WhiteHorse Finance Q1 2025: Unraveling Key Contradictions in Dividends, Market Conditions, and Leverage Strategy

Dividend strategy and spillover income, market conditions and deal quality, return to accrual status for Telestream, spreads and market conditions, leverage and balance sheet strategy are the key contradictions discussed in WhiteHorse Finance's latest 2025Q1 earnings call.



Disappointing Financial Performance:
- WhiteHorse Finance reported GAAP net investment income and core NII of $6.8 million or $0.294 per share in Q1 2025, compared to a quarterly distribution of $0.385 per share and below the Q4 GAAP and core NII of $8 million or $0.343 per share.
- This decline was due to net realized and unrealized losses in the investment portfolio, impacting financial performance.

Net Asset Value (NAV) Decline:
- NAV per share at the end of Q1 was $12.11, representing an approximate 1.6% decrease from the prior quarter.
- The decline was attributed to net realized losses and net markdowns in the portfolio, totaling $2.6 million.

Muted M&A Activity:
- The M&A market has slowed down significantly as sellers do not want to sell into a negative sentiment, and recent tariff announcements have further impacted conditions.
- Sellers are waiting for clarity in the market, leading to a reduced number of transactions.

JV Portfolio Growth:
- The STRS JV portfolio had an aggregate fair value of $310.2 million at the end of Q1, compared to $295 million at the end of the prior quarter.
- Growth was driven by the transfer of three new deals and one existing investment, with the JV continuing to generate a mid-teens return on equity for the BDC's shareholders.

Non-Accrual Investments Increase:
- Non-accrual investments totaled 8.8% of the debt portfolio, compared with 7.2% at fair value in the prior quarter.
- The increase was due to the addition of MSI Information Services to non-accrual status, and the company is actively working on getting deals off the non-accrual list.