion of discount |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Proceeds from paydowns and sales |
| ( |
|
| ( |
| — |
|
| — |
|
| — |
| ( | |||
Conversions |
| ( |
|
| — |
| — |
|
| — |
|
| |
| — | |||
| ( |
|
| — |
| — |
|
| — |
|
| — |
| ( | ||||
| |
|
| — |
| — |
|
| — |
|
| |
| | ||||
Fair value, end of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2025 | $ | ( | $ | — | $ | ( | $ | — | $ | | $ | ( | ||||||
| First Lien |
| Second Lien |
|
| Subordinated |
|
| ||||||||||
Secured | Secured | Unsecured | Notes to STRS | Total | ||||||||||||||
Six months ended June 30, 2025 | Loans | Loans | Loans | JV | Equity | Investments | ||||||||||||
Fair value, beginning of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Funding of investments |
| |
|
| — |
| — |
|
| — |
|
| — |
| | |||
Non-cash interest income |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Accretion of discount |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Proceeds from paydowns and sales |
| ( |
|
| ( |
| — |
|
| — |
|
| — |
| ( | |||
Conversions |
| ( |
|
| — |
| — |
|
| — |
|
| |
| — | |||
| ( |
|
| — |
| — |
|
| — |
|
| — |
| ( | ||||
| |
|
| ( |
| ( |
|
| — |
|
| |
| | ||||
Fair value, end of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2025 | $ | ( | $ | — | $ | ( | $ | — | $ | | $ | ( | ||||||
58
The following table presents the changes in investments measured at fair value using Level 3 inputs for the three and six months ended June 30, 2024:
| First Lien |
| Second Lien |
|
| Subordinated |
|
| ||||||||||
Secured | Secured | Unsecured | Notes to STRS | Total | ||||||||||||||
Three months ended June 30, 2024 | Loans | Loans | Loans | JV | Equity | Investments | ||||||||||||
Fair value, beginning of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Funding of investments |
| |
|
| — |
| — |
|
| — |
|
| |
| | |||
Non-cash interest income |
| |
|
| — |
| |
|
| — |
|
| — |
| | |||
Accretion of discount |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Proceeds from paydowns and sales |
| ( |
|
| — |
| — |
|
| — |
|
| — |
| ( | |||
Conversions |
| — |
|
| — |
| — |
|
| — |
|
| — |
| — | |||
| ( |
|
| — |
| — |
|
| — |
|
| — |
| ( | ||||
| ( |
|
| |
| ( |
|
| — |
|
| |
| ( | ||||
Fair value, end of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2024 | $ | ( | $ | | $ | ( | $ | — | $ | | $ | ( | ||||||
| First Lien |
| Second Lien |
|
| Subordinated |
|
| ||||||||||
Secured | Secured | Unsecured | Notes to STRS | Total | ||||||||||||||
Six months ended June 30, 2024 | Loans | Loans | Notes | JV | Equity | Investments | ||||||||||||
Fair value, beginning of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Funding of investments |
| |
|
| — |
| — |
|
| — |
|
| |
| | |||
Non-cash interest income |
| |
|
| — |
| |
|
| — |
|
| — |
| | |||
Accretion of discount |
| |
|
| |
| |
|
| — |
|
| — |
| | |||
Proceeds from paydowns and sales |
| ( |
|
| ( |
| — |
|
| — |
|
| — |
| ( | |||
Conversions |
| ( |
|
| ( |
| |
|
| — |
|
| |
| — | |||
| ( |
|
| ( |
| — |
|
| — |
|
| — |
| ( | ||||
| |
|
| |
| ( |
|
| — |
|
| ( |
| ( | ||||
Fair value, end of period | $ | |
| $ | |
| $ | |
| $ | |
| $ | | $ | | ||
Change in unrealized appreciation (depreciation) on investments still held as of June 30, 2024 | $ | ( | $ | | $ | ( | $ | — | $ | ( | $ | ( | ||||||
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.
59
The following tables summarize the significant unobservable inputs the Company used to value the majority of its investments categorized within Level 3 as of June 30, 2025 and December 31, 2024. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values. These ranges represent the significant unobservable inputs that were used in the valuation of each type of investment, but they do not represent a range of values for any one investment.
Fair Value as of | Valuation | Unobservable | Range | ||||||
Investment Type | June 30, 2025 | Techniques | Inputs | (Weighted Average)(1) | |||||
First lien secured loans | $ | | Discounted cash flow analysis | Discount Rate | |||||
| Recent transaction | Transaction Price | |||||||
| Enterprise value analysis | EBITDA Multiple | |||||||
| Enterprise value analysis | Revenue Multiple | |||||||
| Expected repayment | Transaction Price | |||||||
| Option pricing Model | Volatility | |||||||
Second lien secured loans | | Discounted cash flow analysis | Discount rate | ||||||
Unsecured loans | | Discounted cash flow analysis | Discount rate | ||||||
Subordinated Notes to STRS JV | | Enterprise value analysis | n/a | n/a | |||||
Common equity | | Enterprise value analysis | EBITDA multiple | ||||||
| Enterprise value analysis | Revenue Multiple | |||||||
Preferred equity | | Enterprise value analysis | EBITDA multiple | ||||||
Warrant | | Enterprise value analysis | EBITDA multiple | ||||||
Total Level 3 Investments | $ | |
| (1) | Unobservable inputs were weighted by the relative fair value of the investments. |
Fair Value as of | Valuation | Unobservable | Range | ||||||
Investment Type | December 31, 2024 | Techniques | Inputs | (Weighted Average)(1) | |||||
First lien secured loans | $ | | Discounted cash flow analysis | Discount Rate | |||||
| Recent transaction | Transaction Price | |||||||
| Enterprise value analysis | EBITDA Multiple | |||||||
| Enterprise value analysis | Revenue Multiple | |||||||
| Expected repayment | Transaction Price | |||||||
| Collateral analysis | Recovery Rate | |||||||
| Market quotations | Broker quoted price | |||||||
| Option pricing Model | Volatility | |||||||
Second lien secured loans | | Discounted cash flow analysis | Discount rate | ||||||
Unsecured loans | | Discounted cash flow analysis | Discount rate | ||||||
Subordinated Notes to STRS JV | | Enterprise value analysis | n/a | n/a | |||||
Common equity | | Enterprise value analysis | EBITDA multiple | ||||||
| Enterprise value analysis | Revenue Multiple | |||||||
Preferred equity | | Enterprise value analysis | EBITDA multiple | ||||||
Warrant | | Enterprise value analysis | EBITDA multiple | ||||||
Total Level 3 Investments | $ | |
| (1) | Unobservable inputs were weighted by the relative fair value of the investments. |
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.
60
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 principal amount and fair value of the Company’s borrowings as of June 30, 2025 and December 31, 2024. 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. As of June 30, 2025, and December 31, 2024 the Credit Facility approximates its carrying value presented net of unamortized debt issuance costs and original issuance discount, net of accretion. The fair value of the Company’s
As of June 30, 2025 | As of December 31, 2024 | |||||||||||||
Fair | ||||||||||||||
| Value Level |
| Principal Amount Outstanding |
| Fair Value |
| Principal Amount Outstanding |
| Fair Value | |||||
2025 CLO Notes | 3 | $ | | $ | | $ | — | $ | — | |||||
JPM Credit Facility |
| 3 | — | — | | | ||||||||
| 3 |
| |
| | |
| | ||||||
3 | | |
| | | |||||||||
| 3 |
| |
| |
| |
| | |||||
| 3 |
| |
| | |
| | ||||||
3 | |
| | |
| | ||||||||
3 | | | | | ||||||||||
$ | | $ | | $ | | $ | | |||||||
61
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
Total borrowings outstanding and available as of June 30, 2025, were as follows:
| Maturity |
| Rate |
| Principal Amount Outstanding |
| Amortized Cost |
| Available | ||||
Credit Facility(1) |
| 1/17/2030 |
| S+ | % | $ | — | $ | ( | $ | | ||
2025 CLO Notes(2) | 5/25/2037 | S+ | % | | | — | |||||||
| 10/20/2025 |
| | % |
| |
| |
| — | |||
| 12/4/2026 |
| | % |
| |
| |
| — | |||
| 12/15/2026 |
| | % |
| |
| |
| — | |||
| 12/4/2027 |
| | % |
| |
| |
| — | |||
12/6/2028 | | % | | | — | ||||||||
9/15/2028 | | % | | | — | ||||||||
Total debt |
| $ | | $ | | $ | | ||||||
| (1) | All foreign denominated principal borrowings have been converted to USD using the exchange rates as of the applicable reporting date. |
| (2) | Amounts presented represent outstanding amounts held by external parties (i.e., not eliminated in consolidation) on an aggregate basis with the interest rate representing the weighted-average stated coupon rate based on principal amounts outstanding; refer to “2025 CLO Securitization” within this Note 6 for further details. |
Total borrowings outstanding and available as of December 31, 2024, were as follows:
| Maturity |
| Rate |
| Principal Amount Outstanding |
| Amortized Cost |
| Available | ||||
Credit Facility(1) |
| 11/22/2025 |
| + | % | $ | | $ | | $ | | ||
| 10/20/2025 |
| | % |
| |
| |
| — | |||
| 12/4/2026 |
| | % |
| |
| |
| — | |||
| 12/15/2026 |
| | % |
| |
| |
| — | |||
| 12/4/2027 |
| | % |
| |
| |
| — | |||
12/6/2028 | | % | | | — | ||||||||
9/15/2028 | | % | | | — | ||||||||
Total debt |
| $ | | $ | | $ | | ||||||
| (1) | All foreign denominated principal borrowings have been converted to USD using the exchange rates as of the applicable reporting date. |
62
Credit Facility: On December 23, 2015, WhiteHorse Credit entered into a revolving credit and security agreement with JPMorgan, as administrative agent, (the “Administrative Agent”) and lender (the “Credit Facility”).
On January 4, 2022, the terms of the Credit Facility were amended to continue to establish a temporary upsize to the borrowing capacity under the Credit Facility, which allowed WhiteHorse Credit to borrow up to $
On February 4, 2022, the terms of the Credit Facility were further amended to apply an annual interest rate equal to applicable plus
On March 30, 2022, the terms of the Credit Facility were further amended to (i) increase WhiteHorse Credit’s availability under the Credit Facility from $
On April 12, 2023, the terms of the Credit Facility were further amended to (i) apply an annual interest rate equal to the applicable base rate plus
On January 17, 2025, the terms of the Credit Facility were amended to, among other things, (i) reduce the applicable margins for interest rates to
On June 27, 2025, the terms of the Credit Facility were amended to, among other things, reduce the availability under the Credit Facility to $
The Credit Facility bears interest at plus
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 June 30, 2025, the Company had
As of December 31, 2024, the Company had $
2025 CLO Securitization: On June 10, 2025, the Company completed a $
63
the 2025 CLO Securitization that is held by external counterparties to the Company is subject to the Company’s regulatory asset coverage requirement.
The debt tranches offered in the 2025 CLO Securitization were issued by WHF CLO, a wholly-owned subsidiary of WhiteHorse Finance, and executed through a private placement comprised of both senior secured floating rate notes and loans (the “2025 Senior CLO Notes”) as well as subordinated notes (the “2025 Subordinated CLO Notes”). The 2025 Senior CLO Notes consisted of (i) $
The following table presents additional information on the 2025 CLO Notes issued in the 2025 CLO Securitization as of June 30, 2025:
June 30, 2025 | ||||||||
CLO Note Tranches | Maturity | Principal | Interest Rate | |||||
Class A Notes | 5/25/2037 | $ | (3M) + | |||||
Class B Notes(1) | 5/25/2037 | (3M) + | ||||||
Class C Notes(1) | 5/25/2037 | (3M) + | ||||||
2025 Subordinated CLO Notes(1) | 5/25/2037 | None | ||||||
Total Notes | $ | |||||||
| (1) | The Company retained the Class B Notes, Class C Notes and Subordinated Notes issued in the CLO Transaction, which are eliminated in consolidation. |
As part of the 2025 CLO Securitization, the Company entered into master loan sale agreements that provide for the sale of assets on the 2025 CLO Securitization closing date as well as for future sales from the Company to WHF CLO. The 2025 CLO Securitization is collateralized and secured by a diversified portfolio of senior secured loans or participation interests therein with the potential for reinvestment in (i) first and second lien loans or participation interests therein, (ii) corporate bonds or (iii) loans made to a debtor-in-possession pursuant to Section 364 of the Bankruptcy Code (“DIP loans”). Through May 25, 2029, all principal collections received on the underlying collateral may be used by WHF CLO to purchase new collateral (allowing the Company to maintain the initial leverage obtained in the 2025 CLO Securitization) under the direction of H.I.G. Capital, L.L.C., an affiliate of the Investment Advisor, in its capacity as the collateral manager to WHF CLO (the “CLO Investment Manager”), and in accordance with the Company’s investment strategy and subject to customary conditions set forth in the documents governing the 2025 CLO Securitization; any fees that the CLO Investment Manager would otherwise be entitled to for providing such services has been waived. The 2025 CLO Notes are scheduled to mature on May 5, 2037; however, they may be redeemed by the Company, at the written direction of (i) a majority of the Subordinated Notes (with the consent of the CLO Investment Manager) or (ii) the CLO Investment Manager (with the consent of a majority of the 2025 Subordinated CLO Notes), in each case, on any business day on or after June 10, 2027.
As of June 30, 2025, there were
The interest charged under the 2025 CLO Securitization is based on three-month Term SOFR. For the three and six months ended June 30, 2025, the components of interest expense, cash paid for interest, annualized average stated interest rates and average outstanding balances for the 2025 CLO Securitization were as follows:
64
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2025 CLO Notes Interest Expense ($ in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Stated Interest Expense | $ | | $ | — | $ | | $ | — | |||||
Amortization of debt issuance costs | | — | | — | |||||||||
Total interest and other debt financing costs | $ | | $ | — | $ | | $ | — | |||||
Capital paid for interest expense | $ | — | $ | — | $ | — | $ | — | |||||
Annualized average stated interest rate | | % | — | | % | — | |||||||
Average outstanding balance | $ | | $ | — | $ | | $ | — | |||||
65
semiannually on June 6 and December 6, at a fixed, annual rate of
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. On October 30, 2024, at an in-person meeting, the Company’s board of directors approved a second amended and restated investment advisory agreement, which was executed by the Company on February 22, 2024 (the “Investment Advisory Agreement”). 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
Base Management Fee
Effective January 1, 2024, the base management fee is calculated at an annual rate equal to
66
Prior to January 1, 2024, the base management fee is calculated at an annual rate of
The following table details management fee expenses for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | ||||||||||||
Management Fees ($ in thousands) |
| 2025 | 2024 |
| 2025 | 2024 |
| ||||||
Base management fees | $ | | $ | | $ | | $ | | |||||
Total management fees | $ | | $ | | $ | | $ | | |||||
As of June 30, 2025 and December 31, 2024, management fees payable on the consolidated statements of assets and liabilities were $
Performance-based Incentive Fee
The performance-based incentive fee consists of
The calculations of these
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
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,
67
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:
| ● |
| ● | 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
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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.
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.
The following table provides a breakdown of the performance-based incentive fees for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | ||||||||||||
Performance-based Incentive Fees ($ in thousands) |
| 2025 | 2024 |
| 2025 | 2024 |
| ||||||
Income incentive fee | $ | | $ | | $ | | $ | | |||||
Capital gains incentive fee | — | — | — | — | |||||||||
Total performance-based incentive fees | $ | | $ | | $ | | $ | | |||||
As of June 30, 2025 and December 31, 2024, incentive fees payable on the consolidated statements of assets and liabilities were $
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
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 both the three and six months ended June 30, 2025 and 2024, the Company incurred $
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Co-investments with Related Parties: As of June 30, 2025 and December 31, 2024, no officers or employees affiliated with or employed by WhiteHorse Advisers and its related entities maintained any co-investments in the Company’s or STRS JV’s investments.
As of June 30, 2025 and December 31, 2024, certain funds affiliated with WhiteHorse Advisers and its related entities maintained co-investments in the Company’s or STRS JV’s investments of $
STRS JV: For the three and six months ended June 30, 2025, the Company sold $
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 $
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The following table summarizes the Company’s unfunded commitments as of June 30, 2025 and December 31, 2024:
Unfunded Commitments ($ in thousands) |
| As of June 30, 2025 |
| As of December 31, 2024 | ||
Revolving Loan Commitments: | ||||||
Bridgepoint Healthcare, LLC | $ | | $ | | ||
BUSA Acquisition Co. (d/b/a BankCard USA Merchant Services Inc.) | | | ||||
Claridge Products and Equipment, LLC | | | ||||
Coastal Television Broadcasting Group LLC | | | ||||
EducationDynamics, LLC | | | ||||
ELM One Call Locators, Inc. (d/b/a One Call Locators, Ltd.) | | — | ||||
Gulf Winds International Acquisition LLC (d/b/a Gulf Winds International, Inc.) | | | ||||
Infotree Holdco LLC (d/b/a Infotree Global Solutions LLC) | | — | ||||
Juniper Landscaping Holdings LLC | | — | ||||
Leviathan Intermediate Holdco, LLC | | | ||||
LogicMonitor, Inc. | | | ||||
Midwest Texas Tea CA, LLC (d/b/a US Petroleum Partners, LLC) | | | ||||
MGT Merger Target, LLC (d/b/a MGT Consulting Group) | | — | ||||
M&M OpCo, LLC (d/b/a Escalent, Inc.) | | | ||||
NM Z Holdco Inc. (d/b/a Zep, Inc.) | | — | ||||
PANOS Brands, LLC | | | ||||
Pavement Partners Interco, LLC (d/b/a Pave America, LLC) | | — | ||||
Quest Events, LLC | | — | ||||
Ribbon Communications Operating Company, Inc. (d/b/a Ribbon Communications Inc.) | | | ||||
Salon Republic Holdings, LLC (d/b/a Salon Republic, LLC) | | | ||||
Sleep OpCo LLC (d/b/a Brooklyn Bedding LLC) | | | ||||
Surge Amuze Holdings Inc. (d/b/a Amuze Products II, Inc.) | | | ||||
Telestream Holdings Corporation | — | | ||||
Telestream 2 LLC (d/b/a Telestream Holdings Corporation) | | — | ||||
The Kyjen Company, LLC (d/b/a Outward Hound) | | — | ||||
TOT Group, Inc. (d/b/a Netevia Group LLC) | | | ||||
Trailhead Media LLC | — | | ||||
W&A Intermediate Co., LLC (d/b/a Wakefield & Associates, LLC) | | | ||||
W Electric Intermediate Holdings, LLC (d/b/a Westinghouse Electric Corporation) | | | ||||
Zephyr Buyer, L.P. (d/b/a The Weather Company, LLC) | | | ||||
Total unfunded revolving loan commitments | | | ||||
Delayed Draw Loan Commitments: | ||||||
Apollon Holdings, LLC (d/b/a Apollon Wealth Management, LLC) | | — | ||||
Arcserve Cayman Opco LP (d/b/a Arcserve (USA), LLC) | | | ||||
Avision Holdings, LLC (d/b/a Avision Sales Group) | | | ||||
Camarillo Fitness Holdings, LLC (f/k/a Honors Holdings, LLC) | | — | ||||
Juniper Landscaping Holdings LLC | | — | ||||
Kelso Industries LLC | | | ||||
MGT Merger Target, LLC (d/b/a MGT Consulting Group) | | — | ||||
Pavement Partners Interco, LLC (d/b/a Pave America, LLC) | | — | ||||
Salon Republic Holdings, LLC (d/b/a Salon Republic, LLC) | | | ||||
Surge Amuze Holdings Inc. (d/b/a Amuze Products II, Inc.) | | | ||||
TOT Group, Inc. (d/b/a Netevia Group LLC) | | | ||||
Trailhead Media LLC | — | | ||||
W&A Intermediate Co., LLC (d/b/a Wakefield & Associates, LLC) | | | ||||
Total unfunded delayed draw loan commitments | | | ||||
Total Unfunded Commitments | $ | | $ | | ||
As of June 30, 2025 and December 31, 2024, the Company had commitments to fund equity interests and subordinated notes in STRS JV of $
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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 Administrator 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.
NOTE 9 - STOCKHOLDERS’ EQUITY
On March 31, 2023, the Company launched an “at-the-market” offering (the “ATM Program”) by entering into an Equity Distribution Agreement with B. Riley Securities, Inc. pursuant to which the Company may offer and sell, from time to time, through B. Riley Securities, Inc., as the sales agent, shares of its common stock having an aggregate offering amount of up to $
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NOTE 10 - FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights:
| Six months ended June 30, | ||||||
| 2025 |
| 2024 |
| |||
Per share data:(1) |
|
|
|
| |||
Net asset value, beginning of period | $ | |
| $ | | ||
Net investment income |
| |
| | |||
Net realized and unrealized gains (losses) on investments and foreign currency transactions | ( | ( | |||||
Net increase in net assets resulting from operations |
| |
| | |||
Distributions declared from net investment income |
| ( |
| ( | |||
Net asset value, end of period | $ | |
| $ | | ||
Total annualized return based on market value(2) |
| ( | % | ( | % | ||
Total annualized return based on net asset value |
| | % | | % | ||
Net assets, end of period | $ | | $ | | |||
Per share market value at end of period | $ | | $ | | |||
Shares outstanding end of period |
| |
| | |||
Ratios/Supplemental Data:(3) |
|
|
|
| |||
Ratio of expenses before incentive fees to average net assets(4) |
| | % |
| | % | |
Ratio of incentive fees to average net assets |
| | % |
| | % | |
Ratio of total expenses to average net assets(4) |
| | % |
| | % | |
Ratio of net investment income to average net assets(4) |
| | % |
| | % | |
Portfolio turnover ratio |
| | % |
| | % | |
| (1) | Based on actual number of shares outstanding at the end of the period or the weighted average shares outstanding for the period, unless otherwise noted, as appropriate. |
| (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 DRIP. |
| (3) | With the exception of the portfolio turnover rate, ratios are reported on an annualized basis. |
| (4) | 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.
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NOTE 11 - 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 or decrease in net assets resulting from operations:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
($ in thousands except share and per share amounts) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
Net increase (decrease) in net assets resulting from operations | $ | | $ | | $ | | $ | | |||||
Weighted average shares outstanding |
| |
| |
| |
| | |||||
Basic and diluted per share net increase (decrease) in net assets resulting from operations | $ | | $ | | $ | | $ | | |||||
NOTE 12 – SEGMENT REPORTING
The Company operates through a single reporting segment, with an investment strategy to generate current income and, to a lesser extent, capital appreciation primarily through direct origination of senior secured debt and select equity investments. The Chief Operating Decision Maker (“CODM”), who are the Company’s chief executive officer and chief financial officer, are responsible for assessing performance and allocating resources on behalf of the Company. The CODM assesses performance and makes operating decisions of the Company on a consolidated basis primarily based on the Company’s net increase (decrease) in net assets resulting from operations. In addition to various other factors and metrics, the CODM utilizes net increase (decrease) in net assets resulting from operations as a key metric in implementing investment policy decisions and in evaluating the Company’s distribution policy. As the Company operates as a single reporting segment, the segment assets are reflected on the accompanying consolidated statement of assets and liabilities as “total assets” and the significant segment expenses are listed on the accompanying consolidated statement of operations.
NOTE 13 - SUBSEQUENT EVENTS
Management has evaluated events that have occurred after the balance sheet date but before the consolidated financial statements are issued and has determined that there were no additional subsequent events requiring adjustment or disclosure in the consolidated financial statements.
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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; |
| ● | the ability of our portfolio companies to achieve their objectives; |
| ● | our contractual arrangements and relationships with third parties; |
| ● | the impact of sustained high interest rates; |
| ● | changes in political, economic or industry conditions, including the imposition or increase of tariffs or other trade-related impositions imposed on foreign goods imported by the United States or on U.S. goods imported by foreign countries and 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 ongoing global conflicts and wars; |
| ● | elevated levels of inflation, and the potential impact of inflation on our portfolio companies and on the industries in which we invest; |
| ● | the impact of interruptions in the supply chain on our portfolio companies; |
| ● | 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 ability to maintain our qualification as a BDC, and as a RIC under the Code; |
| ● | 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; |
| ● | the impact of future acquisitions and divestitures; and |
| ● | the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K and elsewhere in this quarterly report on Form 10-Q. |
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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 1940 Act defined above. 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 two private funds that were advised by 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 LLC 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. Concurrent with the IPO, certain of our directors and officers, the managers of H.I.G. WhiteHorse Advisers, LLC (“WhiteHorse Advisers” or the “Investment Adviser”) 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 of common stock 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 index rate such as the Secured Overnight Financing Rate, or SOFR, 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 the Investment Advisory Agreement, we have agreed to pay WhiteHorse Advisers an annual base management fee based on our average
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consolidated gross assets as well as an incentive fee based on our investment performance. 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.
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 SOFR or an equivalent 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:
| ● | our organization; |
| ● | 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; |
| ● | registration fees; |
| ● | listing fees; |
| ● | taxes; |
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| ● | 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; |
| ● | our fidelity bond; |
| ● | 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 or WhiteHorse Administration may pay for certain expenses that we incur, which are subject to reimbursement by us.
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Recent Developments
For the period July 1, 2025 through August 7, 2025, we contributed two additional assets to the STRS JV, which included two issuers of senior secured debt facilities held as of June 30, 2025.
Consolidated Results of Operations
Comparison of the Three and Six Months Ended June 30, 2025 and June 30, 2024
Set forth below are the consolidated results of operations for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Three Months | Six months ended June 30, | 2025 vs 2024 | |||||||||||||||
($ in thousands) | 2025 | 2024 | Variance | 2025 | 2024 | Variance | ||||||||||||
Total investment income | $ | 18,838 | $ | 23,482 | $ | (4,644) | $ | 37,639 | $ | 48,957 | $ | (11,318) | ||||||
Total expenses | 12,276 | 14,190 | (1,914) | 24,234 | 28,850 | (4,616) | ||||||||||||
Net investment income | 6,562 | 9,292 | (2,730) | 13,405 | 20,107 | (6,702) | ||||||||||||
Net realized gains/(losses) on investments and foreign currency transactions | (22,045) | (93) | (21,952) | (22,447) | (5,727) | (16,720) | ||||||||||||
Net change in unrealized gains/(losses) on investments and foreign currency transactions | 17,733 | (1,360) | 19,093 | 15,556 | (572) | 16,128 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 2,250 | $ | 7,839 | $ | (5,589) | $ | 6,514 | $ | 13,808 | $ | (7,294) | ||||||
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 or decrease 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, period to period comparisons of net increases or decreases in net assets resulting from operations may not be meaningful.
Consolidated operating results for the three and six months ended June 30, 2025 and 2024 are as follows:
Net Investment Income
Net investment income for the three and six months ended June 30, 2025 totaled $6.6 million and $13.4 million, respectively. Net investment income for the three and six months ended June 30, 2024 totaled $9.3 million and $20.1 million, respectively. Net investment income decreased by $2.7 million and $6.7 million for the three and six months ended June 30, 2025 from the three and six months ended June 30, 2024, as described below under “Investment Income” and “Operating Expenses.”
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Investment Income
The following table summarizes our investment income for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Three Months | Six months ended June 30, | 2025 vs 2024 | |||||||||||||||
($ in thousands) | 2025 | 2024 | Variance | 2025 | 2024 | Variance | ||||||||||||
Investment income (excluding STRS JV): | ||||||||||||||||||
Interest income other than payment-in-kind ("PIK") | $ | 13,986 | $ | 17,274 | $ | (3,288) | $ | 27,934 | $ | 35,259 | $ | (7,325) | ||||||
PIK income | 653 | 1,834 | (1,181) | 1,344 | 3,866 | (2,522) | ||||||||||||
Fee and dividend income | 772 | 462 | 310 | 1,268 | 1,128 | 140 | ||||||||||||
Investment income of STRS JV: | ||||||||||||||||||
Interest and dividend income | $ | 3,427 | $ | 3,912 | $ | (485) | $ | 7,093 | $ | 8,704 | $ | (1,611) | ||||||
Total investment income | $ | 18,838 | $ | 23,482 | $ | (4,644) | $ | 37,639 | $ | 48,957 | $ | (11,318) | ||||||
Interest income other than PIK income, decreased $3.3 million and $7.3 million for the three and six months ended June 30, 2025 from the three and six months ended June 30, 2024, primarily attributable to lower yields, investments placed on non-accrual status and lower portfolio size. For the three and six months ended June 30, 2025, the weighted average size of the debt portfolio, excluding STRS JV, and the weighted average yield on income producing investments, excluding STRS JV, was $549.6 million and $553.7 million, and 11.9% and 12.0%, respectively. For the three and six months ended June 30, 2024, the weighted average size of the debt portfolio, excluding STRS JV, and the weighted average yield on income producing investments, excluding STRS JV, was $583.9 million and $597.0 million and 13.8% and 13.7% respectively. During the three months ended June 30, 2024 and three months ended September 30, 2024, the Honors Holdings, LLC (d/b/a Orange Theory) and Telestream Holdings Corporation investments were placed on non-accrual status, respectively.
PIK income decreased by $1.2 million for the three months ended June 30, 2025 from the three months ended June 30, 2024, primarily due to $0.9 million of PIK income earned on the Honors Holdings, LLC (d/b/a Orange Theory) investments during the three months ended June 30, 2024. PIK income decreased $2.5 million for the six months ended June 30, 2025 from the six months ended June 30, 2024 due to higher PIK income earned in the six months ended June 30, 2025, primarily due to $1.6 million on the Telestream Holdings Corporation and $0.9 million on the Honors Holdings, LLC (d/b/a Orange Theory) investments, respectively.
We may invest in loans that contain a PIK interest rate provision where 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. For the three and six months ended June 30, 2025, PIK income as a percentage of total investment income was 3.5% and 3.6%, respectively. For the three and six months ended June 30, 2024, PIK income as a percentage of total investment income was 7.8% and 7.9%, respectively.
Fee and dividend income increased by $0.3 million for the three months ended June 30, 2025 from the three months ended June 30, 2024, due to higher non-recurring fee income. We expect to generate some level of non-recurring fee income during most quarters from prepayments, amendments and other sources. For the three and six months ended June 30, 2025, we earned non-recurring fee income of $0.7 million and $1.1 million, respectively. For the three and six months ended June 30, 2024, we earned non-recurring fee income of $0.3 million and $0.9 million, respectively.
Interest and dividend income from STRS JV decreased by $0.5 million and $1.6 million for the three and six months ended June 30, 2025 from the three months ended June 30, 2024, primarily attributable to a decrease in base rates and portfolio yields.
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Operating Expenses
The following table summarizes our expenses for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Three Months | Six months ended June 30, | 2025 vs 2024 | |||||||||||||||
($ in thousands) | 2025 | 2024 | Variance | 2025 | 2024 | Variance | ||||||||||||
Interest expense | $ | 6,141 | $ | 7,144 | $ | (1,003) | $ | 12,326 | $ | 14,474 | $ | (2,148) | ||||||
Base management fees | 2,844 | 3,065 | (221) | 5,677 | 6,182 | (505) | ||||||||||||
Performance-based incentive fees | 1,640 | 2,323 | (683) | 3,351 | 5,026 | (1,675) | ||||||||||||
Administrative service fees | 170 | 170 | — | 341 | 341 | — | ||||||||||||
General and administrative expenses | 1,295 | 1,221 | 74 | 2,248 | 2,268 | (20) | ||||||||||||
Total expenses, before excise tax | 12,090 | 13,923 | (1,833) | 23,943 | 28,291 | (4,348) | ||||||||||||
Excise tax | 186 | 267 | (81) | 291 | 559 | (268) | ||||||||||||
Total expenses, including excise tax | $ | 12,276 | $ | 14,190 | $ | (1,914) | $ | 24,234 | $ | 28,850 | $ | (4,616) | ||||||
Interest expense decreased by $1.0 million and $2.1 million for the three and six months ended June 30, 2025 from the three and six months ended June 30, 2024, primarily due to lower weighted average borrowing base and weighted average interest rate. For the three and six months ended June 30, 2025, the weighted average outstanding borrowings were $371.3 million and $370.6 million at a weighted average interest rate of 5.72% and 5.79%, respectively. For the three and six months ended June 30, 2024, the weighted average outstanding borrowings were $386.0 million and $392.0 million at a weighted average interest rate of 6.48% and 6.51%, respectively.
Base management fees decreased by $0.2 million and $0.5 million for the three and six months ended June 30, 2025 from the three months ended June 30, 2024, primarily due to lower gross assets.
Performance-based incentive fees decreased by $0.7 million and $1.7 million for the three and six months ended June 30, 2025 from the three and six months ended June 30, 2024, primarily due to lower pre-incentive fee net investment income. For the three and six months ended June 30, 2025 and 2024, there were no capital gains incentive fee expenses incurred.
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.
Excise tax was $0.2 million and $0.3 million for the three and six months ended June 30, 2025, respectively. Excise tax was $0.3 million and $0.6 million for the three and six months ended June 30, 2024, respectively. As of June 30, 2025 and December 31, 2024, we accrued a net federal excise tax expense of $0.4 million and $1.1 million, respectively.
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Net Realized and Unrealized Gains (Losses) on Investments
The following table shows the breakdown of net realized gains and losses on investments for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | |||||||||||
($ in millions) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
AG Kings Holdings Inc.(1) | $ | — | $ | 0.1 | $ | — | $ | 0.6 | ||||
American Crafts, LC | (21.0) |
| — |
| (21.0) |
| — | |||||
Atlas Purchaser, Inc. (d/b/a Aspect Software, Inc.) | — |
| — |
| — |
| (3.1) | |||||
Foodservices Brand Group, LLC (d/b/a Crown Brands Group) |
| — |
| — |
| — |
| (2.9) | ||||
Manchester Acquisition Sub LLC (d/b/a Draslovka Holding AS) | — | (0.2) | — | (0.2) | ||||||||
Project Castle, Inc. (d/b/a Material Handling Systems, Inc.) | — | — | — | (0.2) | ||||||||
Token Buyer, Inc. (d/b/a Therm-O-Disc, Inc.) | (0.3) | — | (0.7) |
| — | |||||||
Other(2) |
| — |
| — |
| — |
| 0.1 | ||||
Total net realized gains/(losses) on investments | $ | (21.3) | $ | (0.1) | $ | (21.7) | $ | (5.7) | ||||
| (1) | Escrow receivable amounts were recognized in connection with cash proceeds received from realization events. |
| (2) | Includes various investments with aggregate realized gains or losses less than $50,000. |
The following table shows the breakdown in the changes in unrealized appreciation and depreciation of investments for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | |||||||||||
($ in millions) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Gross unrealized appreciation on investments | $ | 3.9 | $ | 3.9 | $ | 4.9 | $ | 6.8 | ||||
Gross unrealized depreciation on investments |
| (6.7) |
| (5.4) |
| (9.5) |
| (11.0) | ||||
Reversal of prior period net unrealized (appreciation) depreciation upon a realization(1) |
| 20.5 |
| — |
| 20.1 |
| 3.1 | ||||
Total unrealized appreciation (depreciation) on investments | $ | 17.7 | $ | (1.5) | $ | 15.5 | $ | (1.1) | ||||
| (1) | The six months ended June 30, 2024 includes reversal of unrealized appreciation of $0.4 million from the collection of the AG Kings Holdings Inc. escrow receivable. |
Financial Condition, Off-Balance Sheet Arrangements, Liquidity and Capital Resources
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 WHF CLO, 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 and restricted foreign currency include amounts that are collected and held by the custodians or trutees who have been appointed as custodian of the assets securing certain of the Company’s
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financing transactions including the Credit Facility and the 2025 CLO Securitization. Restricted cash and cash equivalents and restricted foreign currency are held by the trustee for the payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets. Restricted amounts that represent interest or fee income are transferred to unrestricted cash accounts by the trustees generally once a quarter after the payment of operating expenses and other amounts due under the respective credit, indenture or other governing agreements for the Company’s financing transactions as more fully discussed below, pertaining to the Credit Facility and the 2025 CLO Securitization.
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 June 30, 2025 and December 31, 2024, we had commitments to fund approximately $38.2 million and $26.4 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.
Our operating activities provided cash and cash equivalents of $14.7 million during the six months ended June 30, 2025, primarily from realizations and repayments on our investments, partially offset from acquisition of investments and cash used from the net change in working capital. Our financing activities used cash and cash equivalents of $9.3 million during the six months ended June 30, 2025, primarily due to payment of distributions to stockholders and repayment of net borrowings on the Credit Facility, offset with the issuance of the 2025 CLO Notes.
Our operating activities provided cash and cash equivalents of $43.1 million during the six months ended June 30, 2024, primarily from the net proceeds received from realizations and repayments on our investments, partially offset by acquisition of investments and cash used from the net change in working capital. Our financing activities used cash and cash equivalents of $45.8 million during the six months ended June 30, 2024, primarily for repayments on the Credit Facility and the payment of distributions to stockholders.
As of June 30, 2025, we had cash and cash equivalent resources of $33.3 million, including $22.7 million of restricted cash. As of June 30, 2025, we had approximately $100.0 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, 2024, we had cash and cash equivalent resources of $27.8 million, including $15.4 million of restricted cash. As of December 31, 2024, we had approximately $173.5 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.
STRS JV
In January 2019, we and STRS Ohio formed a joint venture, STRS JV, that 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 index rate based on SOFR, or an equivalent index rate and have a term of three to six years. STRS JV invests in portfolio companies in the same industries in which we may directly invest. STRS JV was formed as a Delaware LLC 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 June 30, 2025, STRS JV had total assets of $351.0 million. As of December 31, 2024, STRS JV had total assets of $309.1 million.
We provide capital to STRS JV in the form of LLC equity interests and subordinated notes. In February 2023, we increased our capital commitment to the STRS JV in the amount of an additional $15.0 million, bringing our total capital commitment to the STRS JV to $115.0 million, comprised of $92.0 million of subordinated notes and $23.0 million of LLC equity interests. We previously increased our capital commitment in February 2022 to the STRS JV in the amount of an additional $25.0 million, bringing our then total capital commitment to the STRS JV to $100.0 million, comprised of $80.0 million of subordinated notes and $20.0 million of LLC equity interests.
As of both June 30, 2025 and December 31, 2024, we and STRS Ohio owned approximately 65.71% and 34.29%, respectively, of the LLC equity interests of STRS JV. As of both June 30, 2025 and December 31, 2024, our investment
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in STRS JV consisted of equity contributions and subordinated note advance commitments of $23.0 million and $92.0 million, respectively, of which $1.9 million and $7.6 million were unfunded, respectively.
STRS JV is managed by a four-person board of managers, two of whom are selected by us and two of whom are selected by STRS Ohio. All material decisions with respect to STRS JV, including those involving its investment portfolio, require unanimous approval of a quorum of the board of managers. Quorum is defined as (i) the presence of two members of the board of managers; provided that at least one individual is present that was elected, designated or appointed by each member; (ii) the presence of three members of the board of managers; provided that the individual that was elected, designated or appointed by the member with only one individual present is entitled to cast two votes on each matter; or (iii) the presence of four members of the board of managers; provided that two individuals are present that were elected, designated or appointed by each member.
Below is a summary of STRS JV’s portfolio as of June 30, 2025 and December 31, 2024:
($ in thousands) |
| As of June 30, 2025 |
| As of December 31, 2024 | |||
Total investments(1) | $ | 330,187 | $ | 294,957 | |||
Weighted average effective yield on total portfolio(2) | 10.6 | % | 11.1 | % | |||
Number of portfolio companies in STRS JV | 43 | 38 | |||||
Largest portfolio company investment(1) | 17,937 | 17,949 | |||||
Total of five largest portfolio company investments(1) | 79,846 | 79,058 | |||||
| (1) | At fair value. |
| (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. |
STRS JV’s investments consisted of the following:
As of June 30, 2025 | As of December 31, 2024 | |||||||||||
($ in thousands) |
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | ||||
First lien secured loans | $ | 329,911 | $ | 330,187 | $ | 296,752 | $ | 294,957 | ||||
Total | $ | 329,911 | $ | 330,187 | $ | 296,752 | $ | 294,957 | ||||
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The following table shows the portfolio composition by industry grouping at fair value:
Industry ($ in thousands) | As of June 30, 2025 | As of December 31, 2024 | |||||||||
Advertising |
| $ | 18,510 |
| 5.6 | % | $ | 12,035 |
| 4.1 | % |
Aerospace & Defense | — | — | 3,682 | 1.2 | |||||||
Air Freight & Logistics |
| 3,291 |
| 1.0 | 3,311 |
| 1.1 | ||||
Broadline Retail | 17,640 | 5.3 | 17,827 | 6.0 | |||||||
Building Products | 22,379 | 6.8 | 13,437 | 4.6 | |||||||
Commodity Chemicals | 6,950 | 2.1 | — | — | |||||||
Construction & Engineering | 18,737 | 5.7 | 16,253 | 5.5 | |||||||
Data Processing & Outsourced Services | 13,318 | 4.0 | 12,885 | 4.4 | |||||||
Distributors | 9,345 | 2.8 | 9,372 | 3.2 | |||||||
Diversified Support Services | 18,699 | 5.7 | 19,282 | 6.5 | |||||||
Electrical Components & Equipment | 3,383 | 1.0 | 3,479 | 1.2 | |||||||
Environmental & Facilities Services | 29,184 | 8.8 | 29,963 | 10.2 | |||||||
Food Distributors | 4,939 | 1.5 | 4,993 | 1.7 | |||||||
Health Care Facilities | 8,403 | 2.5 | 8,004 | 2.7 | |||||||
Health Care Services | 4,979 | 1.5 | 4,995 | 1.7 | |||||||
Health Care Supplies | 4,954 | 1.5 | 7,696 | 2.6 | |||||||
Health Care Technology | 4,152 | 1.3 | — | — | |||||||
Household Appliances | 8,244 | 2.5 | 7,632 | 2.6 | |||||||
Human Resource & Employment Services | 2,493 | 0.8 | — | — | |||||||
IT Consulting & Other Services | 33,569 | 10.2 | 32,720 | 11.1 | |||||||
Packaged Foods & Meats | 7,062 | 2.1 | 7,009 | 2.4 | |||||||
Paper & Plastic Packaging Products & Materials | 14,785 | 4.5 | 14,881 | 5.0 | |||||||
Personal Care Products | 3,868 | 1.2 | — | — | |||||||
Pharmaceuticals | 17,092 | 5.2 | 15,461 | 5.2 | |||||||
Real Estate Services |
| 13,662 |
| 4.1 | 13,782 |
| 4.7 | ||||
Research & Consulting Services | 12,060 | 3.7 | 11,977 | 4.1 | |||||||
Technology Hardware, Storage & Peripherals | 17,938 | 5.4 | 17,949 | 6.1 | |||||||
Water Utilities | 4,251 | 1.3 | — | — | |||||||
Wireless Telecommunication Services | 6,300 | 1.9 | 6,332 | 2.1 | |||||||
Total | $ | 330,187 | 100.0 | % | $ | 294,957 | 100.0 | % | |||
See Note 4 to our consolidated financial statements for further discussion on STRS JV’s portfolio and selected balance sheet information as of June 30, 2025 and December 31, 2024 and selected statement of operations information for the three and six months ended June 30, 2025 and 2024.
At-the-Market Offering
On March 31, 2023, we entered into an equity distribution agreement, or the Equity Distribution Agreement, with WhiteHorse Advisers, WhiteHorse Administration and B. Riley Securities, Inc., as the sales agent, or the Sales Agent, in connection with the sale of shares of our common stock, with an aggregate offering price of up to $35.0 million. The Equity Distribution Agreement provides that we may offer and sell shares of our common stock from time to time through the Sales Agent in amounts and at times to be determined by us (the “ATM Offering”). Actual sales will depend on a variety of factors to be determined by us from time to time, including market conditions and the trading price of our common stock. We expect to use all or substantially all of the net proceeds from the ATM Offering to invest in portfolio companies in accordance with our investment objective and strategies and for general corporate purposes.
Credit Facility
On December 23, 2015, our wholly owned subsidiary WhiteHorse Credit I, LLC, or WhiteHorse Credit, entered into the Credit Facility.
On January 4, 2022, the terms of the Credit Facility were amended to, among other things, continue to establish a temporary upsize to the borrowing capacity under the Credit Facility, which allowed WhiteHorse Credit to borrow up to $335.0 million for a four-month period that originally began on October 4, 2021.
On February 4, 2022, the terms of the Credit Facility were further amended to, among other things apply an annual interest rate equal to applicable SOFR plus 2.50% to any borrowings under the Credit Facility.
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On March 30, 2022, the terms of the Credit Facility were further amended to, among other things: (i) increase WhiteHorse Credit’s availability under the Credit Facility from $310.0 million to $335.0 million; (ii) retain an accordion feature which allows for the expansion of the borrowing limit up to $375.0 million; and (iii) increase the minimum funding amount from $217.0 million to $234.5 million.
On April 12, 2023, the terms of the Credit Facility were amended to (i) apply an annual interest rate equal to the applicable base rate plus 2.50% to any USD denominated borrowings, and (ii) convert to SOFR for USD denominated borrowings effective June 6, 2023.
On January 17, 2025, the terms of the Credit Facility were amended to, among other things, (i) reduce the applicable margins for interest rates to 2.25%, (ii) extend the non-call period to January 17, 2027, (iii) extend the reinvestment period to January 17, 2028, and (iv) extend the scheduled termination date to January 17, 2030.
On June 27, 2025, the terms of the Credit Facility were amended to, among other things, reduce the availability under the Credit Facility to $100.0 million from $335.0 million.
As of June 30, 2025, the Credit Facility provided for borrowings in an aggregate principal amount up to $100.0 million. As of June 30, 2025, there is no required minimum outstanding borrowings under the Credit Facility.
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: (i) a borrowing base test and (ii) 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, as amended and restated from time to time, in connection therewith (the “Amended Loan Agreement”), and related documentation. To meet the borrowing base test, this ratio must be less than or equal to 60%, as set forth in the Amended Loan Agreement and related documentation. To meet the market value test, the value of WhiteHorse Credit’s portfolio investments must exceed a minimum of 167.5% of the aggregate outstanding amount of all Lender advances as set forth in the Amended Loan Agreement and related documentation.
Advances under the Credit Facility are based on SOFR for USD denominated borrowings plus an annual spread of 2.25%. The Credit Facility bears interest at EurIBOR for EUR denominated borrowings, CORRA for CAD denominated borrowings and SONIA for GBP denominated borrowings, plus a spread of 2.25% on outstanding borrowings. Interest is payable quarterly in arrears. WhiteHorse Credit is required to pay a non-usage fee which accrues at 0.55% 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 are due and payable, on January 17, 2030.
Prior to the Credit Facility amendment on January 17, 2025, advances under the Credit Facility were based on SOFR for USD denominated borrowings plus an annual spread of 2.50%. The Credit Facility bore interest at EurIBOR for EUR denominated borrowings, CORRA for CAD denominated borrowings and SONIA for GBP denominated borrowings, plus a spread of 2.35% on outstanding borrowings. Interest is payable quarterly in arrears. WhiteHorse Credit was 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.
The Credit Facility and the related documents require WhiteHorse Finance and WhiteHorse Credit to 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 Amended Loan 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
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Credit Facility or to exercise other remedies under the Amended Loan 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.
As of June 30, 2025, there were no outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility agreement, approximately $100.0 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 $186.8 million as of June 30, 2025.
As of December 31, 2024, there was $161.5 million in outstanding borrowings under the Credit Facility and, based on collateral and portfolio requirements stipulated in the Credit Facility agreement, approximately $173.5 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 $512.2 million as of December 31, 2024.
2025 CLO Securitization
On June 10, 2025, we completed a $298.15 million term debt securitization transaction (the “2025 CLO Securitization”). The 2025 CLO Securitization functions as a source of long-term balance sheet financing for a portion of our portfolio investments and, as a result, the debt issued in connection with the 2025 CLO Securitization that is held by external counterparties to the Company is subject to the Company’s regulatory asset coverage requirement.
The debt tranches offered in the 2025 CLO Securitization were issued by WHF CLO, a wholly-owned subsidiary of WhiteHorse Finance, and executed through a private placement comprised of both senior secured floating rate notes and loans (the “2025 Senior CLO Notes”) as well as subordinated notes (the “2025 Subordinated CLO Notes”). The 2025 Senior CLO Notes consisted of (i) $174.0 million of AAA-rated Class A Notes and Class A-L Loans, issued in the aggregate and pari passu to one another (the “Class A Notes”); (ii) $30.0 million of AA-rated Class B Notes (the “Class B Notes”); (iii) $24.0 million of A-rated Class C Notes (the “Class C Notes”). Additionally, $70.15 million of 2025 Subordinated CLO Notes were issued, which do not bear interest but are entitled to all of the residual principal and interest payments made on the loan portfolio of assets collateralizing the 2025 CLO Securitization, net of the interest expense and debt principal payments distributed to the holders of the 2025 Senior CLO Notes. The 2025 Senior CLO Notes, together with the 2025 Subordinated CLO Notes, are collectively referred to herein as the “2025 CLO Notes”. As of June 30, 2025, the Company indirectly retained $30.0 million of the Class B Notes, $24.0 million of the Class C Notes and $70.15 million of the 2025 Subordinated CLO Notes. The Class A Notes are included in the consolidated statements of assets and liabilities as debt of the Company. As of June 30, 2025, the Class B Notes, Class C Notes and 2025 Subordinated CLO Notes were eliminated in consolidation.
The following table presents additional information on the 2025 CLO Notes issued in the 2025 CLO Securitization as of June 30, 2025:
June 30, 2025 | ||||||||
CLO Note Tranches | Maturity | Principal | Interest Rate | |||||
Class A Notes | 5/25/2037 | $ | 174,000 | SOFR (3M) + 1.70% | ||||
Class B Notes(1) | 5/25/2037 | 30,000 | SOFR (3M) + 2.15% | |||||
Class C Notes(1) | 5/25/2037 | 24,000 | SOFR (3M) + 2.80% | |||||
2025 Subordinated CLO Notes(1) | 5/25/2037 | 70,150 | None | |||||
Total Notes | $ | 298,150 | ||||||
| (1) | The Company retained the Class B Notes, Class C Notes and Subordinated Notes issued in the CLO Transaction, which are eliminated in consolidation. |
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As part of the 2025 CLO Securitization, the Company entered into master loan sale agreements that provide for the sale of assets on the 2025 CLO Securitization closing date as well as for future sales from the Company to WHF CLO. The 2025 CLO Securitization is collateralized and secured by a diversified portfolio of senior secured loans or participation interests therein with the potential for reinvestment in (i) first and second lien loans or participation interests therein, (ii) corporate bonds or (iii) loans made to a debtor-in-possession pursuant to Section 364 of the Bankruptcy Code (“DIP loans”). Through May 25, 2029, all principal collections received on the underlying collateral may be used by WHF CLO to purchase new collateral (allowing the Company to maintain the initial leverage obtained in the 2025 CLO Securitization) under the direction of H.I.G. Capital, L.L.C., an affiliate of the Investment Advisor, in its capacity as the collateral manager to WHF CLO (the “CLO Investment Manager”), and in accordance with the Company’s investment strategy and subject to customary conditions set forth in the documents governing the 2025 CLO Securitization; any fees that the CLO Investment Manager would otherwise be entitled to for providing such services has been waived. The 2025 CLO Notes are scheduled to mature on May 5, 2037; however, they may be redeemed by the Company, at the written direction of (i) a majority of the Subordinated Notes (with the consent of the CLO Investment Manager) or (ii) the CLO Investment Manager (with the consent of a majority of the 2025 Subordinated CLO Notes), in each case, on any business day on or after June 10, 2027.
As of June 30, 2025, there were 38 portfolio companies with a total fair value of approximately $294.5 million securing the 2025 CLO Securitization. The pool of loans in the 2025 CLO Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.
5.375% 2025 Notes
On October 20, 2020, we entered into the 2025 Note Purchase Agreement to sell in a private offering $40 million of aggregate principal amount of unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities Act. Interest on the 5.375% 2025 Notes is payable semiannually on April 20 and October 20, at a fixed, annual rate of 5.375%. This interest rate is subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 5.375% 2025 Notes cease to have an investment grade rating. The 5.375% 2025 Notes mature on October 20, 2025, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. The 5.375% 2025 Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that we may issue. The closing of the transaction occurred on October 20, 2020. We used the net proceeds from this offering to redeem existing debt.
5.375% 2026 Notes
On December 4, 2020, we entered into the 2026 Note Purchase Agreement to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities Act. Interest on the 5.375% 2026 Notes is payable semiannually on June 4 and December 4, at a fixed, annual rate of 5.375%. This interest rate is subject to increase (up to 6.375%) in the event that, subject to certain exceptions, the 5.375% 2026 Notes cease to have an investment grade rating. The 5.375% 2026 Notes mature on December 4, 2026, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. The 5.375% 2026 Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that we may issue. The closing of the transaction occurred on December 4, 2020.
5.625% 2027 Notes
On December 4, 2020, we entered into the 2027 Note Purchase Agreement to sell in a private offering $10 million of aggregate principal amount of unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities Act. Interest on the 5.625% 2027 Notes is payable semiannually on June 4 and December 4, at a fixed, annual rate of 5.625%. This interest rate is subject to increase (up to 6.625%) in the event that, subject to certain exceptions, the 5.625% 2027 Notes cease to have an investment grade rating. The 5.625% 2027 Notes mature on December 4, 2027, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. The 5.625% 2027 Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that we may issue. The closing of the transaction occurred on December 4, 2020.
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4.000% 2026 Notes
On November 24, 2021, we completed a public offering of $75 million of aggregate principal amount of unsecured notes, the net proceeds of which were used to fund investments in debt and equity securities and repay outstanding indebtedness under the Credit Facility. Interest on the 4.000% 2026 Notes is paid semiannually on June 15, and December 15, at a fixed, annual rate of 4.00%. The 4.000% 2026 Notes will mature on December 15, 2026 and may be redeemed in whole or in part at any time prior to September 15, 2026, at par plus a “make-whole” premium, and thereafter at par. The 4.000% 2026 Notes are direct unsecured obligations and are structurally subordinate to borrowings under the Credit Facility and 2025 CLO Securitization and will rank pari passu with all outstanding and future unsecured unsubordinated indebtedness.
4.250% 2028 Notes
On December 6, 2021, we entered into the 2028 Note Purchase Agreement to sell in a private offering $25 million of aggregate principal amount of unsecured notes to qualified institutional investors in reliance on Section 4(a)(2) of the Securities Act. Interest on the 4.250% 2028 Notes is payable semiannually on June 6 and December 6, at a fixed, annual rate of 4.25%. This interest rate is subject to increase (up to 5.25%) in the event that, subject to certain exceptions, the 4.250% 2028 Notes cease to have an investment grade rating. The 4.250% 2028 Notes mature on December 6, 2028, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. The 4.250% 2028 Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness that we may issue. The closing of the transaction occurred on December 6, 2021.
7.875% 2028 Notes
On August 24, 2023, the Company completed a public offering of 7.875% 2028 Notes in aggregate principal amount of $30 million, the net proceeds of which were used to fund investments in debt and equity securities and repay outstanding indebtedness under its revolving credit facility. Additionally, the offering included an overallotment feature for up to an additional $4.5 million of aggregate principal amount under the same terms as the initial offering. On August 31, 2023, the underwriters fully exercised their option to purchase an additional $4.5 million, bringing the aggregate principal amount of the 7.875% 2028 Notes to $34.5 million. Interest on the 7.875% 2028 Notes is paid quarterly on March 15, June 15, September 15 and December 15 each year, at an annual rate of 7.875%. The 7.875% 2028 Notes will mature on September 15, 2028 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 September 15, 2025. The 7.875% 2028 Notes are direct unsecured obligations and are structurally subordinate to borrowings under the Credit Facility and 2025 CLO Securitization and will rank pari passu with all outstanding and future unsecured unsubordinated indebtedness we may issue. The 7.875% 2028 Notes are listed on the Nasdaq Global Select Market under the trading symbol “WHFCL”.
Portfolio Investments and Yield
As of June 30, 2025, our investment portfolio consisted primarily of senior secured loans across 132 positions in 71 companies with an aggregate fair value of $629.3 million. As of June 30, 2025, 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 SOFR) with five fixed-rate loan investments representing 1.3% based on fair value. As of June 30, 2025, our portfolio had an average investment size of $4.0 million based on fair value and average debt investment size of $5.0 million, with investment sizes ranging from zero to $22.3 million and a weighted average effective yield of 9.8% (and a weighted average effective yield on income-producing debt investments of 11.9%).
As of December 31, 2024, our investment portfolio consisted primarily of senior secured loans across 127 positions in 71 companies with an aggregate fair value of $642.2 million. As of December 31, 2024, 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 SOFR, with fixed-rate loan investments representing 1.3% based on fair value. As of December 31, 2024, our portfolio had an average investment size of $4.3 million based on fair value and average debt investment size of $5.5 million, with investment sizes ranging from zero to $22.4 million and a weighted average effective yield of 10.2% (and a weighted average effective yield on income-producing debt investments of 12.5%).
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For the six months ended June 30, 2025, we invested $90.5 million in new and existing portfolio companies, offset by repayments and sales of $100.5 million. Proceeds from sales totaled $42.5 million while repayments included $3.1 million of scheduled repayments and $54.9 million of unscheduled repayments.
For the six months ended June 30, 2024, we invested $116.4 million in new and existing portfolio companies, offset by repayments and sales of $152.0 million. Proceeds from sales totaled $57.2 million while repayments included $3.6 million of scheduled repayments and $91.2 million of unscheduled repayments.
In June 2025, as part of a restructuring agreement between the Company and Telestream Holdings Corporation, the Company’s first lien secured term loan and revolver investments to Telestream Holdings Corporation, were converted into a new first lien secured term loan in Telestream 2 LLC (d/b/a Telestream Holdings Corporation) and common equity of Telestream Topco 2 LLC (d/b/a Telestream Holdings Corporation).
In September 2024, as part of a restructuring and partial foreclosure agreement between the Company and Honors Holdings, LLC (d/b/a Orange Theory), the Company’s first lien secured term loan, first lien delayed draw loan and revolver investments in Honors Holdings, LLC, which had a historical cost basis of $17,816, were converted into a new first lien secured term loan of Camarillo Fitness Holdings, LLC (f/k/a Honors Holdings, LLC) and common equity interests in H.I.G. Camarillo, L.P. (f/k/a Honors Holdings, LLC). As of the restructuring date, these investments had an adjusted cost basis of $10,234. The remaining portion of the Honors Holdings, LLC first lien secured investments, with a cost basis of $7,582, was recognized as a net realized loss in the consolidated statements of operations.
In January 2024, as part of a restructuring agreement between the Company and Arcstor Midco, LLC (d/b/a Arcserve (USA), the Company’s first lien secured term loan and priority first lien delayed draw loan investments in Arcstor Midco, LLC (d/b/a Arcserve (USA), converted into a new first lien secured delayed draw loan and unsecured notes in Arcserve Cayman Opco LP (d/b/a Arcserve (USA), LLC) and common equity of Arcserve Cayman GP LLC (d/b/a Arcserve (USA), LLC) and Arcserve Cayman Topco LP (d/b/a Arcserve (USA), LLC).
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
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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:
As of June 30, 2025 | As of December 31, 2024 | ||||||||||
Investment Performance Rating ($ in millions) |
| Investments at |
| Percentage of |
| Investments at |
| Percentage of | |||
1 | $ | 65.0 | 10.3 | % | $ | 70.5 | 11.0 | % | |||
2 | 418.7 | 66.5 | 395.4 | 61.5 | |||||||
3 | 92.4 | 14.7 | 128.9 | 20.1 | |||||||
4 | 46.5 | 7.4 | 38.9 | 6.1 | |||||||
5 | 6.7 | 1.1 | 8.5 | 1.3 | |||||||
Total Portfolio | $ | 629.3 | 100.0 | % | $ | 642.2 | 100.0 | % | |||
Distributions
In order to maintain our status as a RIC and to avoid the imposition of corporate-level tax on income, we must distribute to our stockholders each taxable year 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 in respect of each calendar year 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.
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 tax status as a RIC. We cannot assure stockholders that they will receive any distributions.
During the three and six months ended June 30, 2025, we declared to stockholders distributions of $0.385 and 0.770 per share for total distributions of $8.9 million and $17.9 million respectively. During the three and six months ended June 30, 2024, we declared to stockholders distributions of $0.385 and 0.770 per share for total distributions of $8.9 million and $17.9 million respectively.
To the extent our taxable earnings fall below the total amount of our distributions for a 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 six months ended June 30, 2025, we estimate that distributions to stockholders included $17.9 million of ordinary income, for tax purposes, based on earnings for the fiscal year ended December 31, 2024 and current earnings for the six months ended June 30, 2025. The specific tax characteristics of the distribution are reported to stockholders subject to tax reporting on Form 1099-DIV after the end of each calendar year 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 our 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 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
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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” dividend reinvestment plan, or the DRIP, 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 DRIP. 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 DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.
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. |
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 and restated on February 22, 2024. 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 and the 2025 CLO Securitization. Payments under the Investment Advisory Agreement in future periods will be equal to (1) a management fee equal to 1.75% 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 and the 2025 CLO Securitization. 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.
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.
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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 and Estimates
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 and estimates.
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, WhiteHorse Finance (CA), LLC (“WhiteHorse California”), WHF American Craft Blocker, LLC, WhiteHorse RCKC Holdings, LLC, WhiteHorse Finance CLO I, LLC and WhiteHorse Finance Holdings, LLC, which are investment companies for accounting purposes. As such, we have consolidated the accounts of WhiteHorse Credit, WhiteHorse California, WHF American Craft Blocker, LLC, WhiteHorse RCKC Holdings LLC, WhiteHorse Finance CLO I, LLC and WhiteHorse Finance Holdings, LLC into our financial statements. As a result of this consolidation, the amount outstanding under the Credit Facility and the 2025 CLO Securitization 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.
In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which updated the regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The rule permits a fund board to designate the fund’s investment adviser to perform fair value determinations, subject to board oversight and certain other conditions. Effective September 8, 2022, the Board designated the Investment Adviser as the Company’s valuation designee to perform the fair value determinations relating to all of our investments, subject to the oversight of the Board.
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.
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The Investment Adviser, as the valuation designee, is 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. The Investment Adviser 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 the Investment Adviser 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, the Investment Adviser 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 Investment Adviser 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 valuation committee, comprised of a number of representatives from different functions of the Investment Adviser, 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. |
| ● | Our Board, through the Audit Committee, performs oversight of the fair valuation process in accordance with Rule 2a-5. |
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
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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.
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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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates. These floating rate loans are usually based on a base rate, such as SOFR, that resets on a periodic basis. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. Since we plan to use debt to finance investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
Assuming that the consolidated statement of assets and liabilities as of June 30, 2025 was to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands).
Increase (Decrease) | Increase (Decrease) | Net Increase | |||||||
Basis Point Increase (Decrease) |
| in Interest Income |
| in Interest Expense |
| (Decrease)(1) | |||
(300) | $ | (16,762) |
| $ | (5,220) |
| $ | (11,542) | |
(250) |
| (13,980) |
| (4,350) |
| (9,630) | |||
(200) |
| (11,198) |
| (3,480) |
| (7,718) | |||
(150) |
| (8,413) |
| (2,610) |
| (5,803) | |||
(100) |
| (5,617) |
| (1,740) |
| (3,877) | |||
(50) | (2,822) | (870) | (1,952) | ||||||
50 | 2,769 | 870 | 1,899 | ||||||
100 | 5,565 | 1,740 | 3,825 | ||||||
150 | 8,360 | 2,610 | 5,750 | ||||||
200 | 11,156 | 3,480 | 7,676 | ||||||
250 | 13,951 | 4,350 | 9,601 | ||||||
300 |
| 16,747 |
| 5,220 |
| 11,527 | |||
| (1) | Excludes the impact of incentive fees. See “Item 8. Consolidated Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 7 - Related Party Transactions” for further information. |
As of June 30, 2025, nearly all of the performing floating rate investments in our portfolio had interest rate floors. Variable-rate investments subject to a floor generally reset periodically to the applicable floor and, in the case of investments in our portfolio, quarterly to a floor based on base rates, only if the floor exceeds the index. Under these
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loans, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor.
Although management believes that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit markets, the size, credit quality or composition of the assets in our portfolio and other business developments, including borrowing, that could affect net increase or decrease in net assets resulting from operations or net income. It also does not adjust for the effect of the time-lag between a change in the relevant interest rate index and the rate adjustment under the applicable loan. Accordingly, we can offer no assurance that actual results would not differ materially from the statement above.
We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts to the extent permitted under the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.
We 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 hedge economically the impact that an adverse change in foreign exchange rates would have on the value of our investments denominated in foreign currencies. We currently utilize forward foreign currency exchange contracts to protect ourselves against fluctuations in exchange rates. See Note 3 to our consolidated financial statements. The following table provides a breakdown of our forward currency contracts for the three and six months ended June 30, 2025 and 2024:
Three months ended June 30, | Six months ended June 30, | |||||||||||
($ in thousands) | 2025 | 2024 |
| 2025 | 2024 | |||||||
Realized gain (loss) on forward currency contracts | $ | — | $ | 28 | $ | 22 | $ | — | ||||
Unrealized appreciation (depreciation) on forward currency contracts | 21 | (16) | 1 | 36 | ||||||||
Total net realized and unrealized gains (losses) on forward currency contracts | $ | 21 | $ | 12 | $ | 23 | $ | 36 | ||||
Item 4. Controls and Procedures
As of the period covered by this quarterly report on Form 10-Q, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures. There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, each of WhiteHorse Finance, WhiteHorse Advisers and WhiteHorse Administration is currently not a party to any material legal proceeding.
Item 1A. Risk Factors
You should carefully consider the “Risk Factors” discussed in our most recent Annual Report on Form 10-K which could materially affect our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended June 30, 2025,
Item 6. Exhibits
EXHIBIT INDEX
Number |
| Description |
10.1 | ||
10.2 | ||
10.3 |
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10.4 | ||
31.1* |
| |
31.2* |
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32.1* |
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32.2* |
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101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
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| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| WhiteHorse Finance, Inc. |
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Dated: August 7, 2025 | By | /s/ Stuart Aronson |
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| Stuart Aronson |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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Dated: August 7, 2025 | By | /s/ Joyson C. Thomas |
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| Joyson C. Thomas |
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| Chief Financial Officer |
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| (Principal Accounting and Financial Officer) |
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