New Mountain Finance Corporation

Second-quarter total investment income was $61 million, down 11% from the prior quarter. Total net expenses were about $37 million, broadly unchanged, and adjusted net investment income was $0.26 per share, which covered the $0.25 dividend. NAV per share was $10.89, down $0.03, or 30 basis points, from Q1. Non-accruals at fair value improved to 1.5% from 2.6% last quarter. For Q3, the board declared a $0.25 per share dividend payable September 30 to shareholders of record on September 16. The company said net debt-to-equity was 1.11x, below the midpoint of its 1.0x to 1.25x target range. It also said it had more than $2 billion of total borrowing capacity, including about $830 million available under credit facilities, and closed a $150 million private placement during the quarter.

Steve Klinsky emphasized that the quarter showed book value stabilization and improving credit quality, pointing to the lower non-accrual rate and the modest NAV decline. He was bullish on the stock being undervalued, saying NMFC was buying back shares at a significant discount and that the company believes it is oversold. His tone was confident about dividend sustainability, fee reductions, and upside from loans moving back toward par as market sentiment improves.

Laura Holson said portfolio income was pressured by a smaller, more senior and more diversified portfolio after the secondary sale, which helped explain the 11% drop in total investment income to $61 million. She noted that net expenses were about $37 million, that the effective incentive fee rate was 15% after a $1.4 million voluntary waiver, and that the company expects to permanently reduce the fee to 15% in 2027. She also highlighted balance sheet flexibility, including more than $2 billion of total borrowing capacity, about $830 million available under credit facilities, and the recent $150 million private placement; she said the company is actively managing maturities and extended the revolving credit facility to 2031 after quarter end.

Analysts focused on how quickly NMFC can rotate out of equity and other non-income-producing assets. Management said a couple of smaller positions could be exited in the next quarter or two, while other larger positions are still in process, and it expects better M&A conditions in the fall to help monetizations. Questions also centered on refinancing costs and borrowing spreads, and management said its maturing debt is not the lowest-cost debt, so upcoming unsecured refinancing could be an opportunity to lower financing costs if the portfolio continues to improve.