New Mountain Finance Corporation (NASDAQ: NMFC) (the "Company",
"we", "us" or "our") today announced its financial results for the
quarter and year ended December 31, 2020 and reported fourth
quarter net investment income of $0.30 per weighted average share.
At December 31, 2020, net asset value (“NAV”) per share was $12.62,
compared to $12.24 at September 30, 2020 and $13.26 at December 31,
2019. The Company also announced that its board of directors
declared a first quarter distribution of $0.30 per share, which
will be payable on March 31, 2021 to holders of record as of March
17, 2021. For additional details related to the quarter and year
ended December 31, 2020, please refer to the New Mountain Finance
Corporation Form 10-K 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)
December 31, 2020
Investment Portfolio(1) $
2,974,924
Total Assets $
3,097,519
Total Statutory Debt(3) $
1,514,433
NAV(2) $
1,221,875
NAV per Share $
12.62
Statutory Debt/Equity
1.24x
Investment Portfolio Composition December 31,
2020 Percent of Total First Lien $
1,576,217
53.0%
Second Lien(1)
714,250
24.0%
Subordinated
36,939
1.2%
Preferred Equity
147,643
5.0%
Investment Fund
222,400
7.5%
Common Equity and Other(4)
277,475
9.3%
Total $
2,974,924
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 $236
million of the cost of all investments made since inception in
October 2008, or approximately 2.9% of $8.1 billion, go on
non-accrual.
Robert A. Hamwee, CEO, commented: “Our portfolio continued to
perform well through Q4, as evidenced by $217 million of positive
credit migration and zero negative migration, as well as ongoing
book value recovery, which improved a further $0.38 to $12.62. As
COVID headwinds hopefully continue to abate we look forward to
further book value recovery in 2021.”
John R. Kline, President and COO, commented: “We are pleased to
announce again a first quarter distribution of $0.30 per share
payable on March 31, 2021 to holders of record as of March 17,
2021. This distribution is fully supported by income from our
diverse portfolio of middle market investments in defensive growth
businesses. The annualized yield of this distribution based on our
closing share price on February 19, 2021 is 9.8%.”
“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 December 31, 2020, the Company’s NAV was approximately
$1,221.9 million and its portfolio had a fair value of
approximately $2,974.9 million in 105 portfolio companies, with a
weighted average YTM at Cost2 of approximately 8.6%. For the three
months ended December 31, 2020, the Company generated approximately
$22.3 million of originations in one new portfolio company and
approximately $161.4 million of originations, including
commitments3 for follow-on investments in thirteen portfolio
companies held as of September 30, 2020. For the three months ended
December 31, 2020, the Company had $32.9 million of asset sales and
cash repayments3 of approximately $118.9 million.
Consolidated Results of Operations
Quarterly Results4
The Company’s total investment income for the three months ended
December 31, 2020 and 2019 was approximately $67.8 million and
$73.2 million, respectively.
The Company’s total net expenses, after income tax expense, for
the three months ended December 31, 2020 and 2019 were
approximately $38.7 million and $42.6 million, respectively. Total
net expenses, after income tax expense, for the three months ended
December 31, 2020 and 2019 consisted of approximately $18.6 million
and $22.6 million, respectively, of costs associated with the
Company’s borrowings and approximately $17.7 million and $18.0
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 December 31, 2020 and 2019
totaled approximately $620.3 million and $829.0 million,
respectively. For the three months ended December 31, 2020 and 2019
management fees waived were approximately $2.7 million and $3.5
million, 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 December 31, 2020
and 2019 were approximately $2.4 million and $2.0 million,
respectively.
For the three months ended December 31, 2020 and 2019, the
Company recorded approximately $37.0 million and $(9.1) million,
respectively, of net realized and unrealized gains (losses).
Annual Results4
The Company’s total investment income for the years ended
December 31, 2020 and 2019 was approximately $272.8 million and
$276.5 million, respectively.
The Company’s total net expenses, after income tax expense, for
the years ended December 31, 2020 and 2019 were approximately
$156.3 million and $159.3 million, respectively. Total net
expenses, after income tax expense, for the years ended December
31, 2020 and 2019 consisted of approximately $78.1 million and
$84.3 million, respectively, of costs associated with the Company’s
borrowings and approximately $69.4 million and $66.4 million,
respectively, in net management and incentive fees. For the years
ended December 31, 2020 and 2019, management fees waived were
approximately $12.3 million and $12.0 million, respectively. For
the years ended December 31, 2020 and 2019, incentive fees waived
were approximately $0.5 million and $0, respectively. The Company’s
net direct and indirect professional, administrative, other general
and administrative and income tax expenses for the years ended
December 31, 2020 and 2019 were approximately $8.8 million and $8.6
million, respectively.
For the years ended December 31, 2020 and 2019, the Company
recorded approximately $58.1 million and $4.6 million in net
realized and unrealized losses, respectively.
Liquidity and Capital Resources
As of December 31, 2020, the Company had cash and cash
equivalents of approximately $79.0 million and total statutory debt
outstanding of approximately $1,514.4 million5, which consisted of
approximately $450.2 million of the $745.0 million of total
availability on the Holdings Credit Facility, $165.5 million of the
$188.5 million of total availability on the Company’s senior
secured revolving credit facility (the “NMFC Credit Facility”),
$244.0 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”), $201.4 million6 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 December 31, 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 December 31, 2020, six portfolio companies had an
investment rating of “3” and five 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 $148.8 million and an
aggregate fair value of approximately $111.2 million. The Company’s
investment in portfolio companies with an investment rating of “4”
had an aggregate cost basis of approximately $110.6 million and an
aggregate fair value of approximately $37.1 million.
Recent Developments
On January 29, 2021, the Company entered into a fifth supplement
(the "Fifth Supplement") to its Amended and Restated Note Purchase
Agreement, dated September 30, 2016 (the “NPA”). Pursuant to the
Fifth Supplement, on January 29, 2021, the Company issued to
institutional investors identified therein, in a private placement,
$200.0 million in aggregate principal amount of five-year unsecured
notes that mature on January 29, 2026 (the “2021A Unsecured Notes”)
as an additional series of notes under the NPA. The 2021A Unsecured
Notes will rank equal in priority with the Company's other
unsecured indebtedness. The 2021A Unsecured Notes bear interest at
an annual rate of 3.875%, payable semi-annually in arrears on
January 29 and July 29 of each year, commencing on July 29,
2021.
On February 5, 2021, the Company caused notices to be issued to
holders of the Company's 5.75% Unsecured Notes due 2023 (the “5.75%
Unsecured Notes”) regarding the exercise of the Company's option to
redeem all of the issued and outstanding 5.75% Unsecured Notes. The
Company will redeem all $51.75 million in aggregate principal
amount of the 5.75% Unsecured Notes on March 8, 2021.
On February 5, 2021, the Company caused notices to be issued to
holders of the Company's 5.313% Unsecured Notes due 2021 (the “2016
Unsecured Notes”) regarding the exercise of the Company's option to
prepay all of the Company's $90.0 million in aggregate principal
amount of issued and outstanding 2016 Unsecured Notes, which was
paid on February 16, 2021.
On February 17, 2021, the Company's board of directors declared
a first quarter 2021 distribution of $0.30 per share payable on
March 31, 2021 to holders of record as of March 17, 2021.
_____________________________
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 net income related to
non-controlling interests in NMNLC. For the quarter ended December
31, 2020, $0.3 million of dividend income is excluded from
investment income, $0.0 million of net direct and indirect
professional, administrative, other general and administrative is
excluded from net expenses and $1.5 million of unrealized gains is
excluded from net realized and unrealized losses. For the year
ended December 31, 2020, $0.9 million of dividend income is
excluded from investment income, $0.1 million of net direct and
indirect professional, administrative, other general and
administrative is excluded from net expenses and $2.6 million of
unrealized gains is excluded from net realized and unrealized
losses.
5
Excludes the Company’s United States
(“U.S.”) Small Business Administration (“SBA”)-guaranteed
debentures.
6
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, February 25, 2021, to discuss its
fourth 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)
December 31, 2020
December 31, 2019
Assets Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,281,184 and
$2,619,408, respectively) $
2,249,615
$
2,613,801
Non-controlled/affiliated investments (cost of $115,543 and
$82,825, respectively)
103,012
73,527
Controlled investments (cost of $600,942 and $449,308,
respectively)
600,875
472,952
Total investments at fair value (cost of $2,997,669 and $3,151,541,
respectively)
2,953,502
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
78,966
48,574
Interest and dividend receivable
28,411
31,800
Receivable from unsettled securities sold
9,019
–
Receivable from affiliates
117
277
Deferred tax asset
101
–
Other assets
5,981
3,702
Total assets $
3,097,519
$
3,266,055
Liabilities Borrowings Unsecured Notes $
453,250
$
453,250
Holdings Credit Facility
450,163
661,563
SBA-guaranteed debentures
300,000
225,000
DB Credit Facility
244,000
230,000
Convertible Notes
201,520
201,623
NMFC Credit Facility
165,500
188,500
Deferred financing costs (net of accumulated amortization of
$33,325 and $28,390, respectively)
(16,839
)
(17,640
)
Net borrowings
1,797,594
1,942,296
Payable for unsettled securities purchased
26,842
1,780
Interest payable
15,587
16,484
Management fee payable
10,419
10,298
Incentive fee payable
7,354
7,646
Payable to affiliates
867
673
Deferred tax liability
–
912
Other liabilities
1,967
2,498
Total liabilities
1,860,630
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 shares
authorized, and 96,827,342 and 96,827,342 shares issued and
outstanding, respectively
968
968
Paid in capital in excess of par
1,269,671
1,287,853
Accumulated overdistributed earnings
(48,764
)
(5,353
)
Total net assets of New Mountain Finance Corporation
$
1,221,875
$
1,283,468
Non-controlling interest in New Mountain Net Lease Corporation
15,014
–
Total net assets $
1,236,889
$
1,283,468
Total liabilities and net assets $
3,097,519
$
3,266,055
Number of shares outstanding
96,827,342
96,827,342
Net asset value per share of New Mountain Finance
Corporation $
12.62
$
13.26
New Mountain Finance Corporation
Consolidated Statements of
Operations
(in thousands, except shares and
per share data)
Year Ended December
31,
2020
2019
2018
Investment income From non-controlled/non-affiliated
investments: Interest income (excluding Payment-in-kind ("PIK")
interest income) $
184,705
$
193,500
$
149,509
PIK interest income
9,057
528
4,136
Dividend income
–
–
486
Non-cash dividend income
9,235
8,561
5,912
Other income
5,133
12,150
12,174
From non-controlled/affiliated investments: Interest income
(excluding PIK interest income)
2,042
2,608
1,277
PIK interest income
(1,083
)
1,558
751
Dividend income
2,611
3,073
6,714
Non-cash dividend income
(3,085
)
1,219
12,333
Other income
1,282
1,236
1,832
From controlled investments: Interest income (excluding PIK
interest income)
7,803
3,119
2,473
PIK interest income
9,028
7,409
3,753
Dividend income
32,347
32,011
21,731
Non-cash dividend income
7,297
8,918
6,648
Other income
7,339
617
1,736
Total investment income
273,711
276,507
231,465
Expenses Interest and other financing expenses
78,047
84,297
57,050
Management fee
53,032
49,115
38,530
Incentive fee
29,211
29,288
26,508
Administrative expenses
4,408
4,046
3,629
Professional fees
3,537
3,065
4,497
Other general and administrative expenses
1,845
1,796
1,913
Total expenses
170,080
171,607
132,127
Less: management and incentive fees waived
(12,811
)
(12,012
)
(6,709
)
Less: expenses waived and reimbursed
(924
)
(335
)
(276
)
Net expenses
156,345
159,260
125,142
Net investment income before income taxes
117,366
117,247
106,323
Income tax expense
22
94
291
Net investment income
117,344
117,153
106,032
Net realized (losses) gains: Non-controlled/non-affiliated
investments
(4,305
)
872
(18,047
)
Non-controlled/affiliated investments
(3,497
)
–
8,387
Controlled investments
4,188
18
3
New Mountain Net Lease Corporation
812
–
–
Net change in unrealized (depreciation) appreciation:
Non-controlled/non-affiliated investments
(47,907
)
1,855
(30,758
)
Non-controlled/affiliated investments
(3,233
)
(8,353
)
(2,344
)
Controlled investments
(1,766
)
3,010
10,896
Securities purchased under collateralized agreements to resell
–
(2,086
)
(1,704
)
New Mountain Net Lease Corporation
(812
)
–
–
Benefit (provision) for taxes
1,013
94
(112
)
Net realized and unrealized losses
(55,507
)
(4,590
)
(33,679
)
Net increase in net assets resulting from operations
61,837
112,563
72,353
Less: Net increase in net assets resulting from operations related
to non-controlling interest in New Mountain Net Lease Corporation
(3,364
)
–
–
Net increase in net assets resulting from operations related to
New Mountain Finance Corporation $
58,473
$
112,563
$
72,353
Basic earnings per share $
0.60
$
1.32
$
0.95
Weighted average shares of common stock outstanding-basic
96,827,342
85,209,378
76,022,375
Diluted earnings per share $
0.60
$
1.22
$
0.91
Weighted average shares of common stock outstanding-diluted
110,084,927
100,464,045
88,627,741
Distributions declared and paid per share $
1.24
$
1.36
$
1.36
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 $30
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/20210224006101/en/
New Mountain Finance Corporation Investor Relations Shiraz Y.
Kajee, Authorized Representative NMFCIR@newmountaincapital.com
(212) 220-3505
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