WhiteHorse Finance (NASDAQ:WHF) reported improved fourth-quarter 2025 earnings and net asset value, while management emphasized share repurchases, lower-cost leverage, and a continued base dividend with a formula-driven approach to supplemental distributions. Executives also discussed credit developments in a handful of portfolio companies and described competitive, spread-compressed market conditions for new direct lending originations.
Quarterly results and NAV drivers
CEO Stuart Aronson said fourth-quarter GAAP net investment income (NII) and core NII rose to $6.6 million, or $0.287 per share, from $6.1 million, or $0.263 per share, in the third quarter. Net asset value (NAV) per share increased to $11.68 at December 31, 2025, from $11.41 at the end of the prior quarter, a gain of about 2.4%.
CFO Joyson Thomas added that fourth-quarter fee income was about $0.8 million, driven mainly by higher prepayment fees versus the prior quarter. The company also reported a net increase in net assets resulting from operations of $8.4 million for the quarter.
Dividend framework and spillover income
Management reiterated its distribution policy framework, which targets a quarterly base distribution of $0.25 per share and the potential for supplemental distributions. For the first quarter of 2026, the board declared a $0.25 base distribution plus a $0.01 per share supplemental distribution. The distributions are payable April 6, 2026, to stockholders of record as of March 12, 2026.
Thomas detailed the company’s supplemental dividend formula, stating it will be calculated as the lesser of:
- 50% of quarterly net investment income in excess of the base distribution, and
- an amount that results in no more than a $0.15 per share decline in NAV per share over the current quarter and the preceding quarter (inclusive of the supplemental distribution).
Thomas also discussed taxable income and “spillover” as part of the dividend assessment process. He said the company’s current estimate of undistributed taxable income at the end of fourth-quarter 2025 was approximately $27.6 million, and about $21.6 million on a pro forma basis after the distribution made in January 2026.
Share repurchases, leverage actions, and discount to NAV
Aronson emphasized that the company’s shares have traded at a “persistent discount” to NAV and said management has prioritized steps to support earnings power and narrow that gap. During the fourth quarter, WhiteHorse repurchased about 1 million shares for approximately $7.4 million. The board approved an incremental $7.5 million authorization, bringing total repurchase authorization to $22.5 million, with roughly $15 million remaining.
In the question-and-answer session, Aronson told analysts that at current trading levels the company views its stock as “a very attractive purchase,” and he highlighted open-market insider buying. Thomas noted that certain officers and directors purchased 87,000 shares during the prior quarter, as disclosed in Form 4 filings.
Aronson also discussed actions aimed at the cost and stability of leverage, including a term debt securitization through the company’s CLO vehicle. He said the transaction included $164 million of AAA-rated notes priced at three-month SOFR plus 170 basis points. In addition, he said the advisor voluntarily reduced the incentive fee on net investment income from 20% to 17.5% for the most recently completed fiscal quarter and for the first quarter of 2026. Management said the reduction lowered incentive fees by about $200,000 in the fourth quarter, and the advisor may extend the waiver, though the duration and extent are uncertain.
On the balance sheet, Thomas said cash resources were about $29.7 million at quarter end, including $22.7 million in restricted cash. The company’s 1940 Act asset coverage ratio was 179.1% as of December 31, 2025, above the 150% minimum. Net effective debt-to-equity, after adjusting for cash, was about 1.15x, compared with 1.07x in the prior quarter.
Portfolio activity, yields, and credit developments
During the fourth quarter, WhiteHorse reported gross capital deployments of $77.1 million, offset by repayments and sales of $49.6 million, for net deployments of $27.5 million before transfers into the STRS joint venture (JV). Aronson said the company completed seven new originations totaling $64 million and funded nine add-ons to existing investments. All fourth-quarter originations were first-lien loans, with average underwriting leverage of about 4.3x EBITDA. At quarter end, 99.7% of the debt portfolio was first-lien senior secured, according to management.
The weighted average effective yield on income-producing debt investments declined to 11.0% at the end of the quarter from 11.6% in the third quarter, driven mainly by lower spreads and lower base rates. The weighted average effective yield on the overall portfolio decreased to 9.1% from about 9.5%.
The company recognized $11.3 million in net realized losses and about $13.1 million in net unrealized gains, for a net gain of $1.9 million in the quarter. Aronson said realized losses were primarily driven by an $11.2 million loss from the Aspect Software investment restructuring and exit and a $0.5 million loss from a partial sale of Therm-O-Disc, noting these investments had already been marked down in prior periods. He said the Aspect Software realization removed those debt investments from non-accrual status, while the remaining Therm-O-Disc exposure was placed on non-accrual at quarter end and subsequently sold and exited in the first quarter of 2026.
Excluding the STRS JV, non-accrual investments represented 2.4% of the total debt portfolio at fair value. The remaining non-accrual issuers at quarter end were Honors Holdings, Newcycle Solutions, PlayMonster, and Therm-O-Disc.
Management also provided updates after quarter end. Aronson said the company saw negative developments at Honors Holdings, with new-year sign-ups below budget, and expected a markdown in the first quarter of 2026. He also said Outward Hound was being sold at a price below the company’s fourth-quarter marks, with an expected gap of about $3 million versus the quarter-end mark. On Lumen LATAM, Aronson said the company received updated financial information and exited a portion of the position at market values below the fourth-quarter mark. He added that there were positive developments in certain credits, including Telestream, Starco, and PlayMonster.
STRS JV performance and market environment
WhiteHorse continues to use the STRS JV alongside the BDC. During the quarter, the company transferred two new deals and two existing investments to the JV totaling $19.2 million. At December 31, 2025, the JV portfolio had an aggregate fair value of $323.6 million and an average effective yield of 9.9%, with positions in 43 portfolio companies. Thomas said JV leverage was about 1.07x at quarter end, down from 1.24x in the prior quarter. Fourth-quarter income recognized from the JV investment was approximately $3.8 million, up from about $3.6 million in the third quarter, and management characterized the JV as accretive to earnings, generating a “low teens” return on equity.
Asked whether holding equity in a levered JV effectively subordinated the BDC versus owning loans directly, Aronson agreed that the equity is subordinated to JV leverage, but said the leverage is against a pool of first-lien assets and that such structures are common in direct lending. He said the company had not heard from covering analysts or shareholders that the JV structure was a key driver of the stock’s discount to NAV.
On market conditions, Aronson said competition remains intense, with capital availability exceeding new deal supply. He cited sponsor-backed mid-market pricing generally in the SOFR plus 450–525 basis point range and lower mid-market pricing in the SOFR plus 450–550 range, with terms varying by credit and structure. In non-sponsor lending, he described a less competitive environment with pricing generally at SOFR plus 600 or above and average leverage around 4x to 4.5x. Aronson said the company is focused on structure and credit quality and is working to minimize liability management execution (LME) risk through deal structures and documentation.
Looking ahead, management said deal volume appeared somewhat better than the same time last year, though Aronson noted the forward pipeline was “lower than normal” for this time of year. He said the company currently had five new mandates (all sponsor deals) and one add-on in progress, with sponsor mandate pricing of 450–550 over SOFR. Management also outlined capacity constraints, stating that after net deployment activity, capital reserved for share buybacks, and other factors, remaining on-balance-sheet capacity was “very limited,” while the STRS JV had remaining capacity of roughly $55 million at quarter end and approximately $35 million on a pro forma basis after mandates and anticipated repayments.
About WhiteHorse Finance (NASDAQ:WHF)
WhiteHorse Finance Corporation (NASDAQ: WHF) is a closed-end management investment company organized as a business development company under the Investment Company Act of 1940. The firm’s primary objective is to generate current income and, to a lesser extent, capital appreciation by making debt and equity investments in privately held middle-market companies. WhiteHorse Finance seeks to partner with established businesses across a range of industries, providing flexible financing solutions designed to support growth initiatives, acquisitions and recapitalizations.
The company’s investment portfolio predominantly comprises senior secured loans, second-lien debt, subordinated debt and select equity interests.
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