New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2013 Earnings Presentation
31 slides from New Mountain Finance's earnings presentation, Mar 6, 2014
Slide 1: Q4 2013 Earnings Presentation
Q4 2013 Earnings Presentation March 6, 2014
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: Q4 2013 and Full Year Highlights
Q4 2013 and Full Year Highlights ▪ Q4 Pro-Forma Adjusted Net Investment Income (“NII”) ( NII ) of $0 $0.34 34 per weighted average share – Q4 regular dividend of $0.34 per share paid on December 31, 2013 ▪ December 31, 2013 book value of $14.38 per share, an increase of $0.06 per share from the Sept
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 $12 billion of assets under management(1), approximate
Slide 6: NMFC Relative Trading Performance – Indexed Total Return
NMFC Relative Trading Performance – Indexed Total Return Ma 19, May 19 2011 (IPO) – March 3, 3 2014 Indexed Total Return 150.0 NMFC 46.7% 145.0 S&P 46.0% S&P Fin 42.3% 42 3% 140.0 135.0 130.0 HY 26.4% 125.0 BDC 23.8% BDCs 23 8% 120.0 115.0 110.0 105 0 105.0 100.0 95.0 90.0 85.0 80.0 75.0 70.0 7/1/11
Slide 7: NMFC Return Attribution
NMFC Return Attribution ($ per Share, Share unaudited) $5 34 $5.34 $0.99 $2.17 $0.30 $0.46 $1.80 $0.49 $0 9 $0.32 $0.37 $0.12 $0 38 $0.38 $3.56 $1.34 $1.36 $0.86 ($0.48) Cumulative IPO to 12/31/11(1) 2012 2013 (IPO to 12/31/13) (1) ∆ in BV Special Dividend Regular Dividends Trading Multiple Expansio
Slide 8: Credit Market Conditions
Credit Market Conditions ▪ Last three months have generally been characterized by ongoing tightening in spreads – Market resiliency and reduced volatility – Long term rates remain stable – Inflows into both loan and bond funds continue to be significant ▪ With limited exceptions, smaller deals conti
Slide 9: Credit Market Conditions – Interest Rates
Credit Market Conditions – Interest Rates (unaudited) Floating vs. vs Fixed Assets Liabilities (Aggregate par value of $1,106.3 million as of December 31, 2013)(1) ($436.5 million drawn as of December 31, 2013) Fixed 15% Floating – No Floor (1-Month Libor) 100% Floating – Floor(2) 85% Impact of Chan
Slide 10: Credit Performance
Credit Performance ($ in millions, unaudited) Cumulative Since Inception(1) As of 12/31/2013 (October 2008 – December 31, 2013) Cost / FMV Cost / # Portfolio Co’s Investments $1,094.1 / $1,115.7 $2,360.5 / 126 of which of which Internal Watch List (3 or 4 Rating)(2) $15.1 / $7.7 $20.5 / 2 of which o
Slide 11: Credit Performance – Non-70% Advance Rate Assets
Credit Performance – Non-70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company A 4.1x 4.1x - Company B 5.9x 5.8x 0.1x Company C 5.9x 5.1x 0.9x Company D 5.8x 6.3x (0.5x) Company E 5 9x 5.9x 5 7x 5.7x 0 2x 0.2x Company F 3.5x
Slide 12: Credit Performance – 70% Advance Rate Assets
Credit Performance – 70% Advance Rate Assets (2) NMFC Leverage Ratio Variance (1) Portfolio Company At Purchase Current Positive / (Negative) Company AE 2.1x 2.1x - Company AF 2.0x 1.3x 0.7x Company AG 3.2x 10.9x (7.7x) Company AH 4.1x 3.5x 0.6x Company AI 3.4x 2.8x 0.5x Company AJ 3.7x 3.5x 0.2x Co
Slide 13: SBIC Process
SBIC Process ▪ On January 27, 2014, we announced that we received a “green light” letter from the U.S. Small Business Administration (“SBA”) inviting NMFC to continue its application process to obtain a Small Business Investment Company (“SBIC”) license – License application submitted and accepted b
Slide 14: Share Ownership Migration
Share Ownership Migration (shares in millions) (1) (4) IPO - May-11 2012 Offerings 2013 & 2014 Offerings Issuances Issuances Cumulative Issuances Cumulative (2)(3) (2)(3) Public Shares ("PubCo") 10.7 13.6 24.3 23.6 47.9 % of Total 34.6% 60.0% 100.0% NMC Fund Shares ("AIV Holdings") 20.2 (4.0) 16.2 (
Slide 15: Performance Since IPO
Performance Since IPO ($ in millions, unaudited)(1) IPO - 2013 (2) 12/31/2011 2012 3/31/2013 6/30/2013 9/30/2013 12/31/2013 Regular Dividend $26.6 $46.6 $13.8 $14.5 $15.2 $16.3 Cumulative Regular Dividend 26 6 26.6 73 2 73.2 87 0 87.0 101 5 101.5 116 7 116.7 133 0 133.0 (3) (3) (3) Adj. NII 26.5 46.
Slide 16: Q4 Originations
Q4 Originations ($ 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 Preferred 10/15/13 $35.0 $200 N/A 12.6% 12.6% & Logistics Equity $2.0 / $360 / 1st Lien / 70
Slide 17: Originations and Repayments
Originations and Repayments ($ in millions, unaudited) Quarterly Portfolio Originations ($’s Invested) FY 2013 FY 2012 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 T t l Originations Total O i i ti $180 3 $180.3 $87 1 $87.1 $150 3 $150.3 $112 0 $112.0 $266 7 $266.7 $173 4 $173.4 $
Slide 18: Investment Activity Since Quarter End (Through 3/5/14)
Investment Activity Since Quarter End (Through 3/5/14) ($ 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 1/27/14 Education $14.9 $408 1st Lien 70% 7.2% 15.9% 2/12/14 Media
Slide 19: Q4 Originations and Repayments
Q4 Originations and Repayments Originations by Type(1) Sales / Repayments by Type(1) 70% Advance Rate (2) First Lien Debt Preferred Equity 19% 17% Subordinated 23% Subordinated 2% 56% Non-70% 30% Advance Rate Second 17% Lien Debt First Lien Debt 32% Second Lien Debt 70% Advance Rate 4% (2) First Lie
Slide 20: Q4 Investment Activity Roll
Q4 Investment Activity Roll ($ in millions, unaudited) Originations(1) Amount Sales / Repayments(2) Amount Name ($’s Invested) YTM at Purchase(3) Name ($’s Sold/Repaid) YTM at Cost(4) $35.0 12.6% $19.9 8.4% $2.0 / 7.6% / $ $6.9 11 3% 11.3% $16.9 9.4% $29.3 9.4% $15.0 12.1% $11.3 10.7% $21 8 $21.8 7
Slide 21: Investment Portfolio Review
Investment Portfolio Review (unaudited) 12/31/13 9/30/13 6/30/13 3/31/13 IPO - 6/30/11((5)) Fair Value $1,116 million $1,041 million $1,059 million $1,031 million $544 million YTM(1) 10.6% 10.4% 10.3% 9.8% 10.4% YTM at Cost(2) 11.0% 10.9% 10.7% 10.7% 9.7% # Portfolio Companies 59 57 59 61 47 Middle
Slide 22: Investment Portfolio Review – As of 12/31/2013
Investment Portfolio Review – As of 12/31/2013 Portfolio Names By Fair Value McGraw-Hill Global Global Knowledge 4.0% 4.1% Deltek 3.7% UniTek 3.6% Top 15 portfolio Edmentum 3.4% companies Crowley 3 3.1% 1% represent $515 $515.4 4 44 Other SRA 3.1% million, or 46.2%, Portfolio Companies of consolidat
Slide 23: Net Asset Value – As of 12/31/2013
Net Asset Value – As of 12/31/2013 ($ in millions, unaudited) Net Asset Value Portfolio $1,115.7 Cash & Equivalents 15.0 Other Assets (1) 17.1 Total Assets 1,147.8 Less: Total Debt (436.5) Less: Other Liabilities (2) (22.8) NAV $688.5 Shares Outstanding (millions) 47.9 NAV / Share $14.38 Debt / Equi
Slide 24: Historical NAV / Share and Leverage Trends
Historical NAV / Share and Leverage Trends (unaudited) NAV / Share $14.31 $14.32 $14.32 $14.38 $14.40 $14.08 $14.10 $14.06 (1) (2) $14.00 $13.98 $13.82 $13.83 $13.60 $13.60 $13.32 $13.20 $12 80 $12.80 At IPO Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Debt
Slide 25: Pro-Forma Adjusted Net Investment Income Reconciliation
Pro-Forma Adjusted Net Investment Income Reconciliation ($ in millions except per unit data, unaudited)(1) Three months ended Year ended December 31, 2013 December 31, 2013 Per Weighted Per Weighted Amount Average Unit Amount Average Unit GAAP net investment income ("NII") $15.8 $0.33 $63.7 $1.45 No
Slide 26: Adjusted Consolidated Income Statement by Quarter
Adjusted Consolidated Income Statement by Quarter Pro-Forma Pro Forma Adj Adj. Pro-Forma Pro Forma Adj Adj. Pro-Forma Pro Forma Adj Adj. ($ in millions, except per unit data, unaudited)(1) Three Months Three Months Three Months Adj. Three (2) (2) (2) Ended Ended Ended Months Ended 12/31/2013 9/30/20
Slide 27: Adjusted Investment Income Detail
Adjusted Investment Income Detail millions unaudited)(1) ($ in millions, Pro-Forma Adj. Three Months Pro-Forma Adj. Ended(2) Year Ended(2) Year Ended 12/31/2013 12/31/2013 12/31/2012 Cash interest $24.3 $94.5 $71.9 Non-cash interest 1.0 3.4 2.2 Amortization of purchase discounts (premiums) and fees
Slide 28: Adjusted Consolidated Income Statement By Year
Adjusted Consolidated Income Statement By Year Pro-Forma Adj. j ($ in millions, except per unit data, unaudited)(1) (2) Year Ended Adj. Year Ended 12/31/2013 12/31/2012 Investment income Interest income $106.1 $80.2 Di id d and Dividend d other th iincome 30 3.0 21 2.1 Total investment income 109.1
Slide 29: Dividend Summary and Coverage
Dividend Summary and Coverage We believe our Q1 2014 Adjusted NII will be in the $0.33 $0 33 to $0.35 $0 35 per share range. range Our board of directors has declared a first quarter dividend of $0.34 per share. $0.80 (2) 120% 114% (2) 103% 103% (2) $0.70 101% 100% 100% 100% 98% 99% 99% 95% 100% $0.
Slide 30: New Mountain Finance Corporation
NIM|E NEw MOUNTAIN FINANCE CORPORATION
Slide 31: Appendix A: Structure Chart
Appendix A: Structure Chart(1) 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 (100.0%) New Mountain Finance Holdings, L.L.C. (“OpCo”) Investme