WhiteHorse Finance Inc (WHF) 2024 Q3 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 third-quarter 2024 earnings conference call. Our hosts for today's call are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer.

早安.我叫傑米，今天我將擔任您的會議主持人。現在，我歡迎大家參加WhiteHorse Finance 2024年第三季財報電話會議。今天電話會議的主持人是執行長 Stuart Aronson；以及財務長均勝托馬斯 (Joyson Thomas)。

Today's call is being recorded and will be made available for replay beginning at 4:00 PM Eastern Time. The replay dial-in number is (402) 220-6085. No passcode is required. (Operator Instructions)

今天的通話正在錄音，並將於東部時間下午 4:00 開始提供重播。重播撥入號碼為 (402) 220-6085。不需要密碼。（操作員指令）

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, Jamie, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's third quarter 2024 earnings results.

謝謝 Jamie，也謝謝大家今天加入我們討論 WhiteHorse Finance 2024 年第三季的獲利結果。

Before we begin, I'd 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 statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Today's speakers may refer to material from the WhiteHorse Finance third-quarter 2024 earnings presentation, which was posted on our website this morning.

在我們開始之前，我想提醒大家，本次電話會議中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有關的陳述，可能被視為《1995 年私人證券訴訟改革法案》所定義的前瞻性陳述。由於這些前瞻性陳述涉及已知和未知的風險和不確定性，這些是可能導致實際結果與這些前瞻性陳述表達或暗示的結果有重大差異的重要因素。WhiteHorse Finance 不承擔更新任何前瞻性陳述的義務或責任。今天的發言者可以參考 WhiteHorse Finance 2024 年第三季財報的資料，該報告已於今天早上發佈在我們的網站上。

With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

首先，請容許我介紹一下 WhiteHorse Finance 的執行長 Stuart Aronson。斯圖爾特，你可以開始啦。

Thank you, Rob. Good morning, everybody, and thank you all 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 September 30, 2024, which can also be found on our website. On today's call, I will begin by addressing our third-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.

謝謝你，羅布。大家早安，感謝大家今天的參加。如您所知，我們今天早上在市場開盤前發布了我們的收益，我希望您有機會查看我們截至 2024 年 9 月 30 日的業績，該業績也可在我們的網站上找到。在今天的電話會議上，我將首先討論我們的第三季業績和當前的市場狀況。我們的財務長均勝托馬斯 (Joyson Thomas) 將更詳細地討論我們的業績，之後我們將開放提問環節。

Our results for the third quarter of 2024 were disappointing as our investment portfolio declined this quarter due to net realized and unrealized losses, which impacted our financial performance. Q3 GAAP net investment income and core NII was $9.2 million or $0.394 per share, which exceeded our quarterly base dividend of $0.385 per share and was slightly below Q2 GAAP and core NII of $9.3 million or $0.40 per share. NAV per share at the end of Q3 was $12.77, representing a 5.1% decrease from the prior quarter. NAV per share was impacted by net markdowns on our portfolio totaling $15.9 million, the majority of which related to markdowns on American Crafts and Honors Holdings, which I will discuss shortly.

我們 2024 年第三季的業績令人失望，因為我們的投資組合本季因淨已實現和未實現損失而下降，這影響了我們的財務表現。第三季 GAAP 淨投資收入和核心 NII 為 920 萬美元或每股 0.394 美元，超過了我們每股 0.385 美元的季度基本股息，略低於第二季度 GAAP 和核心 NII 930 萬美元或每股 0.40 美元。第三季末每股淨資產為 12.77 美元，較上一季下降 5.1%。每股淨值受到我們投資組合淨減記的影響，總計 1,590 萬美元，其中大部分與 American Crafts 和 Honors Holdings 的減記有關，我將在稍後討論。

Turning to our portfolio activity in Q3. We had gross capital deployments of $51 million, which was partially offset by total repayments and sales of $30.2 million, resulting in net deployments of $20.8 million. Gross capital deployments of $51 million consisted of seven new originations totaling $49 million, with the remaining $2 million used to fund four add-ons to existing investments.

談談我們第三季的投資組合活動。我們的總資本部署為 5,100 萬美元，部分被 3,020 萬美元的總還款和銷售額所抵消，導致淨部署為 2,080 萬美元。總資本部署為 5,100 萬美元，包括七項新投資，總額為 4,900 萬美元，剩餘的 200 萬美元用於資助四項現有投資的附加項目。

Of our seven new originations in Q3, three were non-sponsor and four were sponsor deals with the average leverage of approximately 4.13x debt to EBITDA. All of our Q3 deals were first lien loans with an average spread of 575 basis points and an average all-in rate of 10.8% compared to 11.8% in the second quarter of 2024. During the quarter, the BDC transferred three new deals and pne add-on to the STRS JV.

在我們第三季的七筆新發起交易中，有三筆為非發起交易，四筆為發起交易，平均槓桿率約為債務與 EBITDA 比率的 4.13 倍。我們第三季的所有交易都是第一留置權貸款，平均利差為 575 個基點，平均全包利率為 10.8%，而 2024 年第二季為 11.8%。在本季度，BDC 將三筆新交易和一筆附加交易轉移給了 STRS JV。

At the end of Q3, the STRS JV total portfolio had an aggregate fair value of $309.8 million and an average unlevered yield of 11.7% compared to 12.3% in Q2. Leverage for the JV at the end of Q3 was 0.97x compared with 1.08x at the end of the prior quarter. We continue to utilize the STRS JV successfully and believe WhiteHorse's equity investment in the JV continues to provide attractive returns for our shareholders.

截至第三季末，STRS JV 總投資組合的公允價值總額為 3.098 億美元，平均無槓桿殖利率為 11.7%，而第二季為 12.3%。第三季末合資公司的槓桿率為 0.97 倍，而上一季末為 1.08 倍。我們繼續成功利用 STRS 合資企業，並相信 WhiteHorse 對合資企業的股權投資將繼續為我們的股東帶來可觀的回報。

At the end of Q3, 99% of our debt portfolio was first lien, senior secured, and our portfolio mix was approximately 63% sponsor and 37% non-sponsor. In Q3, total repayments and sales were $30.2 million, primarily driven by two complete realizations and one partial repayment and one partial sale.

截至第三季末，我們的債務組合中有 99% 是優先留置權和優先擔保債務，我們的投資組合中約有 63% 是發起人債務，37% 是非發起人債務。第三季度，總還款和銷售額為 3,020 萬美元，主要由於兩筆完全兌現、一筆部分還款和一筆部分銷售。

After the effects of deployments, repayments and STRS JV transfers as well as $15.9 million in net mark-to-market decreases and the $1.3 million of accretion, the total value of our investment portfolio was $654.3 million. This compares to our portfolio's fair value of $660 million at the end of the previous quarter.

考慮到部署、償還和 STRS JV 轉移以及 1590 萬美元的淨市價下跌和 130 萬美元的增值，我們投資組合的總價值為 6.543 億美元。相較之下，上一季末我們投資組合的公允價值為 6.6 億美元。

The weighted average effective yield on our income-producing debt investments was 13.1% at the end of Q3 compared to approximately 13.8% in the second quarter of 2024 and 13.6% in the third quarter of 2023. Transitioning to the BDC's portfolio. The challenges in this quarter generally do not relate to the overall economy, but rather are more company specific.

我們創收債務投資的加權平均有效收益率在第三季末為 13.1%，而 2024 年第二季約為 13.8%，2023 年第三季為 13.6%。轉換至 BDC 的投資組合。本季的挑戰通常與整體經濟無關，而是與公司本身相關。

We are working with experts within H.I.G. to optimize the outcomes of workout accounts. The balance of the portfolio is generally stable. During the quarter, we took a $6.6 million write-down on American Crafts and are currently seeking to either restructure or sell the company. The company's previously challenged performance was further impacted by the loss of a material customer in the quarter.

我們正在與 H.I.G. 內部的專家合作。優化鍛鍊帳戶的結果。投資組合餘額大致穩定。在本季度，我們對 American Crafts 進行了 660 萬美元的減記，目前正尋求重組或出售該公司。由於本季失去一位重要客戶，該公司先前遭遇的業績挑戰進一步受到影響。

While we continue to execute improvement initiatives, we believe we have the asset marked consistent where it might be sold to a strategic player. We also took a $5 million write-down on Honors Holdings, reflecting continued challenging industry conditions with a slowdown across many fitness concepts reflected in ongoing weak customer trends. We had previously placed the company on non-accrual status in the second quarter. We continue to work with the franchisor of the company to restructure the Honors Holding credit and to try to ultimately improve the company's performance. And we, as the lender, have taken control of this credit.

在我們繼續執行改進措施的同時，我們相信我們已將資產標記為一致，可能會將其出售給策略參與者。我們也對榮譽控股公司 (Honors Holdings) 進行了 500 萬美元的減記，反映出產業環境持續嚴峻，許多健身概念的業務放緩，以及持續疲軟的客戶趨勢。我們之前已將該公司第二季列為非應計狀態。我們將繼續與該公司的特許經營商合作，重組榮譽控股信貸，並努力最終提高公司的業績。而我們身為貸款人，已經控制了這筆信貸。

At the end of the third quarter, we also placed Telestream on non-accrual status, which resulted in a $0.9 million write-down. We recognized approximately $557,000 of income from the credit in Q3, while reversing our approximately $300,000 in accrued interest. While the company continues to generate significant EBITDA, we are focused on restructuring Telestream, and our current expectation is that part of the loan will be back on accrual status within two quarters and hopefully even sooner. Non-accrual investments totaled 5.6% of the total debt portfolio compared with the prior quarter of 3.6% of the total debt portfolio.

在第三季末，我們也將 Telestream 置於非應計狀態，導致減記 90 萬美元。我們在第三季確認了約 557,000 美元的信貸收入，同時沖銷了約 30 萬美元的應計利息。在公司繼續產生可觀的 EBITDA 的同時，我們專注於重組 Telestream，我們目前的預期是部分貸款將在兩個季度內恢復應計狀態，希望更快。非應計投資佔總債務投資組合的 5.6%，而上一季則為 3.6%。

Turning to the lending market in general. Conditions across all sponsor segments remain very aggressive. There continues to be a shortage of new quality deal flow and what is in the market is at very thin pricing. We've seen middle market pricing compress down to spreads of SOFR 475 to SOFR 525 and lower mid-market spreads moved to approximately SOFR 475 to SOFR 575.

整體來說，轉向借貸市場。所有贊助商領域的條件仍然非常激烈。新的優質交易流仍然短缺，市場上的交易價格非常低。我們已經看到中間市場定價壓縮至 SOFR 475 至 SOFR 525 的利差，並且較低的中端市場利差移動到大約 SOFR 475 至 SOFR 575。

From our perspective, we believe there is excessive leverage on a lot of credits that have cyclicality, and we are not participating in those transactions. There's a more attractive backdrop in the non-sponsor market where the market continues to support leverage of only 3 to 4.5x and pricing tends to be between SOFR 600 to SOFR 800.

從我們的角度來看，我們認為許多具有週期性的信貸存在過度的槓桿率，而我們不會參與這些交易。非發起人市場的背景更具吸引力，市場繼續支持僅 3 至 4.5 倍的槓桿率，定價往往在 SOFR 600 至 SOFR 800 之間。

We are redoubling our efforts to focus on the non-sponsor market where there is better risk return in many cases and much less competition than what we are seeing in the on-the-run sponsor market. In the on-the-run sponsor market, we see generally very aggressive terms and therefore, focusing more on the off-the-run sponsor market and the non-sponsor market.

我們正在加倍努力，專注於非贊助商市場，在許多情況下，該市場的風險回報更好，而且競爭比我們在現有贊助商市場中看到的要少得多。在現有贊助商市場中，我們通常看到的條款非常激進，因此，我們更加關注非現有贊助商市場和非贊助商市場。

Fourth-quarter volume is likely to be modest compared to other fourth quarters. Generally, supply and demand is out of balance with lenders stretching too far for the better credits. For example, what we see on many of the better credits is the leverage is often so high that the cash flows are not greater than a 1.0 fixed charge coverage level.

與其他第四季相比，第四季的銷量可能會比較溫和。整體而言，供給與需求失衡，貸方為了獲得更好的信貸而過度擴張。例如，我們看到許多較好的信貸的槓桿率往往很高，以至於現金流不超過 1.0 的固定費用覆蓋水準。

More broadly, while we continue to think there will be some declines in interest rates, we are also concerned that we could have government budgets that could put pressure on inflation based on the current policies of our new elected President. So we do not necessarily believe SOFR will come down as far as the yield curve indicates, which is probably good news for the BDC, but it means we're being careful on debt service coverages. We have also continued to see some softening in the economy based on interest rates having been high over the last several years.

更廣泛地說，雖然我們仍然認為利率會下降，但我們也擔心，根據我們新當選總統的現行政策，政府預算可能會給通膨帶來壓力。因此，我們不一定相信 SOFR 會像殖利率曲線所顯示的那麼低，這對 BDC 來說可能是個好消息，但這意味著我們在債務償還覆蓋率方面要保持謹慎。由於過去幾年利率居高不下，我們也看到經濟持續出現疲軟跡象。

Subsequent to quarter end, the BDC closed one new investment and a few add-ons to existing credits totaling approximately $7.5 million and has had repayments of approximately $21 million, including three full realizations. The JV in the third quarter had repayments for three investments for approximately $35 million, following net repayment activity in Q3 and pro forma for several transactions in early Q4 and the special distribution we announced in October, the BDC balance sheet has approximately $45 million of capacity for new assets.

在季度末之後，BDC 完成了一項新投資和幾項現有信貸的附加投資，總額約為 750 萬美元，並已償還約 2,100 萬美元，其中包括三次全額償還。該合資公司在第三季度償還了三項投資，總額約為 3500 萬美元，在第三季度的淨償還活動、第四季度初幾筆交易的預計償還以及我們 10 月份宣布的特別分配之後，BDC 資產負債表上約有 4500 萬美元的新資產容量。

The JV has approximately $90 million of capacity supplementing the BDC's existing capacity. Given the decline in pricing, we continue to expect repayment activity to remain high for the balance of this year and into 2025. While volume is lighter than we'd like it to be in all market segments, our pipeline is still at about 185 deals. We currently have seven new mandates and are working on four add-ons to existing deals. While there can be no assurance that any of these deals will close, all of these credits would fit into the BDC, or our JV should we elect to transact.

該合資公司的產能約為 9,000 萬美元，可補充 BDC 的現有產能。鑑於價格下降，我們繼續預計今年餘下時間和 2025 年的還款活動將保持在高位。儘管所有細分市場的成交量都低於我們的預期，但我們仍有約 185 筆交易。我們目前有七項新任務，並正在為現有任務制定四項附加任務。雖然不能保證這些交易一定會達成，但所有這些信用額度都將納入 BDC 或我們的合資企業（如果我們選擇進行交易的話）。

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

說完這些，我將把電話轉給均勝集團，以了解更多業績細節並審查我們的投資組合組成。均勝？

Thanks, Stuart, and thank you, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $9.2 million or $0.394 per share. This compares with Q2 GAAP NII and core NII of $9.3 million each or $0.405 per share as well as our previously declared quarterly distribution of $0.385 per share. Q3 fee income was lower quarter-over-quarter at approximately $0.3 million compared with $0.4 million from the prior quarter. Q3 amounts were primarily comprised of prepayment and amendment fees.

謝謝，斯圖爾特，也謝謝大家參加今天的電話會議。在本季度，我們記錄了 GAAP 淨投資收益和核心 NII 920 萬美元或每股 0.394 美元。相比之下，第二季的 GAAP NII 和核心 NII 均為 930 萬美元或每股 0.405 美元，而我們先前宣布的季度分配為每股 0.385 美元。第三季費用收入較上季下降至約 30 萬美元，而上一季為 40 萬美元。第三季的金額主要包括預付款和修改費。

For the quarter, we reported a net decrease in net assets resulting from operations of $6.9 million. Our risk ratings during the quarter showed that approximately 75.1% of our portfolio positions either carried a one or two rating, slightly higher than the 74.4% reported in the prior quarter. As a reminder, a one rating indicates that a company has seen its risk of loss reduced relative to initial expectations and a two rating indicates the company is performing according to such initial expectations. Regarding the JV specifically, we continue to grow our investment. As Stuart had mentioned earlier, in the third quarter, we transferred three new deals and one add-on to the STRS JV totaling $15.1 million.

本季度，我們報告經營活動導致的淨資產淨減少額為 690 萬美元。我們在本季的風險評級顯示，我們投資組合中約有 75.1% 的部位獲得一級或二級評級，略高於上一季的 74.4%。提醒一下，一級評級表示公司的損失風險相對於初始預期有所降低，二級評級表示公司的表現符合初始預期。具體到合資企業，我們將繼續增加投資。正如史都華之前提到的，在第三季度，我們向 STRS JV 轉移了三筆新交易和一筆附加交易，總額為 1510 萬美元。

As of September 30, 2024, the JV's portfolio held positions in 38 portfolio companies with an aggregate fair value of approximately $309.8 million compared to 38 portfolio companies at an aggregate fair value of $324.8 million as of June 30, 2024. The investment in the JV continues to be accretive to the BDC's earnings, generating a mid-teens return on equity.

截至 2024 年 9 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，總公允價值約為 3.098 億美元，而截至 2024 年 6 月 30 日，38 家投資組合公司的頭寸總公允價值為 3.248 億美元。對合資企業的投資持續增加 BDC 的收益，產生中等水準的股本回報率。

During Q3, total investment income recognized from our investments in the JV aggregated to approximately $4 million during the quarter, which compares with approximately $3.9 million in Q2. As we have noted in 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.

第三季度，我們對合資企業的投資確認的總投資收益約為 400 萬美元，而第二季度約為 390 萬美元。正如我們在先前的電話會議中指出的那樣，我們對合資企業的投資收益率可能會因多種因素而發生波動，其中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 now. We had cash resources of approximately $20.7 million at the end of Q3, including $9.5 million in restricted cash and approximately $173 million of undrawn capacity available under our revolving credit facility. At December 30, 2024, the company's asset coverage ratio for borrowed amounts as defined by the 1940 Act was 183.4%, which was above the minimum asset coverage ratio of 150%.

現在來看我們的資產負債表。截至第三季末，我們的現金資源約為 2,070 萬美元，其中包括 950 萬美元的受限現金和約 1.73 億美元的循環信貸額度下未使用的可用容量。截至 2024 年 12 月 30 日，該公司根據 1940 年法案定義的借款資產覆蓋率為 183.4%，高於 150% 的最低資產覆蓋率。

Our Q3 net effective debt-to-equity ratio after adjusting for cash on hand was approximately 1.13x compared with 1.09x for the prior quarter. Before I conclude and open up the call to questions, I'd again like to highlight our distributions. This morning, we announced that our Board declared a fourth quarter distribution of $0.385 per share, which is consistent with the prior quarter.

調整庫存現金後，我們第三季的淨有效負債權益比率約為 1.13 倍，而上一季為 1.09 倍。在我結束並開始提問之前，我想再次強調我們的分佈。今天上午，我們宣布董事會宣布第四季度分配為每股 0.385 美元，與上一季一致。

The upcoming regular distribution, the 49th consecutive quarterly distribution paid since our IPO in December 2012, with all distributions at or above a rate of $0.355 per share per quarter will be payable on January 3, 2025, to stockholders of record as of December 20, 2024. In addition to our quarterly distribution, we elected to declare a special distribution of $0.245 per share for stockholders of record as of October 31, 2024. The distribution will be payable on December 10, 2024.

即將進行的定期分配是自 2012 年 12 月我們首次公開募股以來連續第 49 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 2025 年 1 月 3 日支付給截至 2024 年 12 月 20 日登記在冊的股東。除了季度分配外，我們還選擇向截至 2024 年 10 月 31 日登記在冊的股東宣布每股 0.245 美元的特別分配。分配將於 2024 年 12 月 10 日支付。

Pro forma for this special distribution, we estimate our spillback income to be approximately $26.8 million. 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.

對於這次特別分配的預測，我們估計回溢收入約為 2,680 萬美元。正如我們之前所說，我們將根據我們投資組合的核心獲利能力以及其他可能值得考慮的相關因素，繼續評估我們近期和中期的季度分配。

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

說完這些，我現在將電話轉給接線員來回答您的問題。操作員？

(Operator Instructions) Melissa Wedel, JPMorgan.

（操作員指示）摩根大通的梅麗莎·韋德爾。

I wanted to follow up on your comments about the deal environment. And specifically, you mentioned that this fourth quarter may not be as robust as typically seen in that seasonally busy quarter. Though repayments are expected to be elevated, I think you said in the coming quarters. Should we -- it sounds like we should be thinking about modest portfolio deleveraging over the next few quarters. Is that -- am I hearing you correctly there?

我想跟進您對交易環境的評論。具體來說，您提到今年第四季的業績可能不如往年旺季那麼強勁。儘管預計還款金額會增加，但我認為您說的是未來幾季。聽起來我們應該考慮在接下來的幾個季度適度地去槓桿化投資組合。那是——我聽得正確嗎？

I would tell you that based on the mandates that we have without clarity as to whether they'll all close, if most of them do close, they should match up in balance with any repayment activity that we currently see. So I don't see leverage getting lower. That said, we have a lot of undeployed capacity, both on the BDC balance sheet, which is targeted for assets priced at SOFR 600 and greater and on the JV, where there's $90 million of capacity.

我想告訴你，根據我們目前掌握的授權，尚不清楚它們是否都會關閉，如果大多數確實關閉，它們應該與我們目前看到的任何還款活動相匹配。因此我不認為槓桿率會降低。儘管如此，我們仍有許多未部署的產能，無論是在 BDC 資產負債表上（其目標是 SOFR 600 及以上的資產），還是在合資企業上，其產能為 9,000 萬美元。

Those are for assets that are priced under SOFR 600, which would typically be the sponsor deals in today's market. And I'm not sure, given the relative balance of deal volume that we're going to be able to deploy much of that excess capacity here in Q4. But I don't think, based on what we see right now, that we would have shrinkage of portfolio size, I would personally estimate based on current volume stability.

這些是針對 SOFR 600 之下定價的資產，這通常是當今市場上的發起人交易。而且，考慮到交易量的相對平衡，我不確定我們是否能夠在第四季度部署大部分過剩產能。但根據我們目前看到的情況，我不認為我們的投資組合規模會縮減，我個人會根據目前的交易量穩定性進行估計。

I appreciate that. I know it's difficult to estimate that with any degree of accuracy really looking ahead. I understand there are a lot of moving parts. I think one of -- just second question, there's been a lot of focus on the quality of investment income across the industry and the percentage of PIK income, in particular, as a function of total revenue. When you look across the portfolio, we've seen sort of a gradual increase over time over the last four quarters maybe in PIK income as a percentage of total revenue.

我很感激。我知道，展望未來，很難以任何準確度進行估計。我知道有很多活動部件。我認為第二個問題之一是，整個產業都非常關注投資收益的質量，尤其是 PIK 收益佔總收入的百分比。當您查看整個投資組合時，我們發現過去四個季度中 PIK 收入佔總收入的百分比可能呈現逐漸增加的趨勢。

I just want to understand how you're thinking about that, how it informs new deals that you put on the balance sheet and how you manage any investments that are opting for PIK income and what that means for value marks or engagement with management.

我只是想了解您是如何考慮這個問題的，它如何為您在資產負債表上列出的新交易提供信息，以及您如何管理選擇 PIK 收入的任何投資，以及這對價值標記或與管理層的互動意味著什麼。

Yes. As it regards new deals, we generally seek either 100% cash income or the vast majority being cash income. As an example, the Westinghouse deal that we put in a couple of quarters ago had a little bit of PIK, but it was SOFR 550 cash plus 100 basis points of PIK. Most of the PIK that we have in portfolio relates to troubled accounts that we're looking to turn around. And we try to be very realistic if we are picking interest, but a company is moving in the wrong direction and the likelihood of collecting that interest is in debt, we take the asset on the non-accrual as we did with Telestream.

是的。對於新交易，我們通常尋求 100％ 現金收入或絕大多數為現金收入。舉例來說，我們幾個季度前達成的西屋電氣交易中有少量的 PIK，但它是 SOFR 550 現金加上 100 個基點的 PIK。我們投資組合中的大部分實體投資收益都與我們希望扭轉的不良帳戶有關。如果我們選擇利息，我們會盡量做到現實，但一家公司正朝著錯誤的方向發展，而收回利息的可能性是透過債務實現的，我們則會像對待 Telestream 一樣將資產視為非應計資產。

As I highlighted in my prepared remarks, Telestream still has a significant amount of EBITDA, but the amount of EBITDA is not supportive of the current debt load. So the lenders are likely to take over that credit, restructure the debt and most of that debt or the debt -- either all or most of the debt that would come back onto the balance sheet would come on as cash pay debt would be our expectation or at least it would be cash paid debt within a quarter or two.

正如我在準備好的發言中所強調的那樣，Telestream 仍然擁有大量的 EBITDA，但 EBITDA 的金額不足以支撐當前的債務負擔。因此，貸方可能會接管該信貸，重組債務，並且大部分債務或債務——所有或大部分將重新回到資產負債表的債務將以現金支付債務的形式出現，這是我們的預期，或至少將在一兩個季度內以現金支付債務。

(Operator Instructions) Robert Dodd, Raymond James.

（操作員指示）羅伯特·多德、雷蒙德·詹姆斯。

Joyson, you gave us the spillover number. I wrote down $26 million, but I think I might have written down the wrong number. Can you repeat what that is?

均勝，您給了我們溢出數字。我寫下了 2600 萬美元，但我想我可能寫錯了數字。你能重複一遍那是什麼嗎？

Robert, $26.8 million pro forma for the special --

羅伯特，特別撥款 2680 萬美元--

Yes. Got it. Then, I mean, Stuart, your comments about how aggressive the market is, I mean, talking about deals being done at origination for middle market, low middle companies at fixed charge coverage ratios below one. I mean, how long do you think that competitive environment -- a hard question. How long do you think that kind of competitive environment can sustain itself? I mean is it -- the (inaudible) is just betting on growth? Or underwriting on those kind of terms seems somewhat problematic.

是的。知道了。然後，斯圖爾特，我的意思是，你對市場有多激進的評論，我的意思是談論在中端市場、中低端公司以低於一的固定費用覆蓋率進行的交易。我的意思是，您認為這種競爭環境會持續多久——這是一個很難的問題。您認為這種競爭環境能夠維持多久？我的意思是──（聽不清楚）只是押注成長嗎？或者承保此類條款似乎有些問題。

Yes. I mean, Melissa's point about PIK interest in general, really gets to that point, Robert, where people are structuring deals that have the ability to pick part or all of the coupon of the deal in order to accommodate the fact that the cash flows of the company can't service the debt load. I would say, yes, you're right that people are predicting growth, which is one of the ways that they'll dig themselves out of the less than 1.0 fixed charge coverage hole.

是的。我的意思是，梅麗莎關於 PIK 利息的一般觀點，實際上確實涉及到了這一點，羅伯特，人們在構建交易時能夠選擇部分或全部交易息票，以適應公司現金流無法償還債務的事實。我想說，是的，你說得對，人們預測成長，這是他們擺脫低於 1.0 的固定費用覆蓋漏洞的方法之一。

But more than that, people are very much expecting SOFR to decline. Candidly, we are, as I highlighted, more skeptical of the yield curve right now, given what we understand to be pressures that are likely to be on the economy that will be reinflationary.

但更重要的是，人們非常預期SOFR將會下降。坦白說，正如我所強調的那樣，考慮到我們所理解的經濟可能面臨的再通膨壓力，我們現在對殖利率曲線更加懷疑。

That's not to say we don't think there'll be some more small cuts from the Fed in the near term, but we are skeptical that a year to two years from now, SOFR is as low as the yield curve is indicating. And I would say that the move in the 10-year treasuries yesterday was an indication that the market is starting to see some of the same things that we are seeing. So we are sticking to our knitting.

這並不是說我們不認為聯準會短期內會進一步小幅降息，但我們懷疑一到兩年後 SOFR 是否會像殖利率曲線所顯示的那麼低。我想說，昨天十年期公債的走勢表明，市場開始看到一些與我們相同的情況。因此，我們要堅守自己的本職工作。

The catch '22 is on the stronger non-cyclical credits, the leverage levels and fixed charge coverage levels are very challenged. On the more cyclical credits, the leverage levels are obviously lower, but we get very nervous putting more than 3.5x or 4x leverage on a cyclical credit.

問題在於，在非週期性信貸走強的情況下，槓桿水平和固定費用覆蓋水準面臨巨大挑戰。對於週期性信貸而言，槓桿率顯然較低，但我們對週期性信貸的槓桿率超過 3.5 倍或 4 倍感到非常緊張。

And the market at the moment is, in many cases, well in excess of that. So we have turned down, walked away from or lost a lot of deals in the market right now because we just think people -- it's not so much a price issue because we don't think we're going to walk away from a good deal based on price, but it is the fact that people are putting anywhere from 0.5 turn to, in some cases, 1.5 turn too much leverage on credits. And that's why we've redoubled our efforts in the non-sponsor sector where leverage is much lower, and we hope to book a higher ratio of non-sponsor deals while the markets remain this aggressive.

而目前的市場在許多情況下已經遠遠超過了這個水準。因此，我們目前拒絕、放棄或失去了市場上的許多交易，因為我們認為人們——這並不是價格問題，因為我們認為我們不會放棄基於價格的好交易，但事實是人們對信貸的槓桿率過高，從 0.5 倍到某些情況下 1.5 倍。這就是為什麼我們在槓桿率低得多的非贊助商領域加倍努力，我們希望在市場保持如此激進的情況下預定更高比例的非贊助商交易。

Very helpful. One more, if I can. On American Crafts, your historic track record has been to try and stay with the trouble credit long term and work it out, turn it around and hopefully get a full recovery. It sounds like American Crafts, obviously, they lost a material customer. But it sounds like you've taken another look at that credit and decided that's not a viable strategy and a sooner exit might be better.

非常有幫助。如果可以的話，再說一個。就美國工藝品公司而言，你們的歷史記錄一直是試圖長期持有問題信貸並解決問題、扭轉局面，並希望獲得全面復甦。聽起來，American Crafts 顯然失去了一個重要的客戶。但聽起來你已經重新審視了那筆貸款，並認為這不是一個可行的策略，儘早退出可能會更好。

So I mean, is it just the change of -- I mean, just the loss of the material customer? Or is there something else that's changed there in terms of your decision-making of maybe not sticking with it and working it out further versus a quick sale?

所以我的意思是，這僅僅是——我的意思是，只是失去了重要的客戶嗎？或者，在您的決策方面是否存在其他變化，也許您不會堅持下去，而是進一步解決，而不是快速出售？

Yes. Robert, that -- you're exactly right. We have a very strong track record of taking over credits and turning them around and getting to full recovery. When we had to take over American Crafts because it ran into liquidity problems, we did inject additional capital into the company to bring the trade current and to get products shipped and to increase our fill rates. But given the challenges the company was facing, which we were addressing, the loss of the major customer took the revenue base of the company down low enough that we don't see a path for a real recovery of that company as a stand-alone entity.

是的。羅伯特，那——你完全正確。我們在接管信貸、扭轉信貸狀況並實現全面復甦方面有著非常出色的業績。當我們因為 American Crafts 遇到流動性問題而不得不接管它時，我們確實向該公司注入了額外的資本，以使貿易流通、運送產品並提高我們的供應率。但考慮到公司面臨的挑戰（我們正在應對），主要客戶的流失導致公司的收入基礎大幅下降，我們看不到該公司作為獨立實體真正復甦的途徑。

And it would take an injection of more capital into the company to have a shot to turn it around. And at this point, we don't think that that would be money that would be well invested. So we are exploring a sale of the company to strategic players who are the logical ones to own it, given that we don't think the company is going to be able to be significantly profitable on a stand-alone basis. So it is not consistent with our history of successful turnarounds. This would be unfortunately a failed turnaround, and that is why I characterized the NAV for the quarter as disappointing.

並且需要向公司注入更多資本才能扭轉局面。就目前情況而言，我們認為這筆錢不值得投資。因此，鑑於我們認為該公司無法單獨實現顯著盈利，我們正在探討將該公司出售給合適的策略股東。所以這與我們成功扭轉局勢的歷史不符。不幸的是，這將是一次失敗的扭轉，這就是為什麼我認為該季度的資產淨值令人失望。

And we are very disappointed, and we are on other accounts, including Telestream, Honors, working very hard to turn those around and get to what we've done historically, which is not only getting our money back, but getting a gain on many of these credits that we have to take control of. And we do work with H.I.G. private equity resources to make sure that we execute on management changes, cost cuts and revenue growth opportunities on those turnaround accounts.

我們非常失望，我們正在為包括 Telestream、Honors 在內的其他客戶努力扭轉局面，實現我們歷史上所做的事情，不僅收回我們的資金，而且還從我們必須控制的許多信用中獲得收益。我們確實與 H.I.G. 合作。私募股權資源，以確保我們在這些扭虧為盈的帳戶上執行管理變革、削減成本和增加收入的機會。

Bryce Rowe, B. Riley.

布萊斯·羅，B.萊利。

I wanted to ask about your comment around redoubling on the non-sponsor effort. And you guys have talked quite a bit about over the years, the resources you have across the country on -- within different markets to drive deal flow. When you talk about redoubling, I mean, what exactly does that mean?

我想問一下您對加倍非贊助商努力的評論。多年來，你們已經多次談論你們在全國各地不同市場擁有的資源，以推動交易流程。當您談到加倍時，我的意思是，那到底是什麼意思？

It means that we have regular dialogue with our originators in our 12 regional locations, indicating to them that chasing on-the-run sponsor deals in today's market is likely to be low productivity and asking them to work on developing more of the non-sponsor opportunities. That involves talking to CEOs, CFOs, deal brokers, lawyers, accountants, wealth managers.

這意味著我們會與我們 12 個地區的發起人進行定期對話，向他們表明，在當今市場追逐正在進行的贊助商交易可能會降低生產力，並要求他們努力開發更多的非贊助商機會。這涉及與執行長、財務長、交易經紀人、律師、會計師、財富經理的交談。

In fact, in support of that non-sponsor marketing activity, I find myself in Denver this morning, where I joined our new Denver originator last night for a non-sponsor origination effort that was targeted at about 35 or 40 deal professionals in this Denver market. And so things like that, that I did last night, along with a number of efforts being taken by other members of the team have resulted in us doing a higher percentage of non-sponsor deals than we did in 2022 or 2023.

事實上，為了支持這項非贊助商行銷活動，我今天早上來到了丹佛，昨晚我加入了我們新的丹佛發起人，開展了一項非贊助商發起活動，針對丹佛市場大約 35 或 40 名交易專業人士。因此，我昨晚所做的這些事情，以及團隊其他成員所做的一些努力，使得我們完成的非贊助交易比例比 2022 年或 2023 年更高。

So in a normal market environment, we see somewhere between 20% to 30% of our deals being non-sponsor. But in this market environment, any given quarter, 30% to 50% of our deals are non-sponsor.

因此，在正常的市場環境下，我們發現約有 20% 到 30% 的交易是非贊助商交易。但在這種市場環境下，任何一個季度，我們的交易中有 30% 到 50% 是非贊助商交易。

And I mean, if you look across, at least in the deck that you have here, pretty consistent 2/3, 1/3 sponsored versus non-sponsor. Over time, kind of assuming some of these competitive dynamics don't really shift and certainly, they likely will. But is there may be a renewed effort to permanently take that non-sponsored level higher within the portfolio, especially thinking about the better pricing and better terms that you get with it?

我的意思是，如果你看一下，至少在你手中的這張牌中，贊助與非贊助的比例相當穩定，分別為 2/3、1/3。隨著時間的推移，我們可以假設其中一些競爭動態不會真正發生變化，但事實上，它們很可能會發生變化。但是，是否可能會有新的努力來永久提高投資組合中的非贊助水平，尤其是考慮到您可以獲得的更好的定價和更好的條款？

Yes, I would say that is likely. At the moment, virtually all sponsored deals are priced below SOFR 600. So the sponsor deals that we're doing will almost all, not necessarily 100%, but almost all be targeted for the JV, and it will be primarily non-sponsor deals that will be going on to the BDC balance sheet. So if market conditions persist in their current manner, I would expect to see the ratio of non-sponsor deals on our portfolio rise over the next quarter to five quarters.

是的，我認為這是有可能的。目前，幾乎所有贊助交易的價格都低於 SOFR 600。因此，我們進行的贊助交易幾乎全部（不一定是 100%）都針對合資企業，而且主要非贊助交易將進入 BDC 的資產負債表。因此，如果市場狀況持續保持當前狀態，我預計我們投資組合中的非贊助商交易比例將在未來一個季度到五個季度內上升。

Okay. And one more for me. In terms of that non-sponsor market, who are you -- what's the competitive dynamic like there? Are you running into other public BDCs or different, I guess, different capital providers?

好的。對我來說還有一個。就非贊助商市場而言，你是誰？您是否遇到過其他公共 BDC 或不同的資本提供者？

If you get into the upper mid-market and large cap market on non-sponsored deals, you see a number of sponsor -- historically sponsor-oriented players seeking volume because of how the markets are and, in some cases, underpricing those deals. But in the core mid-market and lower mid-market, where sourcing non-sponsor deals is a very organic and labor-intensive effort because the big banks don't intermediate those deals, we see very limited competition. There are other players who participate in the sponsor mid-market and lower mid-market. They include names like Comvest, MGG and Goldman to name three. But there is no one competitor that we see consistently in that market.

如果您進入非贊助交易的中高端市場和大型市場，您會看到許多贊助商——歷史上以贊助商為導向的參與者由於市場狀況而尋求數量，並且在某些情況下，這些交易的價格過低。但在核心中端市場和中低端市場，尋找非贊助商交易是一項非常有機和勞動密集的工作，因為大銀行不中介這些交易，我們看到的競爭非常有限。還有其他參與者參與贊助商中端市場和中低端市場。其中包括 Comvest、MGG 和 Goldman 等。但我們在那個市場上並沒有看到一個始終如一的競爭對手。

And a lot of the mid-market and lower mid-market non-sponsor deals that we work on, we are working on a negotiated basis without any direct competition on the transactions. That's not to say there's not a recognition of those clients as to what market pricing is, but there is, again, very limited competition in the non-sponsor space for organic origination as compared to the sponsor space. In fact, I'd tell you there are 20x more players in the sponsor space than there are in the non-sponsor space.

我們進行的許多中端市場和中低端市場非贊助商交易都是在談判的基礎上進行的，不存在任何直接的交易競爭。這並不是說客戶不了解市場定價，而是與贊助商領域相比，非贊助商領域的有機發起競爭非常有限。事實上，我想告訴你，贊助商領域的參與者比非贊助商領域的參與者多 20 倍。

Okay. Last one for me. When we're looking at the yield compression for the quarter, it looks like 70 basis points, 70 basis points. Any sense for how to think about that spread compression versus interest rate or lower base rates, what the impact is?

好的。對我來說是最後一個。當我們查看本季的收益率壓縮時，它看起來像 70 個基點，70 個基點。您如何看待利差壓縮與利率或較低基準利率之間的關係？

Lower base rates, I mean, Joyson, you can confirm it. I think they were about 50 basis points of the 70 compression, but we are seeing a combination of lower base rates and lower spreads. We, on both our sponsor and non-sponsor deals have during favorable market environments, always seek to maximize our call protection. And so we typically get at least two years of call protection on sponsor deals and three to four years of call protection on non-sponsor deals. And that has been protecting some of our higher spread deals in portfolio.

降低基本利率，我的意思是，均勝，你可以證實這一點。我認為它們大約是 70 個基點中的 50 個基點，但我們看到的是較低基準利率和較低利差的組合。在有利的市場環境下，無論是在發起交易或非發起交易中，我們始終致力於最大限度地提高我們的看漲保護。因此，我們通常會對贊助商交易獲得至少兩年的贖回保護，對非贊助商交易獲得三到四年的贖回保護。這一直保護著我們投資組合中一些利差較高的交易。

But as time passes, you've got an entire year now where market pricing has been lower. And so as those call protections either roll off or step down, we are going to see increased pressure to reprice deals to the current market level. And that market level is down 100 to 150 basis points from where it was in mid-2022 and mid-2023. But that's not just for us.

但隨著時間的推移，現在已經有整整一年的市場價格處於較低水準。因此，隨著這些看漲保護的取消或降低，我們將看到將交易重新定價至當前市場水平的壓力越來越大。該市場水準較 2022 年中期和 2023 年中期下降了 100 至 150 個基點。但這不僅適用於我們。

I believe that is true across the market, both sponsor and non-sponsor where pricing has fallen more in the sponsor market than it has in the non-sponsor market. And I believe that all of our competitors are dealing with a similar dynamic.

我相信整個市場都是如此，包括贊助商和非贊助商，贊助商市場的價格下降幅度比非贊助商市場更大。我相信我們所有的競爭對手都面臨著類似的情況。

As there are no further questions at this time, ladies and gentlemen, that will conclude our question-and-answer session and the WhiteHorse Finance third quarter 2024 earnings call. Thank you for your participation. You may disconnect your line at this time and have a wonderful rest of your day.

女士們、先生們，目前沒有其他問題，我們的問答環節和 WhiteHorse Finance 2024 年第三季財報電話會議將結束。感謝您的參與。現在您可以斷開連接並享受美好的一天。

Thank you.

謝謝。