WhiteHorse Finance, Inc.

Good afternoon. My name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Whitehorse Finance Third Quarter 2021 Earnings Conference Call. At this time, our hosts for today's call are Stuart Aronson, Chief Executive Officer, and Joyce Thomas, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 5 p.m. Eastern Standard Time. The replay dial-in number is 402-220-9185. Please note, no passcode is required. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company.

Thank you, operator, and thank you, everyone, for joining us today to discuss Whitehorse Finance's third quarter 2021 earnings results. Before we begin, I would like to remind everyone that certain statements which are not based on historical facts made during this call, including any statements related to the 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 2021 earnings presentation, which was posted on Whitehorse Finance's website this morning. With that, allow me to introduce Whitehorse Finance's CEO, Stuart Aronson. Stuart, you may begin. Thank you, Rob.

Good afternoon, and thank you all for joining us today. As you're aware, we issued our press release this morning prior to market open, and I hope you've had a chance to review our results from the period ended September 30th, 2021, which can also be found on our website. On today's call, I'll start by addressing our third quarter results and market conditions, and Joyce and Thomas, our Chief Financial Officer, will then discuss our performance in greater detail after which we'll open the floor for questions. I'm pleased to report the strong third quarter performance. In the third quarter, core NII was 7.8 million, or 37.2 cents per share, covering our dividend of 35.5 cents, and up from Q2 core NII of 7 million, or 33.8 cents per share. NII was higher than the previous quarter, primarily due to higher fee income, and accelerated OID amortization driven by repayment activity. I note that this is the company's 36th consecutive quarterly distribution paid since our IPO in 2012, with all distributions consistent at the rate of 35.5 cents per share per quarter. I think this speaks to both the strength of the platform and the deal sourcing capabilities, as well as our historically conservative approach to deal structuring. As we announced on October 14th, the increase in net investment income and realized gains caused us to declare a special distribution of 13.5 cents per share, which will be payable on December 10th of 2021 to stockholders of record as of October 29th, 2021. We achieved modest NAV accretion in the quarter, with NAV per share increasing to 15.46 compared to 15.42 in Q2, driven by NII in excess of our 35.5-cent dividend and markups within our portfolio. When adjusting for special dividends paid in prior years, our pro forma Q3 NAB per share reached a record level for the second consecutive quarter. Q3 was another strong period for capital deployments, totaling $122.5 million across seven new originations. This investment activity enabled us to grow the portfolio by 2.5% from Q2, net of repayments, and after the favorable impact of unrealized gains on our investments. $123 million of gross deployments were partially offset by repayments of $73 million, which included $47 million of refinancings from source code, education dynamics, and NNA services, dispositions of $2 million, and principal repayments of $25 million, excluding revolvers. The result was net deployment value of $49 million. Of our seven new originations, five were sponsor and two were non-sponsor, with an average leverage level of only 4.2 times. I note that these deals were all first lien, and at the end of the third quarter, 95% of our debt portfolio was first lien and 100% of it was senior security. Sponsor loans comprise 67% of our portfolio, which was in line with Q2. We continue to be pleased with our pace of capital deployment, despite the active M&A market driving elevated repayments. Our weighted average effective yield on income-producing debt investments was 9.3% in Q3, slightly below Q2 levels at 9.5%. Now stepping back to bring our entire investment portfolio into focus, Our investment portfolio achieved an increase in the fair value, reaching $687 million at the end of Q3, up from $671 million at the end of Q2. Non-accruals represented only 1.3 percent of our debt portfolio, compared to 1.5 percent based on fair value in Q2. This decrease is driven primarily by the increase in fair value of our portfolio, as the Group Ohima investment remains the only non-accrual as of September 30th. Now, after the quarter closed, we received updated information on Group Ohima. Based on this information and subject to further performance updates and market conditions, we expect to mark the position down by another 5 to 15 cents of par by the end of Q4. The investment is expected to be on non-accrual until restructuring negotiations with the company conclude. Many of our portfolio companies have experienced supply chain issues and inflationary pressures, including higher shipping costs. Thankfully, so far, most of these borrowers have been able to pass cost increases to their customers to offset these higher costs. We continue to successfully utilize our JV with SDRS Ohio. which generated investment income to the BDC of approximately $1.8 million in the quarter, as compared to $2.1 million in Q2. During the third quarter, we contributed an additional $46 million of investments into the JV portfolio. The fair market value of the JV's portfolio was $239 million as of September 30th. The JV's portfolio had an average unleveraged yield of 8% at the end of Q3. a slight decline compared to its Q221 average yield of 8.1% at a portfolio size of $210 million. The JV's portfolio is also comprised exclusively of first lien senior secured loans. We remain pleased with the income contribution from the JV. We believe it supports the higher returns for shareholders and is particularly relevant given the current market backdrop. Once the existing JV capital commitment of $75 million for WHF is deployed, WHF is likely to allocate an additional $25 million or more of commitments into this program to continue to generate attractive returns for Whitehorse Finance and our shareholders. As a result of repayments and transfer of certain investments into the JV, leverage at the end of Q3 was 1.19 times for WHF, approaching our target range of one and a quarter times. During the last quarter, we previewed that our leverage may approach or exceed the top of our targeted range in the near future due to evolving market backdrop and short-term expectations around repayments. We expect to see repayments over the next two quarters due to an uptick in M&A activity and the refinancing of certain existing credits in Q4. Offsetting the expected increase in repayments, we continue to build a strong pipeline. The market is quite busy with a mix across sponsor and non-sponsor deals, and our weekly investment pipeline often includes more than 150 deals. The sourcing process is becoming more competitive, particularly for the on-the-run sponsor deals where pricing, leverage, and documentation terms have returned fully to pre-COVID levels. In addition, heavily adjusted EBITDA levels are often being offered by competitors and we are frankly walking away from more deals than we have in the recent past. While we expect our origination activity levels to remain high, we generally have a cautious approach and continue to underwrite to conservative downside scenarios. Documentation terms and EBITDA adjustments in the off-the-run sponsor market, which are the smaller sponsors, are less aggressive. We continue to have a significant off-the-run sourcing advantage due to our presence in 12 regional markets, Consistent with prior quarters, there is less competition for non-sponsor deals as well, where we continue to source attractively priced transactions at attractive leverage profiles. Whitehorse continues to have differentiated sourcing capabilities through our three-tier architecture. We continue to derive significant advantages from the shared resources and affiliation with HIG, who is a leader in the mid-market. The Whitehorse platform includes 63 deal professionals, dedicated to direct lending, and HIG gives us a 20-plus person business development team leveraging HIG's proprietary prospect database, and we also get additional sourcing at the HIG level from over 400 investment professionals across the firm. Our sourcing drives a high-quality pipeline in markets with less competition for mandates. Our strategy and competitive advantages continue to result in a momentum in our originations business, Thus far in Q4, we have closed five deals and are working on an additional 14 mandates with targeted closings in Q4 and Q1 of 2022. Three of the five closed deals are sponsor, and eight of the mandated deals are sponsor, split between new originations and add-ons. At this stage, we expect the fourth quarter will produce one of the highest origination volume quarters we've ever generated through our platform, which positions us well to deploy the proceeds from our recent issuance of primary shares. This exceptional pipeline growth and these mandated deals are enabling the BDC to drive portfolio growth and grow the JV, which will ultimately lead to higher income levels and greater coverage of our dividend. In closing, we're well positioned to continue executing our three-tiered sourcing approach and rigorous underwriting standards through the last quarter of 2021 and into the new year, Our portfolio as a whole remains very high quality and healthy. Together with a strong pipeline of investment opportunities due to expected repayments, our fee income could ramp up in the final quarter, allowing for continued dividend coverage by core NII. We remain cautious about cyclical industries and the lingering effects of the pandemic and are underwriting deals with these risks in mind. The evolving credit environment also continues to create uncertainty and could impact both portfolio performance and the rate of new asset origination. Nonetheless, we believe our platform is well-positioned to drive portfolio growth and compelling returns to our shareholders. With that, I'll turn the call to Joyce for additional performance details and a review of our portfolio composition. Joyce, go ahead.

Thanks, Stuart, and thank you, everyone, for joining today's call. During the quarter, we recorded gap net investment income of $7.6 million, or $0.366 per share. This compares to $6.1 million or $0.296 per share in the second quarter. Core NNI was $0.372 per share after adjusting for $0.1 million capital gains incentive fee accrual. Q3 fee income was $1.2 million compared with $0.3 million in the prior quarter. The increase was largely due to more meaningful prepayment and amendment activities during the current quarter. We reported an increase in net assets resulting from operations of $8.3 million. Our risk ratings during the quarter showed that 89% of our portfolio positions carried either a 1 or 2 rating compared to 90% in Q2. Regarding the JV specifically, we continued to grow our investment. We transferred two new deals, three add-on transactions, and the remaining portions of four previously transferred deals, which aggregated to approximately $45.7 million in exchange for a net investment in the JV of $9.4 million, as well as cash proceeds of approximately $36.3 million. As of December 30, 2021, the JV's portfolio held positions in 27 portfolio companies with an aggregate fair value of $239 million, compared to 25 portfolio companies at a fair value of $209.5 million in Q2. The investment in the JV continues to be accretive to the BDC's earnings. We expect the yield on our investment in the JV may fluctuate period over period as a result of the timing of additional capital invested, the changes in asset yields in the underlying portfolio, as well as the overall performance of the JV's investment portfolio. Turning to our balance sheet, we had cash resources of approximately $16.6 million as of September 30, 2021, including $7 million in restricted cash. As reported during our last call, at the beginning of Q3, we completed an amendment on our existing JP Morgan revolving credit facility. The impact extended the non-call period to November 2022, pushed out the reinvestment period to November 2024, and reduced interest margin from 250 to 235 basis points. We anticipate this to result in annual cost savings approximately $0.4 million, assuming the line continues to be utilized at historical levels. At quarter end, we had approximately $25.4 million undrawn under our revolving credit facility. Subsequent to quarter end, on October 4th, the terms of our credit facility were again amended to, among other things, allow us to temporarily upsize the credit facility by $50 million, allowing the BDC to borrow up to $335 million for a three-month period beginning on October 4th, 2021. This provides us with significant flexibility to better account for timing differences between anticipated prepayments and originations. As of December 30th, 2021, the company's asset coverage ratio for borrowed amounts, as defined by the 1940 Act, was 184.2%, which is above the minimum asset coverage ratio of 150%. Our Q3 net effective debt-to-equity ratio, after adjusting for cash on hand, was 1.14 times. Substantial to the end of the quarter, we completed a primary follow-on offering of approximately 2.2 million shares of our common stock at an offering price of $15.81 per share. This offering generated net proceeds before offering expenses of approximately $34 million and provides Whitehorse Finance further capital to deploy into new investments. Before I conclude and open up the call to questions, I would like to highlight our distributions. On August 9th, 2021, we declared a distribution for the quarter-ended September 30th, 2021 of 35.5 cents per share for a total distribution of $7.4 million to stockholders of record as of September 20th. The dividend was paid on October 4, 2021. In addition to our quarterly distribution, we elected to declare a special distribution of 13.5 cents per share to be payable on December 10 to stockholders of record as of October 29, 2021. The distribution was related to taxable income that was earned last year, which would have otherwise been taxable. Finally, this morning we announced that our board declared a fourth quarter distribution of 35.5 cents per share to be payable on January 4th, 2022 to stockholders of record as of December 20th, 2021. This will mark the company's 37th consecutive quarterly distribution paid since our IPO in December 2012 with all distributions consistent at the rate of 35.5 cents per share per quarter. Inclusive of this distribution and this year's special distribution, Total distributions declared in 2021 will aggregate to $1.55.5 per share. 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'll now turn the call back over to the operator for your questions. Operator?

Thank you. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star E and 1 if you would like to ask a question. And we will take our first question from Bryce Rowe with Hufti Group. Your line is now open.

Good afternoon. Appreciate you taking the questions here. Stuart, and maybe even Joyce as well, just wanted to touch on the right side of the balance sheet. Appreciate taking advantage of being able to raise equity here in October and certainly appreciate the temporary upsizing of the credit facility. I was curious how you're thinking about, you know, maybe layering in some more unsecured notes here as we get into the end of the year and early next year to help lift that level of unsecured within the liability mix.

Yeah, Bryce, we are actively aware of the opportunity to issue unsecured debt. Our baby bonds are now callable, and we will take under advisement, based on market conditions, the best solution for the capitalization of the BDC. We do generally agree with you that we'd like to have more unsecured debt, so I would say it is likely not certain but likely that we will proceed with an unsecured offering between now and year end. Great.

That's helpful. And obviously a lot of moving parts in terms of originations and repayments. How do you think we should think about net over the next, maybe not necessarily the next quarter, but do you expect to see some level of net portfolio growth With the heavy level of expected repayments, it sounds like that's a yes, but I just wanted to be sure that the originations are likely to outweigh the repayments.

I'll pass that to Joyce in a second, but I am just going to caution. We have found that during due diligence, especially on non-sponsor deals, a lot of credits don't work out. And so even though we have 14 mandated deals, there can be no certainty as to how many of those mandated deals would close. But, Joyce, if you know, looking at the mandated deals and looking at the likely repayments in Q4, does it project that we would grow the portfolio in Q4 or be stable?

Stuart, I think right now it does look like we'd have a net increase or net deployments for the quarter. I think to that point, though, it does depend on whether or not some of these mandated deals do get pushed out into Q1. And then to the extent that there may be some repayments that we had not forecasted that are accelerated, that also is a wild card to consider. But currently right now we are forecasting net deployments.

Great. That's helpful too. And maybe just one more for me. You know, it looks like you've added a little more equity or added some equity positions here in the third quarter. You know, you typically haven't had as many as some of maybe your lower middle market peers. Is that a change in strategy or just relative interest in those particular companies from an equity perspective?

Bryce, feedback we've gotten from both analysts and shareholders is that they would like us to create a modest but diversified pool of equity positions in the BDC to help provide gains that can offset potential future losses. Our equity investing history is very strong, and with the knowledge and wherewithal of HIG to make smart equity investments co-investments, We expect that we should be able to continue to invest and hopefully generate a strong track record of performance looking forward. As you'll notice in our marks, some of our equity positions that we've already taken have been marked up based on strong performance, including, I believe, a nice markup on the Escalon equity this past quarter. Great.

All right, I'll jump back in queue. Appreciate you taking the questions.

Thank you. Have a great day.

We will take our next question from Mickey Schleen with Lattenberg. Your line is now open.

Yeah, good morning, or actually good afternoon, Stuart and Joyce. And just a couple of questions for me, perhaps the first one for Stuart. We look at this year, apart from repayments, which is a theme across the sector, I'd say BDCs have had a lot of positive trends. including strong economic growth and a very low default rate environment. Next year may be more challenging, Stuart, with the Fed potentially tightening and lower economic activity and certainly the election volatility. So I'm curious how you're thinking about these risks in terms of your balance sheet leverage and the style or what particular originations you're focused on.

Mickey, we've seen the market seem to make the assumption that the economy is going to be strong for the next two to three years and that would be based on what we're seeing in terms of leverage multiples being put on cyclical companies. We continue to underwrite with the belief that there is a risk of recession one year out. We don't think that's going to happen but it's always a downside and we underwrite every one of our deals with a mind's eye to a potential repeat of the Great Recession. And if a deal would not survive a repeat of the Great Recession, then we don't do the deal. So we underwrite to cyclical downside, and we also underwrite to pandemic waves. And we are trying to be very careful about what we do, focused on non-cyclicals, light cyclicals, and to a lesser extent, moderate cyclicals as well. In terms of the balance sheet, just because we don't know what's going to happen in the future, we want to have a constructive mix of secured debt and unsecured debt. Obviously, the secured debt is much less expensive, so it does make sense to use that. But as I mentioned to Bryce, we are actively considering issuing more unsecured debt to make sure that our relative ratio of secured to unsecured is optimized in the potential for market volatility.

I appreciate that, Stuart. And your target leverage, if I'm not mistaken, is from 1 to 1.25. Is that still the case, or have you adjusted that at all?

No, no. We would – I would say given current market conditions and what we're doing with so much of the portfolio being first lean – we would expect to operate the BDC at right around one and a quarter leverage.

Okay. And my last question relates to the JV, which, you know, the size of the JV grew and none of its investments were put on non-accrual. I appreciate there's differences between gap and cash and tax, et cetera, but its dividend to you was reduced. Could you just comment on that? And what is the outlook for the dividend from the JV?

I asked Joyce the same question, so I'll pass it back to him to answer for you as well. Okay, there you go.

Yeah, Mickey, as I mentioned in my prepared remarks, quarter over quarter, period over period, the yield on the JV may fluctuate a little bit. So the way to think about the JV entity, and you kind of alluded to it, is that from a cash basis and when we record the dividend that's upon the declaration of the JV's dividend upstreamed up to its owners, The underlying portfolio and the earned income, there may be a timing difference for a number of reasons. The way to think about this is Q3's income was slightly lower than Q2. We actually expect the income to be back up in Q4 to the BDC. It was largely due to some repayments that happened earlier. towards the tail end of Q1 into Q2 at the JV level and really deploying that capital back to work, which again, since it's kind of on a quarter lag for the dividend to be received back up to the BDC, that's kind of why you've seen kind of like the slight decrease this quarter.

I understand, Joyce. And historically, that JVs generated a blended return on investment for you, blended meaning both the interest on the notes and the dividend on the equity of around 12%. Is that where you expect it to be over the long term?

Yeah, that's correct. So currently right now, in terms of long-term forecasts, kind of where we underwrote it to, it's still consistent at 12% plus.

Okay, that's it for me. And the actual numbers are higher than 12%, aren't they, Joyce?

They are, right? And so like, again, at any point in time, it may be low. So if you think of In the prior quarters, it was probably approaching more like 14%, and that's why I kind of just guided to a more tempered 12% plus, but it is performing above 12%, yes.

Okay. That's helpful. Thank you, Joyce and then Stuart.

Thanks, Mickey.

And we will take our next question from Sarkis Shobhatian with B. Reilly Securities. Your line is now open.

Hey, good afternoon, and thank you for taking my question here. I just wanted to touch on the fee income. It sounded like you mentioned it's going to ramp up here in the final quarter because of repayments. I guess just stepping back, I want to get a general sense if you think given the current environment for repayments and if it continues to remain elevated, do you think your repayments are going to be relatively elevated even kind of positioning into next year?

It's really hard to predict the future. We do know that there are a lot of companies that are in an active sale process. Most of those are intending to complete the sale process in Q4, but undoubtedly some of those will roll over into Q1. Generally, historically, Q1 is not as busy an M&A quarter as the end of the year. So I would expect refinancings to slow down into the beginning part of next year, but then probably accelerate into the second half again. But again, that's just a guess.

Got it. And I guess as I look back and think about your dividend level or distribution level relative to kind of coverage, it sounds like when you're getting the fee income, you know, you're more than covering the distribution. But assume, you know, if you don't get these levels of fee income, Do you maybe think you have to revisit the distribution level or kind of grow the portfolio more aggressively? What are your thoughts there?

At one and a quarter leverage and a good mix of assets, we should be in a position, absent other impacts, to generally be earning the dividend. And then when we get higher than normal repayments, the fee sweeps and prepayment penalties will cause the income to rise above the dividend level. And as you've seen for each of the last three years, when we've had supplemental income, we've distributed that as a incremental dividend. And I expect that that's what we continue to do in the future. I don't see any indication right now of our dividend having to be changed. And again, if we continue with historical behavior, then capital gains and earnings on the BDC should allow us to not only make the dividend, but potentially do supplemental dividends in future years. But again, that's all subject to future performance, which is still unknown.

Great. Thank you. That's all for me.

Thank you, Sarkis.

And we will take our next question from Melissa Wedell with JPMorgan. Your line is now open.

Thanks. Good afternoon, and I appreciate you taking my questions. Actually, most of them have already been asked, but I thought it would be worth circling back to one of the charts that you have in the slide deck. And it shows just sort of this long-term shift towards an increased allocation towards sponsored deals in the portfolio. Given your comments, you know, earlier today about sort of the increased competition in the on-the-run sponsored deals, at least, How are you thinking about the opportunity set and the potential yield pickup in sort of the non-sponsored space and the countervailing, maybe a little bit higher risk associated with that space?

Melissa, thank you for the question. In our experience, including during the COVID period, we have not seen higher risk in the non-sponsor portfolio. In fact, the non-sponsor portfolio has, on average, performed better than the sponsor portfolio. We believe that is because we are carefully selecting our non-sponsor deals. The non-sponsor deals have lower leverage, tighter documents, tighter covenants, and all of those things combine to create very strong performance. We are always looking to optimize our non-sponsor originations because we do believe that that is the most attractive sector of the market. But it's also the sector of the market where it's hardest to find qualified deals. As I mentioned earlier, when we get mandates on deals, many of the deals don't make it through due diligence. And that's especially true in the non-sponsor sector. where we do organic due diligence that requires anywhere from three to nine months to complete, a very significant percent of the non-sponsor deals that we get mandated on do not survive the due diligence process, and we do not close on those transactions. So we will continue to try to optimize a mix of sponsor and non-sponsor. And in the sponsor market, as I shared in my prepared remarks, we have found the off-the-run sponsor market to still be more attractive than the on-the-run sponsor market, although there are plenty of good deals in the on-the-run sponsor market as well. But the off-the-run sponsor market is still commanding higher price at slightly lower leverage levels. So we have very broad origination in the on-the-run, off-the-run, and non-sponsor. We really cover the full spectrum of the lower mid-market and mid-market. And we believe we are one of the only players that do cover that full spectrum of on-the-run sponsor, off-the-run sponsor, and non-sponsor, creating a very differentiated portfolio that you've seen through the numbers we've shared has modest leverage multiples and above market pricing.

I appreciate that. Follow-up question for me on your comments about the incremental information and the expected mark under GOEMA in 4Q. I just wanted to confirm. I heard you say that that could be another 5 to 15 cents of par mark during the fourth quarter. Did I hear you right?

Yes. So instead of the current mark of 50, we expect that the mark on that asset will come out somewhere between 35 to 40 cents on the principal dollar.

Understood. Thanks so much.

35 to 45 cents. Sorry. I'm sorry. If I didn't say that, I apologize. 35 to 45 cents. Yep.

And once again, that is star and one. If you would like to ask a question, we'll take our next question from Robert Dodd with Raymond James. Your line is now open.

Hi, guys. Sort of following on to Melissa's, but in a very narrow focus. I mean, the leverage multiple of new deals in the quarter. So, I mean, 4-2, with a lot of those being sponsored, and obviously you talked about the offer and on the run. I mean, you also mentioned in, I think, response to Mickey that people are now offering leverage even on um, uh, cyclical businesses. So it really does make that, that four, two is probably, you know, a point or more below, um, where the, the, the broad market seems to, to be right now. Is there any more you can color, color and you can give us on, you know, I mean, obviously there's off the run, but is it, is it industry that's doing that as well? I mean, are they lower multiple, uh, and it might be 4.2, but it's still 50% LTV, or any color you can give us for context on that 4.2, which looks quite low.

Robert, most of the companies that we're involved with have enterprise values of between 9 to 15 times. So we're lending at pretty low LTVs. We're often below 50% LTV. And again, our ability to find these lower leverage deals and lower LTVs is linked to our full spectrum coverage. There are some low LTV deals that happen in the on-the-run sponsor market because purchase multiples have risen so significantly. But the on-the-run sponsor market is typically a market where you see leverage levels between five and a half and eight times. The off-the-run sponsor market is a market where leverage levels are typically more between four to six times, even four to five and a half times. And that's one of the reasons why we invest the time and resources to cover that off-the-run sponsor market, even though it's a much less fertile market. It takes a lot more resources and a lot more time to find and underwrite and close an off-the-run sponsor deal than it does an on-the-run sponsor deal. But that is the value add of the HIG management company where we have a very broad sourcing architecture. And we have consistently for years now originated loans at less than the market averages in terms of leverage and a premium to market price compared to the data reported by the rating agencies.

I appreciate that extra color. Thanks a lot. If I can, one more. I'm going to a slide in the presentation as well, slide 12. The line of interest, the net investment spread, right? I mean, if we look over the last three years, it's typically been in the call it mid to high fives. I mean, yes, pricing has come down as the market has, but so has your cost of debt. Do you think that in the last three quarters it's been essentially flat at 5.7 on that metric? I mean, do you think that kind of level of net investment spread, separate from pure pricing, Is that level sustainable in the competitive market that's out there right now?

I would tell you that the performance that we generated last quarter is indicative of what we're doing this quarter. We are still closing non-sponsored deals with pricing of $650 to $800 per LIBOR plus 650 to 800. And we're doing that with companies that are levered between three and four and a half times. In the off-the-run sponsor market, we're getting pricing that ranges from 550 to 650. And in the on-the-run sponsor market, we're getting pricing that ranges from LIBOR 550 to LIBOR 600. But again, what we did last quarter would reflect current market conditions. And I would tell you that I think this quarter, Q4, our yields, depending on what closes, our yields will probably be very similar to last quarter.

I appreciate that. Thank you.

And we do have a follow-up question from Bryce Rowe with Humde Group. Your line is now open.

Thanks, guys. Thanks for taking this follow-up. Stuart, I appreciate you talking about adding possibly to the JV in terms of a capital commitment, and we've seen nice growth in the capital committed to the JV here in 21 already after maybe a slower pull down going into 21. How do you think about the pace of that $25 million? Is it You know, could it get deployed all in 2022, you know, depending on what market conditions give you? But just trying to think about, you know, kind of the pace of that JV deployment.

It would be very possible that we could deploy an additional 25 million beyond the current JV, 75 million in 2022 if our volumes hold up. Again, we are experiencing – volumes that are as strong or stronger than we've ever seen. It's the strength of our three-tiered origination that finds us thousands of deals that allows us to be very selective about what we do. But we are closing a lot of transactions. And the fact that we have five transactions already closed in Q4 and 14 more mandates that we're working on with potentially more to come It's still not too late to land mandates to close in Q4. You know, it could be a very strong quarter, and a good number of the deals that were originating would be targeted for the JV. Great. Thank you. No problem, Bryce.

And we have no further questions on the line at this time. I will turn the program back over to Stuart Aronson for any additional or closing remarks.

That's it for me. I appreciate everybody's time. If there are follow-up questions, we're happy to take them. And I'll remind both shareholders and analysts, anything you want us to address in prepared remarks each quarter, if you give us notice of what you'd like to see, we do our very best to include that in the disclosures that we make to you. So thank you for your time and have a great day.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.