WhiteHorse Finance Inc (WHF) 2024 Q2 法說會逐字稿

Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance second-quarter 2024 earnings conference call.

早安.我叫傑米，今天我將擔任你們的會議操作員。此刻，我歡迎大家參加WhiteHorse Finance 2024年第二季財報電話會議。

Our hosts for today's call are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer. Today's call is being recorded and will be made available for replay beginning at 4:00 PM Eastern Time. (Operator Instructions)

今天電話會議的主持人是執行長 Stuart Aronson；和均勝托馬斯，首席財務官。今天的通話正在錄音中，並將於東部時間下午 4:00 開始重播。（操作員說明）

It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company. Please go ahead.

現在我很高興將發言權交給 Rose & Company 的 Robert Brinberg。請繼續。

Thank you, operator, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's second-quarter 2024 earnings results. Before we begin, I would like to remind everyone that certain statements, which are not based on historical facts made during this call, including any statements relating to financial guidance, may be deemed forward-looking guidance statements within the meaning of the Private Securities Litigation Reform Act of 1995.

謝謝營運商，也謝謝大家今天加入我們討論 WhiteHorse Finance 2024 年第二季獲利結果。在我們開始之前，我想提醒大家，本次電話會議期間做出的某些並非基於歷史事實的陳述，包括任何與財務指導相關的陳述，可能被視為私人證券訴訟含義內的前瞻性指導陳述1995 年改革法案。

Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. WhiteHorse Finance assumes no obligation or responsibility to update any forward-looking statements.

由於這些前瞻性陳述涉及已知和未知的風險和不確定性，因此這些重要因素可能導致實際結果與這些前瞻性陳述明示或暗示的結果有重大差異。WhiteHorse Finance 不承擔更新任何前瞻性陳述的義務或責任。

Today's speakers may refer to material from the WhiteHorse Finance second-quarter 2024 earnings presentation, which was posted to our website this morning. With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

今天的演講者可能會參考 WhiteHorse Finance 2024 年第二季度收益簡報中的資料，該簡報已於今天早上發佈到我們的網站上。接下來，請容許我介紹 WhiteHorse Finance 的執行長 Stuart Aronson。斯圖爾特，你可以開始了。

Thank you, Rob, and good morning, everyone. Thank you for joining us today. As you're aware, we issued our earnings this morning prior to market open, and I hope you've had a chance to review our results for the period ending June 30, 2024, which can also be found on our website.

謝謝你，羅布，大家早安。感謝您今天加入我們。如您所知，我們今天早上在開盤前發布了收益報告，希望您有機會查看我們截至 2024 年 6 月 30 日的業績，這些結果也可以在我們的網站上找到。

On today's call, I'll begin by addressing our second-quarter results and current market conditions. Joyson Thomas, our Chief Financial Officer, will then discuss our performance in greater detail, after which, we will open the floor for questions.

在今天的電話會議上，我將首先討論我們的第二季業績和當前的市場狀況。我們的財務長均勝托馬斯隨後將更詳細地討論我們的業績，之後我們將開始提問。

Our results for the second quarter of 2024 were a bit softer due to elevated repayment activity and some markdowns on our portfolio. Q2 GAAP net investment income and core NII was $9.3 million or $0.40 per share, exceeding our quarterly base dividend of $0.385 per share. This represents a decrease from Q1 GAAP and core NII of $10.8 million and $0.465 per share.

由於還款活動增加以及我們的投資組合出現一些降價，我們 2024 年第二季的業績略顯疲軟。第二季 GAAP 淨投資收入和核心 NII 為 930 萬美元，即每股 0.40 美元，超過了每股 0.385 美元的季度基本股息。這比第一季 GAAP 和核心 NII 減少了 1,080 萬美元和每股 0.465 美元。

NAV per share at the end of Q2 was $13.45, representing a 0.4% decrease from prior quarter. NAV per share was impacted by net markdowns in our portfolio, totaling $1.5 million, the majority of which related to Honors Holdings, which I will discuss shortly.

第二季末每股資產淨值為 13.45 美元，較上一季下降 0.4%。每股資產淨值受到我們投資組合淨減價的影響，淨減價總計 150 萬美元，其中大部分與榮譽控股有關，我將很快討論這一點。

Turning to our portfolio activity in Q2, we had gross capital deployments of $55.8 million, which was more than offset by total repayments and sales of $71.7 million, resulting in net repayments of $16.1 million.

談到我們第二季的投資組合活動，我們的資本部署總額為 5,580 萬美元，這被還款和銷售總額 7,170 萬美元所抵消，導致淨還款額為 1,610 萬美元。

Gross capital deployments consisted of seven new originations totaling $47.4 million, with the remaining $8.4 million used to fund nine add-ons to existing investments. Our seven new originations in Q2, three were non-sponsor and four were sponsor deals, with an average leverage of approximately 3.8 times debt to EBITDA. Some of these new assets were transferred to the JV during the quarter. And for the deals that stayed on the BDC balance sheet, leverage was around 3.6 times.

總資本部署包括七個新項目，總額為 4,740 萬美元，其餘 840 萬美元用於為現有投資的九個附加項目提供資金。在我們第二季的 7 項新交易中，3 項是非贊助商交易，4 項是贊助商交易，平均槓桿約為 EBITDA 債務的 3.8 倍。其中一些新資產在本季轉移至合資公司。對於留在 BDC 資產負債表上的交易，槓桿約為 3.6 倍。

All of our Q2 deals were first lien loans with an average spread of 650 basis points at an average all-in rate of 11.8%. I note that both these statistics are attractive from a historical and current market perspective.

我們第二季的所有交易均為第一留置權貸款，平均利差為 650 個基點，平均總利率為 11.8%。我注意到，從歷史和當前市場的角度來看，這兩項統計數據都很有吸引力。

During the quarter, the BDC transferred four new deals and four add-ons to the Ohio STRS JV totaling $22 million in exchange for the $22 million -- in exchange for $22 million in cash. At the end of Q2, the STRS JV's total portfolio comprised 38 issuers with an aggregate fair value of $324.8 million and leverage as of Q2 was 1.08 times compared with 0.99 times at the end of the prior quarter.

本季度，BDC 向俄亥俄州 STRS 合資企業轉讓了四項新交易和四項附加交易，總金額為 2,200 萬美元，以換取 2,200 萬美元，換取 2,200 萬美元現金。截至第二季末，STRS JV 的總投資組合由 38 家發行人組成，總公允價值為 3.248 億美元，截至第二季末的槓桿率為 1.08 倍，而上一季末為 0.99 倍。

At the end of Q2, 99% of our debt portfolio is first lien, senior secured. And our portfolio mix was approximately 60% sponsor deals and approximately 40% non-sponsor deals, roughly similar with prior quarter.

在第二季末，我們 99% 的債務組合是第一留置權、優先擔保。我們的投資組合包括約 60% 的贊助商交易和約 40% 的非贊助商交易，與上一季大致相似。

In Q2, total repayments and sales were $71.7 million, primarily driven by four complete realizations and one partial realization. Repayments are elevated for two reasons. There are a series of counts where performance was challenged, and we asked the borrowers to refinance us out in this borrower-friendly market, and they've done that. This amounted to roughly 80% of our repayments in Q2. We don't expect to see many more refinancings in this category. There may be a couple of credits that we want to exit though.

第二季度，總還款和銷售額為 7,170 萬美元，主要由四項完全變現和一項部分變現推動。還款額增加有兩個原因。有一系列的問題導致績效受到挑戰，我們要求借款人在這個對借款人友好的市場上為我們再融資，他們已經這樣做了。這約占我們第二季還款的 80%。我們預計這一類別不會有更多的再融資。不過，我們可能會想退出一些製作人員名單。

And then there are some other accounts with a much lower interest rate environment and the more aggressive credit environment has led borrowers to be able to push up leverage and push down price. On some of those deals, we just felt the resulting transactions are too aggressive, and we're letting these go.

還有一些其他帳戶的利率環境要低得多，而更激進的信貸環境導致借款人能夠提高槓桿率並壓低價格。在其中一些交易中，我們只是覺得最終的交易過於激進，因此我們放棄了這些交易。

We expect that the borrower from the market, combined with eventually declining base rates, will likely lead to a continued flow of refinancings into the latter part of the year, especially as call protection on the deal steps down or expires. We expect refinancings to remain heavy through the balance of the year. Thus far in Q3, there have been no full repayments or sales though.

我們預計，市場借款人加上最終下降的基本利率，可能會導致今年下半年繼續進行再融資，特別是在交易的贖回保護逐步取消或到期的情況下。我們預計今年餘下時間再融資仍將較多。到目前為止，第三季還沒有全額還款或銷售。

With that in mind, I'll now step back to bring our entire investment portfolio into focus. After the effects of net repayments and the STRS JV transfers as well as $1.5 million in net mark-to-market decreases, $0.2 million of realized losses and $0.8 million of accretion, the fair value of our investment portfolio was $660 million at the end of Q2.

考慮到這一點，我現在將退後一步，重點關注我們的整個投資組合。在淨還款和 STRS 合資企業轉讓以及 150 萬美元的淨市價下跌、20 萬美元的已實現損失和 80 萬美元的增值的影響之後，截至 2017 年末，我們投資組合的公允價值為 6.6 億美元。 Q2。

This compares to our portfolio's fair value of $697.9 million at the end of the previous quarter. The weighted average effective yield on our income-producing debt investments was 13.8% at the end of Q2, a 40-basis-point improvement compared to 13.4% in the second quarter of 2023 and up slightly from 13.7% in the first quarter of 2024.

相較之下，上一季末我們投資組合的公允價值為 6.979 億美元。第二季末，我們創收債務投資的加權平均有效收益率為 13.8%，較 2023 年第二季的 13.4% 提高了 40 個基點，較 2024 年第一季的 13.7% 略有上升。

We continue to utilize the STRS JV successfully. The JV generated investment income to the BDC of approximately $3.9 million in Q2 compared to $4.8 million in Q1. As of June 30, the fair value of the JV's portfolio was $324.8 million, and the portfolio had an average unlevered yield of 12.3% compared to 12.4% in Q1. The JV is currently producing an average annual return on equity in the mid-teens to the BDC. We believe WhiteHorse's equity investment in the JV provides attractive returns for our shareholders.

我們持續成功利用 STRS 合資企業。該合資企業在第二季度為 BDC 帶來了約 390 萬美元的投資收入，而第一季為 480 萬美元。截至 6 月 30 日，合資公司投資組合的公允價值為 3.248 億美元，投資組合的平均無槓桿收益率為 12.3%，而第一季為 12.4%。目前，該合資企業的平均年股本回報率為 BDC 的十幾歲左右。我們相信WhiteHorse對合資公司的股權投資將為我們的股東帶來有吸引力的回報。

Traditionally -- transitioning to the BDC's portfolio more broadly, there were some markdowns in the portfolio during Q2. Most notably, there was a $2.2 million markdown to our investment in Honors Holdings, which was placed on nonaccrual status in the middle of the quarter, resulting in a decrease of approximately $125,000 of interest compared to expectations at the start of the quarter.

傳統上，更廣泛地轉向 BDC 的投資組合，第二季投資組合出現了一些降價。最值得注意的是，我們對 Honors Holdings 的投資減少了 220 萬美元，該投資在本季度中期被置於非應計狀態，導致利息比本季初的預期減少約 125,000 美元。

Honors was a company that was heavily impacted by COVID. After that, a private equity firm contributed additional equity honors to help it navigate the pandemic and to further execute on its growth strategy in the face of a weak market. However, the company has been experiencing weaker customer trends in recent quarters. Now we're taking action to position the company for remediation, and we're working with both the franchisor and of the concept who currently -- and the current owners of the company.

Honors 是一家受新冠疫情影響嚴重的公司。此後，一家私募股權公司貢獻了額外的股權榮譽，以幫助其應對疫情，並在市場疲軟的情況下進一步執行其成長策略。然而，最近幾季該公司的客戶趨勢一直疲軟。現在，我們正在採取行動，對公司進行補救，我們正在與特許人和目前的概念以及公司目前的所有者合作。

We expect to improve and resolve that investment over the next 12 to 24 months. Honors meaningfully contributed to the increase in nonaccrual investments, which totaled 4.2% of the total debt portfolio at fair value compared with 1.3% at Q1, excluding investments in the STRS JV.

我們預計在未來 12 至 24 個月內改善並解決該投資。榮譽對非應計投資的增加做出了重大貢獻，以公允價值計，非應計投資總額佔債務組合總額的 4.2%，而第一季為 1.3%，不包括對 STRS 合資企業的投資。

In regard to American Crafts and Arcserve, we continue to execute turnaround plans to maximize the value of both of these companies, working alongside our restructuring resources and private equity resources, and we remain optimistic that we would seek exits on those in 18 to 30 months. We otherwise see balanced activity in terms of credit performance across the portfolio generally and remain overall pleased with the health and relative stability of our debt portfolio with cash flow coverages holding up in a high interest rate environment.

對於American Crafts 和Arcserve，我們將繼續執行週轉計劃，以最大限度地提高這兩家公司的價值，並與我們的重組資源和私募股權資源合作，我們仍然樂觀地認為我們將在18 至30 個月內尋求退出。除此之外，我們總體上看到整個投資組合的信貸表現保持平衡，並對我們債務投資組合的健康狀況和相對穩定性總體感到滿意，現金流覆蓋率在高利率環境下保持不變。

Turning to the broader lending market. There continues to be a supply-demand imbalance in favor of borrowers. As a result, market conditions across all of the sponsor segments remain very aggressive. In the upper mid-cap and large-cap markets, we're seeing leverage of anywhere between 5 to 7.5 times. We also see lenders putting PIK leverage on companies for an additional one to two turns beyond that 5 to 7.5 times.

轉向更廣泛的貸款市場。供需失衡仍有利於借款人。因此，所有贊助商細分市場的市場狀況仍然非常激進。在中高端和大盤市場，我們看到槓桿在 5 到 7.5 倍之間。我們也看到貸款人將 PIK 槓桿作用於公司，在 5 到 7.5 倍的基礎上再增加一到兩輪。

PIK leverage occurs in the market from time to time, but we are generally avoiding it. Pricing in the upper mid-cap and large-cap markets is SOFR 450 to SOFR 500 with an original issue discounted between 98% and 99%. We have been avoiding doing any deals in the upper mid-cap and large-cap markets due to the aggressive natures of these deals.

PIK槓桿在市場上時有發生，但我們一般都會迴避。中高階和大型市場的定價為 SOFR 450 至 SOFR 500，原始發行折扣在 98% 至 99% 之間。由於這些交易的激進性質，我們一直避免在中高端和大型市場進行任何交易。

The mid-market is one step less aggressive. We are seeing leverage typically between 4.5 times and 6 times. Pricing in the mid-market is SOFR 500 to SOFR 550, for the most part, with OID also between 98% to 99%. The lower mid-cap market is again one step less aggressive with debt leverage generally running 4 times to 5 times and pricing in the lower mid-cap market ranging from SOFR 500 to SOFR 600 with an OID typically of 98% to 98.5%.

中端市場則不那麼激進。我們看到槓桿通常在 4.5 倍到 6 倍之間。中階市場的定價大部分為 SOFR 500 至 SOFR 550，OID 也在 98% 至 99% 之間。中低盤股市場的攻擊性再次減弱，債務槓桿通常為 4 至 5 倍，中低盤股市場的定價範圍為 SOFR 500 至 SOFR 600，OID 通常為 98% 至 98.5%。

The non-sponsor market has not moved much at all, with leverage remaining at 2.5 to 4.5 times and pricing in the range of 600 to 800 over SOFR with an OID of 98% or lower. Given the relative attractiveness of the non-sponsor market, we are focusing heavily on originating deals in the non-sponsor sector.

非保薦市場沒有太大變化，槓桿保持在 2.5 至 4.5 倍，定價在 SOFR 的 600 至 800 倍之間，OID 為 98% 或更低。鑑於非保薦市場的相對吸引力，我們將重點放在非保薦領域的發起交易。

We are seeing more evidence of competitors accepting heavily adjusted EBITDAs as they are trying to win new volume in a market that is short of assets. We've seen bankers bringing out many refinancings on troubled credits where they're trying to adjust the capital structure, often on highly adjusted EBITDA.

我們看到越來越多的證據表明競爭對手接受大幅調整的 EBITDA，因為他們試圖在資產短缺的市場中贏得新的銷售。我們看到銀行家對陷入困境的信貸進行了許多再融資，試圖調整資本結構，通常是高度調整的 EBITDA。

Many of those deals that have come in front of us, we think, are negative cash flow deals. We don't believe many of the adjustments, and we think the leverage is too heavy, and we're turning down all of those deals.

我們認為，我們面前的許多交易都是負現金流交易。我們不相信很多調整，而且我們認為槓桿太大，我們將拒絕所有這些交易。

In the current market environment, we are taking a cautious stance and focused on transactions that have positive free cash flow, limited cyclicality, and strong owners behind them. The on-the-run sponsor market is clearly more aggressive than the off-the-run sponsor market and also more aggressive than the non-sponsor market. As a result, we are spending most of our time focused on the off-the-run sponsor market and the non-sponsor market.

在當前的市場環境下，我們持謹慎態度，重點關注自由現金流為正、週期性有限且背後擁有強大所有者的交易。在場贊助商市場顯然比場外贊助商市場更具侵略性，也比非贊助商市場更具侵略性。因此，我們將大部分時間都花在了非贊助商市場和非贊助商市場上。

With respect to the broader economy, we are seeing signs of weakening that is showing up in lower consumer demand, and in some sectors, lower demand in the business-to-business segment. Given the gradual slowdown in the economy, we do believe that the Fed will begin to reduce interest rates in the fourth quarter of 2024.

就更廣泛的經濟而言，我們看到了疲軟的跡象，這體現在消費者需求下降，以及在某些行業中，企業對企業領域的需求下降。鑑於經濟逐漸放緩，我們確實相信聯準會將在 2024 年第四季開始降息。

Following net repayment activity in Q2, the BDC balance sheet is approximately $60 million of capacity for new assets. The JV has approximately $30 million of capacity, supplementing the BDC's existing capacity. Deals that are priced at SOFR plus 600 and above will generally be put on the BDC's balance sheet, and deals priced below this level will generally go into the STRS joint venture.

繼第二季的淨還款活動之後，BDC 的資產負債表新增資產容量約為 6,000 萬美元。該合資企業擁有約 3,000 萬美元的產能，並補充了 BDC 的現有產能。定價為 SOFR 加 600 及以上的交易通常會納入 BDC 的資產負債表，定價低於此水準的交易通常會進入 STRS 合資企業。

While volume is lighter than we'd expect it to be in all market segments, we're actively working on six new mandated deals split evenly between sponsor and non-sponsor. While there can be no assurance that any of these deals will close, all of these mandates would fit into the BDC or our JV should we elect to transact.

雖然所有細分市場的交易量都比我們預期的要少，但我們正在積極進行六項新的強制交易，這些交易在贊助商和非贊助商之間平均分配。雖然不能保證這些交易中的任何一項都會完成，但如果我們選擇進行交易，所有這些授權都將適合 BDC 或我們的合資企業。

Subsequent to quarter end, we have closed three new originations totaling approximately $18 million with several more pending. Of the new originations, two are expected to be transferred to the JV during the third quarter. So far, there have been no asset transfers to the JV in the third quarter.

到季度末後，我們已經完成了三個新項目，總金額約為 1800 萬美元，還有幾個項目待完成。在新的項目中，預計有兩個將在第三季轉移到合資公司。到目前為止，第三季尚未有資產轉移至合資公司。

Our pipeline is still running about 180 deals, but the portion of the pipeline that we'd call active pipeline is lower than it would normally be this time of year. In addition, our three-tier sourcing architecture continues to provide the BDC with differentiated capabilities. We derive significant advantages from the shared resources and affiliation with HIG, who is a leader in the mid-market, lower mid-market.

我們的管道仍在運行約 180 筆交易，但我們稱之為活動管道的管道部分低於每年這個時候的正常情況。此外，我們的三層採購架構持續為 BDC 提供差異化的能力。我們從共享資源以及與 HIG 的關係中獲得了顯著的優勢，HIG 是中端市場、中低階市場的領導者。

WhiteHorse has approximately 23 origination professionals located in 11 regional markets across North America. The strength of this originations pipeline enables us to be conservative in our deal selection. Based on current market terms and conditions, we are taking a very cautious stance and focused on doing deals that have positive free cash flow, limited cyclicality, and strong owners.

WhiteHorse 在北美 11 個區域市場擁有約 23 位原創專業人士。這項發起管道的優勢使我們能夠在交易選擇上保持保守。根據目前的市場條款和條件，我們採取非常謹慎的立場，並專注於進行具有正自由現金流、有限週期性和強大所有者的交易。

Despite continued concerns regarding economic softening, we believe we are well positioned to continue to source attractive opportunities and navigate economic challenges to our strong originations capabilities and rigorous underwriting standards.

儘管對經濟疲軟的擔憂仍然存在，但我們相信，我們有能力繼續尋找有吸引力的機會，並以我們強大的發起能力和嚴格的承保標準應對經濟挑戰。

With that, I'll turn the call over to Joyson for additional details and a review of our portfolio composition. Joyson?

這樣，我會將電話轉給均勝，以了解更多詳細資訊並審查我們的投資組合組成。均勝？

Thanks, Stuart, and thanks, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $9.3 million or $0.40 per share. This compares with Q1 GAAP NII and core NII of $10.8 million or $0.465 per share and our previously declared quarterly distribution of $0.385 per share.

謝謝斯圖爾特，也謝謝大家參加今天的電話會議。本季度，我們錄得 GAAP 淨投資收入和核心 NII 為 930 萬美元，即每股 0.40 美元。相比之下，第一季 GAAP NII 和核心 NII 為 1,080 萬美元，即每股 0.465 美元，我們先前宣布的季度分配為每股 0.385 美元。

Q2 fee income was lower quarter over quarter at $0.4 million compared with $0.6 million from the prior quarter. Q2 amounts were primarily comprised of approximately $0.3 million of amendment fees. For the quarter, we reported a net increase in net assets resulting from operations of $7.8 million. Our risk ratings during the quarter showed that 74.4% of our portfolio positions carried either a 1 or 2 rating, slightly lower than the 76.6% reported in the prior quarter. As a reminder, our 1 rating indicates that a company has seen its risk of loss reduced relative to initial expectations, and a 2 rating indicates the company is performing according to such initial expectations.

第二季費用收入較上季下降，為 40 萬美元，而上一季為 60 萬美元。第二季金額主要包括約 30 萬美元的修改費。本季度，我們報告營運產生的淨資產淨增加 780 萬美元。本季我們的風險評級顯示，我們 74.4% 的投資組合部位評級為 1 或 2，略低於上一季報告的 76.6%。提醒一下，我們的 1 評級表示公司的損失風險相對於初始預期有所降低，而 2 評級表示公司的表現符合初始預期。

Regarding the JV specifically, we continue to grow our investment. As Stuart mentioned earlier, in the second quarter, we transferred four new deals and four add-ons to the STRS JV totaling $22 million in exchange for cash proceeds of the same amount.

具體就合資企業而言，我們持續增加投資。正如史都華先前所提到的，在第二季度，我們向 STRS 合資企業轉讓了四項新交易和四項附加交易，總計 2,200 萬美元，以換取等額現金收益。

As of June 30, 2024, the JV's portfolio held position in 38 portfolio companies with an aggregate fair value of $324.8 million compared to 34 portfolio companies at a fair value of $309.4 million as of March 31, 2024. The investment in the JV continues to be accretive to the BDC's earnings generating a mid-teens return on equity. During Q2, income recognized for our JV investment aggregated to $3.9 million during the quarter as compared with approximately $4.8 million in Q1.

截至2024年6月30日，合資公司的投資組合持有38家投資組合公司的頭寸，總公允價值為3.248億美元，而截至2024年3月31日，合資公司的投資組合持有34家投資組合公司，公允價值為3.094億美元。對合資企業的投資持續增加 BDC 的收益，產生中雙位數的股本回報率。第二季度，我們的合資企業投資確認的收入總計為 390 萬美元，而第一季約為 480 萬美元。

As a reminder, and as reported in the prior call, in Q1, there was an elevated amount of income recognized from our JV investment, largely attributable to nonrecurring events that had occurred in the JV's portfolio during Q1. As we have noted in the prior calls, the yield on our investment in the JV may fluctuate period over period as a result of a number of factors, including the timing and amount of additional capital investments, the changes in asset yields in the underlying portfolio as well as the overall credit performance of the JV's investment portfolio.

提醒一下，正如先前電話會議中所報告的那樣，在第一季度，我們的合資企業投資確認的收入金額有所增加，這主要歸因於第一季度合資企業投資組合中發生的非經常性事件。正如我們在先前的電話會議中所指出的，我們在合資企業中的投資收益率可能會因多種因素而出現波動，包括額外資本投資的時間和金額、基礎投資組合中資產收益率的變化以及合資企業投資組合的整體信用表現。

Turning to our balance sheet. We had cash resources of approximately $21.8 million at the end of Q2, including $8.9 million restricted cash and approximately $167 million of undrawn capacity available under our revolving credit facility.

轉向我們的資產負債表。截至第二季末，我們擁有約 2,180 萬美元的現金資源，包括 890 萬美元的限制性現金和循環信貸額度下約 1.67 億美元的未提取產能。

As of June 30, 2024, the company's asset coverage ratio for borrowed amounts as defined by the 1940 Act, was 186.2% which was above the minimum asset coverage ratio of 150%. Our Q2 net effective debt-to-equity ratio after adjusting for cash on hand was 1.09 times compared with 1.19 times from the prior quarter.

截至 2024 年 6 月 30 日，該公司根據 1940 年法案定義的借款金額資產覆蓋率為 186.2%，高於 150% 的最低資產覆蓋率。調整手頭現金後，我們第二季的淨有效負債股本比率為 1.09 倍，而上一季為 1.19 倍。

Before I conclude and open up the call to questions, I'd again like to highlight on distributions. This morning, we announced that our Board declared a third-quarter distribution of $0.385 per share, which is consistent with the prior quarter.

在我結束並開始提問之前，我想再次強調發行版。今天早上，我們宣布董事會宣布第三季分配每股 0.385 美元，與上一季一致。

The upcoming distribution, the 48th consecutive quarterly distribution paid since our IPO in December 2012, with all distribution at or above the rate of $0.355 per share per quarter, will be payable on October 2, 2024, to stockholders of record as of September 18, 2024. As we said previously, we will continue to evaluate our quarterly distribution, both in the near and medium term, based on the core earnings power of our portfolio in addition to other relevant factors that may warrant consideration.

即將進行的分配是自2012 年12 月首次公開募股以來連續第48 次季度分配，所有分配均等於或高於每季度每股0.355 美元，將於2024 年10 月2 日支付給截至9 月18 日在冊的股東， 2024 年。正如我們之前所說，我們將繼續根據我們投資組合的核心獲利能力以及其他可能需要考慮的相關因素來評估近期和中期的季度分佈。

With that, I'll now turn the call over to the operator. Operator?

這樣，我現在將把電話轉給接線生。操作員？

(Operator Instructions) Bryce Rowe, B. Riley.

（操作員說明）Bryce Rowe、B. Riley。

Hey, Stuart, I really appreciate some of the market commentary and your cautious approach. I think it's probably the more -- one of the more cautious kind of messages that I've heard throughout the earnings season.

嘿，斯圖爾特，我真的很欣賞一些市場評論和你的謹慎態度。我認為這可能是我在整個財報季聽到的更謹慎的消息之一。

Wanted to ask kind of about the flows in and out of the BDC from an investment perspective. Leverage is coming down. It sounds like that cautious approach could lead to a more kind of muted activity as we think about the second half of this year and into next.

我想從投資角度詢問 BDC 的進出。槓桿正在下降。當我們考慮今年下半年和明年的情況時，聽起來這種謹慎的做法可能會導致更平靜的活動。

Can you talk about kind of where you're comfortable with leverage in terms of how low leverage could go on the balance sheet? Do you think you can maintain here or a good chance that it continues to move lower?

您能否談談您對槓桿的滿意程度，即資產負債表上的槓桿可以達到多低？您認為可以維持在這裡還是繼續走低的可能性很高？

Bryce, we're lucky to have an HIG supplemented origination capability that when the on-the-run markets get really aggressive, like they are right now, we can squirrel down into the off-the-run markets and non-sponsor markets and find deals that we feel are a better risk return. When the markets were very favorable, we completely filled up the BDC. And for a period of time, the BDC had no capacity, and we were doing deals that couldn't go into the BDC.

Bryce，我們很幸運擁有 HIG 補充的發起能力，當正在運行的市場變得非常激進時，就像現在一樣，我們可以進入非運行市場和非贊助商市場，找到我們認為風險回報更好的交易。當市場非常有利時，我們完全填滿了 BDC。在一段時間內，BDC 沒有能力，我們所做的交易無法進入 BDC。

As I highlighted, we now have about $60 million of availability on the BDC balance sheet, which given the average allocation, would be about six deals of incremental capacity plus an incremental two to three deals in the JV. Q3 is a decent but relatively slow quarter so far. But in general, we tend to see Q4 as a stronger quarter. And even in a very slow M&A year like 2023, Q4 had volume that was about double of what Q3 was.

正如我所強調的，我們現在BDC 資產負債表上有大約6000 萬美元的可用資金，考慮到平均分配，這將是大約六筆增量產能交易加上合資企業中的兩到三筆增量交易。到目前為止，第三季是一個不錯但相對緩慢的季度。但總的來說，我們傾向於認為第四季是一個更強勁的季度。即使在像 2023 年這樣併購非常緩慢的年份，第四季的交易量也大約是第三季的兩倍。

So I don't expect that we're going to use up the unused capacity in Q3, but we are hopeful that we will put most of the unused capacity to work in Q4 if we see a normal upswing in economic activity with the expectation of interest rate cuts in Q4 and many private equity firms being pressured by LPs to have realizations and bankers telling us that their pipelines are reasonably robust. We're hoping that after the August slowdown in September, October, we'll see robust M&A flow and be able to use up some of that capacity.

因此，我預計我們不會在第三季度用完未使用的產能，但我們希望，如果我們看到經濟活動正常回升，並且預計，我們將在第四季度將大部分未使用的產能投入使用。第四季利率下調，許多私募股權公司受到有限合夥人的壓力，要求變現，銀行家告訴我們，他們的管道相當強勁。我們希望，在 8 月的經濟放緩之後，9 月、10 月，我們將看到強勁的併購流，並能夠利用部分產能。

Okay. That's helpful. And then in terms of kind of repayments, appreciate the commentary around repayment activity in the quarter. Can you help us kind of handicap if there are more portfolio companies in that, quote-unquote, leave category or ask to leave category?

好的。這很有幫助。然後就還款類型而言，請欣賞有關本季還款活動的評論。如果有更多的投資組合公司在其中，引用-取消引用、離開類別或要求離開類別，您能否幫助我們解決一些問題？

And then maybe on the flip side, help us understand or maybe handicap that other category you mentioned of companies coming to refinance and you all don't want to participate because the terms are not up to your standards.

然後也許在另一方面，幫助我們理解或可能阻礙您提到的其他類別的公司進行再融資，而您都不想參與，因為條款不符合您的標準。

Yeah. In general, at the moment, there's only one company I can think of that I would put in the desired exit category. And so that category is going to slow down because I think we had three of them in the last quarter where we had the opportunity to stay with the credits, but we wanted to exit because of performance issues that our credit teams felt warranted a termination of the relationship.

是的。總的來說，目前我能想到的只有一家公司可以將其歸類為所需的退出類別。因此，這個類別將會放緩，因為我認為我們在上個季度有三個這樣的項目，我們有機會保留信用，但我們想退出，因為我們的信用團隊認為有必要終止績效問題。

As it regards to the refinancings, in 2022 and 2023, we were adamant about getting strong call protection. And we got call protection on our deals that was generally two years on the sponsor deals and three to four years on the non-sponsor deals.

至於再融資，在 2022 年和 2023 年，我們堅決要求強而有力的贖回保障。我們的交易獲得了電話保護，贊助商交易通常為兩年，非贊助商交易為三到四年。

To the extent that that call protection is starting to roll off, especially on the 2022 deals, we are seeing people come back and look to do refinancings. In many cases, based on the strength of the market, those refinancings include dividends as well.

從這種看漲期權保護開始減弱的程度來看，尤其是在 2022 年的交易中，我們看到人們回來尋求再融資。在許多情況下，根據市場的實力，這些再融資也包括股息。

And so where borrowers are taking up leverage, taking down equity in the company and taking down price, we're only sticking with the stronger noncyclical borrowers. And there are several transactions that have gone on where we just felt that the underlying leverage and price made it imprudent to stick with the borrowers.

因此，當借款人使用槓桿、減少公司股權並降低價格時，我們只會選擇更強大的非週期性借款人。在一些交易中，我們認為潛在的槓桿和價格使得堅持與借款人合作是不謹慎的。

There's no way to know how much of that we will see in the balance of Q3 and Q4. But there's no doubt in my mind with interest rates or interest spreads as low as they are right now, that there will be continued refinancing pressure. If the credits are okay, we will adjust the pricing on those deals to the current market, which in many cases, will take pricing from $600 to $650, down to pricing of $500 to $550.

沒有辦法知道我們會在第三季和第四季的餘額中看到多少。但毫無疑問，在目前利率或利差如此低的情況下，再融資壓力將會持續存在。如果積分沒問題，我們將根據當前市場調整這些交易的定價，在許多情況下，定價將從 600 美元到 650 美元下調至 500 美元到 550 美元。

But the thing that will make us exit is if the performance of the borrower, combined with the leverage that they're trying to put on the borrower, leaves us questioning the stability of that credit in the ongoing period. Especially because we have a view that the economy really is softening, we're not necessarily predicting a recession, but we are predicting into 2025 a weaker economy, and we think it's imprudent to overly leverage companies into a weaker economy, and we're making our decisions on that basis.

但讓我們退出的原因是，如果借款人的表現，加上他們試圖對借款人施加的槓桿作用，讓我們對當前時期信貸的穩定性產生質疑。特別是因為我們認為經濟確實正在疲軟，所以我們不一定會預測經濟衰退，但我們預測到 2025 年經濟將更加疲軟，而且我們認為過度利用企業槓桿來應對經濟疲軟的情況是不明智的，我們在此基礎上做出我們的決定。

Good stuff. Two quick ones for you, Joyson. Do you have an estimated UTI balance as of the end of June? And then did I hear that there was an interest reversal in the quarter?

好東西。喬伊森，給你兩個快速的。截至 6 月底，您是否有估計的 UTI 餘額？然後我聽說這個季度有利息逆轉？

In relation to your second question, Bryce, the $125,000 was not recognized in Q2. It wasn't necessarily a reversal of an accrual from the prior quarter. But when we put the Honors Holding position on nonaccrual in Q2, essentially, we didn't recognize an additional $125,000 that we would have as compared to Q1.

關於你的第二個問題，Bryce，125,000 美元在第二季度沒有得到認可。這並不一定是上一季應計項目的逆轉。但當我們在第二季將 Honors Holding 的部位設為非應計利息時，本質上我們並沒有意識到與第一季相比我們將擁有額外的 125,000 美元。

Okay. And then do you have a UTI balance or estimate for us?

好的。那麼您有泌尿道感染餘額或估計值嗎？

I don't have the UTI balance handy for me right now. Let me see if I can just pull that up. I think it's about $32 million. Actually, I just -- $32 million.

我現在手邊沒有泌尿道感染天平。讓我看看是否可以把它拉起來。我認為大約是 3200 萬美元。事實上，我只是──3,200萬美元。

Sean-Paul Adams, Raymond James.

肖恩·保羅亞當斯，雷蒙德詹姆斯。

On the portfolio risk ratings, it seems like the uptick in risk ratings 4 and 5 was likely due to the new nonaccrual. Am I correct in that?

就投資組合風險評級而言，風險評級 4 和 5 的上升似乎可能是由於新的非應計利潤所致。我的說法正確嗎？

Yes, I believe that is the case.

是的，我相信情況確​​實如此。

Okay. So -- but in aggregate, over the last six months, there has been a somewhat large shift in ratings just downward within the portfolio. At the beginning of January, risk ratings 1 were somewhere around 18%. Now they're sitting around 12.8%.

好的。因此，但總的來說，在過去六個月中，投資組合內的評級出現了較大的下降。1 月初，風險評級 1 約為 18%。現在他們的比例約為 12.8%。

So it just seems like there's a somewhat large waterfall effect going downward within the portfolio. And it looks like you guys are really paying large attention to the new deals on the market and really focusing on credit quality and leverage.

因此，投資組合中似乎存在較大的瀑布效應。看起來你們真的非常關注市場上的新交易，並且非常關注信用品質和槓桿。

What kind of aspects are you guys thinking about in regards to your existing portfolio companies? And is there any isolated sectors that are really experiencing the largest material weaknesses?

對於現有的投資組合公司，你們有哪些方面的考量？是否有任何孤立的行業確實正在經歷最大的實質弱點？

Yes, Sean-Paul, in regard to the 1s, what generally happens with credits that are overperforming is the companies get sold or the companies get refinanced. So there's a natural effect that 1s tend to go away. And that happens in all market environment but especially true in a strong market environment.

是的，Sean-Paul，就 1 而言，表現優異的信貸通常會發生公司被出售或公司獲得再融資的情況。因此，存在 1 秒趨於消失的自然效應。這種情況在所有市場環境中都會發生，但在強勁的市場環境中尤其如此。

That said, as I indicated in my prepared statements, we are seeing a slowdown in the economy as recently has been indicated by data that's been released into the marketplace and has led to some equity gyrations recently.

也就是說，正如我在準備好的聲明中指出的那樣，正如最近發佈到市場的數據所表明的那樣，我們看到經濟正在放緩，並導致最近出現了一些股市波動。

We are spending a significant amount of time focused on existing portfolio. Most of our existing portfolio accounts are comfortably paying their interest burden and their debt burden. But we do have a number of situations that are not related to the general economy, like Honors Holdings, where it is a company-specific issue that has led to the weakness in the performance. And actually, it's a fairly recent issue as well. The company was only leveraged about 3.5 times about a year ago, and the company has experienced weakness over the past 12 months.

我們花費大量時間專注於現有的投資組合。我們現有的大多數投資組合帳戶都可以輕鬆支付利息負擔和債務負擔。但我們確實有很多與整體經濟無關的情況，例如榮譽控股，是公司特定問題導致業績疲軟。事實上，這也是一個最近的問題。大約一年前，該公司的槓桿率僅約3.5倍，該公司在過去12個月中經歷了疲軟。

We have a five-person restructuring team that gets involved in all the deals that need covenant waivers. And that restructuring team includes private equity professionals who on owned accounts helps us put the right management teams in place, helps us come up with growth strategies for the company, and helps us cut costs.

我們有一個五人重組團隊，參與所有需要契約豁免的交易。這個重組團隊包括私募股權專業人士，他們在自有帳戶上幫助我們組建合適的管理團隊，幫助我們制定公司的成長策略，並幫助我們削減成本。

And on Arcserve and American Crafts in particular, which are both owned assets, we are working with that restructuring team and with our private equity expertise to execute turnarounds that we hope will take hold and allow us to get strong exits in 18 to 30 months.

特別是對於Arcserve 和American Crafts，它們都是自有資產，我們正在與重組團隊以及我們的私募股權專業知識合作，以實現扭虧為盈，我們希望這些扭虧為盈，並讓我們能夠在18 到30個月內實現強而有力的退出。

So there is a lot of attention being paid to portfolio. And in today's market, where we think competitors are being overly aggressive, we are committed to trying to not add any marginal credits to our portfolio.

因此，投資組合受到了許多關注。在當今的市場中，我們認為競爭對手過於激進，我們致力於努力不在我們的投資組合中添加任何邊際信用。

Okay, thank you so much. And I believe you remarked earlier in the call that Honors Holdings probably had a timeline of 12 to 24 months of a resolution process. And I believe you also mentioned Arcserve would probably be around an 18- to 30-month timeline as well?

好的，非常感謝。我相信您早些時候在電話會議中表示，Honors Holdings 可能有 12 至 24 個月的解決流程時間表。我相信您還提到 Arcserve 可能也會有 18 到 30 個月的時間表？

Yes.

是的。

Okay. Okay. That's perfect. I just need to clarify that. Thank you so much for the color.

好的。好的。那很完美。我只需要澄清這一點。非常感謝你的顏色。

And ladies and gentlemen, as there are no further questions in queue at this time, that will conclude our question-and-answer session and the WhiteHorse Finance second-quarter 2024 earnings call.

女士們、先生們，由於目前沒有其他問題，我們的問答環節和 WhiteHorse Finance 2024 年第二季財報電話會議將結束。

Thank you for your participation. You may disconnect your line at this time, and have a wonderful day.

感謝您的參與。此時您可以斷開線路，度過美好的一天。

Thank you. Bye-bye.

謝謝。再見。