New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q2 2013 Earnings Presentation
27 slides from New Mountain Finance's earnings presentation, Aug 8, 2013
Slide 1: Q2 2013 Earnings Presentation
Q2 2013 Earnings Presentation August 8, 2013
Slide 2: Important Notice and Safe Harbor Statement
Important Notice and Safe Harbor Statement This presentation contains forward looking statements that involve substantial risks and uncertainties. All forward-looking statements included in this presentation are made only as of the date hereof and are subject to change without notice. Actual outcome
Slide 3: Management Participants
Management Participants Steven B. Klinsky Chairman of the Board of Directors Robert A. Hamwee Chief Executive Officer, President and Director David D id M. M Cordova C d Chief Financial Officer and Treasurer 3
Slide 4: Q2 2013 Highlights
Q2 2013 Highlights ▪ Q2 Adjusted Net Investment Income (“NII”) ( NII ) of $0.50 $0 50 per weighted average share – After deducting one-time $0.12 YP LLC (“YP”) distribution, Pro-Forma Adjusted Net Investment Income of $0.38 per weighted average share, which exceeded our expected range of $0.33 - $0.
Slide 5: Review of NMFC and NMFC Strategy
Review of NMFC and NMFC Strategy ▪ NMFC’s portfolio is externally managed by New Mountain Finance Advisers BDC, L.L.C., which is an affiliate of New Mountain Capital, L.L.C. (“New Mountain” or “NMC”), a leading private equity firm with more than $9 billion of assets under management(1), approximatel
Slide 6: NMFC Relative Trading Performance – Indexed Total Return
NMFC Relative Trading Performance – Indexed Total Return Ma 19, May 19 2011 (IPO) – August A g st 2 2, 2013 Indexed Total Return 140.0 135.0 S&P Fin 36.3% S&P 33.5% 33 5% NMFC 33.4% 130.0 125.0 120.0 BDCs 18.9% HY 18 18.3% 3% 115.0 110.0 105.0 100.0 95.0 90.0 85 0 85.0 80.0 75.0 70.0 7/1/11 10/1/11
Slide 7: Credit Market Conditions
Credit Market Conditions ▪ Period of significant credit market volatility in the second half of Q2 – Fed tapering expectations – Spike in long term rates – Record outflows from high yield funds in June – Widening credit spreads ▪ Markets M k t have h stabilized t bili d so ffar iin Q3 and d credit d
Slide 8: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates Floating vs. vs Fixed Assets Liabilities (Aggregate par value of $1,055.4 million as of June 30, 2013)(1) ($416.5 million drawn as of June 30, 2013) Fixed 12% Floating – No Floor (1-Month Libor) 100% Floating – Floor(2) 88% Impact of Changing Rates(3) Estima
Slide 9: Credit Performance
Credit Performance ($ in millions, unaudited) Cumulative Since Inception(1) As of 6/30/2013 (October 2008 – June 30, 2013) Cost / FMV Cost / # Portfolio Co’s Investments $1,045.6 / $1,059.0 $2,093.4 116 On Internal Watch List (3 or 4 Rating, excl. $13.5 / $8.9 $20.5 2 Non-Accrual)(2) Non-Accrual(3)
Slide 10: Credit Performance – Operating Company (OpCo) Assets Portfolio
Credit Performance – Operating Company (“OpCo”) Assets Portfolio (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company A 5.9x 5.5x 0.4x Company B 4.1x 4.1x (0.0x) Company C 5.1x 5.1x 0.1x Company D 5 1x 5.1x 5 3x 5.3x (0 2x) (0.2x) Company E 5.9x 5.
Slide 11: Credit Performance – Senior Loan Funding (SLF) Eligible First Lien Portfolio
Credit Performance – Senior Loan Funding (“SLF”) Eligible First Lien Portfolio (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company AB 3.1x 3.2x (0.0x) Company AC 3.2x 10.7x (7.5x) Company AD 4.1x 3.6x 0.5x Company AE 3.5x 2.8x 0.7x Company AF 4.0x
Slide 12: Special Dividend – YP
Special Dividend – YP (1) ($ in millions, unaudited) Summary ▪ NMFC invested into the second lien bank debt of YP, a large local search, media and advertising company in May 2012 – We received penny warrants in connection with this investment representing ~1% of the equity ▪ In May of this year, YP
Slide 13: Share Ownership Migration
Share Ownership Migration (1) (shares in millions) IPO - May-11 2012 Offerings 2013 Offerings Issuances Issuances Cumulative Issuances Cumulative Public Shares ("PubCo") 10.7 13.6 (2)(3) 24.3 13.8(2)(3) 38.1 % of Total 34.6% 60.0% 85.3% NMC Fund Shares ("AIV Holdings") 20.2 (4.0) 16.2 (9.7) 6.6 % of
Slide 14: Performance Since IPO
Performance Since IPO ($ in millions, unaudited)(1) IPO - (2) 12/31/2011 2012 3/31/2013 6/30/2013 Regular Dividend $26.6 $46.6 $13.8 $14.5 Cumulative Regular Dividend 26.6 73.2 87.0 101.5 (3) Adj. NII 26.5 46.1 13.8 16.5 Cumulative Adj. NII 26.5 72.7 86.5 102.9 Dividend Coverage g (Cumulative ( Adj.
Slide 15: Q2 Originations and Repayments
Q2 Originations and Repayments ($ in millions, unaudited) Portfolio Originations(1) Amount Tranche Type of Advance YTM at Purchase(3) Date(2) Name Industry ($’s Invested) Size Investment Rate Unlevered Levered Preferred 5/3/13 Energy $20.0 $96 N/A 18.1% 18.1% Equity 2ndd Lien Li / Healthcare $13.9 /
Slide 16: Q2 Originations and Repayments
Q2 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) Common Equity and Other Preferred Equity 1% SLF Eligible (2) First Lien Debt SLF Eligible 13% First Lien 20% Debt(2) 24% Second Second 29% 53% Lien Debt Lien Debt 23% 37% Non-SLF Eligible Non-SLF First Lien Debt Eli
Slide 17: Q2 Investment Activity Roll
Q2 Investment Activity Roll ($ in millions, unaudited) Originations(1) Sales / Repayments(2) Amount Amount Name ($’s Invested) YTM at Purchase(3) Name ($’s Sold/Repaid) YTM at Cost(4) 18.1% $7.9 / 8.2% / $20.0 $20.0 12.7% $13.9 / $ 10.6% 10 6% / $9.8 / 4.6% / $1.0 N/A $15.0 9.3% $31.2 9.3% $20.0 12.
Slide 18: Investment Activity Since Quarter End (Through 8/5/13)
Investment Activity Since Quarter End (Through 8/5/13) ($ in millions, unaudited) Portfolio Originations(1) YTM at Purchase(3) Amount Tranche Type of Advance Date(2) Name Industry ($’s Invested) Size Investment Rate Unlevered Levered Distribution $19.7 / $275 / 1st Lien / 70% / 8.4% / 20.2% / 7/9/13
Slide 19: Investment Portfolio Review
Investment Portfolio Review (unaudited) 6/30/13 3/31/13 12/31/12 9/30/12 IPO - 6/30/11((5)) Fair Value $1,059 million $1,031 million $990 million $859 million $544 million YTM(1) 10.3% 9.8% 10.1% 9.9% 10.4% YTM at Cost(2) 10.7% 10.7% 10.6% 10.5% 9.7% # Portfolio Companies 59 61 63 58 47 Middle Marke
Slide 20: Investment Portfolio Review – As of 6/30/2013
Investment Portfolio Review – As of 6/30/2013 Portfolio Names By Fair Value McGraw-Hill 4.2% Edmentum 3.4% SRA 3.3% PRA 3.2% Unitek 3.2% Top 15 portfolio Global Knowledge companies 3.2% represent $483 $483.1 1 44 Other YP 3.2% million, or 45.6%, Portfolio Companies Novell 3.0% of consolidated 54.4%
Slide 21: Net Asset Value – As of 6/30/2013
Net Asset Value – As of 6/30/2013 ($ in millions, unaudited) Net Asset Value(1) Consolidated NAV Memo: NAV / Share Portfolio $1,059.0 3/31/13 $14.31 Cash & Equivalents 15.9 12/31/12 $14.06 (2) Other Assets 19.5 9/30/12 $14.10 Total Assets 1,094.4 6/30/12 $13.83 (4) 3/31/12 $13.82 $ Less: Total Debt
Slide 22: OpCo Q2 Adjusted Net Investment Income Reconciliation
OpCo Q2 Adjusted Net Investment Income Reconciliation Three Months Ended 6/30/2013 Normal Non-Recurring Pro-Forma ($ in millions, unaudited)(1) GAAP Adjustments Adjusted Adjustments - YP Adjusted Adjustments Detail Investment income Interest income $27.3 1 ($0.2) $27.1 $27.1 1 Adjustment to effectiv
Slide 23: Adjusted Investment Income Detail
Adjusted Investment Income Detail millions unaudited)(1) ($ in millions, Pro-Forma Adj. Three Months Ended (2) Adj. Three Months Ended 6/30/2013 3/31/2013 12/31/2012 9/30/2012 Cash interest $23.4 $22.3 $20.5 $18.1 Non-cash interest 0.9 0.6 0.6 0.6 Amortization of purchase discounts (premiums) and fe
Slide 24: OpCo Adjusted Consolidated Income Statement by Quarter
OpCo Adjusted Consolidated Income Statement by Quarter P F Pro-Forma Adj. Adj Three Th ($ in millions, unaudited)(1) Months Ended (2) Adj. Three Months Ended 6/30/2013 3/31/2013 12/31/2012 9/30/2012 Investment income Interest income $27.1 $24.5 $22.7 $20.6 Dividend income - - 0.6 0.2 Other income 1.
Slide 25: Dividend Summary
Dividend Summary ($ in millions, unaudited) IPO (3) Estimated (1) 6/30/2011 9/30/2012 12/31/2012 3/31/2013 6/30/2013 9/30/2013 Net Asset Value $440.6 $520.4 $569.9 $610.5 $640.3 (2) NAV / Share $13.98 $14.10 $14.06 $14.31 $14.32 P I Pre-Incentive ti Fee F Adjusted Adj t d NII $8 9 $8.9 $14 9 $14.9 $
Slide 26: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION
Slide 27: Appendix A: Structure Chart
Appendix A: Structure Chart Concurrent Public Private Shareholders Placement Common Stock Common Stock New Mountain Finance New Mountain Finance AIV Corporation Holdings Corporation (“PubCo”) (“AIV Holdings”) Common Membership Units (85.3%) New Mountain Finance Holdings, L.L.C. (“OpCo”) Investments