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

| November 7, 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
September 30, 2012 and reported third quarter Adjusted Net Investment
Income of New Mountain Finance Holdings, L.L.C. (the “Operating
Company”) of $0.32 per share (in line with the $0.31 to $0.33 range
given on August 9, 2012). At September 30, 2012, net asset value (“NAV”)
per share was $14.10, an increase of $0.27 per share from June 30, 2012.
The Company also announced that its board of directors declared a fourth
quarter 2012 dividend of $0.34 per share, which will be payable on
December 28, 2012 to holders of record as of December 14, 2012.

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

 

 

 

 

 

 

 

 

 

 

September 30, 2012

Investment Portfolio

$

858,884

Total Assets

$

886,828

NAV

$

520,355

 

NAV per Share/Unit

$

14.10

 

Investment Portfolio Composition

September 30, 2012

Percent of Total

First Lien

$

516,697

60.2

%

Second Lien

306,001

35.6

%

Subordinated

29,798

3.5

%

Equity and Other

6,388

 

0.7

%

Total

$

858,884

100.0

%

 

Adjusted

Three months ended

Three months ended

September 30, 2012

Adjustments*

September 30, 2012

Investment Income

$

21,752

$

(806

)

$

20,946

Net Investment Income (1)

$

12,719

$

(806

)

$

11,913

Net Realized and Unrealized Gain (Loss)

$

12,109

$

806

$

12,915

Net Capital Gains Incentive Fee (2)

$

(2,583

)

$

(2,583

)

Net Increase in Capital resulting from Operations

$

22,245

$

22,245

 

Net Investment Income per Share/Unit

$

0.32

 

* Adjusted for unrecognized gains built into the portfolio held as
of the date of our initial public offering (May 19, 2011).

(1)

 

Excludes hypothetical capital gains incentive fees of $2,583
thousand accrued for the three months ended September 30, 2012.

(2)

As of September 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 gains did not exceed cumulative adjusted unrealized
depreciation.

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. The Operating Company has had only one portfolio company,
representing $5.9 million of loans, or less than 0.4% of the cost of all
investments made since its inception in October 2008, go on non-accrual.

Robert Hamwee, CEO, commented “The third quarter represented a
meaningful growth phase for NMFC, whereby we completed our first primary
equity raise and largely deployed the proceeds raised, all while
maintaining minimal dilution to the dividend and continuing our focus on
credit quality.”

“As managers and significant stockholders personally, we are pleased
with the accomplishments of the Company this quarter,” added Steven B.
Klinsky, NMFC Chairman. “We believe our strategy of focusing on
acyclical “defensive growth” industries and companies that we know well
continues to be the right way to build and preserve stockholder value.”

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 September 30, 2012, the Operating Company’s net asset value was
approximately $520.4 million and its portfolio had a fair value of
approximately $858.9 million in 58 portfolio companies, with a weighted
average Yield to Maturity(1) of approximately 9.9%. For the
three months ended September 30, 2012, the Operating Company made
approximately $173.4 million of originations and commitments. The $173.4
million includes approximately $109.9 million of investments in six new
portfolio companies and approximately $63.5 million of investments in
ten portfolio companies held as of June 30, 2012. For the three months
ended September 30, 2012, the Operating Company had approximately $1.0
million of sales in one portfolio company and repayments of
approximately $63.6 million.

(1)References to “Yield to Maturity” assume that the accruing
investments in the Operating Company’s portfolio are purchased at fair
value on September 30, 2012 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. The actual yield
to maturity may be higher or lower due to the future selection of LIBOR
contracts by individual companies in our portfolio or other factors.

Consolidated Results of Operations

The Operating Company’s total adjusted investment income for the three
months ended September 30, 2012 was approximately $20.9 million. For the
three months ended September 30, 2012, total adjusted investment income
consisted of approximately $18.1 million in cash interest income from
investments, prepayment penalties of approximately $1.2 million,
approximately $0.6 million in payment-in-kind (“PIK”) interest income
from investments, net amortization of purchase premiums/discounts and
origination fees of approximately $0.7 million, dividend income of
approximately $0.2 million and approximately $0.2 million in other
income.

The Operating Company’s total net expenses for the three months ended
September 30, 2012 were approximately $9.0 million, excluding $2.6
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 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 September 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 September 30, 2012
consisted of approximately $2.4 million of costs associated with the
Operating Company’s credit facilities and approximately $5.7 million in
management and incentive fees, excluding the $2.6 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 $0.9 million
for the quarter ended September 30, 2012.

During the three months ended September 30, 2012, the Operating Company
recorded approximately $1.4 million in adjusted net realized gains.
During the three months ended September 30, 2012, the Operating Company
also recorded approximately $11.5 million in adjusted net change in
unrealized appreciation (depreciation) of investments.

Liquidity and Capital Resources

As of September 30, 2012, the Operating Company had cash and cash
equivalents of approximately $12.7 million, approximately $19.8 million
of unsettled securities payable and total debt outstanding of
approximately $335.7 million (approximately $135.7 million of the $185.0
million of total availability of the Operating Company’s credit facility
and $200.0 million of the $200.0 million of total availability of the
New Mountain Finance SPV Funding, L.L.C (“NMF SLF”) credit facility).

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
NMFC 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, the underwriters purchased an additional 676,802 shares
with the exercise of the overallotment option to purchase up to an
additional 787,500 shares of common stock.

On September 28, 2012, we completed an underwritten secondary offering
of 4,000,000 shares of our common stock at a public offering price of
$15.00 on behalf of a selling stockholder, New Mountain Finance AIV
Holdings Corporation (“AIV Holdings”). No shares were sold by the
Company, and it did not receive any proceeds from this offering. All
expenses in connection with this offering were borne by the selling
stockholder, AIV Holdings.

As a result of these transactions, NMFC now owns 56.1% of the Operating
Company and AIV Holdings owns 43.9% of the Operating Company.

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 performing materially below our
expectations 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 would be an actual crystallization of a loss through a
restructuring or impaired sale.

During the third quarter, one investment was downgraded from an
investment rating of “2” to an investment rating of “3”. This investment
has a cost basis of approximately $14.6 million and a fair value of
approximately $13.3 million as of September 30, 2012.

The Company’s non-accrual loan from the prior quarter has a cost basis
of approximately $4.3 million and a fair value of approximately $0.3
million as of September 30, 2012. During the third quarter, two
investments with a cost basis of approximately $1.5 million and $0.1
million, respectively, and fair values of $1.1 million and $0.1 million,
respectively, in this same portfolio company, representing our total
exposure to this portfolio company, were downgraded to an investment
rating of “4” and placed on non-accrual status.

Recent Developments

The Operating Company had approximately $123.7 million of originations
and commitments in the first 37 days of the fourth quarter of 2012. This
was offset by approximately $5.0 of sales and $50.8 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 Wednesday, November 7, 2012, to discuss its third
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, LLC

Consolidated Statements of Assets, Liabilities and Members’
Capital

 

 

 

 

 

September 30, 2012

 

 

 

December 31, 2011

(unaudited)

Assets

Investments, at fair value (cost of $844,524,713 and $699,864,784
respectively)

$

858,884,178

$

703,513,560

Cash and cash equivalents

12,670,690

15,318,811

Interest and dividend receivable

8,579,017

7,307,092

Deferred credit facility costs (net of accumulated amortization of
$1,680,588 and $855,955, respectively)

5,317,053

3,713,739

Receivable from affiliate

170,909

369,017

Other assets

1,206,326

356,486

Total assets

$

886,828,173

$

730,578,705

 

Liabilities

SLF Credit Facility

200,000,000

165,928,000

Holdings Credit Facility

135,664,913

129,037,813

Payable for unsettled securities purchased

19,800,000

7,604,931

Incentive fee payable

6,525,063

2,317,328

Management fee payable

2,767,648

2,200,354

Interest payable

580,796

1,747,095

Payable to affiliate

22,728

Other liabilities

1,112,085

1,241,366

Total liabilities

366,473,233

310,076,887

Members’ Capital

520,354,940

420,501,818

Total liabilities and members’ capital

$

886,828,173

$

730,578,705

 

Outstanding common membership units

36,912,573

30,919,629

Capital per unit

$

14.10

$

13.60

 

 

New Mountain Finance Holdings, L.L.C.

Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

Three months ended

Nine months ended

September 30, 2012

September 30, 2011

September 30, 2012

 

 

 

September 30, 2011

Investment income

Interest income

$

21,362,055

$

14,860,750

$

60,087,281

$

38,838,944

Dividend income

215,160

215,160

Other income

174,515

207,831

 

770,313

557,648

 

Total investment income

21,751,730

15,068,581

 

61,072,754

39,396,592

 

 

Expenses

Incentive fee

5,561,173

700,610

11,693,825

1,205,003

Management fee

2,767,649

1,930,140

7,887,506

2,737,649

Interest and other credit facility expenses

2,401,847

1,686,113

7,286,164

4,767,013

Administrative expenses (net of reimbursable expenses of $267,973,
$218,396, $850,816 and $398,651, respectively)

276,277

314,250

753,021

517,668

Professional fees (net of reimbursable expenses of $170,909,
$816,530, $535,771 and $946,716, respectively)

233,561

55,138

742,934

624,972

Other general and administrative expenses

375,777

380,612

 

1,014,660

559,180

 

Total expenses

11,616,284

5,066,863

 

29,378,110

10,411,485

 

 

Net investment income

10,135,446

10,001,718

31,694,644

28,985,107

Net realized gains on investments

1,615,032

1,402,671

14,590,819

13,954,834

Net change in unrealized appreciation (depreciation) of investments

10,494,213

(22,657,239

)

10,710,689

(29,119,352

)

Net increase (decrease) in capital resulting from operations

$

22,244,691

$

(11,252,850

)

$

56,996,152

$

13,820,589

 

 

 

 

 

 

 

 

 

 

 

QTD Adjustments

September 30, 2012

Investment income

 

Interest income

$

21,362,055

$

(805,520

)

$

20,556,535

Dividend income

215,160

215,160

Other income

174,515

174,515

 

 

 

Total investment income

21,751,730

 

(805,520

)

20,946,210

 

 

Total expenses pre-incentive fee

6,055,111

6,055,111

 

 

 

Pre-Incentive Fee Net Investment Income

15,696,619

 

(805,520

)

14,891,099

 

 

Incentive fee

2,978,220

2,978,220

 

 

 

Post-Incentive Fee Net Investment Income

12,718,399

 

(805,520

)

11,912,879

 

 

Realized gains on investments

1,615,032

(168,786

)

1,446,246

Net change in unrealized appreciation (depreciation) of investments

10,494,213

974,306

11,468,519

Capital Gains Incentive Fee (1)

(2,582,953

)

(2,582,953

)

 

 

Net increase in capital resulting from operations

$

22,244,691

 

$

22,244,691

 

 

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.L.C.

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.

Filed Under: Credit Card News

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