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Home›Direct Quotation›NEW MOUNTAIN FINANCE CORP management report and analysis of financial position and operating results (Form 10-Q)

NEW MOUNTAIN FINANCE CORP management report and analysis of financial position and operating results (Form 10-Q)

By Roy George
November 3, 2021
22
0


The information in management's discussion and analysis of financial condition
and results of operations relates to New Mountain Finance Corporation, including
its wholly-owned direct and indirect subsidiaries (collectively, "we", "us",
"our", "NMFC" or the "Company").
Forward-Looking Statements
The information contained in this section should be read in conjunction with the
financial data and consolidated financial statements and notes thereto appearing
elsewhere in this report. Some of the statements in this report (including in
the following discussion) constitute forward-looking statements, which relate to
future events or our future performance or our financial condition. The
forward-looking statements contained in this section involve a number of risks
and uncertainties, including:
•statements concerning the impact of a protracted decline in the liquidity of
credit markets;
•the general economy, including interest and inflation rates, and the COVID-19
pandemic on the industries in which we invest;
•our future operating results, our business prospects, the adequacy of our cash
resources and working capital, and the impact of the COVID-19 pandemic thereon;
•the ability of our portfolio companies to achieve their objectives and the
impact of the COVID-19 pandemic thereon;
•our ability to make investments consistent with our investment objectives,
including with respect to the size, nature and terms of our investments;
•the ability of New Mountain Finance Advisers BDC, L.L.C. (the "Investment
Adviser") or its affiliates to attract and retain highly talented professionals;
•actual and potential conflicts of interest with the Investment Adviser and New
Mountain Capital Group, L.P. (together with New Mountain Capital, L.L.C. and its
affiliates, "New Mountain Capital") whose ultimate owners include Steven B.
Klinsky and related and other vehicles; and
•the risk factors set forth in Item 1A.-Risk Factors contained in our annual
report on Form 10-K for the year ended December 31, 2020 and in this quarterly
report on Form 10-Q.
Forward-looking statements are identified by their use of such terms and phrases
such as "anticipate", "believe", "continue", "could", "estimate", "expect",
"intend", "may", "plan", "potential", "project", "seek", "should", "target",
"will", "would" or similar expressions. Actual results could differ materially
from those projected in the forward-looking statements for any reason, including
the factors set forth in Item 1A.-Risk Factors contained in our annual report on
Form 10-K for the year ended December 31, 2020 and in this quarterly report on
Form 10-Q.
We have based the forward-looking statements included in this report on
information available to us on the date of this report. We assume no obligation
to update or revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by law.
Although we undertake no obligation to revise or update any forward-looking
statements, you are advised to consult any additional disclosures that we may
make directly to you or through reports that we have filed or in the future may
file with the United States ("U.S.") Securities and Exchange Commission (the
"SEC"), including annual reports on Form 10-K, registration statements on Form
N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
We are a Delaware corporation that was originally incorporated on June 29, 2010
and completed our initial public offering ("IPO") on May 19, 2011. We are a
closed-end, non-diversified management investment company that has elected to be
regulated as a business development company ("BDC") under the Investment Company
Act of 1940, as amended (the "1940 Act"). We have elected to be treated, and
intend to comply with the requirements to continue to qualify annually, as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). NMFC is also registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"). Since our IPO, and through September 30, 2021, we raised approximately
$893.2 million in net proceeds from additional offerings of our common stock.
The Investment Adviser is a wholly-owned subsidiary of New Mountain Capital. New
Mountain Capital is a firm with a track record of investing in the middle
market. New Mountain Capital focuses on investing in defensive growth companies
across its private equity, credit and net lease investment vehicles. The
Investment Adviser manages our day-to-day operations
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and provides us with investment advisory and management services. The Investment
Adviser also manages other funds that may have investment mandates that are
similar, in whole or in part, to ours. New Mountain Finance Administration,
L.L.C. (the "Administrator"), a wholly-owned subsidiary of New Mountain Capital,
provides the administrative services necessary to conduct our day-to-day
operations.
We have established the following wholly-owned direct and indirect subsidiaries:
•New Mountain Finance Holdings, L.L.C. ("NMF Holdings") and New Mountain Finance
DB, L.L.C. ("NMFDB"), whose assets are used to secure NMF Holdings' credit
facility and NMFDB's credit facility, respectively;
•New Mountain Finance SBIC, L.P. ("SBIC I")  and New Mountain Finance SBIC II,
L.P. ("SBIC II"), who have received licenses from the United States ("U.S.")
Small Business Administration ("SBA") to operate as small business investment
companies ("SBICs") under Section 301(c) of the Small Business Investment Act of
1958, as amended (the "1958 Act") and their general partners, New Mountain
Finance SBIC G.P., L.L.C. ("SBIC I GP") and New Mountain Finance SBIC II G.P.,
L.L.C. ("SBIC II GP"), respectively;
•NMF Ancora Holdings Inc. ("NMF Ancora"), NMF QID Holdings, Inc. ("NMF QID") NMF
YP Holdings Inc. ("NMF YP"), NMF Permian Holdings LLC ("NMF Permian"), NMF HB,
Inc. ("NMF HB") and NMF TRM, LLC ("NMF TRM"), which serve as tax blocker
corporations by holding equity or equity-like investments in portfolio companies
organized as limited liability companies (or other forms of pass-through
entities); we consolidate our tax blocker corporations for accounting purposes
but the tax blocker corporations are not consolidated for income tax purposes
and may incur income tax expense as a result of their ownership of the portfolio
companies; and
•New Mountain Finance Servicing, L.L.C. ("NMF Servicing"), which serves as the
administrative agent on certain investment transactions.
New Mountain Net Lease Corporation ("NMNLC") is a majority-owned consolidated
subsidiary of ours, which acquires commercial real estate properties that are
subject to "triple net" leases has elected to be treated, and intends to comply
with the requirements to continue to qualify annually, as a real estate
investment trust, or REIT, within the meaning of Section 856(a) of the Code.
Our investment objective 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. The first lien debt may include traditional first lien
senior secured loans or unitranche loans. Unitranche loans combine
characteristics of traditional first lien senior secured loans as well as second
lien and subordinated loans. Unitranche loans will expose us to the risks
associated with second lien and subordinated loans to the extent we invest in
the "last out" tranche. In some cases, our investments may also include equity
interests.
Our primary focus is in the debt of defensive growth companies, which are
defined as generally exhibiting the following characteristics: (i) sustainable
secular growth drivers, (ii) high barriers to competitive entry, (iii) high free
cash flow after capital expenditure and working capital needs, (iv) high returns
on assets and (v) niche market dominance. Similar to us, SBIC I's and SBIC II's
investment objectives are to generate current income and capital appreciation
under our investment criteria. However, SBIC I's and SBIC II's investments must
be in SBA-eligible small businesses. Our portfolio may be concentrated in a
limited number of industries. As of September 30, 2021, our top five industry
concentrations were software, business services, healthcare services, investment
funds (which includes our investments in its joint ventures) and education.
As of September 30, 2021, our net asset value was approximately $1,284.9 million
and our portfolio had a fair value of approximately $3,011.7 million in 106
portfolio companies, with a weighted average yield to maturity at cost for
income producing investments ("YTM at Cost") of approximately 8.8% and a
weighted average yield to maturity at cost for all investments ("YTM at Cost for
Investments") of approximately 7.9%. The YTM at Cost calculation assumes that
all investments, including secured collateralized agreements, not on non-accrual
are purchased at cost on the quarter end date and held until their respective
maturities with no prepayments or losses and exited at par at maturity. The YTM
at Cost for Investments calculation assumes that all investments, including
secured collateralized agreements, are purchased at cost on the quarter end date
and held until their respective maturities with no prepayments or losses and
exited at par at maturity. YTM at Cost and YTM at Cost for Investments
calculations exclude the impact of existing leverage. YTM at Cost and YTM at
Cost for Investments use the London Interbank Offered Rate ("LIBOR") curves at
each quarter's end date. The actual yield to maturity may be higher or lower due
to the future selection of the LIBOR contracts by the individual companies in
our portfolio or other factors.

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Recent Developments
On October 27, 2021, our board of directors declared a fourth quarter 2021
distribution of $0.30 per share payable on December 30, 2021 to holders of
record as of December 16, 2021.
On November 1, 2021, we entered into Amendment No. 1 to the Investment
Management Agreement (defined below), pursuant to which the Base Management Fee
(defined below) will be reduced from 1.75% of our gross assets to 1.4% of our
gross assets.
On November 2, 2021, the Investment Adviser extended the term of the Fee Waiver
Agreement (defined below) to be effective through the quarter ended December 31,
2023, rather than the quarter ended December 31, 2022. Under the Fee Waiver
Agreement, the Investment Adviser will continue to waive base management fees in
order to reach a target base management fee of 1.25% on gross assets.
COVID-19 Developments
Our operating results and portfolio companies may be negatively impacted by the
COVID-19 pandemic. While several countries, as well as certain states, counties
and cities in the United States, have relaxed initial public health restrictions
with the view to partially or fully reopening their economies, many cities have
since experienced a surge in the reported number of cases, hospitalizations and
deaths related to the COVID-19 pandemic. These surges have led to the
re-introduction of such restrictions and business shutdowns in certain states in
the United States and globally and could continue to lead to the re-introduction
of such restrictions elsewhere. Health advisors warn that recurring COVID-19
outbreaks will continue if reopening is pursued too soon or in the wrong manner,
which may lead to the re-introduction or continuation of certain public health
restrictions (such as instituting quarantines, prohibitions on travel and the
closure of offices, businesses, schools, retail stores and other public venues).
Additionally, travelers from the United States are restricted from visiting many
countries including countries in Europe, Asia, Africa and South America. These
continued travel restrictions may prolong the global economic downturn. In
addition, while consumer demand for goods and services has begun to rebound, we
continue to see reductions in business activity and financial transactions,
supply chain interruptions and overall economic and financial market instability
both in the United States and globally. Such effects will likely continue for
the duration of the pandemic, which is uncertain, and for some period
thereafter.
Although the Federal Food and Drug Administration authorized vaccines beginning
in December 2020 and a significant portion of the U.S. population have been
vaccinated, and it remains unclear how quickly the vaccines will continue to be
distributed nationwide and globally, or when "herd immunity" will be achieved
and the restrictions that were imposed to slow the spread of the virus will be
lifted entirely. Any delay in distributing the vaccines could lead people to
continue to self-isolate and not participate in the economy at pre-pandemic
levels for a prolonged period of time. Even after the COVID-19 pandemic
subsides, the U.S. economy and most other major global economies may continue to
experience a recession, and we anticipate our business and operations could be
materially adversely affected by a prolonged recession in the United States and
other major markets.
This outbreak is having, and any future outbreaks could have, an adverse impact
on the markets and the economy in general, which could have a material adverse
impact on, among other things, the ability of lenders to originate loans, the
volume and type of loans originated, and the volume and type of amendments and
waivers granted to borrowers and remedial actions taken in the event of a
borrower default, each of which could negatively impact the amount and quality
of loans available for investment by us and returns to us, among other things.
As of the date of this quarterly report on Form 10-Q, it is impossible to
determine the scope of this outbreak, or any future outbreaks, how long any such
outbreak, market disruption or uncertainties may last, the effect any
governmental actions will have or the full potential impact on us and our
portfolio companies. Any potential impact to our results of operations will
depend to a large extent on future developments and new information that could
emerge regarding the duration and severity of COVID-19 and the actions taken by
authorities and other entities to contain COVID-19 or treat its impact, all of
which are beyond our control. These potential impacts, while uncertain, could
adversely affect our and our portfolio companies' operating results.
An increase in unrealized depreciation of our investment portfolio due to
decreases in fair value of investments attributable to the COVID-19 pandemic had
resulted in a significant reduction in our net asset value from the period of
March 31, 2020 through December 31, 2020 as compared to our net asset value as
of December 31, 2019. As of the three and nine months ended September 30, 2021,
our net asset value has experienced a recovery from that of the three and nine
months ended September 30, 2020. As of September 30, 2021, we were in compliance
with our asset coverage requirements under the 1940 Act. In addition, we are not
in default of any of the asset coverage requirements under any of our credit
facilities as of September 30, 2021. For additional discussion on the impact of
COVID-19 on our portfolio companies, see "Monitoring of Portfolio Investments".

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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and revenues and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following items as critical accounting
policies
Basis of Accounting
We consolidate our wholly-owned direct and indirect subsidiaries: NMF Holdings,
NMF Servicing, NMFDB, SBIC I, SBIC I GP, SBIC II, SBIC II GP, NMF Ancora, NMF
QID, NMF YP, NMF Permian, NMF HB and NMF TRM and our majority-owned consolidated
subsidiary, NMNLC. We are an investment company following accounting and
reporting guidance as described in Accounting Standards Codification Topic 946,
Financial Services-Investment Companies, ("ASC 946").
Valuation and Leveling of Portfolio Investments
At all times consistent with GAAP and the 1940 Act, we conduct a valuation of
assets, which impacts our net asset value.
We value our assets on a quarterly basis, or more frequently if required under
the 1940 Act. In all cases, our board of directors is ultimately and solely
responsible for determining the fair value of our portfolio investments on a
quarterly basis in good faith, including investments that are not publicly
traded, those whose market prices are not readily available and any other
situation where our portfolio investments require a fair value determination.
Security transactions are accounted for on a trade date basis. Our quarterly
valuation procedures are set forth in more detail below:
(1)Investments for which market quotations are readily available on an exchange
are valued at such market quotations based on the closing price indicated from
independent pricing services.
(2)Investments for which indicative prices are obtained from various pricing
services and/or brokers or dealers are valued through a multi-step valuation
process, as described below, to determine whether the quote(s) obtained is
representative of fair value in accordance with GAAP.
a.Bond quotes are obtained through independent pricing services. Internal
reviews are performed by the investment professionals of the Investment Adviser
to ensure that the quote obtained is representative of fair value in accordance
with GAAP and, if so, the quote is used. If the Investment Adviser is unable to
sufficiently validate the quote(s) internally and if the investment's par value
or its fair value exceeds the materiality threshold, the investment is valued
similarly to those assets with no readily available quotes (see (3) below); and
b.For investments other than bonds, we look at the number of quotes readily
available and perform the following procedures:
i.Investments for which two or more quotes are received from a pricing service
are valued using the mean of the mean of the bid and ask of the quotes obtained.
We will evaluate the reasonableness of the quote, and if the quote is determined
to not be representative of fair value, we will use one or more of the
methodologies outlined below to determine fair value;
ii.Investments for which one quote is received from a pricing service are
validated internally. The investment professionals of the Investment Adviser
analyze the market quotes obtained using an array of valuation methods (further
described below) to validate the fair value. If the Investment Adviser is unable
to sufficiently validate the quote internally and if the investment's par value
or its fair value exceeds the materiality threshold, the investment is valued
similarly to those assets with no readily available quotes (see (3) below).
(3)Investments for which quotations are not readily available through exchanges,
pricing services, brokers, or dealers are valued through a multi-step valuation
process:
a.Each portfolio company or investment is initially valued by the investment
professionals of the Investment Adviser responsible for the credit monitoring;
b.Preliminary valuation conclusions will then be documented and discussed with
our senior management;
c.If an investment falls into (3) above for four consecutive quarters and if the
investment's par value or its fair value exceeds the materiality threshold, then
at least once each fiscal year, the valuation for
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each portfolio investment for which we do not have a readily available market
quotation will be reviewed by an independent valuation firm engaged by our board
of directors; and
d.When deemed appropriate by our management, an independent valuation firm may
be engaged to review and value investment(s) of a portfolio company, without any
preliminary valuation being performed by the Investment Adviser. The investment
professionals of the Investment Adviser will review and validate the value
provided.
For investments in revolving credit facilities and delayed draw commitments, the
cost basis of the funded investments purchased is offset by any costs/netbacks
received for any unfunded portion on the total balance committed. The fair value
is also adjusted for the price appreciation or depreciation on the unfunded
portion. As a result, the purchase of a commitment not completely funded may
result in a negative fair value until it is called and funded.
The values assigned to investments are based upon available information and do
not necessarily represent amounts which might ultimately be realized, since such
amounts depend on future circumstances and cannot be reasonably determined until
the individual positions are liquidated. Due to the inherent uncertainty of
determining the fair value of investments that do not have a readily available
market value, the fair value of our investments may fluctuate from period to
period and the fluctuations could be material.
GAAP fair value measurement guidance classifies the inputs used in measuring
fair value into three levels as follows:
Level I-Quoted prices (unadjusted) are available in active markets for identical
investments and we have the ability to access such quotes as of the reporting
date. The type of investments which would generally be included in Level I
include active exchange-traded equity securities and exchange-traded
derivatives. As required by Accounting Standards Codification Topic 820, Fair
Value Measurements and Disclosures ("ASC 820"), we, to the extent that we hold
such investments, do not adjust the quoted price for these investments, even in
situations where we hold a large position and a sale could reasonably impact the
quoted price.
Level II-Pricing inputs are observable for the investments, either directly or
indirectly, as of the reporting date, but are not the same as those used in
Level I. Level II inputs include the following:
•Quoted prices for similar assets or liabilities in active markets;
•Quoted prices for identical or similar assets or liabilities in non-active
markets (examples include corporate and municipal bonds, which trade
infrequently);
•Pricing models whose inputs are observable for substantially the full term of
the asset or liability (examples include most over-the-counter derivatives,
including foreign exchange forward contracts); and
•Pricing models whose inputs are derived principally from or corroborated by
observable market data through correlation or other means for substantially the
full term of the asset or liability.
Level III-Pricing inputs are unobservable for the investment and include
situations where there is little, if any, market activity for the investment.
The inputs used to measure fair value may fall into different levels. In all
instances when the inputs fall within different levels of the hierarchy, the
level within which the fair value measurement is categorized is based on the
lowest level of input that is significant to the fair value measurement in its
entirety. As such, a Level III fair value measurement may include inputs that
are both observable and unobservable. Gains and losses for such assets
categorized within the Level III table below may include changes in fair value
that are attributable to both observable inputs and unobservable inputs.
The inputs into the determination of fair value require significant judgment or
estimation by management and consideration of factors specific to each
investment. A review of the fair value hierarchy classifications is conducted on
a quarterly basis. Changes in the observability of valuation inputs may result
in the transfer of certain investments within the fair value hierarchy from
period to period.

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The following table summarizes the levels in the fair value hierarchy that our
portfolio investments fall into as of September 30, 2021:
(in thousands)             Total         Level I       Level II        Level III
First lien             $ 1,472,741      $      -      $  91,865      $ 1,380,876
Second lien                721,618             -        304,481          417,137
Subordinated                38,863             -              -           38,863
Equity and other           778,432             -              -          778,432
Total investments      $ 3,011,654      $      -      $ 396,346      $ 2,615,308


We generally use the following framework when determining the fair value of
investments where there are little, if any, market activity or observable
pricing inputs. We typically determine the fair value of our performing debt
investments utilizing an income approach. Additional consideration is given
using a market based approach, as well as reviewing the overall underlying
portfolio company's performance and associated financial risks. The following
outlines additional details on the approaches considered:
Company Performance, Financial Review, and Analysis:  Prior to investment, as
part of our due diligence process, we evaluate the overall performance and
financial stability of the portfolio company. Post investment, we analyze each
portfolio company's current operating performance and relevant financial trends
versus prior year and budgeted results, including, but not limited to, factors
affecting its revenue and earnings before interest, taxes, depreciation, and
amortization ("EBITDA") growth, margin trends, liquidity position, covenant
compliance and changes to its capital structure. We also attempt to identify and
subsequently track any developments at the portfolio company, within its
customer or vendor base or within the industry or the macroeconomic environment,
generally, that may alter any material element of our original investment
thesis. This analysis is specific to each portfolio company. We leverage the
knowledge gained from our original due diligence process, augmented by this
subsequent monitoring, to continually refine our outlook for each of our
portfolio companies and ultimately form the valuation of our investment in each
portfolio company. When an external event such as a purchase transaction, public
offering or subsequent sale occurs, we will consider the pricing indicated by
the external event to corroborate the private valuation.
For debt investments, we may employ the Market Based Approach (as described
below) to assess the total enterprise value of the portfolio company, in order
to evaluate the enterprise value coverage of our debt investment. For equity
investments or in cases where the Market Based Approach implies a lack of
enterprise value coverage for the debt investment, we may additionally employ a
discounted cash flow analysis based on the free cash flows of the portfolio
company to assess the total enterprise value. After enterprise value coverage is
demonstrated for our debt investments through the method(s) above, the Income
Based Approach (as described below) may be employed to estimate the fair value
of the investment.
Market Based Approach:  We may estimate the total enterprise value of each
portfolio company by utilizing market value cash flow (EBITDA or revenue)
multiples of publicly traded comparable companies and comparable transactions.
We consider numerous factors when selecting the appropriate companies whose
trading multiples are used to value our portfolio companies. These factors
include, but are not limited to, the type of organization, similarity to the
business being valued, and relevant risk factors, as well as size, profitability
and growth expectations. We may apply an average of various relevant comparable
company EBITDA or revenue multiples to the portfolio company's latest twelve
month ("LTM") EBITDA or revenue, or projected EBITDA or revenue to calculate the
enterprise value of the portfolio company. Significant increases or decreases in
the EBITDA or revenue multiples will result in an increase or decrease in
enterprise value, which may result in an increase or decrease in the fair value
estimate of the investment. In applying the market based approach as of
September 30, 2021, we used the relevant EBITDA or revenue multiple ranges set
forth in the table below to determine the enterprise value of our portfolio
companies. We believe these were reasonable ranges in light of current
comparable company trading levels and the specific portfolio companies involved.
Income Based Approach:  We also may use a discounted cash flow analysis to
estimate the fair value of the investment. Projected cash flows represent the
relevant security's contractual interest, fee and principal payments plus the
assumption of full principal recovery at the investment's expected maturity
date. These cash flows are discounted at a rate established utilizing a
combination of a yield calibration approach and a comparable investment
approach. The yield calibration approach incorporates changes in the credit
quality (as measured by relevant statistics) of the portfolio company, as
compared to changes in the yield associated with comparable credit quality
market indices, between the date of origination and the valuation date. The
comparable investment approach utilizes an average yield-to maturity of a
selected set of high-quality, liquid investments to determine a comparable
investment discount rate. Significant increases or decreases in the discount
rate would result in a decrease or increase in the fair value measurement. In
applying the income based approach as of September 30, 2021, we used the
discount ranges set forth in the table below to value investments in our
portfolio companies.

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The unobservable inputs used in the fair value measurement of our Level III
investments as of September 30, 2021 were as follows:
(in thousands)                                                                                                                          Range
                     Fair Value as of
                       September 30,                                                                                                                      Weighted
Type                       2021                       Approach                     Unobservable Input                Low                High              Average
First lien           $    1,285,658          Market & income approach          EBITDA multiple                           5.0x              27.5x                14.0x
                                                                               Revenue multiple                          4.0x              19.5x                 6.5x
                                                                               Discount rate                           4.6  %            18.6  %               7.5  %
                             20,797          Market quote                      Broker quote                               N/A                N/A                  N/A
                             74,421          Other                             N/A(1)                                     N/A                N/A                  N/A
Second lien                 338,410          Market & income approach          EBITDA multiple                           7.5x              65.3x                18.8x

                                                                               Discount rate                           6.5  %            27.3  %              10.3  %
                             62,542          Market quote                      Broker quote                               N/A                N/A                  N/A
                             16,185          Other                             N/A(1)                                     N/A                N/A                  N/A
Subordinated                 38,863          Market & income approach          EBITDA multiple                           8.0x              18.0x                11.8x

                                                                               Discount rate                          10.9  %            28.7  %              18.0  %

Equity and other            709,323          Market & income approach          EBITDA multiple                           5.0x              26.5x                13.2x
                                                                               Revenue multiple                          5.0x              19.5x                16.5x
                                                                               Discount rate                           4.2  %            32.7  %              10.6  %

                             69,109          Other                             N/A(1)                                     N/A                N/A                  N/A
                     $    2,615,308




(1)Fair value was determined based on transaction pricing or recent acquisition
or sale as the best measure of fair value with no material changes in operations
of the related portfolio company since the transaction date.

NMFC Senior Loan Program I LLC
NMFC Senior Loan Program I LLC ("SLP I") was formed as a Delaware limited
liability company on May 27, 2014 and commenced operations on June 10, 2014. SLP
I was structured as a private investment fund and was a portfolio company held
by the Company. SLP I operated under a limited liability company agreement (the
"SLP I Agreement") and invested in senior secured loans issued by companies
within our core industry verticals. These investments were typically broadly
syndicated first lien loans.
Effective May 5, 2021, us and SkyKnight Income III, LLC ("SkyKnight Income III")
entered into a Contribution Agreement in which 100% of both of our respective
membership interests in SLP I were transferred and contributed to NMFC Senior
Loan Program IV LLC ("SLP IV"), a Delaware limited liability company, structured
as a private joint venture investment fund between the Company and SkyKnight
Income Alpha, LLC ("SkyKnight Alpha"). On May 5, 2021, SLP I entered into
Amendment 1 to the First Amended and Restated Limited Liability Company
Agreement (the "Amended Restated SLP I Agreement"), which admitted SLP IV as the
sole member of SLP I. As of May 5, 2021, SLP I is a wholly-owned subsidiary of
SLP IV.
As of May 4, 2021, SLP I had total investments with an aggregate fair value of
approximately $119.6 million, debt outstanding of $79.5 million and capital that
had been called and funded of $43.0 million. As of December 31, 2020, SLP I had
total investments with an aggregate fair value of approximately $124.7 million,
debt outstanding of $188.9 million and capital that had been called and funded
of $43.0 million. Our investment in SLP I is disclosed on our Consolidated
Schedule of Investments as of December 31, 2020.

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Below is a summary of SLP I's portfolio, along with a listing of the individual
investments in SLP I's portfolio as of December 31, 2020. As of May 5, 2021 all
investments in the SLP I portfolio are included in the consolidated portfolio of
SLP IV.
(in thousands)                                                     December 31, 2020
First lien investments (1)                                        $        127,660
Weighted average interest rate on first lien investments (2)                  4.85  %
Number of portfolio companies in SLP I                                      

34

Largest portfolio company investment (1)                          $         

7 797

Total of five largest portfolio company investments (1)           $         34,918



(1) Reflects the principal amount or face value of the investment. (2) Calculated as the overall interest rate in effect on the accumulated investments divided by the total principal amount of the investments.

                                      106

————————————————– ——————————

Table of contents The following table is a list of the individual investments in the SLP I portfolio as of December 31, 2020:

                                                                                                                             Principal
Portfolio Company and Type of                                                                                              Amount or Par                                        Fair
Investment                                      Industry                Interest Rate (1)           Maturity Date              Value                   Cost                  Value (2)
Funded Investments - First lien                                                                                           (in thousands)          (in thousands)           (in thousands)
Access CIG, LLC                          Business Services              3.98% (L + 3.75%)             2/27/2025           $      3,678          $         3,701          $         3,649
Advisor Group Holdings, Inc.             Consumer Services              5.15% (L + 5.00%)             7/31/2026                  6,866                    6,809                    6,836
Affordable Care Holding Corp.            Healthcare Services            5.75% (L + 4.75%)            10/24/2022                  6,614                    6,578                    6,531
ASG Technologies Group, Inc.             Software                       4.50% (L + 3.50%)             7/31/2024                    653                      651                      636
BarBri, Inc.                             Education                      5.00% (L + 4.00%)             12/1/2023                  5,980                    5,964                    5,980
Bearcat Buyer, Inc.                      Healthcare Services            5.25% (L + 4.25%)             7/9/2026                     131                      130                      131
Bearcat Buyer, Inc.                      Healthcare Services            5.25% (L + 4.25%)             7/9/2026                     631                      628                      631
Bracket Intermediate Holding Corp.       Healthcare Services            4.48% (L + 4.25%)             9/5/2025                   4,520                    4,504                    4,474
                                         Healthcare Information
Certara Holdco, Inc.                     Technology                     3.75% (L + 3.50%)             8/15/2024                  5,138                    5,134                    5,145
CHA Holdings, Inc.                       Business Services              5.50% (L + 4.50%)             4/10/2025                    452                      452                      423
Cvent, Inc.                              Software                       3.90% (L + 3.75%)            11/29/2024                  6,745                    6,732                    6,479
                                         Distribution &
Dealer Tire, LLC                         Logistics                      4.40% (L + 4.25%)            12/12/2025                  3,433                    3,426                    3,419
Drilling Info Holdings, Inc.             Business Services              4.40% (L + 4.25%)             7/30/2025                  6,103                    6,084                    5,925
Emerald 2 Limited                        Business Services              3.50% (L + 3.25%)             7/10/2026                    449                      448                      445
eResearchTechnology, Inc.                Healthcare Services            5.50% (L + 4.50%)             2/4/2027                   1,345                    1,333                    1,336
                                         Distribution &
Fastlane Parent Company, Inc.            Logistics                      4.65% (L + 4.50%)             2/4/2026                   1,363                    1,342                    1,355
Greenway Health, LLC                     Software                       4.75% (L + 3.75%)             2/16/2024                  6,693                    6,677                    6,141
Heartland Dental, LLC                    Healthcare Services            3.65% (L + 3.50%)             4/30/2025                  3,609                    3,597                    3,524
HS Purchaser, LLC / Help/Systems
Holdings, Inc.                           Software                       5.75% (L + 4.75%)            11/19/2026                    138                      137                      138
LSCS Holdings, Inc.                      Healthcare Services            4.51% (L + 4.25%)             3/17/2025                  1,372                    1,367                    1,344
LSCS Holdings, Inc.                      Healthcare Services            4.51% (L + 4.25%)             3/17/2025                  5,314                    5,297                    5,208
Market Track, LLC                        Business Services              5.25% (L + 4.25%)             6/5/2024                     781                      783                      767
Medical Solutions Holdings, Inc.         Healthcare Services            5.50% (L + 4.50%)             6/14/2024                  2,249                    2,245                    2,237
Ministry Brands, LLC                     Software                       5.00% (L + 4.00%)             12/2/2022                  4,876                    4,868                    4,852
National Intergovernmental
Purchasing Alliance Company              Business Services              4.00% (L + 3.75%)             5/23/2025                  1,352                    1,354                    1,346
Pelican Products, Inc.                   Business Products              4.50% (L + 3.50%)             5/1/2025                   2,254                    2,250                    2,217
Premise Health Holding Corp.             Healthcare Services            3.75% (L + 3.50%)             7/10/2025                    628                      626                      614
Project Accelerate Parent, LLC           Business Services              5.25% (L + 4.25%)             1/2/2025                   4,175                    4,159                    3,799
PSC Industrial Holdings Corp.            Industrial Services            4.75% (L + 3.75%)            10/11/2024                  3,906                    3,883                    3,799
Salient CRGT Inc.                        Federal Services               7.50% (L + 6.50%)             2/28/2022                  6,731                    6,713                    6,731
Sierra Enterprises, LLC                  Food & Beverage                5.00% (L + 4.00%)            11/11/2024                  4,260                    4,243                    4,192
                                         Distribution &
Wirepath LLC                             Logistics                      4.25% (L + 4.00%)             8/5/2024                   6,779                    6,779                    6,542
WP CityMD Bidco LLC                      Healthcare Services            5.50% (L + 4.50%)             8/13/2026                  6,148                    6,096                    6,162
Wrench Group LLC                         Consumer Services              4.25% (L + 4.00%)             4/30/2026                  2,739                    2,716                    2,712
YI, LLC                                  Healthcare Services            5.00% (L + 4.00%)             11/7/2024                  7,797                    7,792                    7,174
                                         Healthcare Information
Zelis Cost Management Buyer, Inc.        Technology                     4.90% (L + 4.75%)             9/30/2026                  1,758                    1,743                    1,765

Total Funded Investments                                                                                                  $    127,660          $       127,241          $       124,659




(1)All interest is payable in cash unless otherwise indicated. A majority of the
variable rate debt investments bear interest at a rate that may be determined by
reference to the LIBOR (L), the Prime Rate (P) and the alternative base rate
(Base). For each investment, the current interest rate provided reflects the
rate in effect as of December 31, 2020.
(2)Represents the fair value in accordance with Accounting Standards
Codification Topic 820, Fair Value Measurement and Disclosures ("ASC 820"). Our
board of directors does not determine the fair value of the investments held by
SLP I.


                                      107

————————————————– ——————————

  Table of Contents
Below is certain summarized financial information for SLP I as of May 4, 2021
and December 31, 2020 and for the period from January 1, 2021 through May 4,
2021 and the three and nine months ended September 30, 2020:

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