New Mountain Finance Corporation Announces Financial Results for the Quarter Ended June 30, 2012, Declares Third …

| August 12, 2012 | 0 Comments

NEW YORK–(BUSINESS WIRE)–

New Mountain Finance Corporation (NMFC) (the “Company”, “we”, “us”
or “our”) today announced its financial results for the quarter ended
June 30, 2012 and reported second quarter Adjusted Net Investment Income
of New Mountain Finance Holdings, L.L.C. (the “Operating Company”) of
$0.35 per share. At June 30, 2012, net asset value (“NAV”) per share was
$13.83. The Company also announced that its board of directors declared
a third quarter 2012 dividend of $0.34 per share, which will be payable
on September 28, 2012 to holders of record as of September 14, 2012.

Additionally, during the third quarter, the Operating Company amended
its two credit facilities to increase the maximum capacity of the
Holdings Credit Facility from $160.0 million to $185.0 million and of
the SLF Credit Facility from $175.0 million to $200.0 million.

Except where noted otherwise, all financial information shown is
that of the Operating Company.
Also, please note that
share and unit are used interchangeably.

 

 

Selected Financial Highlights

(in thousands, except per share/unit data)

 

June 30, 2012

 

Investment Portfolio

$

751,079

Total Assets

$

773,674

NAV

$

427,735

 

NAV per Share/Unit

$

13.83

 

Investment Portfolio Composition:

June 30, 2012

Percent of Total

First Lien

$

435,801

58.0

%

Second Lien

$

283,508

37.7

%

Subordinated

$

28,958

3.9

%

Equity and Other

$

2,812

 

0.4

%

Total

$

751,079

Adjusted

Three months ended

Three months ended

June 30, 2012

Adjustments *

June 30, 2012

 

Investment Income

$

20,299

$

(825

)

$

19,474

Net Investment Income (1)

$

11,699

$

(825

)

$

10,874

Net Realized and Unrealized Gain (Loss)

$

(561

)

$

825

$

264

Net Capital Gains Incentive Fee (2)

$

(53

)

$

$

(53

)

Net Increase in Capital resulting from Operations

$

11,085

$

11,085

 

Net Investment Income per Share/Unit

$

0.35

 

We believe that the strength of the Operating Company’s unique
investment strategy – which focuses on acyclical “defensive growth”
companies that are well researched by New Mountain Capital, L.L.C., a
leading private equity firm – is underscored by continued strong credit
performance, including the fact that the Operating Company has had only
one non-performing loan representing 0.3% of the cost of all investments
made since its inception in October 2008.

“New Mountain continues to build our research capabilities and team
strength over time,” commented Steven B. Klinsky, NMFC Chairman. “We
believe this helps to drive the superior credit performance we have had
at NMFC since its inception.”

Robert Hamwee, CEO, added “The second quarter was another strong one for
the company, with Adjusted Net Investment Income reaching $0.35 per
share, gross originations up at $126 million, and no adverse credit
migration.”

Portfolio and Investment Activity

We are a holding company with no direct operations of our own, and our
sole asset is our ownership in the Operating Company. We apply an
investment company master-feeder structure whereby the financial results
of the Operating Company are allocated to us based on our pro-rata
ownership interest in the Operating Company.

The Operating Company is externally managed by its investment adviser,
New Mountain Finance Advisers BDC, L.L.C. Both New Mountain Finance
Corporation and the Operating Company have elected to be treated as
business development companies under the Investment Company Act of 1940,
as amended.

As of June 30, 2012, the Operating Company’s net asset value was
approximately $427.7 million and its portfolio had a fair value of
approximately $751.1 million in 56 portfolio companies, with a weighted
average Unadjusted and Adjusted Yield to Maturity(1) of
approximately 10.7% and 13.0%, respectively. For the three months ended
June 30, 2012, the Operating Company made approximately $126.4 million
of originations and commitments. The $126.4 million includes
approximately $94.6 million of investments in five new portfolio
companies and approximately $31.8 million of investments in four
portfolio companies held as of March 31, 2012. For the three months
ended June 30, 2012, the Operating Company had approximately $26.4
million of sales in five portfolio companies and repayments of
approximately $104.4 million.

(1) “Adjusted Yield to Maturity’’ assumes that the
investments in the Operating Company’s portfolio are purchased at fair
value on June 30, 2012, 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, except for the
non-recourse debt of New Mountain Finance SPV Funding, L.L.C (“NMF
SLF”). NMF SLF is treated as a fully levered asset of the Operating
Company, with NMF SLF’s net asset value being included for yield
calculation purposes. The actual yield to maturity may be higher or
lower due to the future selection of LIBOR contracts by the individual
companies in the portfolio or other factors. References to “Unadjusted
Yield to Maturity” have the same assumptions as Adjusted Yield to
Maturity except that NMF SLF is not treated as a fully levered asset of
the Operating Company, but rather the assets themselves are consolidated
into the Operating Company.

Consolidated Results of Operations

The Operating Company’s total adjusted investment income for the three
months ended June 30, 2012 was approximately $19.5 million. For the
three months ended June 30, 2012, total adjusted investment income
consisted of approximately $17.0 million in cash interest income from
investments, prepayment penalties of approximately $1.1 million,
approximately $0.6 million in payment-in-kind interest income from
investments, net amortization of purchase premiums/discounts and
origination fees of approximately $0.6 million and approximately $0.2
million in other income.

The Operating Company’s total net expenses for the three months ended
June 30, 2012 were approximately $8.6 million, excluding $0.1 million of
accrued hypothetical capital gains incentive fees. The hypothetical
capital gains incentive fee is based upon the net adjusted realized
capital gains and losses and the net adjusted unrealized capital
appreciation and depreciation on a cumulative basis from inception
through the end of the current period. Actual amounts paid to the
Investment Adviser are consistent with the investment advisory and
management agreement, as amended and restated, and are based only on
actual net adjusted realized capital gains and losses computed net of
adjusted unrealized capital depreciation on a cumulative basis from
inception through the end of each calendar year. As of June 30, 2012, no
actual capital gains incentive fee would be owed under the investment
advisory and management agreement, as amended and restated, as
cumulative adjusted net realized capital gains did not exceed cumulative
adjusted unrealized depreciation.

Total net expenses for the three months ended June 30, 2012 consisted of
approximately $2.4 million of costs associated with the Operating
Company’s credit facilities and approximately $5.3 million in management
and incentive fees, excluding the $0.1 million of capital gains
incentive fees. The Operating Company has capped its direct and indirect
expenses for the second year of operations at $3.5 million, resulting in
professional fees, administrative expense, and other general and
administrative expenses totaling approximately $0.875 million for the
quarter ended June 30, 2012.

During the three months ended June 30, 2012, the Operating Company
recorded approximately $7.5 million in adjusted net realized gains.
During the three months ended June 30, 2012, the Operating Company also
recorded approximately $(7.2) million in adjusted net change in
unrealized appreciation (depreciation) of investments.

Liquidity and Capital Resources

As of June 30, 2012, the Operating Company had cash and cash equivalents
of approximately $9.5 million, approximately $19.2 million of net
unsettled securities payable and total debt outstanding of approximately
$311.9 million (approximately $138.8 million of the $160.0 million of
total availability of the Operating Company’s credit facility and $173.1
million of the $175.0 million of total availability of the NMF SLF’s
credit facility).

On May 19, 2011, we priced our initial public offering of 7,272,727
shares of common stock at a public offering price of $13.75 per share.
Concurrently with the closing of the initial public offering and at the
public offering price of $13.75 per share, we sold an additional
2,172,000 shares of our common stock to certain executives and employees
of, and other individuals affiliated with, New Mountain Capital (defined
as New Mountain Capital Group, L.L.C. and its affiliates) in a separate
private placement. The total gross proceeds raised in the offering were
approximately $129.9 million.

On July 10, 2012, our shelf registration statement became effective. On
July 17, 2012, we completed a public offering of 5,250,000 shares of our
common stock at a public offering price of $14.35 per share for total
gross proceeds of approximately $75.3 million. In connection with the
offering, we granted the underwriters for the offering an option to
purchase up to an additional 787,500 shares of common stock. Such option
remains exercisable until August 11, 2012.

Portfolio and Asset Quality

The Operating Company puts its largest emphasis on risk control and
credit performance. On a quarterly basis, or more frequently if deemed
necessary, the Operating 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 as expected. Any investment with consistently declining
performances 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” would be moved to non-accrual status, and the final
development would be an actual crystallization of a loss through a
restructuring or impaired sale. Since the inception of our credit
business in October 2008, one investment has been assigned a rating of
“4” and has been placed on non-accrual status. This investment has a
cost basis of approximately $4.3 million and a fair value of
approximately $0.3 million as of June 30, 2012.

Recent Developments

The Operating Company had approximately $81.3 million of originations
and commitments in the first 39 days of the third quarter of 2012. This
was offset by approximately $1.7 of sales and $19.9 million of
repayments during the same period.

Conference Call

New Mountain Finance Corporation will host a conference call at 10 a.m.
Eastern Time on Thursday, August 9, 2012, to discuss its second quarter
2012 financial results. All interested parties may participate in the
conference call by dialing +1 (877) 317-6789 approximately 15 minutes
prior to the call. International callers should dial +1 (412) 317-6789.
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.

Financial Statements and Tables of the Operating Company

New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Assets, Liabilities and

Members’ Capital

 

 

June 30, 2012

December 31, 2011

 

Assets

Investments, at fair value (cost $747,213,642 and $699,864,784
respectively)

$

751,078,894

$

703,513,560

Cash and cash equivalents

9,508,403

15,318,811

Interest receivable

7,045,804

7,307,092

 

Deferred credit facility costs (net of accumulated amortization of
$1,367,025 and $855,955, respectively)

4,938,821

3,713,739

Deferred offering costs

187,359

Receivable from affiliate

118,853

369,017

Other assets

 

795,788

 

356,486

Total assets

$

773,673,922

$

730,578,705

 

 

Liabilities

SLF Credit Facility

173,112,281

165,928,000

Holdings Credit Facility

138,756,913

129,037,813

Payable for unsettled securities purchased

19,200,000

7,604,931

Dividends payable

6,875,459

Incentive fee payable

3,682,368

2,317,328

Management fee payable

2,605,561

2,200,354

Interest payable

571,386

1,747,095

Other liabilities

 

1,135,145

 

1,241,366

Total liabilities

345,939,113

310,076,887

 

Members’ Capital

 

427,734,809

 

420,501,818

Total liabilities and members’ capital

$

773,673,922

$

730,578,705

Outstanding common membership units

30,919,629

30,919,629

Capital per unit

13.83

13.60

 

New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Operations

 

 

Three months ended

June 30, 2012

June 30, 2011

 

Investment income

Interest income

$

20,124,043

$

12,810,147

Other income

 

 

174,980

 

 

306,144

 

Total investment income

 

 

20,299,023

 

 

13,116,291

 

 

Expenses

Incentive fee

2,771,189

504,393

Management fee

2,605,561

773,509

Interest and other credit facility expenses

2,401,028

1,534,147

Professional fees (net of reimbursable expenses of $118,853 and
$130,186, respectively)

307,535

516,678

Administrative expenses (net of reimbursable expenses of $279,048
and $180,255, respectively)

224,875

62,610

Other general and administrative expenses

 

 

342,590

 

 

170,712

 

Total expenses

 

 

8,652,778

 

 

3,562,049

 

Net investment income

11,646,245

9,554,242

 

Net realized gains on investments

11,968,454

6,659,833

 

Net change in unrealized appreciation (depreciation) of investments

 

 

(12,529,939

)

 

(7,559,450

)

 

Net increase in capital resulting from operations

 

$

11,084,760

 

$

8,654,625

 

 

 

 

Adjusted

Three months ended

Three months ended

June 30, 2012

Adjustments

June 30, 2012

 

Investment income

 

Interest income

$

20,124,043

$

(825,043

)

$

19,299,000

Other income

 

174,980

 

 

 

174,980

 

Total investment income

 

20,299,023

 

 

(825,043

)

 

19,473,980

 

 

Total expenses pre-incentive fee

5,881,589

5,881,589

 

 

 

Pre-Incentive Fee Net Investment Income

 

14,417,434

 

 

(825,043

)

 

13,592,391

 

 

Incentive fee

2,718,477

2,718,477

 

 

 

Post-Incentive Fee Net Investment Income

 

11,698,957

 

 

(825,043

)

 

10,873,914

 

 

Net realized gains (losses) on investments

11,968,454

(4,504,826

)

7,463,628

Net change in unrealized (depreciation) appreciation of investments

(12,529,939

)

5,329,869

(7,200,070

)

Capital gains incentive fee (1)

(52,712

)

(52,712

)

 

 

Net increase in capital resulting from operations

$

11,084,760

 

$

11,084,760

 

 

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 treated as
a business development company under the Investment Company Act of 1940,
as amended. The Company used all of the proceeds from its initial public
offering as well as the proceeds from its concurrent private placement
to acquire common membership units from New Mountain Finance Holdings,
L.L.C. The investment objective of New Mountain Finance Holdings, L.L.C.
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. In some cases, investments may include small
equity interests. New Mountain Finance Holdings, L.L.C.’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, L.LC.

New Mountain Capital, L.L.C is a New York-based private equity firm
investing for long-term capital appreciation through direct investments
in growth equity transactions, leveraged acquisitions, and management
buyouts. The firm currently manages private and public equity funds with
approximately $9.0 billion in aggregate capital commitments. New
Mountain Capital, L.L.C. seeks out the highest-quality defensive 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, L.L.C., please visit 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. 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 publically update or revise any forward-looking statements
made herein. All forward-looking statements speak only as of the time of
this press release.

New Mountain Finance Corporation
Adam Weinstein, 212-220-4247
Chief Financial Officer and Treasurer

Filed Under: Credit Card News

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