Business Context and Reporting Period
This Form 8-K Current Report was filed by WhiteHorse Finance, Inc. on December 4, 2020. The filing reports the entry into a Material Definitive Agreement and the creation of a direct financial obligation on the same date.
Key Financial Metrics and Transaction Details
The Company entered into a Note Purchase Agreement to issue $20,000,000 in aggregate principal amount of unsecured notes in a privately placed follow-on offering. The issuance consists of two tranches:
- 2026 Notes: $10,000,000 principal amount, bearing interest at 5.375% per year, due December 4, 2026.
- 2027 Notes: $10,000,000 principal amount, bearing interest at 5.625% per year, due December 4, 2027.
Interest is payable semiannually. The notes rank pari passu with all outstanding and future unsecured unsubordinated indebtedness. The filing text does not provide specific values for revenue, profit, cash flow, margins, or existing liquidity positions, as this report focuses solely on the debt issuance.
Material Changes and Covenants
This transaction represents a material increase in the Company's debt obligations. Key terms include:
- Interest Rate Step-Up: Interest rates for both series are subject to an increase of 1.0% if the notes cease to have an investment-grade rating (subject to exceptions).
- Change in Control: The Company is obligated to offer to repay the notes at par if certain change in control events occur.
- Covenants: The agreement includes affirmative and negative covenants, including maintenance of status as a business development company and regulated investment company, minimum shareholders' equity, minimum asset coverage ratio, and maximum debt-to-equity ratio.
Use of Proceeds and Outlook
The Company intends to use the net proceeds from this offering to refinance and/or redeem existing debt and/or for general corporate purposes. The notes were delivered and paid for on December 4, 2020. The filing does not provide specific forward-looking guidance, risk factors beyond standard debt covenants, or commentary on unusual items.
Investor Verification Checklist
- Verify the exact amount of net proceeds received after deducting issuance costs.
- Confirm the specific identity of the existing debt being refinanced or redeemed with these proceeds.
- Review the full Note Purchase Agreement (Exhibit 10.1) for detailed definitions of "investment grade rating" and "change in control" events.
- Assess the impact of the new debt on the Company's maximum debt-to-equity ratio and minimum asset coverage ratio covenants.