WhiteHorse leverage rises to 1.31x but is expected to decrease in Q1

By Devika Patel

Knoxville, Tenn., March 4 – WhiteHorse Finance, Inc. saw its effective leverage increase to 1.31x during the last quarter, but management plans to repay some debt this quarter, which will bring the ratio back down.

“Some of this increase in leverage was due to several repayments that were delayed,” chief executive officer Stuart Aronson said on the company’s fourth quarter and year ended Dec. 31, 2021 earnings conference call on Thursday.

“We expect these delayed repayments are likely to occur throughout the duration of fiscal year 2022, which would cause our leverage levels to be reduced,” Aronson said.

The company was active in the capital markets last quarter, repaying some baby bonds with new notes, which explains why leverage rose.

“In November, WhiteHorse announced the closing of the registered public offering of $75 million 4% notes due 2026, which resulted in net proceeds of approximately $73.5 million,” chief financial officer Joyson Thomas said on the call.

“A portion of the offering proceeds were used to redeem our $35 million 6.5% notes that were due 2025.

“Shortly thereafter, in December, we sold $25 million of 4.25% notes due 2028 in a private placement offering to a qualified institutional buyer,” Thomas said.

As of Dec. 31, 2021, WhiteHorse had $22.5 million of cash and cash equivalents, compared to $16.6 million as of Sept. 30, 2021, inclusive of restricted cash.

As of Dec. 31, 2021, the company also had $43.4 million of undrawn capacity under its revolving credit facility.

Debt was $475,958,000 as of Dec. 31, 2021, compared to $384.88 million as of Dec. 31, 2020.

On Nov. 17, 2021, WhiteHorse reported that it would redeem its $35 million of 6.5% senior notes due 2025 (Cusip: 96524V304) on Dec. 17, 2021 at $25 plus interest to but excluding the redemption date.

On Nov. 19, 2021, the company priced $75 million of 4% notes due Dec. 15, 2026 (Egan-Jones: BBB+).

The notes priced at 99.997 to yield 4%, or 280.5 basis points over Treasuries.

The notes may be redeemed with a make-whole premium of Treasuries plus 50 bps until three months before the maturity date, when they will be redeemable at par.

The occurrence of a change-of-control repurchase event would mean the company has to offer to repurchase the notes at par.

Raymond James & Associates, Inc. was the bookrunner.

American Stock Transfer & Trust Co., LLC was the trustee.

Dechert LLP advised the issuer. Proskauer Rose LLP worked as counsel for the underwriters.

Proceeds were earmarked to repay debt, including the $35 million 6½% notes due 2025.

On Dec. 6, 2021, WhiteHorse sold $25 million of 4.25% senior notes due 2028 in a transaction carried out under Section 4(a)(2).

The coupon will increase if the notes cease to have an investment-grade rating, subject to a cap of 5.25%.

Proceeds will be used to refinance existing debt and for general corporate purposes.

WhiteHorse Finance is a New York-based business development company that originates and invests in loans to privately held lower middle-market companies. It is managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC.

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