NEW MOUNTAIN FINANCE CORP management report and analysis of financial position and operating results (Form 10-Q)
The information in management's discussion and analysis of financial condition and results of operations relates toNew 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 ofNew 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 theInvestment Adviser andNew Mountain Capital Group , L.P. (together withNew Mountain Capital, L.L.C. and its affiliates, "New Mountain Capital ") whose ultimate owners includeSteven 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 endedDecember 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 endedDecember 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 withthe 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 aDelaware corporation that was originally incorporated onJune 29, 2010 and completed our initial public offering ("IPO") onMay 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 throughSeptember 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 ofNew 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 99 -------------------------------------------------------------------------------- Table of Contents 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 ofNew 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 ") andNew Mountain Finance DB, L.L.C. ("NMFDB"), whose assets are used to secureNMF 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 fromthe 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") andNew 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") andNMF 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 ofSeptember 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 ofSeptember 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. 100 -------------------------------------------------------------------------------- Table of Contents Recent Developments OnOctober 27, 2021 , our board of directors declared a fourth quarter 2021 distribution of$0.30 per share payable onDecember 30, 2021 to holders of record as ofDecember 16, 2021 . OnNovember 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. OnNovember 2, 2021 , the Investment Adviser extended the term of the Fee Waiver Agreement (defined below) to be effective through the quarter endedDecember 31, 2023 , rather than the quarter endedDecember 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 inthe 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 inthe 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 fromthe United States are restricted from visiting many countries including countries inEurope ,Asia ,Africa andSouth 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 inthe United States and globally. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. Although theFederal Food and Drug Administration authorized vaccines beginning inDecember 2020 and a significant portion of theU.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, theU.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 inthe 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 ofMarch 31, 2020 throughDecember 31, 2020 as compared to our net asset value as ofDecember 31, 2019 . As of the three and nine months endedSeptember 30, 2021 , our net asset value has experienced a recovery from that of the three and nine months endedSeptember 30, 2020 . As ofSeptember 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 ofSeptember 30, 2021 . For additional discussion on the impact of COVID-19 on our portfolio companies, see "Monitoring of Portfolio Investments". 101 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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 102 -------------------------------------------------------------------------------- Table of Contents 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. 103 -------------------------------------------------------------------------------- Table of Contents The following table summarizes the levels in the fair value hierarchy that our portfolio investments fall into as ofSeptember 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 ofSeptember 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 ofSeptember 30, 2021 , we used the discount ranges set forth in the table below to value investments in our portfolio companies. 104
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Table of Contents The unobservable inputs used in the fair value measurement of our Level III investments as ofSeptember 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 aDelaware limited liability company onMay 27, 2014 and commenced operations onJune 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. EffectiveMay 5, 2021 , us andSkyKnight 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 toNMFC Senior Loan Program IV LLC ("SLP IV"), aDelaware limited liability company, structured as a private joint venture investment fund between the Company andSkyKnight Income Alpha, LLC ("SkyKnight Alpha"). OnMay 5, 2021 , SLP I entered into Amendment 1 to theFirst 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 ofMay 5, 2021 , SLP I is a wholly-owned subsidiary of SLP IV. As ofMay 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 ofDecember 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$43.0 million . Our investment in SLP I is disclosed on our Consolidated Schedule of Investments as ofDecember 31, 2020 . 105 -------------------------------------------------------------------------------- Table of Contents Below is a summary of SLP I's portfolio, along with a listing of the individual investments in SLP I's portfolio as ofDecember 31, 2020 . As ofMay 5, 2021 all investments in the SLP I portfolio are included in the consolidated portfolio of SLP IV. (in thousands) December 31, 2020 First lien investments (1)$ 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.
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Table of contents The following table is a list of the individual investments in the SLP I portfolio as of
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 3,524HS 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 ofDecember 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
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Table of Contents Below is certain summarized financial information for SLP I as ofMay 4, 2021 andDecember 31, 2020 and for the period fromJanuary 1, 2021 throughMay 4, 2021 and the three and nine months endedSeptember 30, 2020 :
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