New Mountain Finance Corporation (NYSE: NMFC) (the "Company",
"we", "us" or "our") today announced its financial results for the
quarter ended June 30, 2020 and reported second quarter net
investment income of $0.28 per weighted average share and adjusted
net investment income1 of $0.30 per weighted average share. At June
30, 2020, net asset value (“NAV”) per share was $11.63, compared to
$11.14 at March 31, 2020. The Company also announced that its board
of directors declared a third quarter distribution of $0.30 per
share, which will be payable on September 30, 2020 to holders of
record as of September 16, 2020. For additional details related to
the quarter ended June 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)
June 30, 2020
Investment Portfolio(1) $
2,847,884
Total Assets $
2,943,558
Total Statutory Debt(3) $
1,448,484
NAV(2) $
1,125,623
NAV per Share $
11.63
Statutory Debt/Equity 1.29x
Investment Portfolio
Composition June 30, 2020 Percent of Total First
Lien $
1,633,727
57.4%
Second Lien(1)
710,377
24.9%
Subordinated
41,362
1.5%
Preferred Equity
117,972
4.1%
Investment Fund
211,828
7.4%
Common Equity and Other(4)
132,618
4.7%
Total $
2,847,884
100.0%
Supplemental Information Regarding Adjusted Net Investment
Income1
Three Months Ended June 30, 2020 (in millions, except per
share data)
GAAP(5)
Non-recurring
Adjustments(6)
Adjusted(6) Net investment income ("NII")(7)
$27.3
$1.6
$28.9
Net investment income per weighted average share
$0.28
$0.02
$0.30
_____________________________
(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. (5) Accounting principles
generally accepted in the United States of America (“GAAP”). (6)
Adjusted NII includes $1.6 million non-recurring interest and
incentive fee adjustment related to Permian Holdco 2, Inc. and
Permian Holdco 3, Inc. (7) Excludes $0.3 million of NII related to
non-controlling interests 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: “While risks remain elevated,
overall our portfolio has performed very well, and we expect that
to continue in the months ahead absent a dramatic change in
circumstances. We were able to materially delever this quarter, and
saw a significant increase in 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 175 employees.”
Portfolio and Investment Activity2
As of June 30, 2020, the Company’s NAV was approximately
$1,125.6 million and its portfolio had a fair value of
approximately $2,847.9 million in 109 portfolio companies, with a
weighted average YTM at Cost3 of approximately 8.6%. For the three
months ended June 30, 2020, the Company generated approximately
$48.8 million of originations, including commitments4 for follow-on
investments in eleven portfolio companies held as of March 31,
2020. For the three months ended June 30, 2020, the Company had
$168.3 million of asset sales and cash repayments4 of approximately
$90.8 million.
Consolidated Results of Operations
The Company’s total investment income for the three months ended
June 30, 2020 and 2019 was approximately $65.7 million5 and $66.5
million, respectively.
The Company’s total net expenses, after income tax expense, for
the three months ended June 30, 2020 and 2019 were approximately
$38.4 million and $38.6 million, respectively. Total net expenses,
after income tax expense, for the three months ended June 30, 2020
and 2019 consisted of approximately $19.2 million and $20.8
million, respectively, of costs associated with the Company’s
borrowings and approximately $16.9 million and $15.8 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 June 30, 2020 and 2019
totaled approximately $664.6 million and $658.5 million,
respectively. For the three months ended June 30, 2020 and 2019
management fees waived were approximately $3.2 million and $2.9
million, respectively. The Investment Adviser cannot recoup
management 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 June 30, 2020 and 2019 were approximately $2.3
million and $2.0 million, respectively.
For the three months ended June 30, 2020 and 2019, the Company
recorded approximately $49.1 million and ($4.1) million,
respectively, of net realized and unrealized gains and losses.
Liquidity and Capital Resources
As of June 30, 2020, the Company had cash and cash equivalents
of approximately $56.2 million and total statutory debt outstanding
of approximately $1,448.5 million6, which consisted of
approximately $500.2 million of the $800.0 million of total
availability on the Holdings Credit Facility, $78.5 million of the
$188.5 million of total availability on the Company’s senior
secured revolving credit facility (the “NMFC Credit Facility”),
$215.0 million of the $280.0 million of total availability on the
Company’s secured revolving credit facility (the “DB Credit
Facility”), $0 of the $30.0 million of total availability on the
senior secured revolving credit facility (the “NMNLC 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 June 30, 2020.
Portfolio and Asset Quality2
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 June 30, 2020, nine portfolio company 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 $254.4 million and an aggregate fair value of
approximately $203.4 million. The Company’s investment in portfolio
companies with an investment rating of “4” had an aggregate cost
basis of approximately $153.9 million and an aggregate fair value
of approximately $91.0 million.
Recent Developments
On July 29, 2020, the Company’s board of directors declared a
third quarter 2020 distribution of $0.30 per share payable on
September 30, 2020 to holders of record as of September 16,
2020.
________________________________
1 Adjusted net investment income includes $1.6 million
non-recurring interest and incentive fee adjustment related to
Permian Holdco 2, Inc. and Permian Holdco 3, Inc. 2 Includes
collateral for securities purchased under collateralized agreements
to resell. 3 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. 4
Excludes revolving credit facilities, netbacks, payment-in-kind
(“PIK”) interest, bridge loans, return of capital and realized
gains / losses. 5 Excludes $0.3 million of NII 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, August 6, 2020, to discuss its
second 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)
June 30, 2020
December 31, 2019 Assets
Investments at fair value Non-controlled/non-affiliated investments
(cost of $2,307,414 and $2,619,408, respectively)
$
2,234,933
$
2,613,801
Non-controlled/affiliated investments (cost of $77,989 and $82,825,
respectively)
55,084
73,527
Controlled investments (cost of $582,965 and $449,308,
respectively)
536,445
472,952
Total investments at fair value (cost of $2,968,368 and $3,151,541,
respectively)
2,826,462
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
56,163
48,574
Interest and dividend receivable
33,348
31,800
Receivable from affiliates
259
277
Other assets
5,904
3,702
Total assets
$
2,943,558
$
3,266,055
Liabilities Borrowings Holdings
Credit Facility
$
500,163
$
661,563
Unsecured Notes
453,250
453,250
SBA-guaranteed debentures
300,000
225,000
DB Credit Facility
215,000
230,000
Convertible Notes
201,571
201,623
NMFC Credit Facility
78,500
188,500
Deferred financing costs (net of accumulated amortization of
$30,733 and $28,390, respectively)
(17,263)
(17,640)
Net borrowings
1,731,221
1,942,296
Payable for unsettled securities purchased
3,465
1,780
Management fee payable
30,564
10,298
Incentive fee payable
22,368
7,646
Interest payable
14,640
16,484
Payable to affiliates
2,061
673
Deferred tax liability
391
912
Other liabilities
1,982
2,498
Total liabilities
1,806,692
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
(163,198)
(5,353)
Total net assets of New Mountain Finance Corporation
$
1,125,623
$
1,283,468
Non-controlling interest in New Mountain Net Lease Corporation
11,243
–
Total net assets $
1,136,866
$
1,283,468
Total liabilities and net assets
$
2,943,558
$
3,266,055
Number of shares outstanding
96,827,342
96,827,342
Net asset value per share of New Mountain Finance
Corporation
$
11.63
$
13.26
New Mountain Finance Corporation Consolidated Statements
of Operations (in thousands, except shares and per share data)
(unaudited)
Three Months Ended Six Months
Ended June 30, 2020 June 30, 2019 June 30,
2020 June 30, 2019 Investment income From
non-controlled/non-affiliated investments: Interest income $
48,860
$
48,018
$
106,446
$
92,475
Non-cash dividend income
2,300
2,069
4,624
4,043
Other income
1,117
1,841
2,588
4,095
From non-controlled/affiliated investments: Interest income
(1,235)
1,033
(166)
2,037
Dividend income
689
812
1,409
1,538
Non-cash dividend income
–
301
(3,418)
592
Other income
284
301
575
592
From controlled investments: Interest income
3,738
2,584
6,719
5,047
Dividend income
7,725
7,265
15,954
15,722
Non-cash dividend income
1,502
2,128
4,140
4,173
Other income
987
113
1,180
342
Total investment income
65,967
66,465
140,051
130,656
Expenses Incentive fee
6,896
6,987
14,722
13,850
Management fee
13,134
11,640
26,992
22,615
Interest and other financing expenses
19,229
20,719
41,423
39,865
Administrative expenses
1,239
1,049
2,279
2,144
Professional fees
969
886
1,874
1,652
Other general and administrative expenses
442
398
941
810
Total expenses
41,909
41,679
88,231
80,936
Less: management fees waived
(3,183)
(2,823)
(6,726)
(5,356)
Less: expenses waived and reimbursed
(335)
(335)
(335)
(335)
Net expenses
38,391
38,521
81,170
75,245
Net investment income before income taxes
27,576
27,944
58,881
55,411
Income tax (benefit) expense
(7)
(4)
(7)
13
Net investment income
27,583
27,948
58,888
55,398
Net realized (losses) gains: Non-controlled/non-affiliated
investments
(3,759)
47
(4,461)
90
Controlled investments
3
5
7
8
New Mountain Net Lease Corporation
–
–
812
–
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
51,466
2,677
(88,817)
12,440
Non-controlled/affiliated investments
(2,771)
(1,637)
(13,607)
(2,528)
Controlled investments
4,587
(5,025)
(48,221)
2,417
New Mountain Net Lease Corporation
–
–
(812)
–
(Provision) benefit for taxes
(377)
(270)
521
(160)
Net realized and unrealized gains (losses)
49,149
(4,203)
(154,578)
12,267
Net increase (decrease) in net assets resulting from operations
76,732
23,745
(95,690)
67,665
Less: Net increase in net assets resulting from operations related
to non-controlling interests in New Mountain Net Lease Corporation
251
–
186
–
Net increase (decrease) in net assets resulting from operations
related to New Mountain Finance Corporation $
76,481
$
23,745
$
(95,876)
$
67,665
Basic earnings per share $
0.79
$
0.29
$
(0.99)
$
0.85
Weighted average shares of common stock outstanding-basic
96,827,342
80,522,426
96,827,342
79,495,737
Diluted earnings per share $
0.72
$
0.27
$
(0.99)
$
0.76
Weighted average shares of common stock outstanding-diluted
110,084,927
97,693,499
110,084,927
96,780,587
Distributions declared and paid per share $
0.30
$
0.34
$
0.64
$
0.68
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 focused
on long-term business-building and growth investments. The firm
currently manages private equity, public equity, and credit funds
with over $25 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/20200805006036/en/
New Mountain Finance Corporation Investor Relations Shiraz Y.
Kajee, Authorized Representative NMFCIR@newmountaincapital.com
(212) 220-3505
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