New Mountain Finance Corporation (NASDAQ: NMFC) (the "Company",
"we", "us" or "our") today announced its financial results for the
quarter ended September 30, 2020 and reported third quarter net
investment income of $0.30 per weighted average share. At September
30, 2020, net asset value (“NAV”) per share was $12.24, compared to
$11.63 at June 30, 2020. The Company also announced that its board
of directors declared a fourth quarter distribution of $0.30 per
share, which will be payable on December 30, 2020 to holders of
record as of December 16, 2020. For additional details related to
the quarter ended September 30, 2020, please refer to the New
Mountain Finance Corporation Form 10-Q filed with the SEC and the
supplemental investor presentation which can be found on the
Company's website at http://www.newmountainfinance.com.
Selected Financial Highlights
(in thousands, except per share data)
September 30, 2020
Investment Portfolio(1) $
2,918,045
Total Assets $
3,032,491
Total Statutory Debt(3) $
1,506,458
NAV(2) $
1,184,764
NAV per Share $
12.24
Statutory Debt/Equity
1.27x
Investment Portfolio Composition September 30,
2020 Percent of Total First Lien $
1,662,653
57.0
%
Second Lien(1)
710,741
24.4
%
Subordinated
43,536
1.5
%
Preferred Equity
111,559
3.8
%
Investment Fund
222,400
7.6
%
Common Equity and Other(4)
167,156
5.7
%
Total $
2,918,045
100.0
%
_____________________________
(1)
Includes collateral for
securities purchased under collateralized agreements to resell.
(2)
Excludes non-controlling interest
in New Mountain Net Lease Corporation (“NMNLC”).
(3)
Excludes the Company’s United
States (“U.S.”) Small Business Administration (“SBA”)-guaranteed
debentures. Includes premium received on additional convertible
notes issued in June 2019.
(4)
Includes investments held in
NMNLC.
We believe that the strength of the Company’s unique investment
strategy – which focuses on middle market defensive growth
companies that are well researched by New Mountain Capital, L.L.C.
(“New Mountain”), a leading alternative investment firm, is
underscored by continued stable credit performance. The Company has
had only ten portfolio companies, representing approximately $220
million of the cost of all investments made since inception in
October 2008, or approximately 2.8% of $7.9 billion, go on
non-accrual.
Robert A. Hamwee, CEO, commented: “Our portfolio continues to
perform well, and despite an increasingly challenging COVID
environment, we expect that to continue. The combination of
generally improving portfolio operating metrics and a better market
environment for risk assets drove a further recovery in our book
value.”
“We believe New Mountain’s strategy of focusing on 'defensive
growth' industries and on companies that we know well continues to
prove to be a successful strategy, especially during the current
crisis”, added Steven B. Klinsky, NMFC Chairman. “We believe one of
our keys to success is the strength of the team and we continue to
build the team over time, now at approximately 180 employees.”
Portfolio and Investment Activity1
As of September 30, 2020, the Company’s NAV was approximately
$1,184.8 million and its portfolio had a fair value of
approximately $2,918.0 million in 106 portfolio companies, with a
weighted average YTM at Cost2 of approximately 8.6%. For the three
months ended September 30, 2020, the Company generated
approximately $43.4 million of originations, including commitments3
for follow-on investments in thirteen portfolio companies held as
of June 30, 2020. For the three months ended September 30, 2020,
the Company had $7.5 million of asset sales and cash repayments3 of
approximately $35.1 million.
Consolidated Results of Operations
The Company’s total investment income for the three months ended
September 30, 2020 and 2019 was approximately $65.3 million4 and
$72.6 million, respectively.
The Company’s total net expenses, after income tax expense, for
the three months ended September 30, 2020 and 2019 were
approximately $36.5 million and $41.4 million, respectively. Total
net expenses, after income tax expense, for the three months ended
September 30, 2020 and 2019 consisted of approximately $18.1
million and $21.8 million, respectively, of costs associated with
the Company’s borrowings and approximately $16.7 million and $17.3
million, respectively, in net management and incentive fees. Since
the Company’s initial public offering (“IPO”), the base management
fee calculation has deducted the borrowings under the New Mountain
Finance SPV Funding, L.L.C. credit facility (the “SLF Credit
Facility”). The SLF Credit Facility had historically consisted of
primarily lower yielding assets at higher advance rates. As part of
an amendment to the Company’s existing credit facilities with Wells
Fargo Bank, National Association, the SLF Credit Facility merged
with and into the New Mountain Finance Holdings, L.L.C. credit
facility (the “Holdings Credit Facility”) on December 18, 2014.
Post credit facility merger and to be consistent with the
methodology since the IPO, New Mountain Finance Advisers BDC,
L.L.C. (the “Investment Adviser”) will continue to waive management
fees on the leverage associated with those assets held under
revolving credit facilities that share the same underlying yield
characteristics with investments that were leveraged under the
legacy SLF Credit Facility, which as of September 30, 2020 and 2019
totaled approximately $634.1 million and $777.6 million,
respectively. For the three months ended September 30, 2020 and
2019 management fees waived were approximately $2.8 million and
$3.1 million, respectively. For the three months ended September
30, 2020 and 2019, incentive fees waived were approximately $0.5
million and $0, respectively. The Investment Adviser cannot recoup
management fees and incentive fees that the Investment Adviser has
previously waived. The Company’s net direct and indirect
professional, administrative, other general and administrative and
income tax expenses for the three months ended September 30, 2020
and 2019 were approximately $1.7 million and $2.3 million,
respectively.
For the three months ended September 30, 2020 and 2019, the
Company recorded approximately $59.4 million5 and ($7.8) million,
respectively, of net realized and unrealized gains (losses).
Liquidity and Capital Resources
As of September 30, 2020, the Company had cash and cash
equivalents of approximately $68.7 million and total statutory debt
outstanding of approximately $1,506.5 million6, which consisted of
approximately $459.2 million of the $745.0 million of total
availability on the Holdings Credit Facility, $150.5 million of the
$188.5 million of total availability on the Company’s senior
secured revolving credit facility (the “NMFC Credit Facility”),
$242.0 million of the $280.0 million of total availability on the
Company’s secured revolving credit facility (the “DB Credit
Facility”), $0 of the $50.0 million of total availability on the
uncommitted revolving loan agreement (the “Unsecured Management
Company Revolver”), $201.5 million7 of convertible notes
outstanding and $453.3 million of unsecured notes outstanding.
Additionally, the Company had $300.0 million of SBA-guaranteed
debentures outstanding as of September 30, 2020.
Portfolio and Asset Quality1
The Company puts its largest emphasis on risk control and credit
performance. On a quarterly basis, or more frequently if deemed
necessary, the Company formally rates each portfolio investment on
a scale of one to four. Each investment is assigned an initial
rating of a “2” under the assumption that the investment is
performing materially in-line with expectations. Any investment
performing materially below our expectations, where the risk of
loss has materially increased since the original investment, would
be downgraded from the “2” rating to a “3” or a “4” rating, based
on the deterioration of the investment. An investment rating of a
“4” could be moved to non-accrual status and the final development
could be an actual realization of a loss through a restructuring or
impaired sale.
As of September 30, 2020, eight portfolio companies had an
investment rating of “3” and six portfolio companies had an
investment rating of “4”. The Company’s investments in the
portfolio companies with an investment rating of “3” had an
aggregate cost basis of approximately $216.5 million and an
aggregate fair value of approximately $174.4 million. The Company’s
investment in portfolio companies with an investment rating of “4”
had an aggregate cost basis of approximately $154.4 million and an
aggregate fair value of approximately $86.1 million.
Recent Developments
On October 28, 2020, the Company’s board of directors declared a
fourth quarter 2020 distribution of $0.30 per share payable on
December 30, 2020 to holders of record as of December 16, 2020.
_____________________________
1
Includes collateral for
securities purchased under collateralized agreements to resell.
2
References to “YTM at Cost”
assume the accruing investments, including secured collateralized
agreements, in our portfolio as of a certain date, the ‘‘Portfolio
Date’’, are purchased at cost on that date and held until their
respective maturities with no prepayments or losses and are exited
at par at maturity. This calculation excludes the impact of
existing leverage. YTM at Cost uses the LIBOR curves at each
quarter’s respective end date. The actual yield to maturity may be
higher or lower due to the future selection of LIBOR contracts by
the individual companies in the Company’s portfolio or other
factors.
3
Excludes revolving credit
facilities, netbacks, payment-in-kind (“PIK”) interest, bridge
loans, return of capital and realized gains / losses.
4
Excludes $0.3 million of NII
related to non-controlling interests in NMNLC.
5
Excludes $1.1 million of net
unrealized loss related to non-controlling interests in NMNLC.
6
Excludes the Company’s United
States (“U.S.”) Small Business Administration (“SBA”)-guaranteed
debentures.
7
Includes premium received on additional
convertible notes issued in June 2019.
Conference Call
New Mountain Finance Corporation will host a conference call at
10 a.m. Eastern Time on Thursday, November 5, 2020, to discuss its
third quarter 2020 financial results. All interested parties may
participate in the conference call by dialing +1 (877) 443-9109
approximately 15 minutes prior to the call. International callers
should dial +1 (412) 317-1082. This conference call will also be
broadcast live over the Internet and can be accessed by all
interested parties through the Company's website,
http://ir.newmountainfinance.com. To listen to the live call,
please go to the Company's website at least 15 minutes prior to the
start of the call to register and download any necessary audio
software. Following the call, you may access a replay of the event
via audio webcast on our website. We will be utilizing a
presentation during the conference call and we have posted the
presentation to the investor relations section of our website.
New Mountain Finance Corporation Consolidated Statements
of Assets and Liabilities (in thousands, except shares and per
share data) (unaudited)
September 30, 2020
December 31, 2019
Assets Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,298,918 and
$2,619,408, respectively) $
2,247,848
$
2,613,801
Non-controlled/affiliated investments (cost of $79,785 and $82,825,
respectively)
55,769
73,527
Controlled investments (cost of $599,584 and $449,308,
respectively)
593,006
472,952
Total investments at fair value (cost of $2,978,287 and $3,151,541,
respectively)
2,896,623
3,160,280
Securities purchased under collateralized agreements to resell
(cost of $30,000 and $30,000, respectively)
21,422
21,422
Cash and cash equivalents
68,664
48,574
Interest and dividend receivable
33,568
31,800
Receivable from unsettled securities sold
4,490
–
Receivable from affiliates
513
277
Other assets
7,211
3,702
Total assets $
3,032,491
$
3,266,055
Liabilities Borrowings Holdings Credit Facility $
459,163
$
661,563
Unsecured Notes
453,250
453,250
SBA-guaranteed debentures
300,000
225,000
DB Credit Facility
242,000
230,000
Convertible Notes
201,545
201,623
NMFC Credit Facility
150,500
188,500
Deferred financing costs (net of accumulated amortization of
$31,939 and $28,390, respectively)
(18,222
)
(17,640
)
Net borrowings
1,788,236
1,942,296
Payable for unsettled securities purchased
–
1,780
Management fee payable
19,988
10,298
Incentive fee payable
13,531
7,646
Interest payable
10,141
16,484
Payable to affiliates
1,163
673
Deferred tax liability
134
912
Other liabilities
2,138
2,498
Total liabilities
1,835,331
1,982,587
Commitments and contingencies Net Assets Preferred
stock, par value $0.01 per share, 2,000,000 shares authorized, none
issued
–
–
Common stock, par value $0.01 per share, 200,000,000 authorized,
and 96,827,342 and 96,827,342 shares issued and outstanding,
respectively
968
968
Paid in capital in excess of par
1,287,853
1,287,853
Accumulated overdistributed earnings
(104,057
)
(5,353
)
Total net assets of New Mountain Finance Corporation
$
1,184,764
$
1,283,468
Non-controlling interest in New Mountain Net Lease Corporation
12,396
–
Total net assets $
1,197,160
$
1,283,468
Total liabilities and net assets $
3,032,491
$
3,266,055
Number of shares outstanding
96,827,342
96,827,342
Net asset value per share of New Mountain Finance
Corporation $
12.24
$
13.26
New Mountain Finance Corporation Consolidated Statements
of Operations (in thousands, except shares and per share data)
(unaudited)
Three Months Ended Nine Months
Ended September 30, 2020 September 30, 2019
September 30, 2020 September 30, 2019 Investment
income From non-controlled/non-affiliated investments: Interest
income (excluding Payment-in-kind ("PIK") interest income) $
41,854
$
50,096
$
144,383
$
140,602
PIK interest income
2,547
1,356
6,464
3,325
Non-cash dividend income
2,274
2,239
6,898
6,282
Other income
1,497
3,599
4,085
7,694
From non-controlled/affiliated investments: Interest income
(excluding PIK interest income)
781
659
1,963
1,979
PIK interest income
217
392
(1,131
)
1,109
Dividend income
687
788
2,096
2,326
Non-cash dividend income
–
309
(3,418
)
901
Other income
427
342
1,002
934
From controlled investments: Interest income (excluding PIK
interest income)
2,011
720
4,581
2,323
PIK interest income
2,244
1,997
6,393
5,441
Dividend income
8,107
7,661
24,061
23,383
Non-cash dividend income
1,576
2,273
5,716
6,446
Other income
1,299
163
2,479
505
Total investment income
65,521
72,594
205,572
203,250
Expenses Incentive fee
7,135
7,792
21,857
21,642
Management fee
12,877
12,687
39,869
35,302
Interest and other financing expenses
18,077
21,830
59,500
61,695
Administrative expenses
1,024
930
3,303
3,074
Professional fees
731
834
2,605
2,486
Other general and administrative expenses
442
492
1,383
1,302
Total expenses
40,286
44,565
128,517
125,501
Less: management and incentive fees waived
(3,341
)
(3,141
)
(10,067
)
(8,497
)
Less: expenses waived and reimbursed
(589
)
–
(924
)
(335
)
Net expenses
36,356
41,424
117,526
116,669
Net investment income before income taxes
29,165
31,170
88,046
86,581
Income tax expense
123
–
116
13
Net investment income
29,042
31,170
87,930
86,568
Net realized gains (losses): Non-controlled/non-affiliated
investments
30
349
(4,431
)
439
Non-controlled/affiliated investments
12
-
12
–
Controlled investments
5
6
12
14
New Mountain Net Lease Corporation
–
-
812
–
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
21,410
(8,334
)
(67,407
)
4,106
Non-controlled/affiliated investments
(1,111
)
(143
)
(14,718
)
(2,671
)
Controlled investments
39,943
1,453
(8,278
)
3,870
Securities purchased under collateralized agreements to resell
–
(1,332
)
–
(1,332
)
New Mountain Net Lease Corporation
–
–
(812
)
–
Benefit for taxes
257
281
778
121
Net realized and unrealized gains (losses)
60,546
(7,720
)
(94,032
)
4,547
Net increase (decrease) in net assets resulting from operations
89,588
23,450
(6,102
)
91,115
Less: Net increase in net assets resulting from operations related
to non-controlling interests in New Mountain Net Lease Corporation
(1,398
)
–
(1,584
)
–
Net increase (decrease) in net assets resulting from operations
related to New Mountain Finance Corporation $
88,190
$
23,450
$
(7,686
)
$
91,115
Basic earnings (loss) per share $
0.91
$
0.27
$
(0.08
)
$
1.11
Weighted average shares of common stock outstanding-basic
96,827,342
86,987,841
96,827,342
82,020,549
Diluted earnings (loss) per share $
0.82
$
0.26
$
(0.08
)
$
1.01
Weighted average shares of common stock outstanding-diluted
110,084,927
100,245,426
110,084,927
97,948,225
Distributions declared and paid per share $
0.30
$
0.34
$
0.94
$
1.02
ABOUT NEW MOUNTAIN FINANCE CORPORATION
New Mountain Finance Corporation is a closed-end,
non-diversified and externally managed investment company that has
elected to be regulated as a business development company under the
Investment Company Act of 1940, as amended. The Company’s
investment objective is to generate current income and capital
appreciation through the sourcing and origination of debt
securities at all levels of the capital structure, including first
and second lien debt, notes, bonds and mezzanine securities. The
Company’s first lien debt may include traditional first lien senior
secured loans or unitranche loans. Unitranche loans combine
characteristics of traditional first lien senior secured loans as
well as second lien and subordinated loans. Unitranche loans will
expose the Company to the risks associated with second lien and
subordinated loans to the extent it invests in the “last out”
tranche. In some cases, the investments may also include small
equity interests. The Company’s investment activities are managed
by its Investment Adviser, New Mountain Finance Advisers BDC,
L.L.C., which is an investment adviser registered under the
Investment Advisers Act of 1940, as amended. More information about
New Mountain Finance Corporation can be found on the Company’s
website at http://www.newmountainfinance.com.
ABOUT NEW MOUNTAIN CAPITAL
New Mountain Capital is a New York-based investment firm that
emphasizes business building and growth, rather than debt, as it
pursues long-term capital appreciation. The firm currently manages
private equity, public equity, and credit funds with over $28
billion in assets under management. New Mountain seeks out what it
believes to be the highest quality growth leaders in carefully
selected industry sectors and then works intensively with
management to build the value of these companies. For more
information on New Mountain Capital, please visit
http://www.newmountaincapital.com.
FORWARD-LOOKING STATEMENTS
Statements included herein may contain “forward-looking
statements”, which relate to our future operations, future
performance or our financial condition. Forward-looking statements
are not guarantees of future performance, condition or results and
involve a number of risks and uncertainties, including the impact
of COVID-19 and related changes in base interest rates and
significant volatility on our business, portfolio companies, our
industry and the global economy. Actual results and outcomes may
differ materially from those anticipated in the forward-looking
statements as a result of a variety of factors, including those
described from time to time in our filings with the Securities and
Exchange Commission or factors that are beyond our control. New
Mountain Finance Corporation undertakes no obligation to publicly
update or revise any forward-looking statements made herein, except
as may be required by law. All forward-looking statements speak
only as of the time of this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005755/en/
New Mountain Finance Corporation Investor Relations Shiraz Y.
Kajee, Authorized Representative NMFCIR@newmountaincapital.com
(212) 220-3505
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