10-Q 1 nmfc-063020x10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 2020
o         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission
File Number
 Exact name of registrant as specified in its charter, address of principal executive
offices, telephone numbers and states or other jurisdictions of incorporation or organization
 I.R.S. Employer
Identification Number
814-00832 New Mountain Finance Corporation 27-2978010
  787 Seventh Avenue, 48th Floor
New York, New York 10019
Telephone: (212) 720-0300
State of Incorporation: Delaware
  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareNMFCNew York Stock Exchange
5.75% Notes due 2023NMFXNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock.
Description Shares as of August 5, 2020
Common stock, par value $0.01 per share 96,827,342


FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2020
TABLE OF CONTENTS
 PAGE
  
 
   
  
 
 
 
 
 
 
 
 
  
 
 
 
2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
New Mountain Finance Corporation
 
Consolidated Statements of Assets and Liabilities
(in thousands, except shares and per share data)
(unaudited)
 June 30, 2020December 31, 2019
Assets  
Investments at fair value  
Non-controlled/non-affiliated investments (cost of $2,307,414 and $2,619,408, respectively)$2,234,933  $2,613,801  
Non-controlled/affiliated investments (cost of $77,989 and $82,825, respectively)55,084  73,527  
Controlled investments (cost of $582,965 and $449,308, respectively)536,445  472,952  
Total investments at fair value (cost of $2,968,368 and $3,151,541, respectively)2,826,462  3,160,280  
Securities purchased under collateralized agreements to resell (cost of $30,000 and $30,000, respectively)21,422  21,422  
Cash and cash equivalents56,163  48,574  
Interest and dividend receivable33,348  31,800  
Receivable from affiliates259  277  
Other assets5,904  3,702  
Total assets$2,943,558  $3,266,055  
Liabilities  
Borrowings
     Holdings Credit Facility$500,163  $661,563  
     Unsecured Notes453,250  453,250  
     SBA-guaranteed debentures300,000  225,000  
     DB Credit Facility215,000  230,000  
     Convertible Notes201,571  201,623  
     NMFC Credit Facility78,500  188,500  
     Deferred financing costs (net of accumulated amortization of $30,733 and $28,390, respectively)(17,263) (17,640) 
Net borrowings1,731,221  1,942,296  
Payable for unsettled securities purchased3,465  1,780  
Management fee payable30,564  10,298  
Incentive fee payable22,368  7,646  
Interest payable14,640  16,484  
Payable to affiliates2,061  673  
Deferred tax liability391  912  
Other liabilities1,982  2,498  
Total liabilities1,806,692  1,982,587  
Commitments and contingencies (See Note 9)  
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 96,827,342 and 96,827,342 shares issued and outstanding, respectively968  968  
Paid in capital in excess of par1,287,853  1,287,853  
Accumulated overdistributed earnings(163,198) (5,353) 
Total net assets of New Mountain Finance Corporation1,125,623  1,283,468  
Non-controlling interest in New Mountain Net Lease Corporation
11,243  —  
Total net assets$1,136,866  $1,283,468  
Total liabilities and net assets$2,943,558  $3,266,055  
Number of shares outstanding96,827,342  96,827,342  
Net asset value per share of New Mountain Finance Corporation$11.63  $13.26  
The accompanying notes are an integral part of these consolidated financial statements.
3

New Mountain Finance Corporation
 
Consolidated Statements of Operations
(in thousands, except shares and per share data)
(unaudited)
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Investment income
From non-controlled/non-affiliated investments:
Interest income$48,860  $48,018  $106,446  $92,475  
Non-cash dividend income2,300  2,069  4,624  4,043  
Other income1,117  1,841  2,588  4,095  
From non-controlled/affiliated investments:
Interest income(1,235) 1,033  (166) 2,037  
Dividend income689  812  1,409  1,538  
Non-cash dividend income—  301  (3,418) 592  
Other income284  301  575  592  
From controlled investments:
Interest income3,738  2,584  6,719  5,047  
Dividend income7,725  7,265  15,954  15,722  
Non-cash dividend income1,502  2,128  4,140  4,173  
Other income987  113  1,180  342  
Total investment income65,967  66,465  140,051  130,656  
Expenses
Incentive fee6,896  6,987  14,722  13,850  
Management fee13,134  11,640  26,992  22,615  
Interest and other financing expenses19,229  20,719  41,423  39,865  
Administrative expenses1,239  1,049  2,279  2,144  
Professional fees969  886  1,874  1,652  
Other general and administrative expenses442  398  941  810  
Total expenses41,909  41,679  88,231  80,936  
Less: management fees waived (See Note 5) (3,183) (2,823) (6,726) (5,356) 
Less: expenses waived and reimbursed (See Note 5)(335) (335) (335) (335) 
Net expenses38,391  38,521  81,170  75,245  
Net investment income before income taxes27,576  27,944  58,881  55,411  
Income tax (benefit) expense(7) (4) (7) 13  
Net investment income27,583  27,948  58,888  55,398  
Net realized (losses) gains:
Non-controlled/non-affiliated investments(3,759) 47  (4,461) 90  
Controlled investments    
New Mountain Net Lease Corporation—  —  812  —  
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments51,466  2,677  (88,817) 12,440  
Non-controlled/affiliated investments(2,771) (1,637) (13,607) (2,528) 
Controlled investments4,587  (5,025) (48,221) 2,417  
New Mountain Net Lease Corporation—  —  (812) —  
(Provision) benefit for taxes (377) (270) 521  (160) 
Net realized and unrealized gains (losses)49,149  (4,203) (154,578) 12,267  
Net increase (decrease) in net assets resulting from operations76,732  23,745  (95,690) 67,665  
Less: Net increase in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation251  —  186  —  
Net increase (decrease) in net assets resulting from operations related to New Mountain Finance Corporation$76,481  $23,745  $(95,876) $67,665  
Basic earnings (loss) per share$0.79  $0.29  $(0.99) $0.85  
Weighted average shares of common stock outstanding - basic (See Note 11)
96,827,342  80,522,426  96,827,342  79,495,737  
Diluted earnings (loss) per share$0.72  $0.27  $(0.99) $0.76  
Weighted average shares of common stock outstanding - diluted (See Note 11)
110,084,927  97,693,499  110,084,927  96,780,587  
Distributions declared and paid per share$0.30  $0.34  $0.64  $0.68  
The accompanying notes are an integral part of these consolidated financial statements.
4

New Mountain Finance Corporation
 
Consolidated Statements of Changes in Net Assets
(in thousands, except shares and per share data)
(unaudited)
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Increase (decrease) in net assets resulting from operations:
Net investment income$27,583  $27,948  $58,888  $55,398  
Net realized (losses) gains on investments and New Mountain Net Lease Corporation(3,756) 52  (3,642) 98  
Net change in unrealized appreciation (depreciation) of investments and New Mountain Net Lease Corporation53,282  (3,985) (151,457) 12,329  
(Provision) benefit for taxes(377) (270) 521  (160) 
Net increase (decrease) in net assets resulting from operations76,732  23,745  (95,690) 67,665  
Less: Net increase in net assets resulting from operations related to non-controlling interest in New Mountain Net Lease Corporation251  —  186  —  
Net increase (decrease) in net assets resulting from operations related to New Mountain Finance Corporation76,481  23,745  (95,876) 67,665  
Capital transactions
Net proceeds from shares sold—  —  —  59,297  
Deferred offering costs—  —  —  (229) 
Distributions declared to stockholders from net investment income(29,048) (27,377) (61,969) (54,719) 
Reinvestment of distributions—  1,270  —  2,634  
Total net (decrease) increase in net assets resulting from capital transactions(29,048) (26,107) (61,969) 6,983  
Net increase (decrease) in net assets47,433  (2,362) (157,845) 74,648  
New Mountain Finance Corporation net assets at the beginning of the period1,078,190  1,083,279  1,283,468  1,006,269  
New Mountain Finance Corporation net assets at the end of the period 1,125,623  1,080,917  1,125,623  1,080,917  
Non-controlling interest in New Mountain Net Lease Corporation11,243  —  11,243  —  
Net assets at the end of the period$1,136,866  $1,080,917  $1,136,866  $1,080,917  
Capital share activity
Shares sold—  —  —  4,312,500  
Shares issued from the reinvestment of distributions—  90,872  —  191,430  
Net increase in shares outstanding—  90,872  —  4,503,930  


The accompanying notes are an integral part of these consolidated financial statements.
5

New Mountain Finance Corporation
 
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30, 2020June 30, 2019
Cash flows from operating activities
Net (decrease) increase in net assets resulting from operations$(95,690) $67,665  
Adjustments to reconcile net decrease (increase) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized losses (gains) on investments and New Mountain Net Lease Corporation
3,642  (98) 
Net change in unrealized depreciation (appreciation) of investments and New Mountain Net Lease Corporation
151,457  (12,329) 
Amortization of purchase discount
(6,495) (2,205) 
Amortization of deferred financing costs
2,343  3,247  
Amortization of premium on Convertible Notes
(52) (57) 
Non-cash investment income
(13,159) (14,274) 
(Increase) decrease in operating assets:
Proceeds from sale of non-controlling interest in New Mountain Net Lease Corporation
11,315  —  
Purchase of investments and delayed draw facilities
(215,345) (341,402) 
Proceeds from sales and paydowns of investments
437,631  74,268  
Cash received for purchase of undrawn portion of revolving credit or delayed draw facilities
210  88  
Cash paid for purchase of drawn portion of revolving credit facilities
(13,996) (338) 
Cash paid on drawn revolvers
(40,066) (13,181) 
Cash repayments on drawn revolvers
29,939  8,328  
Interest and dividend receivable
(1,548) (3,304) 
Receivable from affiliates
18  (9) 
Other assets
(1,983) (802) 
Increase (decrease) in operating liabilities:
Management fee payable20,266  425  
Incentive fee payable14,722  123  
Payable for unsettled securities purchased1,685  64,783  
Payable to affiliates1,388  (570) 
Interest payable(1,844) 3,104  
Deferred tax liability(521) 160  
Other liabilities218  (3,360) 
Distributions related to non-controlling interest in New Mountain Net Lease Corporation(258) —  
Net cash flows provided by (used in) operating activities283,877  (169,738) 
Cash flows from financing activities
Net proceeds from shares sold—  59,297  
Distributions paid(61,969) (52,085) 
Offering costs paid(175) (380) 
Proceeds from Holdings Credit Facility16,000  119,500  
Repayment of Holdings Credit Facility(177,400) (83,000) 
Proceeds from Convertible Notes—  86,681  
Repayment of Convertible Notes—  (155,250) 
Proceeds from Unsecured Notes—  116,500  
Proceeds from SBA-guaranteed debentures75,000  —  
Proceeds from NMFC Credit Facility25,000  245,000  
Repayment of NMFC Credit Facility(135,000) (170,000) 
Proceeds from DB Credit Facility40,000  95,000  
Repayment of DB Credit Facility(55,000) (52,000) 
Deferred financing costs paid(2,744) (2,028) 
Net cash flows (used in) provided by financing activities(276,288) 207,235  
Net increase in cash and cash equivalents7,589  37,497  
Cash and cash equivalents at the beginning of the period48,574  49,664  
Cash and cash equivalents at the end of the period$56,163  $87,161  
Supplemental disclosure of cash flow information
Cash interest paid$40,183  $34,452  
Income taxes paid 10  
Non-cash financing activities:
Value of shares issued in connection with the distribution reinvestment plan$—  $2,634  
Accrual for offering costs108  40  
Accrual for deferred financing costs 336  

The accompanying notes are an integral part of these consolidated financial statements.
6

New Mountain Finance Corporation
 
Consolidated Schedule of Investments
June 30, 2020
(in thousands, except shares)
(unaudited)
Portfolio Company, Location and Industry (1)Type of InvestmentInterest Rate (12)Acquisition DateMaturity / Expiration Date Principal
Amount,
Par Value
or Shares
 Cost Fair
Value
Percent of Net
Assets
Non-Controlled/Non-Affiliated Investments
Funded Debt Investments - Canada
Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)**
Healthcare ServicesSecond lien (3)(10)8.50% (L + 7.50%/M)6/1/20186/8/2026$28,613  $28,403  $26,120  
Second lien (8)(10)8.50% (L + 7.50%/M)6/1/20186/8/20267,500  7,448  6,847  
36,113  35,851  32,967  2.90 %
Wolfpack IP Co.**
SoftwareFirst lien (2)(10)7.50% (L + 6.50%/S)6/14/20196/13/20259,091  9,013  9,024  0.79 %
Total Funded Debt Investments - Canada$45,204  $44,864  $41,991  3.69 %
Funded Debt Investments - United Arab Emirates
GEMS Menasa (Cayman) Limited**
EducationFirst lien (8)6.00% (L + 5.00%/S)7/30/20197/31/2026$25,323  $25,206  $24,057  2.12 %
Total Funded Debt Investments - United Arab Emirates$25,323  $25,206  $24,057  2.12 %
Funded Debt Investments - United Kingdom
Shine Acquisition Co. S.à.r.l / Boing US Holdco Inc.**
Consumer ServicesSecond lien (2)(10)8.50% (L + 7.50%/M)9/25/201710/3/2025$37,853  $37,684  $37,043  
Second lien (8)(10)8.50% (L + 7.50%/M)9/25/201710/3/20256,000  5,973  5,872  
43,853  43,657  42,915  3.77 %
Aston FinCo S.a r.l. / Aston US Finco, LLC**
SoftwareSecond lien (8)(10)8.44% (L + 8.25%/M)10/8/201910/8/202734,459  34,200  34,201  3.01 %
Total Funded Debt Investments - United Kingdom$78,312  $77,857  $77,116  6.78 %
Funded Debt Investments - United States
GS Acquisitionco, Inc.
SoftwareFirst lien (2)(10)6.83% (L + 5.75%/S)8/7/20195/24/2024$26,774  $26,634  $26,607  
First lien (2)(10)6.84% (L + 5.75%/S)8/7/20195/24/202426,081  25,931  25,920  
First lien (5)(10)6.83% (L + 5.75%/S)8/7/20195/24/202422,306  22,190  22,168  
First lien (3)(10)(11) - Drawn6.83% (L + 5.75%/S)8/7/20195/24/20241,881  1,869  1,869  
77,042  76,624  76,564  6.73 %
PhyNet Dermatology LLC
Healthcare ServicesFirst lien (2)(10)6.50% (L + 5.50%/M)9/17/20188/16/202450,112  49,743  47,907  
First lien (3)(10)(11) - Drawn6.50% (L + 5.50%/M)9/17/20188/16/202427,998  27,880  26,766  
78,110  77,623  74,673  6.55 %
The accompanying notes are an integral part of these consolidated financial statements.
7

New Mountain Finance Corporation
 
Consolidated Schedule of Investments (Continued)
June 30, 2020
(in thousands, except shares)
(unaudited)

Portfolio Company, Location and Industry (1)Type of InvestmentInterest Rate (12)Acquisition DateMaturity / Expiration Date Principal
Amount,
Par Value
or Shares
 Cost Fair
Value
Percent of Net
Assets
Associations, Inc.
Business ServicesFirst lien (2)(10)8.46% (L + 4.00% + 3.00% PIK/Q)*7/30/20187/30/2024$45,239  $45,035  $44,424  
First lien (8)(10)8.46% (L + 4.00% + 3.00% PIK/Q)*7/30/20187/30/20245,193  5,170  5,099  
First lien (2)(10)(11) - Drawn8.46% (L + 4.00% + 3.00% PIK/Q)*7/30/20187/30/20247,488  7,453  7,354  
First lien (2)(10)(11) - Drawn7.46% (L + 6.00%/Q)7/30/20187/30/20242,033  2,020  1,996  
59,953  59,678  58,873  5.18 %
ConnectWise, LLC
SoftwareFirst lien (2)(10)7.07% (L + 6.00%/S)11/26/20192/28/202555,333  55,020  54,989  4.84 %
CentralSquare Technologies, LLC
SoftwareSecond lien (3)(10)7.68% (L + 7.50%/M)8/15/20188/31/202647,838  47,327  44,628  
Second lien (8)(10)7.68% (L + 7.50%/M)8/15/20188/31/20267,500  7,420  6,997  
55,338  54,747  51,625  4.54 %
Salient CRGT Inc.
Federal ServicesFirst lien (2)(10)7.57% (L + 6.50%/S)1/6/20152/28/202238,470  38,270  37,370  
First lien (8)(10)7.57% (L + 6.50%/S)6/6/20192/28/202213,146  12,804  12,770  
51,616  51,074  50,140  4.41 %
iCIMS, Inc.
SoftwareFirst lien (8)(10)7.50% (L + 6.50%/S)9/12/20189/12/202441,636  41,307  41,011  
First lien (8)(10)7.50% (L + 6.50%/S)6/14/20199/12/20248,667  8,595  8,537  
50,303  49,902  49,548  4.36 %
DCA Investment Holding, LLC
Healthcare ServicesFirst lien (3)(10)6.30% (L + 5.25%/S)4/16/20197/2/202120,411  20,264  18,845  
First lien (2)(10)6.32% (L + 5.25%/S)7/2/20157/2/202117,006  16,973  15,701  
First lien (3)(10)6.32% (L + 5.25%/S)12/20/20177/2/20218,845  8,808  8,167  
First lien (2)(10)6.32% (L + 5.25%/S)12/20/20177/2/20214,163  4,149  3,844  
First lien (3)(10)(11) - Drawn6.25% (L + 5.25%/S)7/2/20157/2/20212,056  2,036  1,899  
52,481  52,230  48,456  4.26 %
Frontline Technologies Group Holdings, LLC
SoftwareFirst lien (4)(10)6.75% (L + 5.75%/Q)9/18/20179/18/202322,051  21,953  21,542  
First lien (2)(10)6.75% (L + 5.75%/Q)9/18/20179/18/202318,583  18,533  18,154  
First lien (2)(10)6.75% (L + 5.75%/Q)9/18/20179/18/20237,671  7,626  7,494  
48,305  48,112  47,190  4.15 %
The accompanying notes are an integral part of these consolidated financial statements.
8

New Mountain Finance Corporation
 
Consolidated Schedule of Investments (Continued)
June 30, 2020
(in thousands, except shares)
(unaudited)

Portfolio Company, Location and Industry (1)Type of InvestmentInterest Rate (12)Acquisition DateMaturity / Expiration Date Principal
Amount,
Par Value
or Shares
 Cost Fair
Value
Percent of Net
Assets
NM GRC Holdco, LLC
Business ServicesFirst lien (2)(10)8.50% (L + 6.00% + 1.50% PIK/Q)*2/9/20182/9/2024$38,269  $38,144  $35,671  
First lien (2)(10)8.50% (L + 6.00% + 1.50% PIK/Q)*2/9/20182/9/202410,636  10,599  9,914  
48,905  48,743  45,585  4.01 %
Integro Parent Inc.
Business ServicesFirst lien (2)(10)6.75% (L + 5.75%/M)10/9/201510/31/202234,743  34,634  34,743  
Second lien (8)(10)10.25% (L + 9.25%/M)10/9/201510/30/202310,000  9,948  10,000  
44,743  44,582  44,743  3.94 %
Brave Parent Holdings, Inc.
SoftwareSecond lien (5)(10)7.68% (L + 7.50%/M)4/17/20184/17/202622,500  22,410  22,093  
Second lien (2)(10)7.68% (L + 7.50%/M)4/17/20184/17/202616,624  16,488  16,323  
Second lien (8)(10)7.68% (L + 7.50%/M)4/17/20184/17/20266,000  5,951  5,891  
45,124  44,849  44,307  3.90 %
Quest Software US Holdings Inc.
SoftwareSecond lien (2)(10)9.01% (L + 8.25%/Q)5/17/20185/18/202643,697  43,342  42,662  3.75 %
Tenawa Resource Holdings LLC (14)
Tenawa Resource Management LLC
Specialty Chemicals & MaterialsFirst lien (3)(10)10.50% (Base + 8.00%/Q)5/12/201410/30/202438,800  38,754  38,800  3.41 %
Trader Interactive, LLC
Business ServicesFirst lien (2)(10)7.57% (L + 6.50%/S)6/15/20176/17/202431,769  31,628  31,327  
First lien (8)(10)7.57% (L + 6.50%/S)6/15/20176/17/20244,924  4,902  4,856  
36,693  36,530  36,183  3.18 %
Peraton Holding Corp. (fka MHVC Acquisition Corp.)
Federal ServicesFirst lien (2)6.25% (L + 5.25%/Q)4/25/20174/29/202436,717  36,605  35,432  3.12 %
Affinity Dental Management, Inc.
Healthcare ServicesFirst lien (2)(10)9.30% (L + 8.00%/S)9/15/20179/15/202326,960  26,910  23,882  
First lien (4)(10)9.30% (L + 8.00%/S)9/17/20199/15/202310,890  10,890  9,646  
First lien (3)(10)9.00% (P + 7.00%/Q)9/15/20173/15/20231,738  1,720  1,539  
39,588  39,520  35,067  3.08 %
CoolSys, Inc.
Industrial ServicesFirst lien (5)(10)7.00% (L + 6.00%/Q)11/20/201911/20/202622,388  22,282  22,276  
First lien (2)(10)7.00% (L + 6.00%/Q)11/20/201911/20/2026