New Mountain Finance Corporation (NASDAQ:NMFC) (the "Company",
"we", "us" or "our") today announced its financial results for the
quarter ended March 31, 2021 and reported first quarter net
investment income of $0.30 per weighted average share and adjusted
net investment income1 of $0.30 per weighted average share. At
March 31, 2021, net asset value (“NAV”) per share was $12.85,
compared to $12.62 at December 31, 2020. The Company also announced
that its board of directors declared a second quarter distribution
of $0.30 per share, which will be payable on June 30, 2021 to
holders of record as of June 16, 2021. For additional details
related to the quarter ended March 31, 2021, 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)
March 31, 2021
Investment Portfolio(1)
$
3,040,034
Total Assets
$
3,128,335
Total Statutory Debt(3)
$
1,471,157
NAV(2)
$
1,244,317
NAV per Share
$
12.85
Statutory Debt/Equity
1.18x
Investment Portfolio Composition
March 31, 2021 Percent of Total First Lien
$
1,576,600
51.9%
Second Lien(1)
717,631
23.6%
Subordinated
37,295
1.2%
Preferred Equity
161,405
5.3%
Investment Fund
232,400
7.6%
Common Equity and Other(4)
314,703
10.4%
Total
$
3,040,034
100.0%
Supplemental Information Regarding Adjusted Net Investment
Income1
Three Months Ended March 31, 2021 (in millions,
except per share data)
GAAP(5)
Non-recurringAdjustments(6) Adjusted(6) Net
investment income ("NII")(7)
$28.7
$0.8
$29.5
Net investment income per weighted average share
$0.30
$0.00
$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 excludes $0.8 million of
accelerated deferred financing cost associated with the early
repayment of unsecured notes.
(7) Excludes $0.3 million of NII related
to non-controlling interest 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 2.8% of $8.3 billion, go on
non-accrual.
Robert A. Hamwee, CEO, commented: “Our portfolio continued to
perform well through Q1, as evidenced by 85% of our companies
maintaining the green rating, as well as ongoing book value
recovery, which improved an additional $0.23 to
$12.85. Additionally, Moody’s has assigned NMFC an investment
grade rating of Baa3 in May, which reflects our successful track
record, extensive firm resources, and experienced management
team.”
John R. Kline, President and COO, commented: “We are pleased to
announce again a second quarter distribution of $0.30 per share
payable on June 30, 2021 to holders of record as of June 16, 2021.
With the continued support of our Investment Adviser, we are
committed to paying quarterly dividends of at least $0.30 over the
next seven quarters as we expect our positive performance will
continue.”
“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,” added Steven B. Klinsky, NMFC
Chairman. “We have had good news on a number of fronts this
quarter, and we believe one of our keys to success is the strength
of the team, which we continue to build over time, now at over 175
employees.”
Portfolio and Investment Activity2
As of March 31, 2021, the Company’s NAV was approximately
$1,244.3 million and its portfolio had a fair value of
approximately $3,040.0 million in 102 portfolio companies, with a
weighted average YTM at Cost3 of approximately 8.8%. For the three
months ended March 31, 2021, the Company generated approximately
$96.6 million of originations in four new portfolio companies and
approximately $122.8 million of originations, including
commitments4 for follow-on investments in nine portfolio companies
held as of December 31, 2020. For the three months ended March 31,
2021, the Company had $5.5 million of asset sales and cash
repayments4 of approximately $190.7 million.
Consolidated Results of Operations5
The Company’s total investment income for the three months ended
March 31, 2021 and 2020 was approximately $67.4 million and $74.1
million, respectively.
The Company’s total net expenses, after income tax expense, for
the three months ended March 31, 2021 and 2020 were approximately
$38.7 million and $42.8 million, respectively. Total net expenses,
after income tax expense, for the three months ended March 31, 2021
and 2020 consisted of approximately $19.4 million and $22.2
million, respectively, of costs associated with the Company’s
borrowings and approximately $17.0 million and $18.1 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. Effective as of and for the quarter
ended March 31, 2021 through the quarter ending December 31, 2022,
the Investment Adviser has entered into a fee waiver agreement
pursuant to which the Investment Adviser will waive base management
fees in order to reach a target base management fee of 1.25% on
gross assets (the “Reduced Base Management Fee”) as opposed to the
Company’s current base management fee of 1.75% on gross assets less
the borrowings under the SLF Credit Facility and less cash and cash
equivalents (the “Base Management Fee”). If, for any quarterly
period during the term of the fee waiver agreement, the Reduced
Base Management Fee would be greater than the Base Management Fee
calculated under the terms of the Investment Management Agreement,
the Investment Adviser shall only be entitled to the lesser of
those two amounts. The Investment Adviser cannot recoup management
fees that the Investment Adviser has previously waived. For the
three months ended March 31, 2021 and 2020 management fees waived
were approximately $3.6 million and $3.5 million, respectively. The
Company’s net direct and indirect professional, administrative,
other general and administrative and income tax expenses for the
three months ended March 31, 2021 and 2020 were approximately $2.3
million and $2.5 million, respectively.
For the three months ended March 31, 2021 and 2020, the Company
recorded approximately $22.8 million and ($203.7) million,
respectively, of net realized and unrealized gains (losses).
Liquidity and Capital Resources
As of March 31, 2021, the Company had cash and cash equivalents
of approximately $47.3 million and total statutory debt outstanding
of approximately $1,471.2 million6, which consisted of
approximately $450.2 million of the $745.0 million of total
availability on the Holdings Credit Facility, $107.0 million of the
$188.5 million of total availability on the Company’s senior
secured revolving credit facility (the “NMFC Credit Facility”),
$201.0 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”), $0 of the $10.0 million of total availability
on the senior secured revolving credit facility (the “NMNLC Credit
Facility II”), $201.5 million7 of convertible notes outstanding and
$511.5 million of unsecured notes outstanding. Additionally, the
Company had $300.0 million of SBA-guaranteed debentures outstanding
as of March 31, 2021.
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 March 31, 2021, six portfolio companies had an investment
rating of “3” and four 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 $151.4 million and an aggregate fair value of
approximately $112.0 million. The Company’s investment in portfolio
companies with an investment rating of “4” had an aggregate cost
basis of approximately $98.9 million and an aggregate fair value of
approximately $36.5 million.
Recent Developments
On April 20, 2021, the Company entered into the Fifth Amendment
to Loan and Security Agreement (the “Fifth Amendment”), which
amended the Holdings Credit Facility. Pursuant to the Fifth
Amendment, the revolving period was extended from September 30,
2021 to April 20, 2024. The Holdings Credit Facility continues to
mature two years after the end of the revolving period. With the
extension of the revolving period, the Holdings Credit Facility
will now mature on April 20, 2026. As of the date of the Fifth
Amendment, the aggregate commitments of the lenders to the Holding
Credit Facility equaled $730.0 million.
The Fifth Amendment made a number of other modifications,
including, but not limited to, the following. The applicable spread
used to determine the per annum interest rate payable under the
Holdings Credit Facility was modified to be the higher of (a) 1.85%
(reduced from 2.25%) and (b) the pro rata portion of the facility
secured by assets that are First Lien Loans that are also Broadly
Syndicated Loans (as each such term is defined under the Holdings
Credit Facility) multiplied by 1.60% (reduced from 2.00%), plus the
pro rata portion of the facility secured by assets that are not
First Lien Loans that are Broadly Syndicated Loans multiplied by
2.10% (reduced from 2.50%). The Fifth Amendment also modified the
applicable spread that would be effective during an Event of
Default or a Curable BDC Asset Coverage Event (as each such term is
defined under the Holdings Credit Facility) by reducing such
applicable spread from 3.75% to 3.25%.
On May 5, 2021, NMFC and SkyKnight Income Alpha, LLC ("SkyKnight
Alpha") entered into a limited liability company agreement to
establish a joint venture, NMFC Senior Loan Program IV LLC ("SLP
IV"). NMFC and SkyKnight Alpha have transferred and contributed
100% of their membership interest in SLP I and SLP II to SLP IV,
pursuant to contribution agreements. The purpose of the joint
venture is to invest primarily in senior secured loans issued by
portfolio companies within our core industry verticals. All
investment decisions must be unanimously approved by the investment
committee of SLP IV, which has equal representations from NMFC and
SkyKnight Alpha. On May 5, 2021, SLP IV entered into a $370.0
million revolving credit facility with Wells Fargo Bank, National
Association which matures on May 5, 2026 and bears interest at a
rate of LIBOR plus 1.60% per annum.
On May 4, 2021, the Company and the Investment Adviser entered
into a Fee Waiver Agreement (the “Fee Wavier Agreement”). Pursuant
to the Fee Waiver Agreement, the Investment Adviser agreed to
voluntarily reduce the base management fees payable to the
Investment Adviser by the Company under the Investment Management
Agreement. Effective as of and for the quarter ended March 31, 2021
through the quarter ending December 31, 2022, the Investment
Adviser agreed to waive a portion of the base management fee
payable under the Investment Management Agreement such that the
base management fee payable would not exceed 1.25% of the Company’s
gross assets (the “Reduced Base Management Fee”). If, for any
quarterly period during the term of the Fee Wavier Agreement, the
Reduced Base Management Fee would be greater than the base
management fee calculated under the terms of the Investment
Management Agreement, the Investment Adviser shall only be entitled
to the lesser of those two amounts.
On April 30, 2021, the Company’s board of directors declared a
second quarter 2021 distribution of $0.30 per share payable on June
30, 2021 to holders of record as of June 16, 2021.
The Company will, subject to extraordinary circumstances, pay
quarterly distributions to its common stockholders of at least
thirty cents ($0.30) per quarter over the next seven quarters
beginning with the second quarter distribution to be paid on June
30, 2021 and ending in the fourth quarter of 2022, subject to any
possible extensions. The declaration of any such future
distributions will be subject to the availability of legally
distributable funds and the discretion and approval of the board of
directors. The Investment Adviser has informed the Company that, to
the extent necessary, it will waive incentive fees payable to the
Investment Adviser in the event that there is an insufficient
amount of legally distributable funds available to the Company to
make the thirty cent ($0.30) distributions through the periods
described above.
_____________________________
1 Adjusted NII excludes $0.8 million of
accelerated deferred financing cost associated with the early
repayment of unsecured notes.
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 net income related to
non-controlling interests in NMNLC. For the quarter ended March 31,
2021, $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 $0.1 million of unrealized gains is excluded from
net realized and unrealized gains.
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, May 6, 2021, to discuss its first
quarter 2021 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)
March 31,
2021 December 31, 2020 Assets
Investments at fair value
Non-controlled/non-affiliated investments (cost of
$2,275,442 and $2,281,184 respectively)
$
2,252,144
$
2,249,615
Non-controlled/affiliated investments (cost of $104,959 and
$115,543, respectively)
121,470
103,012
Controlled investments (cost of $648,906 and $600,942,
respectively)
644,998
600,875
Total investments at fair value (cost of $3,029,307 and $2,997,669,
respectively)
3,018,612
2,953,502
Securities purchased under collateralized agreements to resell
(cost of $30,000 and $30,000, respectively)
21,422
21,422
Cash and cash equivalents
47,299
78,966
Interest and dividend receivable
32,927
28,411
Receivable from unsettled securities sold
–
9,019
Receivable from affiliates
–
117
Deferred tax asset
–
101
Other assets
8,075
5,981
Total assets
$
3,128,335
$
3,097,519
Liabilities
Borrowings
Unsecured Notes
$
511,500
$
453,250
Holdings Credit Facility
450,163
450,163
SBA-guaranteed debentures
300,000
300,000
Convertible Notes
201,494
201,520
DB Credit Facility
201,000
244,000
NMFC Credit Facility
107,000
165,500
Deferred financing costs (net of accumulated amortization of
$35,513 and $33,325, respectively)
(18,270
)
(16,839
)
Net borrowings
1,752,887
1,797,594
Payable for unsettled securities purchased
62,863
26,842
Management fee payable
20,202
10,419
Incentive fee payable
14,602
7,354
Interest payable
9,826
15,587
Payable to affiliates
1,538
867
Deferred tax liability
14
–
Other liabilities
3,605
1,967
Total liabilities
1,865,537
1,860,630
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 and
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
1,269,671
Accumulated overdistributed earnings
(26,322
)
(48,764
)
Total net assets of New Mountain Finance Corporation
$
1,244,317
$
1,221,875
Non-controlling interest in New Mountain Net Lease Corporation
18,481
15,014
Total net assets
$
1,262,798
$
1,236,889
Total liabilities and net assets
$
3,128,335
$
3,097,519
Number of shares outstanding
96,827,342
96,827,342
Net asset value per share of New Mountain Finance
Corporation
$
12.85
$
12.62
New Mountain Finance Corporation Consolidated Statements
of Operations (in thousands, except shares and per share data)
(unaudited)
Three Months Ended
March 31, 2021 March 31, 2020 Investment
income From non-controlled/non-affiliated
investments: Interest income (excluding Payment-in-kind
("PIK") interest income) $
39,560
$
56,560
PIK interest income
2,534
1,026
Non-cash dividend income
2,401
2,324
Other income
2,824
1,471
From non-controlled/affiliated investments: Interest income
(excluding PIK interest income)
463
612
PIK interest income
–
457
Dividend income
–
720
Non-cash dividend income
1,505
(3,418
)
Other income
102
291
From controlled investments: Interest income (excluding PIK
interest income)
1,148
974
PIK interest income
3,304
2,007
Dividend income
10,475
8,229
Non-cash dividend income
1,281
2,638
Other income
2,111
193
Total investment income
67,708
74,084
Expenses Incentive fee
7,248
7,826
Management fee
13,420
13,858
Interest and other financing expenses
19,385
22,194
Administrative expenses
1,129
1,040
Professional fees
726
905
Other general and administrative expenses
442
499
Total expenses
42,350
46,322
Less: management and incentive fees waived
(3,637
)
(3,543
)
Net expenses
38,713
42,779
Net investment income before income taxes
28,995
31,305
Income tax expense
1
–
Net investment income
28,994
31,305
Net realized (losses) gains: Non-controlled/non-affiliated
investments
181
(702
)
Non-controlled/affiliated investments
(12,212
)
-
Controlled investments
1,535
4
New Mountain Net Lease Corporation
–
812
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
8,271
(140,283
)
Non-controlled/affiliated investments
29,042
(10,836
)
Controlled investments
(3,841
)
(52,808
)
New Mountain Net Lease Corporation
–
(812
)
(Provision) Benefit for taxes
(115
)
898
Net realized and unrealized gains (losses)
22,861
(203,727
)
Net increase (decrease) in net assets resulting from operations
51,855
(172,422
)
Less: Net (increase) decrease in net assets resulting from
operations related to non-controlling interests in New Mountain Net
Lease Corporation
(365
)
65
Net increase (decrease) in net assets resulting from operations
related to New Mountain Finance Corporation $
51,490
$
(172,357
)
Basic earnings (loss) per share $
0.53
$
(1.78
)
Weighted average shares of common stock outstanding-basic
96,827,342
96,827,342
Diluted earnings (loss) per share $
0.49
$
(1.78
)
Weighted average shares of common stock outstanding-diluted
110,084,927
110,084,927
Distributions declared and paid per share $
0.30
$
0.34
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 $33
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/20210505006162/en/
New Mountain Finance Corporation Investor Relations Shiraz Y.
Kajee, Authorized Representative NMFCIR@newmountaincapital.com
(212) 220-3505
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