New Mountain Finance Corporation (NASDAQ: NMFC) (the "Company",
"we", "us" or "our") today announced its financial results for the
quarter ended June 30, 2021 and reported second quarter net
investment income of $0.30 per weighted average share. At June 30,
2021, net asset value (“NAV”) per share was $13.33, compared to
$12.85 at March 31, 2021. 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, 2021 to holders of
record as of September 16, 2021. For additional details related to
the quarter ended June 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)
June 30, 2021
Investment Portfolio(1) $
3,110,310
Total Assets $
3,180,060
Total Statutory Debt(3) $
1,539,632
NAV(2) $
1,292,130
NAV per Share $
13.33
Statutory Debt/Equity
1.19x
Investment Portfolio Composition June 30, 2021
Percent of Total First Lien $
1,606,232
51.6%
Second Lien(1)
677,856
21.8%
Subordinated
37,982
1.2%
Preferred Equity
201,053
6.5%
Investment Fund
252,400
8.1%
Common Equity and Other(4)
334,787
10.8%
Total $
3,110,310
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 2.8% of $8.4 billion, go on
non-accrual.
Robert A. Hamwee, CEO, commented: “Our portfolio continued to
perform well through Q2, as evidenced by over 85% of our companies
maintaining the green rating, as well as ongoing growth in book
value, which improved an additional $0.48 to $13.33. We are pleased
to highlight the write up in valuation of both Edmentum, which
reflects the valuation the company recently raised new equity
capital at to finance a significant acquisition, and New Mountain
Net Lease Corporation, which reflects meaningful increases in fair
value due to market demand in prime real estate locations.”
John R. Kline, President and COO, commented: “We are pleased to
announce again, a third quarter distribution of $0.30 per share
payable on September 30, 2021 to holders of record as of September
16, 2021. NMFC is on track to fully cover this distribution with
net investment income earned in the third quarter. We remain
committed to paying quarterly dividends of at least $0.30 per share
over at least the next six quarters as we expect our consistent
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 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.”
Portfolio and Investment Activity1
As of June 30, 2021, the Company’s NAV was approximately
$1,292.1 million and its portfolio had a fair value of
approximately $3,110.3 million in 102 portfolio companies, with a
weighted average YTM at Cost2 of approximately 8.8%. For the three
months ended June 30, 2021, the Company generated approximately
$52.9 million of originations in five new portfolio companies and
approximately $49.4 million of originations, including commitments3
for follow-on investments in eight portfolio companies held as of
March 31, 2021. For the three months ended June 30, 2021, the
Company had cash repayments3 of approximately $94.9 million.
Consolidated Results of Operations4
The Company’s total investment income for the three months ended
June 30, 2021 and 2020 was approximately $66.2 million and $65.7
million, respectively.
The Company’s total net expenses, after income tax expense, for
the three months ended June 30, 2021 and 2020 were approximately
$37.4 million and $38.4 million, respectively. Total net expenses,
after income tax expense, for the three months ended June 30, 2021
and 2020 consisted of approximately $17.9 million and $19.2
million, respectively, of costs associated with the Company’s
borrowings and approximately $17.2 million and $16.9 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 June 30, 2021 and 2020 management fees waived
were approximately $3.8 million and $3.2 million, respectively. The
Company’s net direct and indirect professional, administrative,
other general and administrative and income tax expenses for the
three months ended June 30, 2021 and 2020 were approximately $2.3
million and $2.3 million, respectively.
For the three months ended June 30, 2021 and 2020, the Company
recorded approximately $47.0 million and $49.1 million,
respectively, of net realized and unrealized gains.
Liquidity and Capital Resources
As of June 30, 2021, the Company had cash and cash equivalents
of approximately $27.8 million and total statutory debt outstanding
of approximately $1,539.6 million5, which consisted of
approximately $505.2 million of the $730.0 million of total
availability on the Holdings Credit Facility, $98.0 million of the
$188.5 million of total availability on the Company’s senior
secured revolving credit facility (the “NMFC Credit Facility”),
$223.5 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”), $201.4 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 June 30, 2021.
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 June 30, 2021, seven 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 $201.2 million and an aggregate fair value of
approximately $146.1 million. The Company’s investment in portfolio
companies with an investment rating of “4” had an aggregate cost
basis of approximately $99.2 million and an aggregate fair value of
approximately $34.7 million.
Recent Developments
On July 29, 2021, the Company’s board of directors declared a
third quarter 2021 distribution of $0.30 per share payable on
September 30, 2021 to holders of record as of September 16,
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 June 30,
2021, $0.4 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 $2.9 million of unrealized gains is excluded from
net realized and unrealized gains. For the quarter ended June 30,
2020, $0.3 million of dividend income is excluded from investment
income.
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, August 5, 2021, to discuss its
second 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)
June 30, 2021
December 31, 2020 Assets Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,294,920 and
$2,281,184 respectively) $
2,260,701
$
2,249,615
Non-controlled/affiliated investments (cost of $105,573 and
$115,543, respectively)
158,056
103,012
Controlled investments (cost of $649,282 and $600,942,
respectively)
670,131
600,875
Total investments at fair value (cost of $3,049,775 and $2,997,669,
respectively)
3,088,888
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
27,809
78,966
Interest and dividend receivable
32,290
28,411
Receivable from unsettled securities sold
–
9,019
Receivable from affiliates
–
117
Deferred tax asset
–
101
Other assets
9,651
5,981
Total assets $
3,180,060
$
3,097,519
Liabilities Borrowings Unsecured Notes $
511,500
$
453,250
Holdings Credit Facility
505,163
450,163
SBA-guaranteed debentures
300,000
300,000
DB Credit Facility
223,500
244,000
Convertible Notes
201,469
201,520
NMFC Credit Facility
98,000
165,500
Deferred financing costs (net of accumulated amortization of
$37,264 and $33,325, respectively)
(23,044
)
(16,839
)
Net borrowings
1,816,588
1,797,594
Interest payable
17,250
15,587
Payable for unsettled securities purchased
15,213
26,842
Management fee payable
9,921
10,419
Incentive fee payable
7,298
7,354
Payable to affiliates
945
867
Deferred tax liability
13
–
Other liabilities
1,746
1,967
Total liabilities
1,868,974
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
20,442
(48,764
)
Total net assets of New Mountain Finance Corporation
$
1,292,130
$
1,221,875
Non-controlling interest in New Mountain Net Lease Corporation
18,956
15,014
Total net assets $
1,311,086
$
1,236,889
Total liabilities and net assets $
3,180,060
$
3,097,519
Number of shares outstanding
96,906,988
96,827,342
Net asset value per share of New Mountain Finance
Corporation $
13.33
$
12.62
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, 2021 June 30, 2020 June
30, 2021 June 30, 2020 Investment income From
non-controlled/non-affiliated investments: Interest income
(excluding Payment-in-kind ("PIK") interest income) $
39,819
$
45,969
$
79,379
$
102,529
PIK interest income
2,064
2,891
4,598
3,917
Non-cash dividend income
2,967
2,300
5,368
4,624
Other income
1,578
1,117
4,402
2,588
From non-controlled/affiliated investments: Interest income
(excluding PIK interest income)
563
570
1,026
1,182
PIK interest income
-
(1,805
)
–
(1,348
)
Dividend income
-
689
–
1,409
Non-cash dividend income
1,545
-
3,050
(3,418
)
Other income
103
284
205
575
From controlled investments: Interest income (excluding PIK
interest income)
1,169
1,596
2,317
2,570
PIK interest income
3,466
2,142
6,770
4,149
Dividend income
11,117
7,725
21,592
15,954
Non-cash dividend income
1,334
1,502
2,615
4,140
Other income
836
987
2,947
1,180
Total investment income
66,561
65,967
134,269
140,051
Expenses Incentive fee
7,298
6,896
14,546
14,722
Management fee
13,725
13,134
27,145
26,992
Interest and other financing expenses
17,871
19,229
37,256
41,423
Administrative expenses
1,029
1,239
2,158
2,279
Professional fees
764
969
1,490
1,874
Other general and administrative expenses
466
442
908
941
Total expenses
41,153
41,909
83,503
88,231
Less: management fees waived
(3,804
)
(3,183
)
(7,441
)
(6,726
)
Less: expenses waived and reimbursed
-
(335
)
–
(335
)
Net expenses
37,349
38,391
76,062
81,170
Net investment income before income taxes
29,212
27,576
58,207
58,881
Income tax expense (benefit)
22
(7
)
23
(7
)
Net investment income
29,190
27,583
58,184
58,888
Net realized gains (losses): Non-controlled/non-affiliated
investments
157
(3,759
)
338
(4,461
)
Non-controlled/affiliated investments
1
-
(12,211
)
-
Controlled investments
22
3
1,557
7
New Mountain Net Lease Corporation
-
-
–
812
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
(10,921
)
51,466
(2,650
)
(88,817
)
Non-controlled/affiliated investments
35,972
(2,771
)
65,014
(13,607
)
Controlled investments
24,757
4,587
20,916
(48,221
)
New Mountain Net Lease Corporation
-
-
–
(812
)
(Provision) benefit for taxes
-
(377
)
(115
)
521
Net realized and unrealized gains (losses)
49,988
49,149
72,849
(154,578
)
Net increase (decrease) in net assets resulting from operations
79,178
76,732
131,033
(95,690
)
Less: Net increase in net assets resulting from operations related
to non-controlling interests in New Mountain Net Lease Corporation
(3,366
)
(251
)
(3,731
)
(186
)
Net increase (decrease) in net assets resulting from operations
related to New Mountain Finance Corporation $
75,812
$
76,481
$
127,302
$
(95,876
)
Basic earnings (loss) per share $
0.78
$
0.79
$
1.31
$
(0.99
)
Weighted average shares of common stock outstanding-basic
96,828,217
96,827,342
96,827,782
96,827,342
Diluted earnings (loss) per share $
0.71
$
0.72
$
1.20
$
(0.99
)
Weighted average shares of common stock outstanding-diluted
110,085,802
110,084,927
110,085,367
110,084,927
Distributions declared and paid per share $
0.30
$
0.30
$
0.60
$
0.64
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/20210804006078/en/
New Mountain Finance Corporation Investor Relations Shiraz Y.
Kajee, Authorized Representative NMFCIR@newmountaincapital.com
(212) 220-3505
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