Horizon Finance - Earnings Call - Q1 2025

Transcript

Operator (participant)

Greetings and welcome to the Horizon Technology Finance Corporation First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Megan Bacon, Director of Investor Relations and Marketing. Thank you. You may begin.

Megan Bacon (Director of Investor Relations and Marketing)

Thank you and welcome to Horizon Technology Finance Corporation's First Quarter 2025 Conference Call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; Dan Devorsetz, Chief Operating Officer and Chief Investment Officer; and Dan Trolio, Chief Financial Officer. I would like to point out that the Q1 earnings press release and Form 10-Q are available on the company's website at horizontechfinance.com. Before we begin our formal remarks, I need to remind everyone that during this conference call, the company will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believes, expects, anticipates, intends, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements, and some of these factors are detailed in the risk factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31, 2024. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Rob Pomeroy.

Rob Pomeroy (Chairman and CEO)

Welcome, everyone, and thank you for your interest in Horizon. Today, we will update you on our quarterly performance and our current operating environment. Dan Devorsetz will take us through recent business and portfolio developments. Jerry will then discuss the current status of the venture lending market, and Dan Trolio will detail our operating performance and financial condition. We will then take questions. We began 2025 with guarded optimism that markets were improving and that it was going to be a growth-focused year for Horizon. However, the macro environment, including tariff-related uncertainty over the past several weeks, has dampened our optimism and directly impacted our potential recovery from some of our stressed assets, which was a significant factor in the decrease in our NAV at the end of the quarter.

Until the worldwide volatility in the market subsides, the venture capital ecosystem is unlikely to return to the positive path forward, which we had hoped for earlier in the year. Our comments today will focus on our first quarter results and our outlook going forward. Turning to our specific results for the quarter, we generated net investment income of $0.27 per share. As we look to grow our portfolio in future quarters, it is our goal to deliver NII at or above our declared distributions over time. Despite the headwinds, we were able to fund new investments and grow our debt portfolio by $20 million during the first quarter. Based on our outlook and our undistributed spillover income, our board declared regular monthly distributions of $0.11 per share through September 2025. We once again achieved a portfolio yield on debt investments at or near the top of the BDC industry.

We were able to increase our investment capacity early in the year by raising equity from our at-the-market program. We have continued capital support from our lenders under our credit facilities, as shown by the recent closing of an increase in the commitment amount and extension of the maturity date of our New York Life credit facility. We increased our committed and approved backlog to nearly $236 million, providing us with a solid base of opportunities to further grow our portfolio over time. As we previously disclosed, in order to further align our advisor and shareholders' interests, our advisor has agreed to waive a portion of its quarterly income incentive fees if, after the payment of such a portion, the company's net investment income for the quarter would be less than the distributions declared.

Finally, Monroe Capital, the owner of our advisor, completed its partnership with Wendel Group, a French investment company. Monroe, and by extension our advisor, continue to operate independently. As part of the Monroe family, Horizon will benefit from the additional capital, scale, and commitment of the partnership between Monroe and Wendel Group. We are continuing to support and work closely with our portfolio companies as we focus on maximizing the value of our stressed investments and preserving NAV.

Moving forward, despite the near-term macro challenges, we remain guardedly optimistic about Horizon's prospects for the following reasons: our portfolio yield remains among the industry's highest, which we expect will lead to increased NII over time; our committed backlog is growing, and our pipeline remains full with quality opportunities to invest in new companies; our liquidity and balance sheet remain strong; and finally, our markets are still active and demand for venture debt capital remains high. We look forward to being a key supplier of such capital. Again, we appreciate your continued interest and support in the Horizon Technology Finance platform. I will now turn the call over to Dan, Jerry, and Dan to give you the details of our first quarter results and progress. Dan?

Daniel Devorsetz (COO and CIO)

Thanks, Rob, and good morning to everyone. Our portfolio at the end of the first quarter stood at $690 million as the high-quality loans we originated during the quarter were offset by prepayments, amortization, and unrealized depreciation in our existing portfolio. In the first quarter, we funded nine debt investments totaling $100 million and two equity investments of $2 million. $31 million of the new debt investments were to three new portfolio companies, all well-sponsored companies with growing revenue in our core life science and technology markets. We also continued to build a sizable pipeline across our target sectors. Looking ahead to Q2, as Rob noted, we are watching the macro environment very closely. We continue to believe we are positioned well for portfolio growth over the long term, but given the current environment, we remain selective in originating loans.

During the quarter, we experienced five loan prepayments, including two refinancings totaling $68 million in prepaid principal. Based on anticipated additional prepayment activity in the quarter, we expect a more positive impact on NII in Q2. Our onboarding debt investment yield of 13% during the first quarter remained consistent with our historic levels. We expect to continue to generate strong onboarding yields with our current pipeline of opportunities, which we believe will generate strong net investment income over time. Our debt portfolio yield of 15% for the quarter was once again one of the highest-yielding debt portfolios in the BDC industry. Our ability to generate these industry-leading yields continues to be a testament to our venture lending strategy and our execution of such strategy across various market cycles and interest rate environments.

As of March 31, we held warrant and equity positions in 105 portfolio companies with a fair value of $32 million. Structuring investments with warrant and equity rights is a key component of our venture debt strategy and a potential generator of shareholder value. In the first quarter, we closed $157 million in new loan commitments and approvals and ended the quarter with a committed and approved backlog of $236 million compared to $207 million at the end of the fourth quarter. We believe our pipeline, combined with our committed backlog, with most of our funding commitments subject to companies achieving certain key milestones, provides a solid base to prudently grow our portfolio. As of quarter end, 89% of the fair value of our debt portfolio consisted of three and four-rated debt investments, while 11% of the fair value of our portfolio was rated two or one.

During the first quarter and subsequently in April, we received positive news from several of our portfolio companies, most notably MLX Biosciences and Kodiak Robotics. MLX announced that it met the endpoints in its pivotal trial for its drug to treat Tourette syndrome, which trial is the final clinical step to obtain FDA approval. In other positive news, Kodiak, a developer of autonomous trucking technology, became the first company to publicly announce the use of driverless trucks in commercial operations. Kodiak also recently announced its intention to go public via a business combination with a SPAC backed by Ares at a $2.5 billion valuation. Unfortunately, as we have mentioned, we have also experienced negative portfolio events.

Most significantly, our investments in both Embrace and Standvast were impacted by the lack of exit markets and the broader macro volatility, including tariffs, resulting in the downgrade of both to one-rated investments and reduction in fair values to zero in the quarter. As we manage our stressed investments, we continue to collaborate closely with all of our portfolio companies and utilize a variety of strategies to seek to optimize returns and create opportunities for potential future value. To summarize, we continue to work diligently on our current portfolio while maintaining an opportunistic approach toward originating new loans in the current environment. Over time and as the macro environment normalizes, we believe we are positioned to grow our portfolio, which should lead to increased NII that covers our regular monthly distributions over time.

With that, I'll turn it over to Jerry for a look at the overall venture industry and current environment.

Jerry Michaud (President)

Thank you very much, Dan. Turning to the venture capital environment, according to PitchBook, approximately $92 billion was invested in VC-backed companies in the first quarter, up 19% from the fourth quarter of 2024 and the highest level since the first quarter of 2022. However, the elevated deal value was once again due in meaningful part to large AI deals that represented a significant portion of the quarterly value. With the tariff-related uncertainty in the marketplace, exit markets for VC-backed tech and life science companies remain nearly shut. Specifically, we saw some momentum for biotech IPOs starting to build in Q4 and continue into January.

However, the uncertainty related to policy announcements regarding increasing tariffs on pharmaceuticals, the decrease in NIH and FDA funding, and the HHS pause on the development of key vaccines is resulting in significant investor pullback in the life science market and the IPO market all but disappearing. To date, the S&P Biotech Select Industry Index, XBI, is now down 14% year over year, reflecting cooling investor sentiment. With continued volatility in the equity markets, investors and M&A acquirers are sitting on the sidelines waiting for greater certainty. That said, with less equity options available to VC-backed tech and life science companies, venture debt is a significant option for early-stage companies to extend liquidity runway while they wait for better market conditions to raise equity or complete M&As. This has created opportunity for Horizon to seek high-quality, well-sponsored tech and life science companies to add to its portfolio.

Q1's total exit value of $56 billion was the highest quarterly total since the fourth quarter of 2021. However, nearly 40% of the total exit value was achieved through just one IPO. Until the tariffs and other macro headwinds clear up, we expect the exit market to remain relatively closed in the near term. With that said, should market conditions persist well past the second quarter, with VCs needing to find exits for their long-standing portfolio companies, it will become even more challenging for VCs to return capital to their limited partners and raise new capital, putting even more pressure on the whole VC ecosystem. To sum up, we remain committed to sourcing high-quality, well-priced investments as we seek to grow our portfolio. We believe market conditions, while very challenging, present a unique opportunity for experienced venture debt firms, including Horizon, to add high-quality, high-yielding debt investments to their portfolios.

For Horizon, such opportunities, when combined with its historical prepayment activity, should generate NII that will cover its regular monthly distributions over time. With that, I will now turn the call over to Dan Trolio.

Dan Trolio (CFO)

Thanks, Jerry, and good morning, everyone. As Rob and Dan noted, despite headwinds, we were able to grow the portfolio of debt investments in the first quarter as we continue to work toward sustained growth with the goal to continue to cover our regular monthly distributions over time. We also strengthened our balance sheet by completing an amendment to our New York Life facility and by utilizing our ATM program to successfully and accretively sell over 400,000 shares early in the quarter. These actions demonstrate our continued ability to opportunistically access the debt and equity markets. In addition, we continue to diligently work with all of our portfolio companies to optimize outcomes for our investments and improve our credit quality. As such, we believe we remain well-positioned to grow our portfolio and create additional value for our shareholders moving forward.

As of March 31st, we had $126 million in available liquidity, consisting of $77 million in cash and $49 million in funds available to be drawn under our existing credit facilities. We currently have no borrowings outstanding under our $150 million KeyBank credit facility, $181 million outstanding on our $250 million New York Life credit facility, and $90 million outstanding on our $100 million Nubine credit facility, leaving us with ample capacity to grow our portfolio of debt investments. Our debt-to-equity ratio stood at 1.54 to 1 as of March 31st, and netting out cash on our balance sheet, our net leverage was 1.29 to 1, which was within our target leverage. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity as of March 31st was $307 million.

Turning to our operating results, for the first quarter, we earned investment income of $25 million compared to $26 million in the prior year period, primarily due to lower interest income and fee income on our debt investment portfolio. Our debt investment portfolio on a net cost basis stood at $700 million as of March 31, up 3% compared to $678 million as of December 31, 2024. For the first quarter of 2025, we achieved onboarding yields of 13% compared to 12.6% achieved in the fourth quarter of 2024. Our loan portfolio yield was 15% for the first quarter compared to 15.6% for last year's first quarter. Total expenses for the quarter were $13.4 million compared to $13.1 million in the first quarter of 2024. Our interest expense increased to $8.7 million from $8.2 million in last year's first quarter due to an increase in our average borrowings.

Our base management fee was $3.2 million, comparable with the prior year period. We received no performance-based incentive fees in the first quarter as we continued to experience a deferral of incentive fees otherwise earned by our advisor under our incentive fee cap and deferral mechanism. The deferral in the quarter was driven by net realized and unrealized losses on our portfolio. While we expect the advisor will return to earning incentive fees, as we previously mentioned, the advisor has agreed to waive a portion of any incentive fee in a quarter where we do not earn our distributions. Net investment income for the first quarter of 2025 was $0.27 per share compared to $0.27 per share in the fourth quarter of 2024 and $0.38 per share for the first quarter of 2024. The company's undistributed spillover income as of March 31 was $1 per share.

We anticipate that the size of our portfolio, along with our portfolio's higher interest rates and our predictive pricing strategy, will enable us to continue generating NII that covers our distribution over time. To summarize our portfolio activities for the first quarter, new originations totaled $102 million, which were partially offset by $11 million in scheduled principal payments and $68 million in principal prepayments and partial paydowns. We ended the quarter with a total investment portfolio of $690 million. As of March 31, the portfolio consisted of debt investments in 53 companies with an aggregate fair value of $644 million and a portfolio of warrant, equity, and other investments in 110 companies with an aggregate fair value of $46 million. Based upon our outlook and our undistributed spillover income, our board declared monthly distributions of $0.11 per share for July, August, and September 2025.

We remain committed to providing our shareholders with distributions that are covered by our net investment income over time. Our NAV as of March 31 was $7.57 per share compared to $8.43 as of December 31, 2024, and $9.64 as of March 31, 2024. The $0.86 reduction in NAV on a quarterly basis was primarily due to adjustments to fair value in our paid distributions, partially offset by net investment income and accretive sales of equity. As we've consistently noted, nearly 100% of the outstanding principal amount of our debt investments bear interest at floating rates with coupons that are structured to increase if interest rates rise, with interest rate floors that will mitigate the impact of decreasing interest rates. This concludes our opening remarks. We'll be happy to take questions you may have at this time.

Operator (participant)

Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press Star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment while we pull for our first question. The first question comes from Douglas Harter with UBS. Please proceed.

Corey Johnson (Analyst)

Hi, sorry. This is Corey Johnson. I'm for Doug Harter. You guys have mentioned how you expect to cover your dividend over time. Currently, you have a $1 in spillover earnings. How are you thinking about, we've sort of talked about how this environment is sort of uncertain and how that might be slowing some of the growth and ability to cover that during the meantime. We could also be in this period for some time. Just how are you thinking about managing that spillover and how deeply, how much of it you might give back over time?

Dan Trolio (CFO)

Yeah. As we mentioned, I think last quarter, a similar question related to the distribution. Each quarter, if you look back to the last three quarters, we've been able to grow the distribution. The plan is to continue to do that through 2025. As we mentioned, every quarter, we expect to have prepayments. As you plan out the quarter, you can never determine which quarter that they will happen and the impact on income for the quarter. This quarter, we had about $68 million in prepayments and refinance. A couple of those were related to refinance and a paydown or revolver. The fee income was a little bit less than you would normally expect at that level. As you mentioned, of course, the $1 spillover is something we'll continue to manage throughout the year.

We review that every quarter in discussions with the board and set the distribution. I will just point out that we declare distributions through September of 2025. The confidence is there to continue to cover and pay that distribution, as we mentioned, over time.

Corey Johnson (Analyst)

All right. Thank you. Just as a follow-up, you did mention how currently, I guess, since some of the markets for venture equity are closed at the moment, that venture debt is the other option. It is an opportunity for you guys. You have expanded your backlog, and your debt portfolio grew. Can you sort of just talk about how the quality of deals that you are seeing come across your table at the moment? Are there a lot of good ones, or are there more that you would rather pass on? What does that sort of look like at the moment for you?

Jerry Michaud (President)

Hi, this is Jerry. Yep, you kind of hit on it. There's definitely a significantly higher bar relative to selecting the kind of transactions that we would be pursuing in today's market, in addition to strong continued equity support based on realistic valuations in today's market versus what they were in 2021 and 2022, the quality of investors, the quality of their funds, because many VCs haven't been able to return capital to LPs, and they have limited ability to continue to fund portfolio companies. Just on that side of the equation, the bar has been lifted significantly. There are a lot of companies, or there certainly are companies out there today that are performing very well operationally. They're continuing to be funded by high-quality VCs who do have liquidity. Those are the kinds of deals that we are looking at.

That does, I have to say, obviously shrink. The pipeline is very wide at the top. It is very narrow at the bottom. That is the way we have been selecting transactions in this current environment. That is going to continue, at least as I indicated, probably for the next couple of quarters.

Corey Johnson (Analyst)

Great. Thank you.

Operator (participant)

The next question comes from Christopher Nolan with Ladenburg Thalmann. Please proceed.

Christopher Nolan (SVP)

Hey, just to follow up on those questions. Is the plan to raise the leverage ratios if you're going to grow the portfolio in coming quarters?

Dan Trolio (CFO)

I think we mentioned each quarter, our target leverage net of cash is around 1.2-1.3 times. We may go above that slightly in a quarter, but that's still our target. We ended this quarter net of cash at 1.29. There was some activity afterwards with the cash on the balance sheet where we paid down some debt. We are towards the lower range of that today. The goal is to stay within that range.

Christopher Nolan (SVP)

Is the plan to not tap the ATM in coming quarters, just given where the stock price is?

Dan Trolio (CFO)

We look at our equity needs, debt, and equity needs each quarter. We look at the funding pipeline and what we have related to prepayments. We make that determination on a quarterly basis. We do not make that determination flat throughout the year.

Christopher Nolan (SVP)

You guys have a 2% base management fee. The industry is closer to 1.50%. Any discussion of cutting the base management fee?

Dan Trolio (CFO)

Our base management fee has two tiers to it. It is 2% up to $250 million and 1.6% after that. Our blended rate is probably closer to 1.6%, 1.7%. We review that to the market and our comps. We are right where our comps are when you actually do the calculations.

Christopher Nolan (SVP)

Two more questions. One, were there any timing issues, deals closing late in the quarter, which might have resulted in the EPS coming in below where the dividend is?

Dan Trolio (CFO)

There definitely is timing issues every quarter. You try to manage the debt outstanding and the cash on the balance sheet related to that timing. Some funding slips into the second quarter. Timing always has an impact on it. Can't say specifically that drove the NII this quarter.

Christopher Nolan (SVP)

Final question. Given where the stock price is and given where the dividend is, you're paying out roughly 14.7% by my estimate of equity as dividend. Your debt yields are 15%. How does that math work where you're paying out if you raise new equity, you're paying 14.7% of it out. And even if you invest it, you're only getting 15%. I mean, something has to give.

Dan Trolio (CFO)

Again, it's just something we'll look at each quarter as far as raising equity or not. Based on the fundings and the yields, what you mentioned is exactly one of the things we look at every quarter.

Christopher Nolan (SVP)

Okay. That's it for me, guys. Thank you.

Operator (participant)

Once again, to ask a question, that's Star 1 on your telephone keypad. Our next question comes from Paul Johnson with KBW. Please proceed.

Paul Johnson (Analyst)

Yeah. Good morning. Thank you for taking my questions. Following up on Chris's question a little bit, I mean, I think you mentioned 13% onboarding yields. I mean, is that what you're seeing in the market? I mean, just because to cover what you guys have is roughly like a 16% cost of equity today, you would need to be generating like a 20%+ return at the asset level. So do you include warrant returns or any other sort of expected item that would increase that over the long term?

Jerry Michaud (President)

Clearly, onboarding yields is not reflective of what it looks historically, what the portfolio actually yields on an ongoing basis. Yeah, some of that in stronger markets, we have more exit activity. The overall portfolio yield can get up into the range that you were kind of mentioning, Paul. In today's market, with exits being fewer and not as exciting, actually, compared to historical periods, the portfolio yield will probably, I think, in the 16% range, 15-16% range, continue for at least the next couple of quarters until we start seeing better optimism in the M&A and IPO markets. There are some things going on in a couple of a few of our portfolio companies.

Dan mentioned a couple, but there is some optimism relative to some of our stronger portfolio companies, our four-rated credit, three-rated credits, where there is some activity that does give us some confidence relative to some exit opportunities over the next couple of quarters. We have to see how they play out because in the last couple of quarters, we've come very close on a couple of our portfolio companies from getting what looked like reasonable exits. The buyers essentially pulled back, especially over the last 90 days, just literally pulled back. The reasons we got were basically they were frozen. They needed more indications about overall market volatility before they were willing to move. That is the market we operate in today. It is frustrating at times.

For some of the quality portfolio companies we have, there is interest in high-quality technology companies because at the end of the day, the kinds of companies that buy these companies need new technology as they move forward. There is a bit of a pull toward those kinds of companies. There just is not enough in the market today to be able to say with great confidence what is going to happen over the next couple of quarters. We need greater certainty in a lot of the macro issues that everybody is quite aware of.

Rob Pomeroy (Chairman and CEO)

Paul, this is—

Yeah. Go ahead. I'm sorry.

Paul Johnson (Analyst)

No, no, that's good. Go ahead.

Rob Pomeroy (Chairman and CEO)

Yeah. Paul, this is Rob. I was just going to comment on your question about onboarding yields. Just for clarity, the onboarding yield is a cash-on-cash return in the transaction, assuming it goes to term without any benefit of any warrant upside or otherwise. That onboarding yield turns into the actual portfolio yield based on accelerated fees from prepayments and other events. To get to the ROE we need, you can do the math with the leverage cost, the spread on the cost of debt.

Paul Johnson (Analyst)

Okay. Yeah. That's helpful. Thanks for that. I mean, just given how frozen the market is, as you kind of say, and the potential for that to continue for some time, I mean, have you approached that part of your strategy any differently in terms of the warrant and the equity kickers? Has that made you rethink how hard you push for that in deals?

Jerry Michaud (President)

I think overall, yeah. I mean, that's not necessarily just a recent phenomenon. I think over the last few quarters, especially as we look at valuations of companies very closely now, given valuations that were in existence 2021, 2022 compared to just the significant decline in valuations over the last really almost two years now, which is part of the issue, of course. It's been a long-running problem for the venture capital market in general. That's one of the reasons exits have been so hard. It's hard to get companies back to valuations that make sense in today's market. Yeah, we look at other ways of propping up returns through higher yields, more fee income, end-of-term payments, and things like that. We're much more focused on getting our yield from those kinds of events versus a warrant expectation.

Paul Johnson (Analyst)

Got it. Thanks. That's helpful once again. I was hoping maybe you could expand a little bit on the disclosure and the press release just regarding Soli Organics post-quarter receiving the blockage notice from Western Alliance. That loan, I think it was marked at 96 last quarter. I believe it was around 91 or so this quarter fair value cost. I mean, was there any sort of ongoing action or any ongoing discussion with the sponsor there? I mean, I guess what changed so quickly kind of between the most previous quarters and getting the blockage notice in April?

Jerry Michaud (President)

Yeah. We have been working with the senior lender, the management team, and the investors on Soli for a number of quarters now. As new capital has come in, they look for external investors or an acquisition of the company. That has been occurring for a while. We continue that dialogue now, and there is activity going on. This latest notice that we got from the senior lender was just part of that process. As they get to the finish line on some of these situations that are evolving and we believe will be successful, the senior lender needed to take this action. We needed to disclose it, and we did. Their dialogues continue to happen with all parties.

Paul Johnson (Analyst)

Got it. Thank you. Just a few more, if I can, another credit-specific question. I noticed Standvast, I believe it may have some e-commerce. I do not know if it is an e-commerce aggregator or if it just has some exposure there. I mean, we have seen some weakness in that industry. Is that the only type of particular company that you have like that? Is there any more? I guess I would ask any more sort of consumer exposure that you see in the portfolio that might be susceptible to some sort of any sort of consumer slowdown? One additional to that, I would also ask if there is any sort of meaningful tariff sort of exposure in any of your companies in terms of tech hardware, manufacturing, anything like that that might be impacted.

Jerry Michaud (President)

Sure. You're right. Yeah. Standvast did operate in the 3PL space. They weren't selling to consumers, but they were certainly adjacent to the consumer market. That had an impact on the eventual outcome there. We have intentionally, over the last number of years, managed our portfolio out of consumer-facing and direct e-commerce transactions. We currently have one transaction in the portfolio that's directly e-commerce. That's Havenly. They're actually performing quite well. We are not actively looking to grow that into that sector. In terms of the tariffs in general, we have addressed that, looked at all of our portfolio companies. In terms of specific impacts to their products, not a ton. In terms of how their supply chains work, we're still working through that. We expect that while there will be some displacement, most of them have planned for it.

Rob Pomeroy (Chairman and CEO)

Yeah. I'll add to that, Paul, this is Rob, that the real impact of the tariffs on our portfolio, as we mentioned in the body of the script, was just the great uncertainty and the shocks to the stock markets on again, off again, targeted industries. It's not specific to a specific tariff or a specific country or anything. It was people nearing the finish line on transactions that in a more calm environment could have and would have gotten done that were jolted into, "Well, we're just paralyzed. We're not going to do anything." That is the fundamental part of the comments we made earlier.

Paul Johnson (Analyst)

Got it. Appreciate that. I guess if I can just ask one more. I mean, the recent Wendel-Monroe partnership, I mean, can you say if there's been any sort of additional resources you've been able to access or anything that's been given in support of the BDC, I guess, to assist in whether it's just recovery efforts or potentially expanding verticals to capture some different industries such as the AI, some of the AI investment going on? Has there been anything, I guess, notable that you could mention there?

Rob Pomeroy (Chairman and CEO)

The deal's closed. It's been closed for 30 days. The real impact is that the deal's closed now and that Monroe and Horizon, we could be focused on our businesses and the things that we need to do, especially in light of the market we're in. This is a business that continued to operate independent of Wendel. However, the fact that it's closed has really focused now everybody's attention on the things we need to do to stabilize and grow and all of Monroe's segments. I think we will see over time the strong benefit of the scale. For Horizon, we're getting good help from Monroe on all the places we need help. From that standpoint, that's been ongoing and continuing, and I think will be ramped up as we go forward.

Paul Johnson (Analyst)

Great. Thanks. You did this all for me.

Operator (participant)

The next question comes from Mitchel Penn with Oppenheimer. Please proceed.

Mitchel Penn (Managing Director)

Thanks so much. Hey, guys. I just had a follow-up on Soli.

Rob Pomeroy (Chairman and CEO)

Morning.

Mitchel Penn (Managing Director)

Morning. I just had a follow-up on Soli. It looks like you say a default has occurred. Do you guys have a cross-default so that you're essentially going you have to put it on non-accrual this quarter?

Jerry Michaud (President)

It is related to non-accrual. This just occurred as far as getting the blockage and looking into the default and looking into that currently. If we do not collect any interest payments, as has been noted in the blockage, then yeah, that will have to be on non-accrual.

Mitchel Penn (Managing Director)

Got it. Okay. Are you comfortable with the marks, or would you have to reassess next quarter, this quarter, I guess, to figure out what the value is?

Jerry Michaud (President)

Yeah. We will obviously reassess the mark as we get more detail and work more through the credit. As Dan mentioned, it's been ongoing, and there's still activity that still has to come to fruition. That will factor into the fair value going forward.

Mitchel Penn (Managing Director)

Okay. That's all. Thank you so much.

Jerry Michaud (President)

Thank you.

Operator (participant)

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Rob Pomeroy (Chairman and CEO)

We want to thank you all for joining us this morning. We really do appreciate your continued interest and support in Horizon. We look forward to speaking with you again soon. This will conclude our call.

Operator (participant)

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.