WhiteHorse Finance (WHF) Earnings Call Transcript

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Date

Monday, March 2, 2026 at 1:30 p.m. ET

Call participants

• Chief Executive Officer — Stuart D. Aronson
• Chief Financial Officer — Joyson C. Thomas
• Operator

Takeaways

• Net Investment Income -- GAAP and core net investment income was $6,600,000, or $0.287 per share, up from $6,100,000, or $0.263 per share, in the prior quarter.
• Net Asset Value -- Net asset value per share rose by 2.4% to $11.68, compared to $11.41 at the end of the prior quarter.
• Distributions -- Base dividend for the quarter was $0.25 per share, with an additional $0.35 per share distributed as a special dividend; for 2026, a $0.01 per share supplemental dividend was declared alongside the $0.25 base distribution.
• Share Repurchases -- 1,000,000 shares were repurchased during the quarter for approximately $7,400,000, accretive to NAV by roughly 18.4¢ per share.
• Repurchase Program Expansion -- Board approved an additional $7,500,000 authorization, bringing the total to $22,500,000, with $15,000,000 still available under the program.
• CLO Securitization -- Completed term debt securitization through CLO vehicle with $164,000,000 in AAA-rated notes at three-month SOFR plus 170 basis points.
• Incentive Fee Reduction -- Adviser voluntarily reduced the incentive fee on net investment income from 20% to 17.5%, lowering fees by about $200,000 for the most recent quarter; duration of this reduction remains uncertain.
• Portfolio Net Deployments -- Gross capital deployments were $77,100,000, offset by $49,600,000 in repayments and sales, leading to net deployments of $27,500,000 before asset transfers to the STRS JV.
• New Originations -- Seven new originations totaled $64,000,000, all first lien loans, with average underwriting leverage of 4.3x EBITDA.
• Portfolio Composition -- At period end, 99.7% of the debt portfolio was first lien, senior secured.
• Debt Yields -- Weighted average effective yield on income-producing debt investments was 11%, down from 11.6% in the prior quarter; overall portfolio yield decreased to 9.1%, from 9.5% previously, due to lower spreads and base rates.
• STRS JV Performance -- STRS JV portfolio had a fair value of $323,600,000 (down from $341,500,000 in Q3) and an average yield of 9.9%; leverage declined to 1.07x from 1.24x last quarter.
• Realized and Unrealized Gains/Losses -- Recognized $11,300,000 in net realized losses and $13,100,000 in net unrealized gains, with an aggregate net gain of $1,900,000 for the quarter.
• Nonaccruals -- At quarter-end, 2.4% of the total debt portfolio at fair value was on nonaccrual status; issuers included Honors Holdings, New Cycle Solutions, PlayMonster, and ThermoDisc.
• Fee Income -- Q4 fee income totaled approximately $800,000, primarily from higher prepayment activity.
• Net Assets from Operations -- Net increase in net assets from operations was $8,400,000 for the quarter.
• Risk Ratings -- 85.9% of portfolio positions were rated one or two, up from 81.8% in the prior quarter; upgrades occurred for Telestream and MAX Solutions, while Outward Hound and ThermoDisc received downgrades.
• Balance Sheet Metrics -- Cash resources totaled $29,700,000 (including $22,700,000 restricted); net effective debt-to-equity ratio after cash was 1.15x, up from 1.07x; asset coverage ratio was 179.1%.
• Undistributed Taxable Income -- Estimated spillover income was $27,600,000 as of year-end, with a pro forma figure of $21,600,000 after January’s distribution.
• Insider Purchases -- Insiders and affiliates bought 87,000 shares in the open market in the prior quarter, as disclosed in Form 4 filings.
• Software Exposure -- Software investments represented 10% of the portfolio at cost and 9% at fair value.
• Recent Portfolio Activity -- After the quarter ended, the company closed two new deals and seven add-ons totaling $20,000,000; one ThermoDisc sale totaled $1,100,000.

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Risks

• Aronson stated, "We have seen negative developments at Honors Holdings, where New Year sign-ups were below budget, and based on the current information we have, we would expect a markdown in 2026."
• Aronson said, "Outward Hound is being sold at a price that is below our fourth quarter marks based on weak performance in Q4. The gap between the Q4 mark and the anticipated recovery is approximately $3,000,000."
• Portion of the Lumen LatAm investment was exited at current market values, which were below the Q4 mark.
• ThermoDisc’s remaining exposure was placed on nonaccrual status as of period-end with the remaining investment already sold and exited in 2026.

Summary

WhiteHorse Finance (NASDAQ:WHF) reported an increase in net investment income and NAV per share, supported by accretive share repurchases and a lower incentive fee arrangement. The board expanded the share buyback mandate and maintained its distribution policy, including a new supplemental dividend declared for 2026. Portfolio activity reflected strong credit quality in new first lien senior secured loans and continued active management of underperforming credits. While STRS JV contributions remained accretive and cash positions were stable, management highlighted limited capacity for new balance sheet investments and strategic prioritization of share repurchases given the large discount to NAV.

• Management confirmed persistent high portfolio quality, with 85.9% of positions rated one or two, but highlighted targeted nonaccruals and imminent markdowns in select positions.
• The adviser’s voluntary incentive fee reduction is described as supporting distributable earnings, though extension beyond the current fiscal year is uncertain.
• Despite ongoing net investment activities, overall deal pipeline remains below typical levels for this time of year, which management attributes to market competitiveness and volatility risks.

Industry glossary

• STRS JV: A joint venture investment platform ("STRS JV") utilized by WhiteHorse Finance to hold certain portfolio investments, providing leveraged exposure and supplemental earnings accretive to the BDC.
• First Lien Loan: A type of secured loan that has the highest priority in the event of borrower default, with claims on collateral senior to all other debt.
• Nonaccrual Status: Classification for loans where interest is no longer being accrued due to borrower financial distress or payment delinquency, signaling increased credit risk.
• CLO (Collateralized Loan Obligation): A financial vehicle issuing debt securities backed by a pool of loans, used here to securitize a portion of WhiteHorse's portfolio and reduce funding costs.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated derivatives and loans, referenced in loan pricing structures.
• Spillover Income: Undistributed taxable income that can be used to pay future dividends without incurring non-deductible excise tax for BDCs.
• Incentive Fee: Portion of investment income paid to the investment adviser, based on performance, subject to a stated percentage under the management agreement.

Full Conference Call Transcript

Stuart D. Aronson: Thank you, Rob. Good afternoon, everyone, and thank you for joining us today. As you are aware, we issued our earnings this morning before the market opened. I hope you have had a chance to review the results for the period ending 12/31/2025, which can also be found on our website. On today's call, I will begin by addressing our fourth quarter results and current market conditions, then Joyson C. Thomas, our Chief Financial Officer, will discuss our performance in greater detail. Afterwards, we will open the floor for questions. Our results for 2025 reflected improved earnings and NAV performance relative to the prior quarter.

Q4 GAAP net investment income and core NII was $6,600,000, or 28.7¢ per share, compared with Q3 GAAP and core NII of $6,100,000 or 26.3¢ per share. NAV per share at the end of Q4 was $11.68 compared to $11.41 at the end of Q3, an increase of approximately 2.4%. The increase in NAV resulted from share repurchases that were accretive to NAV by approximately 18.4¢ per share, as well as net realized and unrealized gains of approximately 7.7¢ per share, while also reflecting distributions paid during the quarter of $0.25 per share in base dividends and $0.35 per share in special dividends.

We will continue our distribution policy framework that was previously discussed, where the company intends to distribute a quarterly base distribution of 25¢, as well as make potential supplemental distributions above the base level in the future pursuant to this distribution policy. For 2026, the company declared a 1¢ per share supplemental distribution in addition to our base 25¢ dividend. To the extent our nonaccrual and other troubled situations in our portfolio result in recoveries, or if current market conditions improve and/or base rates increase, and any of these factors lead to additional earnings, we will be prepared to share those incremental earnings with investors in the form of supplemental or special distributions. Turning to shareholder value.

We recognize that our shares have traded at a persistent discount to NAV, and we have been focused on taking concrete steps to improve earnings power and narrow that gap over time. Over the last several quarters, we have prioritized actions that directly support sustainable net investment income and long-term value. First, we completed a term debt securitization through our CLO vehicle, which included $164,000,000 of AAA-rated notes priced at three-month SOFR plus 170 basis points. This transaction improves the stability and cost profile of a meaningful portion of our secured leverage.

Second, our adviser voluntarily agreed to reduce the incentive fee on net investment income from 20% to 17.5% for the most recently completed fiscal quarter and 2026, providing near-term support for distributable earnings. In Q4, this voluntary reduction reduced incentive fees by approximately $200,000 and provided additional support for our quarterly distributions. The adviser may extend this voluntary reduction; however, the duration and extent of any future reductions are uncertain and will be subject to ongoing discussions with the Board. Finally, during Q4, the company repurchased 1,000,000 shares for an aggregate cost of approximately $7,400,000, which was accretive to NAV by approximately 18.4¢ per share.

Given the continued gap in price to book, our Board has approved an incremental authorization to our share repurchase program of approximately $7,500,000, bringing the total authorization to $22,500,000 with approximately $15,000,000 still available under the authorization. This expanded program positions us to continue repurchasing shares opportunistically at prices below NAV when conditions warrant. Looking ahead, in addition to executing on portfolio repositioning and disciplined origination and building on the actions we have already taken, we and the Board will continue to evaluate and pursue other potential avenues to enhance shareholder value. Turning to our portfolio activity.

We had gross capital deployments of $77,100,000 in Q4, which was partially offset by repayments and sales of $49,600,000, resulting in net deployments of $27,500,000 before the effects of transferring assets into the STRS JV. Gross capital deployments consisted of seven new originations totaling $64,000,000; the remaining amounts were deployed to fund nine add-ons to existing investments. In addition, there were $1,200,000 in net repayments on revolver commitments during the quarter. Our new originations in Q4 included a mix of sponsor and non-sponsor deals at an average underwriting leverage of approximately 4.3x EBITDA. All of our Q4 deals were first lien loans. Pricing reflected competitive market conditions, and our focus remained on structure and credit quality.

Total repayments and sales were driven by complete or partial realizations in four portfolio companies: Brooklyn Bedding, Bridgepoint Healthcare, Elm OneCall Locators, and Contemporary Services Corporation. In the cases of Brooklyn Bedding and Elm, we led new financings that took out the old financings. At the end of Q4, 99.7% of our debt portfolio was first lien, senior secured, and our portfolio continued to reflect the balanced mix of sponsor and non-sponsor investments. The weighted average effective yield on our income-producing debt investments decreased to 11% at the end of Q4 compared to 11.6% at the end of Q3, mainly due to lower spreads and lower base rates.

The weighted average effective yield on our overall portfolio also decreased to 9.1% at the end of Q4, compared to approximately 9.5% at the end of Q3. During the quarter, the BDC transferred two new deals and two existing investments to the STRS JV, totaling $19,200,000. At the end of Q4, the STRS JV portfolio had an aggregate fair value of $323,600,000 and an average effective yield of 9.9%. We continue to successfully utilize the STRS JV and believe WhiteHorse Finance, Inc.'s equity investment in the JV continues to provide attractive returns to our shareholders.

After net deployments and JV transfer activity, as well as net realized and unrealized gains recognized during the quarter, total investments increased from the prior quarter by $10,200,000 to $578,600,000. This compares to our portfolio's fair value of $568,400,000 at the end of Q3. During the quarter, we recognized $11,300,000 in net realized losses and approximately $13,100,000 in net unrealized gains, an aggregate total of $1,900,000 in net realized and unrealized gains in Q4. The net realized and unrealized gains of $1,900,000, or 7.7¢ per share, were primarily driven by a $1,100,000 unrealized gain in Sklar Holdings, also known as Starco, a $700,000 unrealized gain on Motivational Fulfillment, and other net markups across the portfolio.

These items were partially offset by a $700,000 unrealized loss in Lumen LatAm. In addition, we recognized realized losses of $11,600,000, primarily driven by $11,200,000 from the Aspect Software investment restructuring and exit, and $500,000 from the partial sale of ThermoDisc. Importantly, these investments were already marked down in prior periods and reflected in our fair value, so the Q4 realizations largely converted previously recognized unrealized losses into realized losses, which accordingly also resulted in a corresponding net unrealized gain of $11,600,000 in the quarter. With the Aspect Software realization, those debt investments were removed from nonaccrual status.

Our small remaining exposure in ThermoDisc was placed on nonaccrual status as of quarter-end, with the remaining investment already sold and exited in 2026. Excluding the 2.4% of the total debt portfolio at fair value, the remaining issuers on nonaccrual at quarter-end were Honors Holdings, New Cycle Solutions, PlayMonster, and ThermoDisc. As always, we continue to actively manage underperforming credits, leveraging our dedicated restructuring resources and the broader H.I.G. platform. Subsequent to quarter-end, we have had some credit-specific updates worth noting. We have seen negative developments at Honors Holdings, where New Year sign-ups were below budget, and based on the current information we have, we would expect a markdown in 2026.

In addition, Outward Hound is being sold at a price that is below our fourth quarter marks based on weak performance in Q4. The gap between the Q4 mark and the anticipated recovery is approximately $3,000,000. On Lumen LatAm, we received updated financial information during this quarter, and we exited a portion of that position at current market values, which were below the mark in Q4. Partially offsetting these items, we have seen positive developments in certain credits, including Telestream, Starco, and PlayMonster. Aside from the credits on nonaccrual, our portfolio continues to perform well. I would also note that we have modest exposure to Internet or software companies.

The BDC software exposure across six portfolio names represents 10% of the portfolio at cost and 9% at fair value. Market conditions remain competitive, with capital availability continuing to exceed new deal supply. In the mid-market, we are generally seeing sponsor-backed deals pricing in the SOFR plus 450 to 525 range, and in the lower mid-market the SOFR plus 450 to 550 range, with terms varying by credit quality and structure. We have been avoiding certain large-cap opportunities. We believe the market has been overheated, both in documentation and pricing. We are also highly focused on minimizing exposure to liability management executions in new investments.

For investors less familiar with the term, liability management execution, or LME risk, refers to the risk that a borrower can move assets away from the existing lenders and pledge them to new lenders, effectively subordinating the original senior debt. We are working to ensure that structures and documentation provide adequate protections for all the deals we do against this risk. Looking forward, we are seeing somewhat better deal volume than this time last year. The sentiment we hear from bankers and private equity sponsors is for an increase in M&A volumes in 2026, supported by lower interest rates, abundant capital, and increased pressure on sponsors from LPs to drive realizations.

At the same time, the market continues to recognize the possibility of volatility from political and geopolitical developments, which could disrupt M&A activity. In the non-sponsor market, conditions remain stable and less competitive than the sponsor market. Average leverage is approximately 4 to 4.5x, and pricing continues to be generally at SOFR plus 600 or above, with our non-sponsor portfolio performing as well as or better than the sponsor portfolio. We continue to focus significant resources on the non-sponsored market, where there are better risk/returns in many cases and much less competition than what we are seeing in the on-the-run sponsor market. We currently have 21 originators covering 12 regional markets.

Given market conditions, these originators are heavily focused on sourcing off-the-run sponsor deals and non-sponsor deals as we look for value in a market where there is limited deal flow and a lot of aggressiveness. Subsequent to quarter-end, the BDC has closed on two new deals and seven add-on investments totaling $20,000,000 and had one sale on ThermoDisc totaling $1,100,000. Following the net deployment activity to date in Q4, the capital reserved for share buybacks, the BDC's remaining capacity is very limited. At the end of the fourth quarter, the STRS JV's remaining capacity was approximately $55,000,000, and pro forma for recently mandated deals to be eventually transferred and anticipated repayments, the JV's capacity is approximately $35,000,000 currently.

Additionally, we continue to expect a normal level of repayment activity over time. For 2026, our current estimate is that 30% of the portfolio could repay over the course of the year, consistent with the typical three to three-and-a-half year average life for loans, although actual repayment timing will be driven by M&A, refinancing activity, and company-specific outcomes. Our pipeline remains lower than normal for this time of year. We currently have five new mandates and are working on one add-on to an existing deal. Our five mandates are all sponsor deals.

While there can be no assurance that any of these deals will close, all of these credits could fit into the BDC or our JV should we elect to transact and if there is room for more assets. All the sponsor mandates have pricing of 450 to 550 basis points over SOFR. With that, I will turn the call over to Joyson for additional performance details and a review of our portfolio composition. Joyson?

Joyson C. Thomas: Thanks, Stuart. And thanks, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $6,600,000, or $0.287 per share. This compares with Q3 GAAP NII and core NII of $6,100,000 or $0.263 per share, as well as our previously declared fourth quarter base distribution of $0.25 per share. Q4 fee income was approximately $800,000, primarily due to higher prepayment fee activity relative to the prior quarter. For the quarter, we reported a net increase in net assets resulting from operations of $8,400,000.

Our risk ratings during the quarter showed that approximately 85.9% of our portfolio positions either carried a one or two rating, an increase from the 81.8% reported in the prior quarter. Upgrades during the quarter included investments in Telestream and MAX Solutions. Downgrades during the quarter included moving our positions in Outward Hound from a four to a five rating, as well as ThermoDisc from a three to a five rating, given those investments' anticipated exit values in Q1. 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 utilize the platform as a complement to the BDC. As Stuart mentioned earlier, we transferred two new deals and two existing investments during the fourth quarter to the STRS JV totaling $19,200,000. As of 12/31/2025, the JV's portfolio held positions in 43 portfolio companies with an aggregate fair value of $323,600,000, compared to an aggregate fair value of $341,500,000 as of 09/30/2025. Leverage for the JV at the end of Q4 was approximately 1.07x, compared with 1.24x at the end of the prior quarter. Investment in the JV continues to be accretive for the BDC's earnings, generating a low-teens return on equity.

During Q4, income recognized from our JV investment aggregated to approximately $3,800,000, compared to approximately $3,600,000 reported in Q3. 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, changes in asset yields in the underlying portfolio, and the overall credit performance of the JV's investment portfolio. Turning to our balance sheet now. We had cash resources of approximately $29,700,000 at the end of Q4, including $22,700,000 in restricted cash.

As of 12/31/2025, the company's asset coverage ratio for borrowed amounts as defined by the 1940 Act was 179.1%, above the minimum asset coverage ratio of 150%. Our Q4 net effective debt-to-equity ratio after adjusting for cash on hand was approximately 1.15x, compared with 1.07x in the prior quarter. In regards to our share repurchase program, as Stuart noted earlier, our Board approved a $7,500,000 increase to the existing authorization, bringing the total share repurchase program to $22,500,000 with approximately $15,000,000 of that still to be used.

I would like to also highlight that in addition to the company's share repurchase activity, certain company insiders and other individuals and H.I.G. affiliate employees also purchased shares in the open market during the prior quarter, including 87,000 shares by certain officers and directors of WhiteHorse Finance, Inc., as disclosed on Form 4 filings. This demonstrates their view of WhiteHorse Finance, Inc.'s valuation. Before I conclude and open up the call to questions, I would like to discuss our recent distributions and corresponding distribution policy. This morning, we announced that our Board declared a first quarter base distribution of $0.25 per share.

Consistent with our existing distribution framework, the Board also evaluated and declared a supplemental $0.01 per share distribution in addition to the regular quarterly distribution. The distributions will be payable on 04/06/2026, to stockholders of record as of 03/12/2026. As a reminder, the framework that we will use to determine supplemental distribution, if any, will be calculated as the lesser of: 1) 150% of the quarter's earnings that is in excess of the quarterly base distribution, and 2) an amount that results in no more than a $0.05 per share decline in NAV per share over the current quarter and preceding quarter. Earnings for the purpose of measuring the excess over the quarter's base distribution is net investment income.

The NAV decline measurement is inclusive of the supplemental distribution and, to be clear, is measured over the two most recently completed quarters. We believe this formulaic supplemental distribution framework allows us to maximize distributions to our shareholders while preserving the stability of our NAV, a factor that we do believe to be an important driver of shareholder economics over time. In assessing distributions, we also consider our taxable income relative to amounts that we have distributed during the year when setting our overall dividend. Our current estimate of undistributed taxable income, sometimes referred to as our spillover, as of 2025 is approximately $27,600,000, and pro forma for a distribution already made in January 2026 is approximately $21,600,000.

We continue to believe that having a healthy level of spillover income is beneficial to the long-term stability of our base dividend. We will continue to monitor our undistributed earnings and balance these levels against prudent capital management considerations. 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. With that, I will now turn the call back over to the operator for your questions. Operator?

Operator: Thank you, sir. To ask a question, press 1. You can remove yourself from the queue by pressing 2. Once again, that is 1 for questions, and we will pause for one moment to allow everyone a chance. We will go first today to Rick Shane with JPMorgan.

Rick Shane: Hey, guys. Thanks for taking my question. Look, solid quarter. The stock is still trading 40-plus percent discount to NAV. You have announced an increase to the repurchase. I am curious, and this is not going to be a shock given all the questions I have asked over and over again on earnings calls. How are you balancing the opportunity in terms of what is out there for new deployment versus the attractiveness of your stock? And also, as we think about that, can you just give us a sense of how you are going to be managing leverage as well?

Stuart D. Aronson: Yes. Thanks for the questions, Rick. And the simple answer is at the current trading levels, or really anything close to the current trading levels, we think our stock represents a very attractive purchase, which is why the Board originally authorized the $15 million buyback and why insiders, including myself, have been buying shares at or near current levels. Given how far the shares had traded down, and given the success of the buyback in the last quarter, the Board authorized an increased amount for buybacks. We have very limited availability of capital for new on-balance-sheet transactions. The JV generates a higher return, and so we are still doing some JV transactions.

But as long as the shares are continuing to trade at this type of discount, one of the best things we can do with our capital is to buy the shares. And then, also, though it was not in your question, I will highlight we and the Board are viscerally aware of the significance of the discount and are looking at options that we can try to avail ourselves of to improve the earnings of the BDC, and/or improve value to shareholders.

Rick Shane: I appreciate that. And again, I mean, look. I think the challenge ultimately is, I think you would suggest that of your investment options, buying the stock at this discount for yourselves might be the most attractive. In general, we have seen BDCs struggle with that approach. Is the expectation, if we see net runoff in the portfolio, that capital will largely be redeployed into repurchases at this point? Is that how we should be thinking about things? Or how will you balance that?

Stuart D. Aronson: The Board is going to continue to evaluate the trading price vis-à-vis the NAV and make decisions with the management to try to optimize performance for the shareholders. That is why, even though we had enough capital to continue the buyback into the next quarter, the Board wanted to send a message to shareholders by increasing the capital by another $7.5 million. And each quarter, the Board will look at the trading level and the market to determine what it thinks the best use of capital would be.

But at the moment, as opposed to putting assets on the balance sheet, we are primarily focused on repurchasing shares at, currently, as you said, a 40% or more discount to NAV, which is very accretive to both NAV and also accretive to NII.

Rick Shane: Got it. I really appreciate the clarity of the answers. Thank you, guys.

Stuart D. Aronson: No problem.

Operator: Thank you. We will go next now to Christopher Nolan with Ladenburg Thalmann.

Christopher Nolan: Hi. Following up on the previous question, what measure does the Board use to compare the performance of WhiteHorse Finance, Inc. to its peers?

Stuart D. Aronson: We look at a whole series of metrics. Joyson, I may pass it to you to highlight what those metrics are. But we look at return on the share price, we look at costs that the BDC incurs versus others, and we look at our trading level vis-à-vis the discount to NAV compared to other BDCs. Joyson, did I miss any there that are important?

Joyson C. Thomas: No. I think I would just add also just the dividend yield relative to NAV, and obviously our own analysis on what the core earnings power of the portfolio is.

Christopher Nolan: Okay. Do you guys feel that your exposure to the JV senior loan funds effectively takes a first lien investment on the scheduled investments, puts it into the JV, and suddenly you are in a subordinate position, because you are holding equity in the JV. Is that correct analysis?

Stuart D. Aronson: We put leverage on the JV, and we are subordinated to that leverage. That is correct.

Christopher Nolan: Okay. So you are in a subordinated position to keep taking— you know, you are getting a mid-teens return. Do you think in the current environment, which is sensitive to the asset quality of private credit, that part of the discount in your share price could be the fact that the market is looking at these SLF positions and saying they are second lien? They are given the appropriate haircut.

Stuart D. Aronson: We have not heard that from any of our covering analysts, nor have we heard that directly from any shareholders. The JV portfolio is remarkably clean in terms of performance. And while we do have leverage on the JV, and leverage on the BDC, that leverage is against a pool of first lien assets. And modest leverage against first lien assets is, frankly, a very common thing in the direct lending market and the BDC market. And if we heard from shareholders or covering analysts that the STRS JV was a reason or a key reason for the share discount, we would certainly take that information in, communicate it to the Board, and make decisions based on that.

But, again, so far, I have gotten no feedback that would indicate that would account for the discount to NAV of the trading level.

Christopher Nolan: Got it. Okay. Well, your stock is trading roughly almost a 16% dividend yield on the stock price. On the new NAV, it is roughly trading a 9% yield, which is okay. But your stock price is, you know, 50–60% of book. I mean, there has to be a real big issue. And the only thing that is left there is most likely the portfolio. I am just putting it out there. I mean, so anyhow, thank you very much.

Stuart D. Aronson: Chris, I would tell you that we strive to be transparent and realistic in our marks. That is why, historically, you have seen some assets that mark down and continue to mark down, but other assets that get marked down and then get marked up, which include names like Telestream, Chase, and I mentioned this quarter we are seeing positive news also on PlayMonster. Too early yet to know whether there will be a markup.

But we agree that the discount to the NAV is extreme, and we are trying to take action to improve shareholder value, starting with the share buyback and also with the refinancing of the leverage at a cheaper rate, and we are talking to advisers about anything else we can do that would improve value for shareholders.

Christopher Nolan: No argument on the marks. And I think what you guys are doing in terms of repurchases is definitely awesome. And I hope you continue the waiver and the repurchases. I think it is a great use of capital. My point is this is an elephant in the room, and it is effectively a second lien position, at a time when financial services companies or the sector is under scrutiny. BDCs, in my humble opinion, tend to be valued more on a discounted value of their NAV, which leads to haircuts in terms of the asset—the type of assets—in the book. So that is just my 2¢. Thank you for taking my questions.

Stuart D. Aronson: You, Chris. Thank you.

Operator: Further questions today. We will go next now to Heli Sheth with Raymond James.

Heli Sheth: Good afternoon. Thanks for the question. You mentioned an active M&A market, but also a lower-than-normal pipeline currently. Any further insight into what we should expect in terms of timing or pacing of both repayments and origination for the year? Are there any catalysts down the line that might drive more activity?

Stuart D. Aronson: Yes. Just to be clear, we have had noticeably better activity and volume in Q1 of this year so far than we had in Q1 of last year. But as we sit here now in early March, the pipeline that we have looking forward March into April is not as strong as it was at this time last year. Now you will also remember—or I will remind folks—that at this time last year, there was a fair amount of optimism in terms of M&A activity coming back, and then the tariff issues arose, which threw a real monkey wrench into a lot of people's plans on the M&A side.

There is, once again, optimism from the bankers we are speaking to and from the private equity shops we are speaking to regarding likely activity—M&A activity—in 2026, for the reasons that I highlighted in my call, including lower interest rates and abundant capital, with pricing on that capital being at or near all-time lows. But as we have seen just in the past couple of days, things can certainly happen on the geopolitical side that were not forecast and can have an impact on M&A activity. So we currently are projecting, based on what we see, improved M&A activity for the year.

We think that could lead to slightly better pricing in the marketplace, but that slightly better pricing is likely to be offset by rate cuts, whether it is one or two, which I think is the current conventional wisdom, or whether it is three or four, driven by leadership of the Fed likely changing in May.

Heli Sheth: Got it. Appreciate the detail. And in that pipeline, is there any sort of shift in the kinds of deals that you are seeing, maybe in terms of sponsor, non-sponsor, incumbent versus new borrowers, or LTVs—anything along those—

Stuart D. Aronson: We are seeing fewer deals that are straight repricings because the lower pricing has now been in the marketplace for about a year and a half to two years. So we are seeing more new M&A deals. In terms of sponsor, non-sponsor, we finished the year with a couple of non-sponsor deals in Q4. But the non-sponsor pipeline has been lighter than normal here in 2026.

We do think that the non-sponsor market in general is more appealing than the sponsor market right now, largely because in the sponsor market there are over 200 active direct lenders, but in the non-sponsor market, at least in the mid-market and lower mid-market, we see fewer than 10 shops who actively originate non-sponsor mid-market and lower mid-market deals. So it is a much less competitive market and is evidenced by the non-sponsored deals that we did in Q4. We are getting still pricing of 650, or even 700, basis points over SOFR on non-sponsored deals at modest leverage and modest loan-to-value.

Heli Sheth: Got it. Thanks for the color.

Stuart D. Aronson: No problem.

Operator: Thank you. And, ladies and gentlemen, just one final reminder. It appears we have no further questions this afternoon, so that will bring us to the conclusion of today's conference call. Ladies and gentlemen, I would like to thank you all so much for joining the WhiteHorse Finance, Inc. Fourth Quarter 2025 Earnings Call. Again, thanks so much for joining us, and we wish you all a great day.

Operator: Goodbye. Thank you.

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