Andrew McGloin - Prosek Partners Jay Carvell - Chief Executive Officer Gerhard Lombard - Chief Financial Officer.

Good morning. My name is Crystal and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Third Quarter Earnings Teleconference. Our hosts for today’s call are Jay Carvell, Chief Executive Officer and Gerhard Lombard, Chief Financial Officer.

Today’s call is being recorded and will be available for replay beginning at 1 PM Eastern. The replay dial-in number is 404-537-3406 and the pin number is 64841910. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation.

[Operator Instructions] It is now my pleasure to turn the floor over to Mr. Andrew McGloin with Prosek Partners..

Thank you, operator and thank you everyone for joining us today to discuss WhiteHorse Finance third quarter 2015 earnings results.

Before we begin, I would like to remind everyone that certain statements made during this call, which are not based on historical facts, including any statements relating to financial guidance, maybe 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.

With that, allow me to introduce WhiteHorse Finance CEO, Jay Carvell. Jay, you may begin..

Thank you, Andrew. Good morning. Thank you for joining us today. As you know, our press release was issued this morning before market opened and I hope you have had a chance to review our results. I am going to take you through our third quarter operating performance and then Gerhard will review our financial results.

At the end of our prepared remarks, I will review some of the details of our rights offering plan that was announced in October 20 and is currently underway. After my comments, we will then take your questions.

Turning now to the third quarter, from our perspective, the highlight was our strong earnings which covered the dividend for the third consecutive quarter. NII per share was $0.38. As you are aware, our dividend has been consistent at $0.355 per share for 12 consecutive quarters going back to our IPO.

On last quarter’s call, I stated our clear understanding of the dividend’s importance to shareholders and we are well aware of the focus it receives by the analyst community. The dividend policy is constantly being reviewed by our board, which makes a determining decision each quarter.

While management is unable to speak for the board, given where we are from the financial and operational perspective, we have no expectation that it will change from its current level. We continue to see meaningful year-over-year growth in NII. This quarter, we are reporting a 40% increase in NII over third quarter last year.

Our ability to generate NII and steadily cover the dividend is a result of a few items. The primary driver is our continued focus on sourcing opportunities with attractive risk-adjusted returns. We have been consistent in pursuing this strategy since our IPO three years ago.

Second, we remained focused on risk by primarily participating in senior secured loans at appropriate leverage levels that we will continue to explore other opportunities should they complement our portfolio.

Third, and as I have mentioned on prior quarters, is our emphasis on portfolio optimization, specifically cycling out of certain positions and replacing them with investments that we find more attractive.

We believe our rights offering plan which you will hear me talk about more in a few minutes will help drive these three areas of focus even further, while simultaneously providing long-range benefits to our existing shareholders.

Looking at our average effective yield, we ended the quarter at 11.6%, consistent with where we were during the second quarter and showing year-over-year improvement from where we were in the mid 10% range. During the third quarter, we invested in three loans totaling approximately $27.9 million.

These three loans were across advertising, office and support services and financial intermediary sectors. The average effective yield of these three loans was 11.4%. We also had two refinancings during the quarter in the real estate and healthcare sectors. These two refinancings totaled $35.3 million.

The net result of those and other scheduled repayments reduced the portfolio size by approximately $10 million. I have mentioned that in the past that our investment pace will be lumpy. I will note that we had some opportunities slip this year from Q3 to Q4.

That being said, we continue to feel very strong about our pipeline and opportunities in direct lending in general supported by affiliation with HIG. We have already seen and expect to further benefit from their support in our efforts to grow and manage the portfolio. I would like to highlight a few items regarding the investment portfolio.

As of September 30, fair value of the portfolio was $376.1 million, slightly down from the $387.5 million reported at the end of second quarter. In addition to the pay-downs I just mentioned, the decline also includes some unrealized losses on a few of our holdings resulting from valuation changes.

These fair value adjustments were the product of our internal valuation methodology, which takes into account company-specific items as well as macro factors such as interest rate movements.

We recognized $4.2 million or $0.28 per share of mark-to-market adjustments primarily related to a) our energy investments and b) general market volatility and lack of liquidity. Overall, our portfolio remains strong. As we previously indicated, we are comfortable with our borrowers and their general financial performance.

We have no loans in our portfolio and non-accrual. Energy represents approximately 5% of our portfolio. And at this point, we feel comfortable about our eventual recovery on all of our positions even those I just mentioned.

Over 96% of the loans in our portfolio carry a variable rate, which should continue to position the portfolio well in a rising interest rate environment. Our investment portfolio, of 32 positions across 26 companies, remains primarily composed of senior secured loans.

The portfolio is well diversified across a number of industries within average investment size of $11.8 million and a weighted average effective yield of 11.6%.

Looking at the capital markets, as we saw in the first half of the year, the broader credit markets were slow and that continued to spillover into the BDC sector in the third quarter and we don’t expect much movement in the fourth.

We continue to see a lack of liquidity in the market that we believe is being driven at least in part by the implementation of Dodd-Frank. Energy, retail and pharma remain the weakest sectors from our primary and secondary trading perspective.

Credit markets are sloppy with spreads and execution risk moving based on company-specific items as well as shifting market sentiment almost from week to week.

Despite this overall environment, we are seeing a lot of attractive opportunities in the pipeline and have the luxury of being patient and selective in the loans we originate to maintain the overall health of the portfolio. With that, I will now turn the call over to Gerhard.

Gerhard?.

Thanks, Jay. Let’s begin with our results for the quarter ended September 30, 2015. Net investment income was $5.7 million compared with $5.9 million reported in the second quarter of 2015 and $4 million reported in the third quarter of 2014. This translates to NII per share of $0.38 for Q3 2015.

And as you are aware, our quarterly dividend has been consistent at $0.355 per share. Our investment income continues to consist primarily of recurring cash interest. Third quarter fee income was approximately $681,000 compared to second quarter fee income of $724,000.

Net realized and unrealized losses on investments were $4.1 million during the third quarter of 2015 compared with net realized and unrealized gains of $136,000 reported during the second quarter of 2015. Jay mentioned the main driver of this is mark-to-market and not an impairment of our investments.

As a result, we reported net assets from operations of $1.4 million or $0.10 per share for the third quarter of 2015 compared with $5.8 million or $0.38 per share for the second quarter of 2015. Expenses for the quarter totaled $6 million, a slight decrease from the $6.3 million of expenses reported during the second quarter.

Third quarter expenses consisted primarily of interest expense on our credit facilities of $1.7 million and base management fees and performance-based incentive fees of $3.5 million. As of September 30, 2015, net asset value was $221.4 million, or $14.77 per share as compared with $225.2 million, or $15.03 per share reported as of June 30, 2015.

Switching over to portfolio and investment activity, as Jay mentioned, as of September 30, the fair value of WhiteHorse Finance’s investment portfolio was $376.1 million, less than 32 positions across 26 companies and consistent with previous quarters is primarily composed of senior secured debt.

The weighted average current yield on the portfolio at the end of the quarter was 11.6%, consistent with recent quarters. For the majority of the investments in the portfolio, the risk ratings remained unchanged. As Jay mentioned, we continue to maintain a three rating on our energy holdings to reflect the current market conditions.

We continue to have low exposure to the energy sector overall with approximately 5% of our portfolio representing energy or energy-related investments. And there were no non-accrual loans as of September 30, 2015.

Turning to our balance sheet, WhiteHorse Finance had cash resources, inclusive of restricted cash of approximately $25.9 million as of September 30, 2015. This compares with $27.3 million as of June 30, 2015.

As of September 30, the company had indebtedness in the form of senior notes in two credit facilities that on a combined basis were drawn by approximately $174 million.

As of September 30, the company had $61.5 million of undrawn capacity on its revolving credit facility and we remain comfortable that our cash position and credit lines will continue to provide us the ability to source loans and meet our origination targets.

We closely monitor our asset coverage ratio and feel comfortable with our leverage as of September 30, 2015. The company’s asset coverage ratio for borrowed amounts as defined by the 1940 Act was 227.6% at September 30, 2015, well above the statute’s requirement of 200%.

Our net effective debt to equity ratio after adjusting for unsettled trades and cash on hand was 0.68 times. Last, I would like to highlight our quarterly distribution. On August 20, we declared a distribution for the quarter ended September 30 of $0.355 per share for a total distribution of $5.3 million.

That distribution was paid to stockholders on October 2, 2015 and this marks the company’s 12th distribution since our IPO in December of 2012 with all those distributions at the rate of $0.355 per share per quarter. We expect to be in a position to continue our regular distribution.

I would also like to call your attention to two items as you look ahead to Q4. As we have disclosed in our filings, the reinvestment period of our revolving credit facility expires this year. We are exploring several alternatives, including extending or refinancing the current facility.

These options could trigger an accelerated amortization of the deferred financing costs on our balance sheet. This non-cash amortization would be expensed as a component of interest expense and would impact NII in the fourth quarter.

Jay will speak to the rights offering in a minute assuming that stockholders exercise their rights or total number of outstanding shares will increase, which will have an impact on per share disclosures for Q4 consistent with the share counts, detailed and offering perspective. This concludes my formal remarks.

I will now turn the call back over to Jay to talk about our rights offering.

Jay?.

Thank you, Gerhard. I want to spend a couple of minutes talking about our rights offering, explaining the intent of the plan, its structure, and most importantly, the impact on both the company and its shareholders. The details of the plan itself can be found in the perspective. So, let me focus on the plans, rationale and timing.

First and foremost, the decision to proceed with the rights offering is an integral part of the capital plan toward the long-term profitability of our shareholders.

The additional capital will provide the company the opportunity to grow NII per share by sourcing investments through our traditional channels as well as by pursuing other strategic options.

Secondly, the company in consultation with its board chose to raise capital through our rights offering which allows all shareholders ability to participate on an equal basis. Management spent an extensive amount of time working with our bankers and underwriters and believes that this approach is the best on several fronts.

And importantly, based on the offering price, there is minimal dilution involved for shareholders with current expectations of approximately 1% to 2%.

Finally, as detailed in the offering prospectus, funds affiliated with HRG have indicated their intent to subscribe for their proportion of shares, including any unsubscribed shares, which gives us a high level of confidence that this offering will be successful.

We remain confident in maintaining our historical pace of originations due to the opportunities in the market. We believe that the results of this rights offering will be the ability to continue to execute on our origination strategy as well as open the door to other opportunities such as larger size deals or strategic partnerships.

However, I want to reiterate that this additional capital will not have a stray from the disciplined investment approach that has made us successful in the past. As I said earlier, our pipeline is strong and we are seeing opportunities. We will now be able to participate on an increased basis.

And while I cannot predict how fast we can put this additional capital to work, I can tell you that our expectations look at it in terms of quarters, not years. So, we understand concerns about an offering below NAV, but believe this offering is compelling for a number of reasons.

As I have stated, the additional capital grows our opportunity set for both additional borrowers as well as strategic alternatives. The structure of the offering doesn’t require us to change our investment approach and affords us the opportunity to expand NII per share.

The manager and its affiliates have been very supportive of the strategy and are supportive of the offering. Besides the secondary buying program we have talked about, I would like to point out that affiliates and individuals on the Board and on the company’s management team have significant holdings in the company’s stock.

We are right alongside our shareholders here. The manager and our Board believe this is a good long- term tradeoff in terms of the amount of dilution in exchange for potential growth. We look forward to demonstrating that an offering like this has the ability to work on behalf of existing shareholders for their long-term benefit.

I will now turn the call back to the operator for your questions.

Operator?.

[Operator Instructions] Thank you. Our first question comes from the line of William James [ph]..

Hello?.

[Operator Instructions] At this time, there are no questions..

Alright. Well, thanks everyone for joining us today. We look forward to speaking to you next quarter. Operator, we will turn it back to you..

That does conclude today’s teleconference. Thank you for your participation. You may now disconnect at this time..