EX-99.1 4 tm2131793d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

New Mountain Finance Corporation Announces Financial Results for the Quarter Ended September 30, 2021,

 

Reports Net Investment Income of $0.31 per Share, Exceeding Previous Guidance,

 

Announces a Permanent Decrease in the Base Management Fee from 1.75% to 1.40%,

 

Extends Previously Announced Dividend Protection Program

 

NEW YORK--(BUSINESS WIRE) — November 3, 2021 -- New Mountain Finance Corporation (NASDAQ: NMFC) (the "Company", "we", "us" or "our") today announced its financial results for the quarter ended September 30, 2021 and reported third quarter net investment income of $0.31 per weighted average share. At September 30, 2021, net asset value (“NAV”) per share was $13.26, compared to $13.33 at June 30, 2021. 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, 2021 to holders of record as of December 16, 2021. For additional details related to the quarter ended September 30, 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)  September 30, 2021 
Investment Portfolio(1)  $3,033,076 
Total Assets  $3,168,111 
Total Statutory Debt(3)  $1,529,828 
NAV(2)  $1,284,905 
NAV per Share  $13.26 
Statutory Debt/Equity   1.19x 

 

Investment Portfolio Composition  September 30, 2021   Percent of Total 
First Lien  $1,472,741    48.6%
Second Lien(1)   743,040    24.5%
Subordinated   38,863    1.3%
Preferred Equity   147,313    4.8%
Investment Fund   252,400    8.3%
Common Equity and Other(4)   378,719    12.5%
Total  $3,033,076    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 twelve portfolio companies, representing approximately $276 million of the cost of all investments made since inception in October 2008, or approximately 3.1% of $8.8 billion, go on non-accrual.

 

“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 believe one of our keys to success is the strength of the team, which we continue to build over time, now at approximately 190 employees.”

 

Robert A. Hamwee, CEO, commented: “The third quarter represented another solid quarter of performance for NMFC, which was highlighted by our $430 million in originations. With the launch of our at-the-market (“ATM”) program, we will continue to focus our efforts on investing in high-quality, defensive growth companies, which we believe is a major factor in being able to maintain a stable book value”.

 

John R. Kline, President and COO, commented: “We are pleased to announce a fourth quarter distribution of $0.30 per share based on our expectation that Q4 Net Investment Income will be at least $0.30 per share, prior to any fee waivers. Given our outlook for consistent operating performance and continued support, if needed, from our investment advisor, we remain confident that our Net Investment Income will continue to cover our quarterly dividend for the foreseeable future.”

 

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Portfolio and Investment Activity1

 

As of September 30, 2021, the Company’s NAV was approximately $1,284.9 million and its portfolio had a fair value of approximately $3,033.1 million in 106 portfolio companies, with a weighted average YTM at Cost2 of approximately 8.8%. For the three months ended September 30, 2021, the Company generated approximately $314.8 million of originations in fifteen new portfolio companies and approximately $114.1 million of originations, including commitments3 for follow-on investments in thirteen portfolio companies held as of June 30, 2021. For the three months ended September 30, 2021, the Company had $43.9 million of asset sales and cash repayments3 of approximately $446.9 million.

 

Consolidated Results of Operations4

 

The Company’s total investment income for the three months ended September 30, 2021 and 2020 was approximately $68.2 million and $65.3 million, respectively.

 

The Company’s total net expenses, after income tax expense, for the three months ended September 30, 2021 and 2020 were approximately $37.8 million and $36.5 million, respectively. Total net expenses, after income tax expense, for the three months ended September 30, 2021 and 2020 consisted of approximately $17.6 million and $18.1 million, respectively, of costs associated with the Company’s borrowings and approximately $17.7 million and $16.7 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 and incentive fees that the Investment Adviser has previously waived. For the three months ended September 30, 2021 and 2020 management fees waived were approximately $3.8 million and $2.8 million, respectively. For the three months ended September 30, 2021 and 2020 incentive fees waived were approximately $0 and $0.5 million, respectively. The Company’s net direct and indirect professional, administrative, other general and administrative and income tax expenses for the three months ended September 30, 2021 and 2020 were approximately $2.5 million and $1.7 million, respectively.

 

For the three months ended September 30, 2021 and 2020, the Company recorded approximately ($8.5) million and $59.4 million, respectively, of net realized and unrealized (losses) gains.

 

Liquidity and Capital Resources

 

As of September 30, 2021, the Company had cash and cash equivalents of approximately $83.4 million and total statutory debt outstanding of approximately $1,529.8 million5, which consisted of approximately $493.3 million of the $730.0 million of total availability on the Holdings Credit Facility, $150.0 million of the $188.5 million of total availability on the Company’s senior secured revolving credit facility (the “NMFC Credit Facility”), $167.8 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”), $5.8 million of the $10.0 million of total availability on the senior secured revolving credit facility (the “NMNLC Credit Facility II”), $201.4 million6 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 September 30, 2021.

 

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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, 2021, seven portfolio companies had an investment rating of “3” and seven 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 $168.4 million and an aggregate fair value of approximately $122.5 million. The Company’s investment in portfolio companies with an investment rating of “4” had an aggregate cost basis of approximately $138.7 million and an aggregate fair value of approximately $52.9 million.

 

Recent Developments

 

On October 27, 2021, the Company’s board of directors declared a fourth quarter 2021 distribution of $0.30 per share payable on December 30, 2021 to holders of record as of December 16, 2021.

 

On November 1, 2021, the Company entered into Amendment No. 1 to the Investment Management Agreement, pursuant to which the Base Management Fee will be reduced from 1.75% of the Company’s gross assets to 1.4% of the Company’s gross assets.

 

On November 2, 2021, the Investment Adviser extended the term of the Fee Waiver Agreement to be effective through the quarter ended December 31, 2023, rather than the quarter ended December 31, 2022. Under the Fee Waiver Agreement, the Investment Adviser will continue to waive base management fees in order to reach a target base management fee of 1.25% on gross assets.

 

On November 3, 2021, the Company entered into an equity distribution agreement (the “Distribution Agreement”) with B. Riley Securities, Inc. and Raymond James & Associates, Inc. Under the Distribution Agreement, the Company may offer for sale, from time to time, and sell, by means of “at the market” offerings, up to $250,000,000 in aggregate amount of shares of its common stock. Subject to the terms and conditions of the Equity Distribution Agreement, sales of common stock, if any, may be made in transactions that are deemed to be an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended.

 

 

1Includes collateral for securities purchased under collateralized agreements to resell.

2References 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.
3Originations exclude payment-in-kind (“PIK”); originations, repayments, and sales revolvers, unfunded commitments, bridges, return of capital, and realized gains / losses.

4Excludes net income related to non-controlling interests in NMNLC. For the quarter ended September 30, 2021, $0.2 million of dividend income is excluded from investment income and $0.8 million of unrealized gains is excluded from net realized and unrealized gains. For the quarter ended September 30, 2020, $0.3 million of dividend income is excluded from investment income and $1.1 million of unrealized gains is excluded from net realized and unrealized gains.

5Excludes the Company’s United States (“U.S.”) Small Business Administration (“SBA”)-guaranteed debentures.

6Includes premium received on additional convertible notes issued in June 2019.

 

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Conference Call

 

New Mountain Finance Corporation will host a conference call at 10 a.m. Eastern Time on Thursday, November 4, 2021, to discuss its third 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.

 

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New Mountain Finance Corporation

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

(unaudited)

 

   September 30, 2021   December 31, 2020 
Assets        
Investments at fair value          
Non-controlled/non-affiliated investments (cost of $2,260,975 and $2,281,184 respectively)  $2,206,300   $2,249,615 
Non-controlled/affiliated investments (cost of $79,591 and $115,543, respectively)   111,605    103,012 
Controlled investments (cost of $663,216 and $600,942, respectively)   693,749    600,875 
Total investments at fair value (cost of $3,003,782 and $2,997,669, respectively)   3,011,654    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   83,357    78,966 
Interest and dividend receivable   32,773    28,411 
Receivable from unsettled securities sold   8,990    9,019 
Receivable from affiliates   –    117 
Deferred tax asset   –    101 
Other assets   9,915    5,981 
Total assets  $3,168,111   $3,097,519 
Liabilities          
Borrowings          
Unsecured Notes  $511,500   $453,250 
Holdings Credit Facility   493,263    450,163 
SBA-guaranteed debentures   300,000    300,000 
Convertible Notes   201,443    201,520 
DB Credit Facility   167,800    244,000 
NMFC Credit Facility   149,977    165,500 
NMNLC Credit Facility II   5,845    – 
Deferred financing costs (net of accumulated amortization of $38,985 and $33,325, respectively)   (21,337)   (16,839)
Net borrowings   1,808,491    1,797,594 
Payable for unsettled securities purchased   24,658    26,842 
Management fee payable   9,988    10,419 
Interest payable   9,528    15,587 
Incentive fee payable   7,661    7,354 
Payable to affiliates   316    867 
Deferred tax liability   13    – 
Other liabilities   2,498    1,967 
Total liabilities   1,863,153    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 shares authorized, and 96,906,988 and 96,827,342 shares issued and outstanding, respectively   969    968 
Paid in capital in excess of par   1,270,719    1,269,671 
Accumulated undistributed (overdistributed) earnings   13,217    (48,764)
Total net assets of New Mountain Finance Corporation  $1,284,905   $1,221,875 
Non-controlling interest in New Mountain Net Lease Corporation   20,053    15,014 
Total net assets  $1,304,958   $1,236,889 
Total liabilities and net assets  $3,168,111   $3,097,519 
Number of shares outstanding   96,906,988    96,827,342 
Net asset value per share of New Mountain Finance Corporation  $13.26   $12.62 

 

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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, 2021   September 30, 2020   September 30, 2021   September 30, 2020 
Investment income                    
From non-controlled/non-affiliated investments:                    
Interest income (excluding Payment-in-kind ("PIK") interest income)  $40,540   $41,854   $119,919   $144,383 
PIK interest income   1,903    2,547    6,501    6,464 
Dividend income   867    -    867    – 
Non-cash dividend income   1,956    2,274    7,324    6,898 
Other income   5,249    1,497    9,651    4,085 
From non-controlled/affiliated investments:                    
Interest income (excluding PIK interest income)   296    781    1,322    1,963 
PIK interest income   182    217    182    (1,131)
Dividend income   288    687    288    2,096 
Non-cash dividend income   831    -    3,881    (3,418)
Other income   79    427    284    1,002 
From controlled investments:                    
Interest income (excluding PIK interest income)   1,253    2,011    3,570    4,581 
PIK interest income   3,614    2,244    10,384    6,393 
Dividend income   9,686    8,107    31,278    24,061 
Non-cash dividend income   918    1,576    3,533    5,716 
Other income   812    1,299    3,759    2,479 
Total investment income   68,474    65,521    202,743    205,572 
Expenses                    
Incentive fee   7,661    7,135    22,207    21,857 
Management fee   13,740    12,877    40,885    39,869 
Interest and other financing expenses   17,693    18,077    54,949    59,500 
Administrative expenses   1,082    1,024    3,240    3,303 
Professional fees   923    731    2,413    2,605 
Other general and administrative expenses   490    442    1,398    1,383 
Total expenses   41,589    40,286    125,092    128,517 
Less: management fees waived   (3,752)   (3,341)   (11,193)   (10,067)
Less: expenses waived and reimbursed   -    (589)   –    (924)
Net expenses   37,837    36,356    113,899    117,526 
Net investment income before income taxes   30,637    29,165    88,844    88,046 
Income tax (benefit) expense   (8)   123    15    116 
Net investment income   30,645    29,042    88,829    87,930 
Net realized gains (losses):                    
Non-controlled/non-affiliated investments   2,459    30    2,797    (4,431)
Non-controlled/affiliated investments   20,549    12    8,338    12 
Controlled investments   -    5    1,557    12 
New Mountain Net Lease Corporation   -    -    –    812 
Net change in unrealized (depreciation) appreciation:                    
Non-controlled/non-affiliated investments   (19,951)   21,410    (22,601)   (67,407)
Non-controlled/affiliated investments   (20,469)   (1,111)   44,545    (14,718)
Controlled investments   9,684    39,943    30,600    (8,278)
New Mountain Net Lease Corporation   -    -    –    (812)
Foreign Currency   (13)   -    (13)   – 
Benefit (provision) for taxes   1    257    (114)   778 
Net realized and unrealized (losses) gains   (7,740)   60,546    65,109    (94,032)
Net increase (decrease) in net assets resulting from operations   22,905    89,588    153,938    (6,102)
Less: Net increase in net assets resulting from operations related to non-controlling interests in New Mountain Net Lease Corporation   (1,058)   (1,398)   (4,789)   (1,584)
Net increase (decrease) in net assets resulting from operations related to New Mountain Finance Corporation  $21,847   $88,190   $149,149   $(7,686)
Basic earnings (loss) per share  $0.23   $0.91   $1.54   $(0.08)
Weighted average shares of common stock outstanding-basic   96,906,988    96,827,342    96,854,474    96,827,342 
Diluted earnings (loss) per share  $0.22   $0.82   $1.42   $(0.08)
Weighted average shares of common stock outstanding-diluted   110,164,573    110,084,927    110,112,059    110,084,927 
Distributions declared and paid per share  $0.30   $0.30   $0.90   $0.94 

 

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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, credit and net lease investment strategies with over $35 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.

 

CONTACT

 

New Mountain Finance Corporation

Investor Relations 

Shiraz Y. Kajee, Authorized Representative

NMFCIR@newmountaincapital.com

(212) 220-3505

 

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