New Mountain Finance (US:NMFC)2026-02-24 21:32Investment Portfolio - The fair value of the company's investments was approximately $2,742.0 million in 113 portfolio companies as of December 31, 2025, compared to approximately $3,091.0 million in 120 portfolio companies as of December 31, 2024[25]. - The company's ten largest portfolio investments accounted for 33.2% of total assets as of December 31, 2025, with the largest being NMFC Senior Loan Program III LLC at 5.5%[27]. - The top three industries in which the company was invested as of December 31, 2025, were Software (18.1%), Business Services (17.8%), and Healthcare (16.0%), totaling 90.1% of total assets[27]. - The company targets debt investments that yield current income and may provide opportunities for capital appreciation through equity securities[33]. - The company monitors portfolio company performance and financial trends on at least a quarterly basis to identify any developments that may impact investment strategy[38]. - Exit strategies for investments include the sale of the portfolio company, recapitalization, repayment of loans at maturity, or sale of the debt investment[39]. - The company values its assets on a quarterly basis, with the board of directors responsible for determining the fair value of portfolio investments[41]. - The company may suffer credit losses and defaults by portfolio companies, which could harm its operating results[72]. - The company’s investment strategy focuses primarily on privately held companies, presenting challenges due to the lack of available information about these companies[76]. Financial Performance - The weighted average yield to maturity at cost for income-producing investments was approximately 10.5% at December 31, 2025, down from 11.0% at December 31, 2024[26]. - The base management fee is calculated at an annual rate of 1.25% of gross assets, following a fee waiver agreement that resulted in approximately $0.3 million in waived management fees for the year ended December 31, 2025[79][80]. - The incentive fee consists of two parts, with 20.0% of Pre-Incentive Fee Net Investment Income payable quarterly, subject to a hurdle rate of 2.0% per quarter[81][82]. - For the year ended December 31, 2025, total incentive fees waived were approximately $12.8 million, which cannot be recouped by the Investment Adviser[83]. - The company accrued a hypothetical capital gains incentive fee based on cumulative net realized capital gains and losses, as well as cumulative net unrealized capital appreciation and depreciation on investments held at the end of each period[85]. - In Alternative 1, the pre-incentive fee net investment income was 0.74%, which did not exceed the hurdle rate of 2.00%, resulting in no income-related incentive fee[86]. - In Alternative 2, the pre-incentive fee net investment income was 2.39%, leading to an income-related incentive fee of 0.39% after applying the "catch-up" provision[87]. - In Alternative 3, the pre-incentive fee net investment income was 2.99%, resulting in an income-related incentive fee of 0.60% after fully satisfying the "catch-up" provision[89]. - For Year 2 in Example 1, the capital gains incentive fee was $6.0 million, calculated as 20.0% of the $30.0 million realized capital gains from the sale of Investment A[90]. - In Year 4 of Example 1, the capital gains incentive fee was $0.2 million, calculated as $6.2 million (20.0% of cumulative realized capital gains) less the $6.0 million fee taken in Year 2[90]. - In Example 2, the capital gains incentive fee for Year 2 was $5.0 million, calculated as 20.0% of the $25.0 million (realized gains from Investment A less unrealized depreciation on Investment B)[92]. Regulatory Compliance - The company adheres to regulatory requirements under the 1940 Act, which includes restrictions on investments and transactions with affiliates[44]. - The company is required to maintain a coverage ratio of at least 150.0%, allowing it to borrow $2 for every $1 of equity[46]. - The company may issue additional equity or debt capital, but cannot sell common stock below net asset value without shareholder approval[47]. - The company received a new exemptive order from the SEC on May 13, 2025, allowing co-investments with affiliates under specific conditions[48]. - To qualify as a Regulated Investment Company (RIC), the company must distribute at least 90.0% of its investment company taxable income annually[54]. - The company is subject to a 4.0% nondeductible U.S. federal excise tax on certain undistributed income unless it meets specific distribution requirements[55]. - The company has received licenses from the SBA for its subsidiaries to operate as SBICs, allowing them to incur leverage through SBA-guaranteed debentures[60]. - The maximum leverage available to a group of SBICs under common control is $350.0 million, with individual SBICs having specific limits[61]. - The SBA prohibits SBICs from financing certain businesses, including those engaged in project finance and real estate[64]. - An SBIC may not provide financing to a single small business in an amount exceeding approximately 10.0% of its private capital and the aggregate amount of SBA leverage[65]. - The company intends to monitor compliance with the Sarbanes-Oxley Act of 2002 and related regulations[116]. Operational Structure - The Investment Committee is responsible for approving investments above $10.0 million, ensuring a structured investment process[29]. - The company does not have any employees; day-to-day operations are managed by the Investment Adviser[115]. - The company has adopted a code of ethics to establish procedures for personal investments and restrict certain personal securities transactions[107]. - The company incurs various operating expenses, including management fees, incentive fees, and costs associated with investment monitoring and compliance[93]. Market Conditions - The company operates in a period of capital markets disruption and economic uncertainty, which may impair its ability to secure debt financing[69]. - The company is subject to numerous constraints under the 1940 Act and the Code, which could adversely affect its business operations[69]. - The company’s ability to grow may be impaired if additional capital is unavailable or not available on favorable terms[72]. - The valuation process for certain portfolio holdings creates potential conflicts of interest, impacting investment returns[72]. - The company’s business model may depend on maintaining referral relationships with private equity sponsors, which could affect its investment strategy if not developed effectively[72]. Interest Rate Sensitivity - As of December 31, 2025, approximately 83.74% of the company's investments at fair value are floating-rate investments, while 16.26% are fixed-rate investments[503]. - The Federal Reserve held interest rates flat in January 2026 after previously decreasing rates by 0.25% in September, October, and December of 2025[503]. - A hypothetical decrease of 200 basis points in interest rates could lead to a 12.07% reduction in interest and dividend income net of interest expense[506]. - Conversely, a hypothetical increase of 200 basis points in interest rates could result in a 12.07% increase in interest and dividend income net of interest expense[506]. Investment Restrictions - The company had no temporary investments as of December 31, 2025[104]. - The company had no repurchase agreements as of December 31, 2025[105]. - The company is permitted to issue multiple classes of debt if its asset coverage is at least 150.0% immediately after issuance[106].