UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2019

o         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number		Exact name of registrant as specified in its charter, address of principal executive offices, telephone numbers and states or other jurisdictions of incorporation or organization		I.R.S. Employer Identification Number
814-00832		New Mountain Finance Corporation		27-2978010
		787 Seventh Avenue, 48th Floor New York, New York 10019 Telephone: (212) 720-0300 State of Incorporation: Delaware

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
	Common stock, par value $0.01 per share	NMFC	New York Stock Exchange
	5.75% Notes due 2023	NMFX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ý		Accelerated filer o
	Non-accelerated filer o		Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

---

Indicate the number of shares outstanding of each of the issuer’s classes of common stock.

Description		Shares as of November 6, 2019
Common stock, par value $0.01 per share		96,768,695

---

Table of Contents

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2019

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	New Mountain Finance Corporation
	Consolidated Statements of Assets and Liabilities as of September 30, 2019 (unaudited) and December 31, 2018 (unaudited)	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	5
	Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 (unaudited) and September 30, 2018 (unaudited)	7
	Consolidated Schedule of Investments as of September 30, 2019 (unaudited)	8
	Consolidated Schedule of Investments as of December 31, 2018	26
	Notes to the Consolidated Financial Statements of New Mountain Finance Corporation (unaudited)	41
	Report of Independent Registered Public Accounting Firm	82
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	83
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	115
Item 4.	Controls and Procedures	116
PART II. OTHER INFORMATION		117
Item 1.	Legal Proceedings	117
Item 1A.	Risk Factors	117
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	117
Item 3.	Defaults Upon Senior Securities	118
Item 4.	Mine Safety Disclosures	118
Item 5.	Other Information	118
Item 6.	Exhibits	119
	Signatures	121

3

---

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

New Mountain Finance Corporation

 

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

(unaudited)

	September 30, 2019				December 31, 2018
Assets
Investments at fair value
Non-controlled/non-affiliated investments (cost of $2,456,149 and $1,868,785, respectively)	$	2,452,793			$	1,861,323
Non-controlled/affiliated investments (cost of $82,085 and $78,438, respectively)	78,469				77,493
Controlled investments (cost of $442,414 and $382,503, respectively)	466,918				403,137
Total investments at fair value (cost of $2,980,648 and $2,329,726, respectively)	2,998,180				2,341,953
Securities purchased under collateralized agreements to resell (cost of $30,000 and $30,000, respectively)	22,176				23,508
Cash and cash equivalents	69,815				49,664
Interest and dividend receivable	37,330				30,081
Receivable from affiliates	586				288
Other assets	4,041				3,172
Total assets	$	3,132,128			$	2,448,666
Liabilities
Borrowings
Holdings Credit Facility	$	637,563			$	512,563
Unsecured Notes	453,250				336,750
DB Credit Facility	202,000				57,000
Convertible Notes	201,649				270,301
SBA-guaranteed debentures	184,000				165,000
NMFC Credit Facility	138,500				60,000
NMNLC Credit Facility	10,600				—
Deferred financing costs (net of accumulated amortization of $26,933 and $22,234, respectively)	(16,785		)		(17,515		)
Net borrowings	1,810,777				1,384,099
Payable for unsettled securities purchased	99,667				20,147
Management fee payable	18,363				8,392
Incentive fee payable	14,779				6,864
Interest payable	11,972				12,397
Payable to affiliates	1,210				1,021
Deferred tax liability	885				1,006
Other liabilities	5,196				8,471
Total liabilities	1,962,849				1,442,397
Commitments and contingencies (See Note 9)
Net assets
Preferred stock, par value $0.01 per share, 2,000,000 shares authorized, none issued	—				—
Common stock, par value $0.01 per share, 200,000,000 and 100,000,000 shares authorized, respectively, and 87,568,695 and 76,106,372 shares issued and outstanding, respectively	876				761
Paid in capital in excess of par	1,191,881				1,035,629
Accumulated overdistributed earnings	(23,478		)		(30,121		)
Total net assets	$	1,169,279			$	1,006,269
Total liabilities and net assets	$	3,132,128			$	2,448,666
Number of shares outstanding	87,568,695				76,106,372
Net asset value per share	$	13.35			$	13.22

The accompanying notes are an integral part of these consolidated financial statements.

4

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Statements of Operations

(in thousands, except shares and per share data)

(unaudited)

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Investment income
From non-controlled/non-affiliated investments:
Interest income	$	51,452			$	38,332			$	143,927			$	112,278
Dividend income	—				—				—				486
Non-cash dividend income	2,239				1,491				6,282				4,254
Other income	3,599				4,669				7,694				8,550
From non-controlled/affiliated investments:
Interest income	1,051				817				3,088				1,129
Dividend income	788				787				2,326				2,423
Non-cash dividend income	309				4,024				901				12,050
Other income	342				315				934				1,529
From controlled investments:
Interest income	2,717				1,771				7,764				4,342
Dividend income	7,661				5,925				23,383				14,755
Non-cash dividend income	2,273				1,721				6,446				4,683
Other income	163				617				505				1,477
Total investment income	72,594				60,469				203,250				167,956
Expenses
Incentive fee	7,792				6,780				21,642				19,644
Management fee	12,687				10,018				35,302				28,011
Interest and other financing expenses	21,830				14,759				61,695				38,873
Professional fees	834				2,053				2,486				3,455
Administrative expenses	930				846				3,074				2,607
Other general and administrative expenses	492				437				1,302				1,365
Total expenses	44,565				34,893				125,501				93,955
Less: management fees waived (See Note 5)	(3,141		)		(1,766		)		(8,497		)		(4,583		)
Less: expenses waived and reimbursed (See Note 5)	—				—				(335		)		(276		)
Net expenses	41,424				33,127				116,669				89,096
Net investment income before income taxes	31,170				27,342				86,581				78,860
Income tax expense	—				225				13				286
Net investment income	31,170				27,117				86,568				78,574
Net realized gains (losses):
Non-controlled/non-affiliated investments	349				3,254				439				(3,149		)
Controlled investments	6				—				14				—
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments	(8,334		)		(4,048		)		4,106				(22,069		)
Non-controlled/affiliated investments	(143		)		829				(2,671		)		10,908
Controlled investments	1,453				(390		)		3,870				10,471
Securities purchased under collateralized agreements to resell	(1,332		)		—				(1,332		)		(12		)
Benefit (provision) for taxes	281				(2		)		121				(986		)
Net realized and unrealized gains (losses)	(7,720		)		(357		)		4,547				(4,837		)
Net increase in net assets resulting from operations	$	23,450			$	26,760			$	91,115			$	73,737
Basic earnings per share	$	0.27			$	0.35			$	1.11			$	0.97
Weighted average shares of common stock outstanding - basic (See Note 11)	86,987,841				76,106,372				82,020,549				75,994,068
Diluted earnings per share	$	0.26			$	0.32			$	1.01			$	0.91
Weighted average shares of common stock outstanding - diluted (See Note 11)	100,245,426				89,388,999				97,948,225				86,983,697
Distributions declared and paid per share	$	0.34			$	0.34			$	1.02			$	1.02

The accompanying notes are an integral part of these consolidated financial statements.

5

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Statements of Changes in Net Assets

(in thousands, except shares and per share data)

(unaudited)

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Increase (decrease) in net assets resulting from operations:
Net investment income	$	31,170			$	27,117			$	86,568			$	78,574
Net realized gains (losses) on investments	355				3,254				453				(3,149		)
Net change in unrealized (depreciation) appreciation of investments	(7,024		)		(3,609		)		5,305				(690		)
Net change in unrealized depreciation of securities purchased under collateralized agreements to resell	(1,332		)		—				(1,332		)		(12		)
Benefit (provision) for taxes	281				(2		)		121				(986		)
Net increase in net assets resulting from operations	23,450				26,760				91,115				73,737
Capital transactions
Net proceeds from shares sold	94,185				—				153,482				—
Deferred offering costs	(315		)		—				(544		)		—
Distributions declared to stockholders from net investment income	(29,753		)		(25,876		)		(84,472		)		(77,512		)
Reinvestment of distributions	795				—				3,429				2,330
Total net increase (decrease) in net assets resulting from capital transactions	64,912				(25,876		)		71,895				(75,182		)
Net increase (decrease) in net assets	88,362				884				163,010				(1,445		)
Net assets at the beginning of the period	1,080,917				1,032,646				1,006,269				1,034,975
Net assets at the end of the period	$	1,169,279			$	1,033,530			$	1,169,279			$	1,033,530
Capital share activity
Shares sold	6,900,000				—				11,212,500				—
Shares issued from the reinvestment of distributions	58,393				—				249,823				171,279
Net increase in shares outstanding	6,958,393				—				11,462,323				171,279

The accompanying notes are an integral part of these consolidated financial statements.

6

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	September 30, 2019				September 30, 2018
Cash flows from operating activities
Net increase in net assets resulting from operations	$	91,115			$	73,737
Adjustments to reconcile net (increase) decrease in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized (gains) losses on investments	(453		)		3,149
Net change in unrealized (appreciation) depreciation of investments	(5,305		)		690
Net change in unrealized depreciation of securities purchased under collateralized agreements to resell	1,332				12
Amortization of purchase discount	(3,684		)		(3,924		)
Amortization of deferred financing costs	4,699				4,068
Amortization of premium on Convertible Notes	(83		)		(83		)
Non-cash investment income	(22,075		)		(13,469		)
(Increase) decrease in operating assets:
Purchase of investments and delayed draw facilities	(827,462		)		(1,046,015		)
Proceeds from sales and paydowns of investments	207,785				599,218
Cash received for purchase of undrawn portion of revolving credit or delayed draw facilities	195				978
Cash paid for purchase of drawn portion of revolving credit facilities	(338		)		(11,631		)
Cash paid on drawn revolvers	(18,574		)		(19,609		)
Cash repayments on drawn revolvers	13,684				21,514
Interest and dividend receivable	(7,249		)		(18,120		)
Receivable from unsettled securities sold	—				(1,283		)
Receivable from affiliates	(298		)		48
Other assets	(1,054		)		5,350
Increase (decrease) in operating liabilities:
Payable for unsettled securities purchased	79,520				80,781
Management fee payable	9,971				8,993
Incentive fee payable	7,915				6,539
Interest payable	(425		)		3,812
Payable to affiliates	189				125
Deferred tax liability	(121		)		986
Other liabilities	(2,885		)		9,416
Net cash flows used in operating activities	(473,601		)		(294,718		)
Cash flows from financing activities
Net proceeds from shares sold	153,482				—
Distributions paid	(81,043		)		(75,182		)
Offering costs paid	(606		)		—
Proceeds from Holdings Credit Facility	222,500				382,500
Repayment of Holdings Credit Facility	(97,500		)		(228,900		)
Proceeds from Convertible Notes	86,681				115,000
Repayment of Convertible Notes	(155,250		)		—
Proceeds from Unsecured Notes	116,500				190,000
Proceeds from SBA-guaranteed debentures	19,000				15,000
Proceeds from NMFC Credit Facility	268,500				255,000
Repayment of NMFC Credit Facility	(190,000		)		(242,500		)
Proceeds from DB Credit Facility	232,000				—
Repayment of DB Credit Facility	(87,000		)		—
Proceeds from NMNLC Credit Facility	10,600				—
Deferred financing costs paid	(4,112		)		(4,791		)
Net cash flows provided by financing activities	493,752				406,127
Net increase in cash and cash equivalents	20,151				111,409
Cash and cash equivalents at the beginning of the period	49,664				34,936
Cash and cash equivalents at the end of the period	$	69,815			$	146,345
Supplemental disclosure of cash flow information
Cash interest paid	$	58,037			$	30,162
Income taxes paid	10				213
Non-cash operating activities:
Non-cash activity on investments	$	—			$	1,346
Non-cash financing activities:
Value of shares issued in connection with the distribution reinvestment plan	$	3,429			$	2,330
Accrual for offering costs	49				335
Accrual for deferred financing costs	19				373

The accompanying notes are an integral part of these consolidated financial statements.

7

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Non-Controlled/Non-Affiliated Investments
Funded Debt Investments - Canada
Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)**
Healthcare Services		Second lien (3)		9.54% (L + 7.50%/M)		6/1/2018		6/8/2026		$	28,613			$	28,384			$	28,148
		Second lien (8)		9.54% (L + 7.50%/M)		6/1/2018		6/8/2026		7,500				7,443				7,378
										36,113				35,827				35,526				3.04	%
Wolfpack IP Co.**
Software		First lien (2)(9)		8.56% (L + 6.50%/M)		6/14/2019		6/13/2025		9,091				9,004				9,000				0.77	%
Total Funded Debt Investments - Canada										$	45,204			$	44,831			$	44,526			3.81	%
Funded Debt Investments - United Arab Emirates
GEMS Menasa (Cayman) Limited**
Education		First lien (8)		7.04% (L + 5.00%/M)		7/30/2019		7/30/2026		$	33,489			$	33,321			$	33,572			2.87	%
Total Funded Debt Investments - United Arab Emirates										$	33,489			$	33,321			$	33,572			2.87	%
Funded Debt Investments - United Kingdom
Shine Acquisition Co. S.à.r.l / Boing US Holdco Inc.**
Consumer Services		Second lien (2)		9.54% (L + 7.50%/M)		9/25/2017		10/3/2025		$	37,853			$	37,665			$	36,623
		Second lien (8)		9.54% (L + 7.50%/M)		9/25/2017		10/3/2025		6,000				5,970				5,805
										43,853				43,635				42,428				3.63	%
Air Newco LLC**
Software		First lien (2)		6.79% (L + 4.75%/M)		5/25/2018		5/31/2024		19,974				19,933				20,007				1.71	%
Total Funded Debt Investments - United Kingdom										$	63,827			$	63,568			$	62,435			5.34	%
Funded Debt Investments - United States
Benevis Holding Corp.
Healthcare Services		First lien (2)(9)		8.90% (L + 6.32%/Q)		3/15/2018		3/15/2024		$	62,891			$	62,891			$	62,890
		First lien (8)(9)		8.90% (L + 6.32%/Q)		3/15/2018		3/15/2024		15,431				15,431				15,431
		First lien (3)(9)		8.91% (L + 6.32%/Q)		3/29/2019		3/15/2024		7,821				7,821				7,821
										86,143				86,143				86,142				7.38	%
PhyNet Dermatology LLC
Healthcare Services		First lien (2)(9)		7.54% (L + 5.50%/M)		9/17/2018		8/16/2024		50,496				50,064				50,496
		First lien (3)(9)(10) - Drawn		7.55% (L + 5.50%/M)		9/17/2018		8/16/2024		25,441				25,318				25,441
										75,937				75,382				75,937				6.49	%
Integro Parent Inc.
Business Services		First lien (2)(9)		7.84% (L + 5.75%/Q)		10/9/2015		10/31/2022		50,848				50,609				50,848
		Second lien (8)(9)		11.36% (L + 9.25%/Q)		10/9/2015		10/30/2023		10,000				9,938				10,000
										60,848				60,547				60,848				5.20	%
Nomad Buyer, Inc.
Healthcare Services		First lien (2)		7.04% (L + 5.00%/M)		8/3/2018		8/1/2025		58,582				56,889				58,436				5.00	%

The accompanying notes are an integral part of these consolidated financial statements.

8

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Associations, Inc.
Business Services		First lien (2)(9)		9.32% (L + 4.00% + 3.00% PIK/Q)*		7/30/2018		7/30/2024		$	44,215			$	43,981			$	43,928
		First lien (8)(9)		9.32% (L + 4.00% + 3.00% PIK/Q)*		7/30/2018		7/30/2024		5,076				5,050				5,043
		First lien (3)(9)(10) - Drawn		9.32% (L + 4.00% + 3.00% PIK/Q)*		7/30/2018		7/30/2024		5,986				5,953				5,947
										55,277				54,984				54,918				4.70	%
GS Acquisitionco, Inc.
Software		First lien (2)(9)		7.80% (L + 5.75%/M)		8/7/2019		5/24/2024		26,962				26,797				26,793
		First lien (5)(9)		7.80% (L + 5.75%/M)		8/7/2019		5/24/2024		22,462				22,326				22,322
		First lien (3)(9)(10) - Drawn		7.80% (L + 5.75%/M)		8/7/2019		5/24/2024		3,730				3,706				3,706
		First lien (3)(9)(10) - Drawn		7.80% (L + 5.75%/M)		8/7/2019		5/24/2024		1,097				1,090				1,090
										54,251				53,919				53,911				4.61	%
Dealer Tire, LLC
Distribution & Logistics		First lien (2)		7.54% (L + 5.50%/M)		12/4/2018		12/12/2025		53,515				52,293				53,682				4.59	%
Frontline Technologies Group Holdings, LLC
Education		First lien (2)(9)		8.60% (L + 6.50%/Q)		9/18/2017		9/18/2023		23,724				23,636				23,724
		First lien (4)(9)		8.60% (L + 6.50%/Q)		9/18/2017		9/18/2023		22,218				22,099				22,218
		First lien (2)(9)		8.60% (L + 6.50%/Q)		9/18/2017		9/18/2023		7,729				7,674				7,729
										53,671				53,409				53,671				4.59	%
Salient CRGT Inc.
Federal Services		First lien (2)		8.05% (L + 6.00%/M)		1/6/2015		2/28/2022		39,593				39,299				38,405
		First lien (8)		8.05% (L + 6.00%/M)		6/6/2019		2/28/2022		13,529				13,033				13,123
		First lien (3)(10) - Drawn		9.75% (P + 4.75%/Q)		6/26/2018		11/29/2021		2,100				1,932				2,037
										55,222				54,264				53,565				4.58	%
Kronos Incorporated
Software		Second lien (2)		10.50% (L + 8.25%/Q)		10/26/2012		11/1/2024		41,000				40,655				41,768
		Second lien (8)		10.50% (L + 8.25%/Q)		10/26/2012		11/1/2024		11,147				11,147				11,356
										52,147				51,802				53,124				4.54	%
CentralSquare Technologies, LLC
Software		Second lien (3)		9.54% (L + 7.50%/M)		8/15/2018		8/31/2026		47,838				47,282				45,327
		Second lien (8)		9.54% (L + 7.50%/M)		8/15/2018		8/31/2026		7,500				7,413				7,106
										55,338				54,695				52,433				4.48	%
NM GRC Holdco, LLC
Business Services		First lien (2)(9)		8.10% (L + 6.00%/Q)		2/9/2018		2/9/2024		38,443				38,295				38,443
		First lien (2)(9)(10) - Drawn		8.10% (L + 6.00%/Q)		2/9/2018		2/9/2024		10,685				10,640				10,685
										49,128				48,935				49,128				4.20	%
Quest Software US Holdings Inc.
Software		Second lien (2)		10.51% (L + 8.25%/Q)		5/17/2018		5/18/2026		43,697				43,310				43,042				3.68	%
Brave Parent Holdings, Inc.
Software		Second lien (5)		9.76% (L + 7.50%/Q)		4/17/2018		4/17/2026		22,500				22,402				21,206
		Second lien (2)		9.76% (L + 7.50%/Q)		4/17/2018		4/17/2026		16,624				16,475				15,668
		Second lien (8)		9.76% (L + 7.50%/Q)		4/17/2018		4/17/2026		6,000				5,946				5,655
										45,124				44,823				42,529				3.64	%

The accompanying notes are an integral part of these consolidated financial statements.

9

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Symplr Software Intermediate Holdings, Inc. (23)
Symplr Software, Inc. (fka Caliper Software, Inc.)
Healthcare Information Technology		First lien (2)(9)		8.10% (L + 6.00%/Q)		11/30/2018		11/28/2025		$	25,625			$	25,445			$	25,433
		First lien (4)(9)		8.10% (L + 6.00%/Q)		11/30/2018		11/28/2025		14,888				14,786				14,776
										40,513				40,231				40,209				3.44	%
iCIMS, Inc.
Software		First lien (8)(9)		8.56% (L + 6.50%/M)		9/12/2018		9/12/2024		31,636				31,364				31,320
		First lien (8)(9)		8.56% (L + 6.50%/M)		6/14/2019		9/12/2024		8,667				8,584				8,580
										40,303				39,948				39,900				3.41	%
Tenawa Resource Holdings LLC (13)
Tenawa Resource Management LLC
Energy		First lien (3)(9)		10.50% (Base + 8.50%/Q)		5/12/2014		10/30/2024		39,100				39,048				39,100				3.34	%
KAMC Holdings, Inc
Business Services		Second lien (2)(9)		10.18% (L + 8.00%/Q)		8/14/2019		8/13/2027		18,750				18,611				18,609
		Second lien (8)(9)		10.18% (L + 8.00%/Q)		8/14/2019		8/13/2027		18,750				18,611				18,609
										37,500				37,222				37,218				3.18	%
Trader Interactive, LLC
Business Services		First lien (2)(9)		8.54% (L + 6.50%/M)		6/15/2017		6/17/2024		32,014				31,850				32,014
		First lien (8)(9)		8.54% (L + 6.50%/M)		6/15/2017		6/17/2024		4,962				4,937				4,962
										36,976				36,787				36,976				3.16	%
Peraton Holding Corp. (fka MHVC Acquisition Corp.)
Federal Services		First lien (2)		7.30% (L + 5.25%/M)		4/25/2017		4/29/2024		37,001				36,869				36,909				3.16	%
Apptio, Inc.
Software		First lien (8)(9)		9.56% (L + 7.25%/Q)		1/10/2019		1/10/2025		34,076				33,449				33,394				2.86	%
Geo Parent Corporation
Business Services		First lien (2)		7.54% (L + 5.50%/M)		12/13/2018		12/19/2025		33,410				33,257				33,326				2.85	%
Finalsite Holdings, Inc.
Software		First lien (4)(9)		7.76% (L + 5.50%/Q)		9/28/2018		9/25/2024		22,275				22,131				22,275
		First lien (2)(9)		7.76% (L + 5.50%/Q)		9/28/2018		9/25/2024		11,002				10,931				11,002
										33,277				33,062				33,277				2.85	%
TDG Group Holding Company
Consumer Services		First lien (2)(9)		7.60% (L + 5.50%/Q)		5/22/2018		5/31/2024		24,923				24,821				24,923
		First lien (8)(9)		7.60% (L + 5.50%/Q)		5/22/2018		5/31/2024		4,962				4,942				4,962
		First lien (2)(9)		7.60% (L + 5.50%/Q)		5/22/2018		5/31/2024		3,329				3,315				3,329
										33,214				33,078				33,214				2.84	%
Definitive Healthcare Holdings, LLC
Healthcare Information Technology		First lien (8)(9)		8.67% (L + 5.50% + 1.00% PIK/Q)*		8/7/2019		7/16/2026		33,317				33,153				33,150				2.84	%
Idera, Inc.
Software		Second lien (4)		11.05% (L + 9.00%/M)		6/27/2019		6/28/2027		22,500				22,334				22,500
		Second lien (2)		11.05% (L + 9.00%/M)		6/27/2019		6/28/2027		9,500				9,430				9,500
										32,000				31,764				32,000				2.74	%

The accompanying notes are an integral part of these consolidated financial statements.

10

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Ansira Holdings, Inc.
Business Services		First lien (8)		7.79% (L + 5.75%/M)		12/19/2016		12/20/2022		$	28,527			$	28,445			$	27,101
		First lien (3)(10) - Drawn		7.79% (L + 5.75%/M)		12/19/2016		12/20/2022		4,755				4,746				4,517
										33,282				33,191				31,618				2.70	%
DCA Investment Holding, LLC
Healthcare Services		First lien (2)(9)		7.35% (L + 5.25%/Q)		7/2/2015		7/2/2021		17,140				17,083				17,140
		First lien (3)(9)(10) - Drawn		7.35% (L + 5.25%/Q)		12/20/2017		7/2/2021		8,251				8,192				8,251
		First lien (2)(9)		7.35% (L + 5.25%/Q)		12/20/2017		7/2/2021		4,195				4,170				4,195
		First lien (3)(9)(10) - Drawn		9.25% (P + 4.25%/Q)		7/2/2015		7/2/2021		232				230				232
										29,818				29,675				29,818				2.55	%
Conservice, LLC
Business Services		First lien (2)(9)		7.29% (L + 5.25%/M)		1/3/2019		11/29/2024		25,375				25,260				25,248
		First lien (3)(9)(10) - Drawn		7.29% (L + 5.25%/M)		1/3/2019		11/29/2024		4,430				4,408				4,407
										29,805				29,668				29,655				2.54	%
Clarkson Eyecare, LLC
Healthcare Services		First lien (2)(9)		8.37% (L + 6.25%/Q)		8/21/2019		4/2/2021		17,343				17,170				17,170
		First lien (2)		8.39% (L + 6.25%/Q)		9/11/2019		4/2/2021		11,562				11,447				11,447
										28,905				28,617				28,617				2.45	%
Keystone Acquisition Corp.
Healthcare Services		First lien (2)		7.35% (L + 5.25%/Q)		5/10/2017		5/1/2024		24,545				24,426				23,992
		Second lien (2)		11.35% (L + 9.25%/Q)		5/10/2017		5/1/2025		4,500				4,464				4,399
										29,045				28,890				28,391				2.43	%
Kaseya Traverse Inc.
Software		First lien (8)(9)		8.72% (L + 5.50% + 1.00% PIK/S)*		5/9/2019		5/2/2025		27,455				27,195				27,180
		First lien (3)(9)(10) - Drawn		8.60% (L + 6.50%/Q)		5/9/2019		5/2/2025		660				654				654
		First lien (3)(9)(10) - Drawn		8.69% (L + 5.50% + 1.00% PIK/S)*		5/9/2019		5/2/2025		429				425				425
										28,544				28,274				28,259				2.42	%
Sovos Brands Intermediate, Inc.
Food & Beverage		First lien (2)		7.20% (L + 5.00%/S)		11/16/2018		11/20/2025		28,028				27,900				27,888				2.39	%
Confluent Health, LLC
Healthcare Services		First lien (2)		7.10% (L + 5.00%/Q)		6/21/2019		6/24/2026		27,431				27,297				27,294				2.33	%
Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)
Education		Second lien (2)		10.35% (L + 8.25%/Q)		7/26/2018		7/30/2026		24,533				24,475				24,472				2.09	%
AAC Holding Corp.
Education		First lien (2)(9)		10.36% (L + 8.25%/M)		9/30/2015		9/30/2022		24,754				24,657				22,922				1.96	%
Affinity Dental Management, Inc.
Healthcare Services		First lien (4)(9)		8.07% (L + 6.00%/S)		9/17/2019		9/15/2023		10,973				10,973				10,973
		First lien (2)(9)		8.07% (L + 6.00%/S)		9/15/2017		9/15/2023		6,630				6,599				6,630
		First lien (3)(9)		8.09% (L + 6.00%/S)		9/15/2017		9/15/2023		5,237				5,193				5,237
										22,840				22,765				22,840				1.95	%

The accompanying notes are an integral part of these consolidated financial statements.

11

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Integral Ad Science, Inc.
Software		First lien (8)(9)		9.30% (L + 6.00% + 1.25% PIK/M)*		7/19/2018		7/19/2024		$	18,856			$	18,699			$	18,856
		First lien (3)(9)		9.30% (L + 6.00% + 1.25% PIK/M)*		8/27/2019		7/19/2024		3,496				3,461				3,495
										22,352				22,160				22,351				1.91	%
Convey Health Solutions, Inc.
Healthcare Services		First lien (4)		7.39% (L + 5.25%/Q)		9/9/2019		9/4/2026		22,500				22,249				22,247				1.90	%
Navicure, Inc.
Healthcare Services		Second lien (2)		9.54% (L + 7.50%/M)		10/23/2017		10/31/2025		15,970				15,934				16,050
		Second lien (8)		9.54% (L + 7.50%/M)		10/23/2017		10/31/2025		6,000				5,987				6,030
										21,970				21,921				22,080				1.89	%
CRCI Longhorn Holdings, Inc.
Business Services		Second lien (3)		9.29% (L + 7.25%/M)		8/2/2018		8/10/2026		14,349				14,300				14,205
		Second lien (8)		9.29% (L + 7.25%/M)		8/2/2018		8/10/2026		7,500				7,474				7,425
										21,849				21,774				21,630				1.85	%
Avatar Topco, Inc. (22)
EAB Global, Inc.
Education		Second lien (3)		10.13% (L + 7.50%/S)		11/17/2017		11/17/2025		13,950				13,776				13,811
		Second lien (8)		10.13% (L + 7.50%/S)		11/17/2017		11/17/2025		7,500				7,407				7,425
										21,450				21,183				21,236				1.82	%
National Mentor Holdings, Inc. (aka Civitas Solutions, Inc.)
Healthcare Services		Second lien (2)		10.55% (L + 8.50%/M)		2/5/2019		3/8/2027		21,051				20,599				21,051				1.80	%
MED Parentco, LP
Healthcare Services		Second lien (8)		10.29% (L + 8.25%/M)		8/2/2019		8/30/2027		20,857				20,701				20,753				1.77	%
Institutional Shareholder Services, Inc.
Business Services		Second lien (3)		10.60% (L + 8.50%/Q)		3/5/2019		3/5/2027		20,372				20,081				20,321				1.74	%
DiversiTech Holdings, Inc.
Distribution & Logistics		Second lien (2)		9.60% (L + 7.50%/Q)		5/18/2017		6/2/2025		12,000				11,906				11,790
		Second lien (8)		9.60% (L + 7.50%/Q)		5/18/2017		6/2/2025		7,500				7,441				7,369
										19,500				19,347				19,159				1.64	%
Xactly Corporation
Software		First lien (4)(9)		9.30% (L + 7.25%/M)		7/31/2017		7/29/2022		19,047				18,915				19,047				1.63	%
FR Arsenal Holdings II Corp.
Business Services		First lien (2)(9)		9.38% (L + 7.25%/Q)		9/29/2016		9/8/2022		18,403				18,288				18,403				1.57	%
Help/Systems Holdings, Inc.
Software		Second lien (5)		9.79% (L + 7.75%/M)		3/23/2018		3/27/2026		18,208				18,129				18,254				1.56	%
Bluefin Holding, LLC
Software		Second lien (8)		9.86% (L + 7.75%/Q)		9/6/2019		9/6/2027		18,000				18,000				18,000				1.54	%
The Kleinfelder Group, Inc.
Business Services		First lien (4)(9)		6.70% (L + 4.75%/W)		12/18/2018		11/29/2024		17,369				17,291				17,282				1.48	%
PaySimple, Inc.
Software		First lien (2)		7.55% (L + 5.50%/M)		8/19/2019		8/23/2025		17,427				17,254				17,166				1.47	%
Bullhorn, Inc.
Software		First lien (2)		7.60% (L + 5.50%/Q)		9/24/2019		10/1/2025		17,174				17,045				17,045				1.46	%
TIBCO Software Inc.
Software		Subordinated (3)		11.38%/S		11/24/2014		12/1/2021		15,000				14,826				15,661				1.34	%

The accompanying notes are an integral part of these consolidated financial statements.

12

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Hill International, Inc.**
Business Services		First lien (2)(9)		7.79% (L + 5.75%/Q)		6/21/2017		6/21/2023		$	15,445			$	15,392			$	15,444			1.32	%
Netsmart Inc. / Netsmart Technologies, Inc.
Healthcare Information Technology		Second lien (2)		9.54% (L + 7.50%/M)		4/18/2016		10/19/2023		15,000				14,762				14,925				1.28	%
TMK Hawk Parent, Corp.
Distribution & Logistics		First lien (3)		5.57% (L + 3.50%/Q)		6/24/2019		8/28/2024		16,952				14,413				14,155				1.21	%
Transcendia Holdings, Inc.
Packaging		Second lien (8)(9)		10.04% (L + 8.00%/M)		6/28/2017		5/30/2025		14,500				14,342				14,108				1.21	%
Alegeus Technologies Holding Corp.
Healthcare Services		First lien (8)(9)		8.54% (L + 6.25%/Q)		9/5/2018		9/5/2024		13,444				13,385				13,444				1.15	%
Castle Management Borrower LLC
Business Services		First lien (2)(9)		8.41% (L + 6.25%/Q)		5/31/2018		2/15/2024		13,249				13,196				13,249				1.13	%
BackOffice Associates Holdings, LLC
Business Services		First lien (2)(9)		12.70% (L + 7.50% + 3.00% PIK/Q)*		8/25/2017		8/25/2023		13,004				12,925				12,383
		First lien (3)(9)(10) - Drawn		12.70% (L + 7.50% + 3.00% PIK/Q)*		8/25/2017		8/25/2023		835				828				795
										13,839				13,753				13,178				1.13	%
Ministry Brands, LLC
Software		First lien (2)(9)		6.04% (L + 4.00%/M)		12/7/2016		12/2/2022		2,940				2,931				2,940
		Second lien (8)(9)		11.34% (L + 9.25%/Q)		12/7/2016		6/2/2023		7,840				7,802				7,840
		Second lien (3)(9)		11.34% (L + 9.25%/Q)		12/7/2016		6/2/2023		2,160				2,149				2,160
		First lien (3)(9)(10) - Drawn		7.04% (L + 5.00%/M)		12/7/2016		12/2/2022		200				199				200
										13,140				13,081				13,140				1.12	%
OEConnection LLC
Business Services		Second lien (2)		10.27% (L + 8.25%/M)		9/25/2019		9/25/2027		12,044				11,924				11,924				1.02	%
CFS Management, LLC
Healthcare Services		First lien (2)(9)		7.95% (L + 5.75%/S)		8/6/2019		7/1/2024		11,762				11,705				11,703				1.00	%
CHA Holdings, Inc.
Business Services		Second lien (4)		11.08% (L + 8.75%/Q)		4/3/2018		4/10/2026		7,012				6,950				7,082
		Second lien (3)		11.08% (L + 8.75%/Q)		4/3/2018		4/10/2026		4,453				4,414				4,497
										11,465				11,364				11,579				0.99	%
Alert Holding Company, Inc. (14)
Appriss Holdings, Inc.
Business Services		First lien (8)		7.60% (L + 5.50%/Q)		5/24/2019		5/29/2026		11,081				10,989				10,915				0.93	%
PPVA Black Elk (Equity) LLC
Business Services		Subordinated (3)(9)		—		5/3/2013		—		14,500				14,500				10,718				0.92	%
NorthStar Financial Services Group, LLC
Software		Second lien (5)		9.54% (L + 7.50%/M)		5/23/2018		5/25/2026		10,607				10,584				10,501				0.90	%
Vectra Co.
Business Products		Second lien (8)		9.29% (L + 7.25%/M)		2/23/2018		3/8/2026		10,788				10,753				10,465				0.89	%
Masergy Holdings, Inc.
Business Services		Second lien (2)		9.60% (L + 7.50%/Q)		12/14/2016		12/16/2024		10,500				10,457				10,316				0.88	%

The accompanying notes are an integral part of these consolidated financial statements.

13

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Quartz Holding Company
Software		Second lien (3)		10.07% (L + 8.00%/M)		4/2/2019		4/2/2027		$	10,000			$	9,808			$	10,050			0.86	%
VT Topco, Inc.
Business Services		Second lien (4)		9.10% (L + 7.00%/Q)		8/14/2018		7/31/2026		10,000				9,977				10,025				0.86	%
AG Parent Holdings, LLC
Healthcare Services		First lien (2)		7.26% (L + 5.00%/Q)		7/30/2019		7/31/2026		10,000				9,951				9,969				0.85	%
Amerijet Holdings, Inc.
Distribution & Logistics		First lien (4)(9)		10.04% (L + 8.00%/M)		7/15/2016		7/15/2021		8,490				8,464				8,490
		First lien (4)(9)		10.04% (L + 8.00%/M)		7/15/2016		7/15/2021		1,415				1,411				1,415
										9,905				9,875				9,905				0.85	%
Stats Intermediate Holdings, LLC**
Business Services		First lien (2)		7.30% (L + 5.25%/Q)		5/22/2019		7/10/2026		10,000				9,878				9,775				0.84	%
Affordable Care Holding Corp.
Healthcare Services		First lien (2)		6.84% (L + 4.75%/M)		3/18/2019		10/24/2022		9,923				9,750				9,600				0.82	%
Teneo Holdings, LLC
Business Services		First lien (2)		7.29% (L + 5.25%/M)		7/15/2019		7/11/2025		10,000				9,805				9,600				0.82	%
AgKnowledge Holdings Company, Inc.
Business Services		First Lien (4)		6.79% (L + 4.75%/M)		11/30/2018		7/23/2023		9,379				9,339				9,356				0.80	%
WD Wolverine Holdings, LLC
Healthcare Services		First lien (2)		7.54% (L + 5.50%/M)		2/22/2017		8/16/2022		9,126				8,955				9,058				0.77	%
JAMF Holdings, Inc.
Software		First lien (8)(9)		9.18% (L + 7.00%/Q)		11/13/2017		11/11/2022		8,757				8,698				8,757
		First lien (3)(9)(10) - Drawn		9.05% (L + 7.00%/M)		11/13/2017		11/11/2022		263				260				263
										9,020				8,958				9,020				0.77	%
Wrike, Inc.
Software		First lien (8)(9)		8.80% (L + 6.75%/M)		12/31/2018		12/31/2024		9,067				8,985				8,976				0.77	%
Zywave, Inc.
Software		Second lien (4)(9)		11.28% (L + 9.00%/Q)		11/22/2016		11/17/2023		6,980				6,945				6,980
		First lien (3)(9)(10) - Drawn		7.04% (L + 5.00%/Q)		11/22/2016		11/17/2022		670				665				670
										7,650				7,610				7,650				0.65	%
J.D. Power (fka J.D. Power and Associates)
Business Services		Second lien (3)		10.54% (L + 8.50%/M)		6/9/2016		9/7/2024		7,583				7,516				7,507				0.64	%
Restaurant Technologies, Inc.
Business Services		Second lien (4)		8.54% (L + 6.50%/M)		9/24/2018		10/1/2026		6,722				6,707				6,756				0.58	%
CP VI Bella Midco, LLC
Healthcare Services		Second lien (3)		8.79% (L + 6.75%/M)		1/25/2018		12/29/2025		6,732				6,704				6,654				0.57	%
DG Investment Intermediate Holdings 2, Inc. (aka Convergint Technologies Holdings, LLC)
Business Services		Second lien (3)		8.79% (L + 6.75%/M)		1/29/2018		2/2/2026		6,732				6,704				6,564				0.56	%
DealerSocket, Inc.
Software		First lien (2)		6.79% (L + 4.75%/M)		4/16/2018		4/26/2023		6,627				6,590				6,561				0.56	%
Recorded Future, Inc.
Software		First lien (8)(9)		8.79% (L + 6.75%/M)		8/26/2019		7/3/2025		6,250				6,219				6,219				0.53	%
Solera LLC / Solera Finance, Inc.
Software		Subordinated (3)		10.50%/S		2/29/2016		3/1/2024		5,000				4,837				5,311				0.45	%

The accompanying notes are an integral part of these consolidated financial statements.

14

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Diligent Corporation
Software		First lien (3)(9)(10) - Drawn		7.76% (L + 5.50%/S)		12/19/2018		4/14/2022		$	5,026			$	4,998			$	4,994			0.43	%
ADG, LLC
Healthcare Services		Second lien (3)(9)		12.20% (L + 10.00%/S)		10/3/2016		3/28/2024		5,176				5,124				4,484				0.38	%
York Risk Services Holding Corp.
Business Services		Subordinated (3)		8.50%/S		9/17/2014		10/1/2022		3,000				3,000				3,064				0.26	%
First American Payment Systems, L.P.
Business Services		First lien (2)		7.06% (L + 4.75%/Q)		1/3/2017		1/5/2024		3,077				3,057				3,062				0.26	%
Sphera Solutions, Inc.
Software		First lien (2)		9.13% (L + 7.00%/Q)		9/10/2019		6/14/2022		2,495				2,471				2,470				0.21	%
Ensemble S Merger Sub, Inc.
Software		Subordinated (3)		9.00%/S		9/21/2015		9/30/2023		2,000				1,960				2,057				0.18	%
Education Management Corporation (12)
Education Management II LLC
Education		First lien (2)		11.00% (P + 5.50%/Q)(24)		1/5/2015		7/2/2020		211				205				2
		First lien (3)		11.00% (P + 5.50%/Q)(24)		1/5/2015		7/2/2020		119				116				1
		First lien (2)		14.00% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		300				292				—
		First lien (3)		14.00% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		169				165				—
		First lien (2)		13.50% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		145				120				—
		First lien (2)		13.50% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		4				3				—
		First lien (3)		13.50% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		82				67				—
		First lien (3)		13.50% (P + 8.50%/M)(24)		1/5/2015		7/2/2020		2				2				—
										1,032				970				3				0.00	%
PPVA Fund, L.P.
Business Services		Collateralized Financing (25)		—		11/7/2014		—		—				—				—				—	%
Total Funded Debt Investments - United States										$	2,258,919			$	2,238,783			$	2,231,953			190.88	%
Total Funded Debt Investments										$	2,401,439			$	2,380,503			$	2,372,486			202.90	%
Equity - Hong Kong
Bach Special Limited (Bach Preference Limited)**
Education		Preferred shares (3)(9)(21)		—		9/1/2017		—		72,901				$	7,210			$	7,290			0.62	%
Total Shares - Hong Kong														$	7,210			$	7,290			0.62	%
Equity - United States
Avatar Topco, Inc.
Education		Preferred shares (3)(9)(22)		—		11/17/2017		—		35,750				$	44,597			$	44,756			3.83	%

The accompanying notes are an integral part of these consolidated financial statements.

15

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Symplr Software Intermediate Holdings, Inc.(23)
Healthcare Information Technology		Preferred shares (4)(9)		—		11/30/2018		—		$	7,500			$	8,239			$	8,226
		Preferred shares (3)(9)		—		11/30/2018		—		2,586				2,840				2,836
														11,079				11,062				0.94	%
Tenawa Resource Holdings LLC (13)
QID NGL LLC		Preferred shares (6)(9)		—		10/30/2017		—		1,623,385				1,623				2,699
Energy		Ordinary shares (6)(9)		—		5/12/2014		—		5,290,997				5,291				8,357
														6,914				11,056				0.95	%
Alert Holding Company, Inc. (14)
Alert Intermediate Holdings I, Inc.
Business Services		Preferred shares (3)(9)		—		5/31/2019		—		6,111				6,262				6,259				0.54	%
Education Management Corporation(12)
Education		Preferred shares (2)		—		1/5/2015		—		3,331				200				—
		Preferred shares (3)		—		1/5/2015		—		1,879				113				—
		Ordinary shares (2)		—		1/5/2015		—		2,994,065				100				—
		Ordinary shares (3)		—		1/5/2015		—		1,688,976				56				—
														469				—				—	%
Total Shares - United States														$	69,321			$	73,133			6.26	%
Total Shares														$	76,531			$	80,423			6.88	%
Warrants - United States														.
ASP LCG Holdings, Inc.
Education		Warrants (3)(9)		—		5/5/2014		5/5/2026		622				$	37			$	827			0.07	%
Total Warrants - United States														$	37			$	827			0.07	%
Total Funded Investments														$	2,457,071			$	2,453,736			209.85	%
Unfunded Debt Investments - Canada
Wolfpack IP Co.**
Software		First lien (3)(9)(10) - Undrawn		—		6/14/2019		6/13/2025		$	909			$	(9	)		$	(9	)		(0.00	)%
Total Unfunded Debt Investments - Canada										$	909			$	(9	)		$	(9	)		(0.00	)%
Unfunded Debt Investments - United States														`
DCA Investment Holding, LLC
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		4/16/2019		4/16/2021		$	20,426			$	—			$	—
		First lien (3)(9)(10) - Undrawn		—		12/20/2017		12/20/2019		952				(8		)		—
		First lien (3)(9)(10) - Undrawn		—		7/2/2015		7/2/2021		1,868				(19		)		—
										23,246				(27		)		—				—	%
Ministry Brands, LLC
Software		First lien (3)(9)(10) - Undrawn		—		12/7/2016		12/2/2022		800				(4		)		—				—	%

The accompanying notes are an integral part of these consolidated financial statements.

16

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Zywave, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		11/22/2016		11/17/2022		$	1,330			$	(10	)		$	—			—	%
Trader Interactive, LLC
Business Services		First lien (3)(9)(10) - Undrawn		—		6/15/2017		6/15/2023		1,673				(13		)		—				—	%
Xactly Corporation
Software		First lien (3)(9)(10) - Undrawn		—		7/31/2017		7/29/2022		992				(10		)		—				—	%
Integro Parent Inc.
Business Services		First lien (3)(9)(10) - Undrawn		—		6/8/2018		10/30/2021		6,743				(34		)		—				—	%
Affinity Dental Management, Inc.
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		9/15/2017		3/15/2023		1,738				(17		)		—				—	%
JAMF Holdings, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		11/13/2017		11/11/2022		488				(5		)		—				—	%
NM GRC Holdco, LLC
Business Services		First lien (2)(9)(10) - Undrawn		—		2/9/2018		2/9/2020		771				(2		)		—				—	%
TDG Group Holding Company
Consumer Services		First lien (3)(9)(10) - Undrawn		—		5/22/2018		5/31/2024		5,044				(25		)		—				—	%
Integral Ad Science, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		7/19/2018		7/19/2023		1,429				(14		)		—				—	%
Finalsite Holdings, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		9/25/2018		9/25/2024		2,521				(19		)		—				—	%
PhyNet Dermatology LLC
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		9/17/2018		8/16/2020		19,864				(99		)		—				—	%
AgKnowledge Holdings Company, Inc.
Business Services		First lien (3)(10) - Undrawn		—		11/30/2018		7/23/2023		526				(3		)		(1		)		(0.00	)%
BackOffice Associates Holdings, LLC
Business Services		First lien (3)(9)(10) - Undrawn		—		8/25/2017		8/25/2023		52				—				(2		)		(0.00	)%
DealerSocket, Inc.
Software		First lien (3)(10) - Undrawn		—		4/16/2018		4/26/2023		560				(4		)		(6		)		(0.00	)%
Recorded Future, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		8/26/2019		1/3/2021		500				(3		)		(3		)
		First lien (3)(9)(10) - Undrawn		—		8/26/2019		7/3/2025		750				(4		)		(4		)
										1,250				(7		)		(7		)		(0.00	)%
Wrike, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		12/31/2018		12/31/2024		933				(9		)		(9		)		(0.00	)%
Alert Holding Company, Inc. (14)
Appriss Holdings, Inc.
Business Services		First lien (3)(10) - Undrawn		—		5/24/2019		5/30/2025		930				(9		)		(14		)		(0.00	)%

The accompanying notes are an integral part of these consolidated financial statements.

17

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Bullhorn, Inc.
Software		First lien (3)(10) - Undrawn		—		9/24/2019		10/1/2021		$	1,419			$	(11	)		$	(11	)
		First lien (3)(10) - Undrawn		—		9/24/2019		10/1/2025		852				(6		)		(6		)
										2,271				(17		)		(17		)		(0.00	)%
CFS Management, LLC
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		8/6/2019		7/1/2024		3,468				(17		)		(17		)		(0.00	)%
Conservice, LLC
Business Services		First lien (3)(9)(10) - Undrawn		—		1/3/2019		11/29/2024		1,360				(7		)		(7		)
		First lien (3)(9)(10) - Undrawn		—		1/3/2019		6/30/2020		2,283				—				(11		)
										3,643				(7		)		(18		)		(0.00	)%
iCIMS, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		9/12/2018		9/12/2024		1,977				(20		)		(20		)		(0.00	)%
Bluefin Holding, LLC
Software		First lien (3)(10) - Undrawn		—		9/6/2019		9/6/2024		1,515				(23		)		(23		)		(0.00	)%
Associations, Inc.
Business Services		First lien (3)(9)(10) - Undrawn		—		7/30/2018		7/30/2021		4,300				(27		)		(28		)
		First lien (3)(9)(10) - Undrawn		—		7/30/2018		7/30/2024		2,033				(13		)		(13		)
										6,333				(40		)		(41		)		(0.00	)%
Apptio, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		1/10/2019		1/10/2025		2,066				(41		)		(41		)		(0.00	)%
Kaseya Traverse Inc.
Software		First lien (3)(9)(10) - Undrawn		—		5/9/2019		5/3/2021		2,873				—				(29		)
		First lien (3)(9)(10) - Undrawn		—		5/9/2019		5/2/2025		1,651				(17		)		(17		)
										4,524				(17		)		(46		)		(0.01	)%
Definitive Healthcare Holdings, LLC
Healthcare Information Technology		First lien (3)(9)(10) - Undrawn		—		8/7/2019		7/16/2021		7,391				—				(37		)
		First lien (3)(9)(10) - Undrawn		—		8/7/2019		7/16/2024		1,848				(9		)		(9		)
										9,239				(9		)		(46		)		(0.01	)%
Diligent Corporation
Software		First lien (3)(9)(10) - Undrawn		—		12/19/2018		12/19/2020		8,395				(52		)		(52		)		(0.01	)%
PaySimple, Inc.
Software		First lien (3)(10) - Undrawn		—		8/19/2019		8/24/2020		5,681				—				(85		)		(0.01	)%
Salient CRGT Inc.
Federal Services		First lien (3)(10) - Undrawn		—		6/26/2018		11/29/2021		4,025				(322		)		(121		)		(0.01	)%
Ansira Holdings, Inc.
Business Services		First lien (3)(10) - Undrawn		—		12/19/2016		4/16/2020		2,437				(10		)		(122		)		(0.01	)%

The accompanying notes are an integral part of these consolidated financial statements.

18

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
GS Acquisitionco, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		8/7/2019		8/2/2021		$	35,103			$	—			$	(219	)
		First lien (3)(9)(10) - Undrawn		—		8/7/2019		5/24/2024		4,388				(27		)		(27		)
										39,491				(27		)		(246		)		(0.02	)%
Total Unfunded Debt Investments - United States										$	165,955			$	(913	)		$	(934	)		(0.08	)%
Total Unfunded Debt Investments										$	166,864			$	(922	)		$	(943	)		(0.08	)%
Total Non-Controlled/Non-Affiliated Investments														$	2,456,149			$	2,452,793			209.77	%
Non-Controlled/Affiliated Investments (26)
Funded Debt Investments - United States
Permian Holdco 1, Inc.
Permian Holdco 2, Inc.
Permian Holdco 3, Inc.
Energy		First lien (3)(9)		14.60% (L + 7.50% + 5.00% PIK/Q)*		6/14/2018		6/30/2022		$	10,414			$	10,414			$	10,414
		First lien (3)(9)(10) - Drawn		8.54% (L + 6.50%/M)		6/14/2018		6/30/2022		17,750				17,750				17,750
		Subordinated (3)(9)		18.00% PIK/Q*		12/26/2018		6/30/2022		2,752				2,752				2,752
		Subordinated (3)(9)		14.00% PIK/Q*		10/31/2016		10/15/2021		2,553				2,553				2,174
		Subordinated (3)(9)		14.00% PIK/Q*		10/31/2016		10/15/2021		1,315				1,315				1,120
										34,784				34,784				34,210				2.92	%
Sierra Hamilton Holdings Corporation
Energy		Second lien (3)		15.00% PIK/Q*		9/12/2019		9/12/2023		1,390				1,356				1,355				0.12	%
Total Funded Debt Investments - United States										$	36,174			$	36,140			$	35,565			3.04	%
Equity - United States
NMFC Senior Loan Program I LLC**
Investment Fund		Membership interest (3)(9)		—		6/13/2014		—		—				$	23,000			$	23,000			1.97	%
Sierra Hamilton Holdings Corporation
Energy		Ordinary shares (2)(9)		—		7/31/2017		—		25,000,000				11,501				9,897
		Ordinary shares (3)(9)		—		7/31/2017		—		2,786,000				1,281				1,103
														$	12,782			$	11,000			0.94	%
Permian Holdco 1, Inc.
Energy		Preferred shares (3)(9)(16)		—		10/31/2016		—		1,929,949				8,813				8,704
		Ordinary shares (3)(9)		—		10/31/2016		—		1,366,452				1,350				200
														$	10,163			$	8,904			0.76	%
Total Shares - United States														$	45,945			$	42,904			3.67	%
Total Funded Investments														$	82,085			$	78,469			6.71	%

The accompanying notes are an integral part of these consolidated financial statements.

19

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
Unfunded Debt Investments - United States
Permian Holdco 3, Inc.
Energy		First lien (3)(9)(10) - Undrawn		—		6/14/2018		6/30/2022		$	2,250			$	—			$	—			—	%
Total Unfunded Debt Investments - United States										$	2,250			$	—			$	—			—	%
Total Non-Controlled/Affiliated Investments														$	82,085			$	78,469			6.71	%
Controlled Investments (27)
Funded Debt Investments - United States
Edmentum Ultimate Holdings, LLC (15)
Edmentum, Inc. (fka Plato, Inc.) (Archipelago Learning, Inc.)
Education		First lien (2)		10.76% (L + 4.50% + 4.00% PIK/Q)*		8/6/2018		6/9/2021		$	10,055			$	8,965			$	10,055
		Second lien (3)(9)		7.00% PIK/Q*		2/23/2018		12/9/2021		11,788				11,317				11,788
		Second lien (3)(9)(10) - Drawn		5.00% PIK/Q*		6/9/2015		12/9/2021		5,721				5,721				5,721
		Subordinated (3)(9)		8.50% PIK/Q*		6/9/2015		12/9/2021		5,213				5,210				5,213
		Subordinated (2)(9)		10.00% PIK/Q*		6/9/2015		12/9/2021		19,966				19,966				18,891
		Subordinated (3)(9)		10.00% PIK/Q*		6/9/2015		12/9/2021		4,912				4,912				4,647
										57,655				56,091				56,315				4.82	%
NHME Holdings Corp. (20)
National HME, Inc.
Healthcare Services		Second lien (3)(9)		12.00% PIK/Q*		11/27/2018		5/27/2024		16,039				12,433				11,629
		Second lien (3)(9)		12.00% PIK/Q*		11/27/2018		5/27/2024		8,864				7,972				7,755
										24,903				20,405				19,384				1.66	%
UniTek Global Services, Inc.
Business Services		First lien (2)(9)		8.54% (L + 5.50% + 1.00% PIK/M)*		6/29/2018		8/20/2024		12,458				12,458				12,458
		First lien (2)(9)		8.54% (L + 5.50% + 1.00% PIK/M)*		6/29/2018		8/20/2024		2,492				2,492				2,492
										14,950				14,950				14,950				1.28	%
Total Funded Debt Investments - United States										$	97,508			$	91,446			$	90,649			7.76	%
Equity - Canada
NM APP Canada Corp.**
Net Lease		Membership interest (7)(9)		—		9/13/2016		—		—				$	7,345			$	10,147			0.87	%
Total Shares - Canada														$	7,345			$	10,147			0.87	%
Equity - United States
NMFC Senior Loan Program III LLC**
Investment Fund		Membership interest (3)(9)		—		5/4/2018		—		—				$	100,000			$	100,000			8.55	%
NMFC Senior Loan Program II LLC**
Investment Fund		Membership interest (3)(9)		—		5/3/2016		—		—				79,400				79,400				6.79	%

The accompanying notes are an integral part of these consolidated financial statements.

20

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
UniTek Global Services, Inc.
Business Services		Preferred shares (2)(9)(17)		—		1/13/2015		—		27,442,890				25,063				22,275
		Preferred shares (3)(9)(17)		—		1/13/2015		—		7,583,909				6,926				6,156
		Preferred shares (3)(9)(18)		—		6/30/2017		—		15,033,196				15,033				14,366
		Preferred shares (3)(9)(19)		—		8/17/2018		—		8,185,040				8,185				8,185
		Preferred shares (3)(9)(19)		—		8/29/2019		—		3,325,931				3,326				3,326
		Ordinary shares (2)(9)		—		1/13/2015		—		2,096,477				1,925				1,820
		Ordinary shares (3)(9)		—		1/13/2015		—		1,993,749				532				1,730
														60,990				57,858				4.95	%
NM NL Holdings, L.P.**
Net Lease		Membership interest (7)(9)		—		6/20/2018		—		—				32,800				35,852				3.06	%
NM GLCR LP
Net Lease		Membership interest (7)(9)		—		2/1/2018		—		—				14,750				23,113				1.98	%
NM YI, LLC
Net Lease		Membership interest (7)(9)		—		9/30/2019		—		—				17,262				17,265				1.48	%
NM CLFX LP
Net Lease		Membership interest (7)(9)		—		10/6/2017		—		—				12,538				12,714				1.09	%
NM APP US LLC
Net Lease		Membership interest (7)(9)		—		9/13/2016		—		—				5,080				6,415				0.55	%
NM DRVT LLC
Net Lease		Membership interest (7)(9)		—		11/18/2016		—		—				5,152				5,785				0.49	%
NHME Holdings Corp.(20)
Healthcare Services		Ordinary Shares (3)(9)		—		11/27/2018		—		640,000				4,000				4,000				0.34	%
NM JRA LLC
Net Lease		Membership interest (7)(9)		—		8/12/2016		—		—				2,043				3,667				0.31	%
Edmentum Ultimate Holdings, LLC(15)
Education		Ordinary shares (3)(9)		—		6/9/2015		—		123,968				11				1,484
		Ordinary shares (2)(9)		—		6/9/2015		—		107,143				9				1,282
														20				2,766				0.24	%
NM KRLN LLC
Net Lease		Membership interest (7)(9)		—		11/15/2016		—		—				7,510				2,292				0.20	%

The accompanying notes are an integral part of these consolidated financial statements.

21

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

Portfolio Company, Location and Industry (1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity / Expiration Date		Principal  Amount,  Par Value  or Shares				Cost				Fair  Value				Percent of Net Assets
NM GP Holdco, LLC**
Net Lease		Membership interest (7)(9)		—		6/20/2018		—		—				$	309			$	331			0.03	%
Total Shares - United States														$	341,854			$	351,458			30.06	%
Total Shares														$	349,199			$	361,605			30.93	%
Warrants - United States
Edmentum Ultimate Holdings, LLC(15)
Education		Warrants (3)(9)		—		2/23/2018		5/5/2026		1,141,846				$	769			$	13,664			1.16	%
NHME Holdings Corp.(20)
Healthcare Services		Warrants (3)(9)		—		11/27/2018		—		160,000				1,000				1,000				0.09	%
Total Warrants - United States														$	1,769			$	14,664			1.25	%
Total Funded Investments														$	442,414			$	466,918			39.93	%
Unfunded Debt Investments - United States
Edmentum Ultimate Holdings, LLC(15)
Edmentum, Inc. (fka Plato, Inc.) (Archipelago Learning, Inc.)
Education		Second lien (3)(9)(10) - Undrawn		—		6/9/2015		12/9/2021		$	2,086			$	—			$	—			—	%
Total Unfunded Debt Investments - United States										$	2,086			$	—			$	—			—	%
Total Controlled Investments														$	442,414			$	466,918			39.93	%
Total Investments														$	2,980,648			$	2,998,180			256.41	%

(1)	New Mountain Finance Corporation (the “Company”) generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.

(2)	Investment is pledged as collateral for the Holdings Credit Facility, a revolving credit facility among the Company as Collateral Manager, New Mountain Finance Holdings, L.L.C. (“NMF Holdings”) as the Borrower, Wells Fargo Bank, National Association as the Administrative Agent, and Collateral Custodian. See Note 7. Borrowings, for details.

(3)	Investment is pledged as collateral for the NMFC Credit Facility, a revolving credit facility among the Company as the Borrower and Goldman Sachs Bank USA as the Administrative Agent and the Collateral Agent and Goldman Sachs Bank USA, Morgan Stanley Bank, N.A. and Stifel Bank & Trust as Lenders. See Note 7. Borrowings, for details.

(4)	Investment is held in New Mountain Finance SBIC, L.P.

(5)	Investment is held in New Mountain Finance SBIC II, L.P.

(6)	Investment is held in NMF QID NGL Holdings, Inc.

(7)	Investment is held in New Mountain Net Lease Corporation.

(8)	Investment is pledged as collateral for the DB Credit Facility, a revolving credit facility among New Mountain Finance DB, L.L.C as the Borrower and Deutsche Bank AG, New York Branch as the Facility Agent. See Note 7. Borrowings, for details.

(9)	The fair value of the Company's investment is determined using unobservable inputs that are significant to the overall fair value measurement. See Note 4. Fair Value, for details.

(10)	Par Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities or delayed draws. Cost amounts represent the cash received at settlement date net of the impact of paydowns and cash paid for drawn revolvers or delayed draws.

(11)

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 London Interbank Offered Rate (L), the Prime Rate (P) and the alternative base rate (Base) and which resets daily (D), weekly (W), monthly (M), quarterly (Q), semi-annually (S) or annually (A). For each investment the current interest rate provided reflects the rate in effect as of September 30, 2019.

(12)

The Company holds investments in Education Management Corporation and one related entity of Education Management Corporation. The Company holds series A-1 convertible preferred stock and common stock in Education Management Corporation and holds a tranche A first lien term loan and a tranche B first lien term loan in Education Management II LLC, which is an indirect subsidiary of Education Management Corporation.

The accompanying notes are an integral part of these consolidated financial statements.

22

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

(13)

The Company holds investments in two related entities of Tenawa Resource Holdings LLC. The Company holds 4.77% of the common units in QID NGL LLC (which at closing represented 98.1% of the ownership in the common units in Tenawa Resource Holdings LLC), class A preferred units in QID NGL LLC and a first lien investment in Tenawa Resource Management LLC, a wholly-owned subsidiary of Tenawa Resource Holdings LLC.

(14)	The Company holds investments in two wholly-owned subsidiaries of Alert Holding Company, Inc. The Company holds a first lien term loan and a first lien revolver in Appriss Holdings, Inc. and preferred equity in Alert Intermediate Holdings I, Inc. The preferred equity is entitled to receive preferential dividends at a rate of L + 10.0% per annum.

(15)	The Company holds investments in Edmentum Ultimate Holdings, LLC and its related entities. The Company holds subordinated notes, ordinary equity, and warrants in Edmentum Ultimate Holdings, LLC and holds a first lien term loan, second lien revolver and a second lien term loan in Edmentum, Inc. and Archipelago Learning, Inc., which are wholly-owned subsidiaries of Edmentum Ultimate Holdings, LLC.

(16)	The Company holds preferred equity in Permian Holdco 1, Inc. that is entitled to receive cumulative preferential dividends at a rate of 12.0% per annum payable in additional shares.

(17)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.

(18)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.

(19)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to received cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.

(20)	The Company holds ordinary shares and warrants in NHME Holdings Corp., as well as second lien term loans in National HME, Inc., a wholly-owned subsidiary of NHME Holdings Corp.

(21)	The Company holds preferred equity in Bach Special Limited (Bach Preference Limited) that is entitled to receive cumulative preferential dividends at a rate of 12.25% per annum payable in additional shares.

(22)	The Company holds preferred equity in Avatar Topco, Inc., and holds a second lien term loan investment in EAB Global, Inc., a wholly-owned subsidiary of Avatar Topco, Inc. The preferred equity is entitled to receive cumulative preferential dividends at a rate of L + 11.00% per annum.

(23)	The Company holds preferred equity in Symplr Intermediate Holdings, Inc. and holds a first lien term loan investment in Symplr Software Inc, Inc. (fka Caliper Software, Inc.), a wholly-owned subsidiary of Symplr Software Intermediate Holdings, Inc. The preferred equity is entitled to receive preferential dividends at a rate of L + 10.50% per annum.

(24)	Investment or a portion of the investment is on non-accrual status. See Note 3. Investments, for details.

(25)	The Company holds one security purchased under a collateralized agreement to resell on its Consolidated Statement of Assets and Liabilities with a cost basis of $30,000 and a fair value of $22,176 as of September 30, 2019. See Note 2. Summary of Significant Accounting Policies, for details.

(26)

Denotes investments in which the Company is an “Affiliated Person”, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), due to owning or holding the power to vote 5.0% or more of the outstanding voting securities of the investment but not controlling the company. Fair value as of September 30, 2019 and December 31, 2018, along with transactions during the nine months ended September 30, 2019 in which the issuer was a non-controlled/affiliated investment, is as follows:

Portfolio Company		Fair Value at December 31, 2018				Gross Additions (A)				Gross Redemptions (B)				Net Realized Gains (Losses)				Net Change In Unrealized Appreciation (Depreciation)				Fair Value at September 30, 2019				Interest Income				Dividend Income				Other Income
NMFC Senior Loan Program I LLC		$	23,000			$	—			$	—			$	—			$	—			$	23,000			$	—			$	2,326			$	865
Permian Holdco 1, Inc. / Permian Holdco 2, Inc. / Permian Holdco 3, Inc.		41,966				2,366				(75		)		—				(1,143		)		43,114				3,076				901				33
Sierra Hamilton Holdings Corporation		12,527				1,356				—				—				(1,528		)		12,355				12				—				36
Total Non-Controlled/Affiliated Investments		$	77,493			$	3,722			$	(75	)		$	—			$	(2,671	)		$	78,469			$	3,088			$	3,227			$	934

(A)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, payment-in-kind ("PIK") interest or dividends, the amortization of discounts, reorganizations or restructurings and the movement of an existing portfolio company into this category from a different category.

(B)	Gross redemptions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, reorganizations or restructurings and the movement of an existing portfolio company out of this category into a different category.

The accompanying notes are an integral part of these consolidated financial statements.

23

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(in thousands, except shares)

(unaudited)

(27)	Denotes investments in which the Company is in “Control”, as defined in the 1940 Act, due to owning or holding the power to vote 25.0% or more of the outstanding voting securities of the investment. Fair value as of September 30, 2019 and December 31, 2018, along with transactions during the nine months ended September 30, 2019 in which the issuer was a controlled investment, is as follows:

Portfolio Company		Fair Value at December 31, 2018				Gross Additions (A)				Gross Redemptions (B)				Net  Realized Gains (Losses)				Net Change In Unrealized Appreciation (Depreciation)				Fair Value at September 30, 2019				Interest Income				Dividend Income				Other Income
Edmentum Ultimate Holdings, LLC/Edmentum Inc.		$	45,011			$	10,830			$	(2,194	)		$	14			$	19,098			$	72,745			$	4,266			$	—			$	17
National HME, Inc./NHME Holdings Corp.		22,722				2,573				—				—				(911		)		24,384				2,573				—				—
NM APP CANADA CORP		9,727				—				—				—				420				10,147				—				675				—
NM APP US LLC		5,912				—				—				—				503				6,415				—				403				—
NM CLFX LP		12,770				—				—				—				(56		)		12,714				—				1,183				—
NM DRVT LLC		5,619				—				—				—				166				5,785				—				394				—
NM JRA LLC		2,537				—				—				—				1,130				3,667				—				197				—
NM GLCR LP		20,343				—				—				—				2,770				23,113				—				1,323				—
NM KRLN LLC		4,205				—				—				—				(1,913		)		2,292				—				630				—
NM NL Holdings, L.P.		33,392				222				—				—				2,238				35,852				—				2,419				—
NM GP Holdco, LLC		311				3				—				—				17				331				—				23				—
NM YI, LLC		—				17,262				—				—				3				17,265				—				—				—
NMFC Senior Loan Program II LLC		79,400				—				—				—				—				79,400				—				8,536				—
NMFC Senior Loan Program III LLC		78,400				21,600				—				—				—				100,000				—				7,600				—
UniTek Global Services, Inc.		82,788				9,728				(113		)		—				(19,595		)		72,808				925				6,446				488
Total Controlled Investments		$	403,137			$	62,218			$	(2,307	)		$	14			$	3,870			$	466,918			$	7,764			$	29,829			$	505

(A)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, reorganizations or restructurings and the movement of an existing portfolio company into this category from a different category.

(B)	Gross redemptions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, reorganizations or restructurings and the movement of an existing portfolio company out of this category into a different category.

*	All or a portion of interest contains PIK interest.

**

Indicates assets that the Company deems to be “non-qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70.0% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of September 30, 2019, 13.47% of the Company’s total assets are represented by investments at fair value that are considered non-qualifying assets.

The accompanying notes are an integral part of these consolidated financial statements.

24

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

September 30, 2019

(unaudited)

		September 30, 2019
Investment Type		Percent of Total Investments at Fair Value
First lien		55.88	%
Second lien		25.04	%
Subordinated		2.39	%
Equity and other		16.69	%
Total investments		100.00	%

 

		September 30, 2019
Industry Type		Percent of Total Investments at Fair Value
Software		21.84	%
Business Services		21.80	%
Healthcare Services		18.96	%
Education		9.39	%
Investment Fund (includes investments in joint ventures)		6.75	%
Net Lease		3.92	%
Energy		3.52	%
Healthcare Information Technology		3.31	%
Distribution & Logistics		3.23	%
Federal Services		3.01	%
Consumer Services		2.52	%
Food & Beverage		0.93	%
Packaging		0.47	%
Business Products		0.35	%
Total investments		100.00	%

 

		September 30, 2019
Interest Rate Type		Percent of Total Investments at Fair Value
Floating rates		93.99	%
Fixed rates		6.01	%
Total investments		100.00	%

The accompanying notes are an integral part of these consolidated financial statements.

25

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Non-Controlled/Non-Affiliated Investments
Funded Debt Investments - Canada
Dentalcorp Perfect Smile ULC**
Healthcare Services		Second lien (3)		10.02% (L + 7.50%/M)		6/1/2018		6/8/2026		$	12,130			$	12,032			$	11,948
		Second lien (8)		10.02% (L + 7.50%/M)		6/1/2018		6/8/2026		7,500				7,439				7,388
		Second lien (3)(10) - Drawn		10.02% (L + 7.50%/M)		6/1/2018		6/8/2026		2,797				2,772				2,754
										22,427				22,243				22,090				2.20	%
Total Funded Debt Investments - Canada										$	22,427			$	22,243			$	22,090			2.20	%
Funded Debt Investments - United Kingdom
Shine Acquisition Co. S.à.r.l / Boing US Holdco Inc.**
Consumer Services		Second lien (2)		10.09% (L + 7.50%/Q)		9/25/2017		10/3/2025		$	37,853			$	37,648			$	36,150
		Second lien (8)		10.09% (L + 7.50%/Q)		9/25/2017		10/3/2025		6,000				5,968				5,730
										43,853				43,616				41,880				4.16	%
Air Newco LLC**
Software		First lien (2)		7.14% (L + 4.75%/M)		5/25/2018		5/31/2024		20,125				20,079				19,987				1.99	%
Total Funded Debt Investments - United Kingdom										$	63,978			$	63,695			$	61,867			6.15	%
Funded Debt Investments - United States
Benevis Holding Corp.
Healthcare Services		First lien (2)(9)		8.86% (L + 6.32%/Q)		3/15/2018		3/15/2024		$	63,370			$	63,370			$	62,261
		First lien (8)(9)		8.86% (L + 6.32%/Q)		3/15/2018		3/15/2024		8,578				8,578				8,428
		First lien (3)(9)		8.86% (L + 6.32%/Q)		3/15/2018		3/15/2024		6,970				6,970				6,848
										78,918				78,918				77,537				7.71	%
Integro Parent Inc.
Business Services		First lien (2)(9)		8.48% (L + 5.75%/Q)		10/9/2015		10/31/2022		51,245				50,952				51,245
		Second lien (8)(9)		11.97% (L + 9.25%/Q)		10/9/2015		10/30/2023		10,000				9,930				10,000
		First lien (3)(9)(10) - Drawn		7.23% (L + 4.50%/Q)		6/8/2018		10/30/2021		2,057				2,046				2,057
										63,302				62,928				63,302				6.29	%
Kronos Incorporated
Software		Second lien (2)		10.79% (L + 8.25%/Q)		10/26/2012		11/1/2024		36,000				35,560				35,657
		Second lien (3)		10.79% (L + 8.25%/Q)		10/26/2012		11/1/2024		21,147				21,145				20,945
										57,147				56,705				56,602				5.62	%
CentralSquare Technologies, LLC
Software		Second lien (3)		10.02% (L + 7.50%/M)		8/15/2018		8/31/2026		47,838				47,241				47,838
		Second lien (8)		10.02% (L + 7.50%/M)		8/15/2018		8/31/2026		7,500				7,406				7,500
										55,338				54,647				55,338				5.50	%
Dealer Tire, LLC
Distribution & Logistics		First lien (2)		8.02% (L + 5.50%/M)		12/4/2018		12/12/2025		53,784				52,444				51,296				5.10	%
PhyNet Dermatology LLC
Healthcare Services		First lien (2)(9)		8.02% (L + 5.50%/M)		9/17/2018		8/16/2024		50,879				50,391				50,371				5.01	%
NM GRC Holdco, LLC
Business Services		First lien (2)(9)		8.80% (L + 6.00%/Q)		2/9/2018		2/9/2024		38,735				38,565				38,542
		First lien (2)(9)(10) - Drawn		8.80% (L + 6.00%/Q)		2/9/2018		2/9/2024		10,766				10,715				10,739
										49,501				49,280				49,281				4.90	%

The accompanying notes are an integral part of these consolidated financial statements.

26

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Nomad Buyer, Inc.
Healthcare Services		First lien (2)		7.38% (L + 5.00%/M)		8/3/2018		8/1/2025		$	48,953			$	47,538			$	46,383			4.61	%
Brave Parent Holdings, Inc.
Software		Second lien (5)		10.02% (L + 7.50%/M)		4/17/2018		4/17/2026		22,500				22,394				22,416
		Second lien (2)		10.02% (L + 7.50%/M)		7/18/2018		4/17/2026		16,624				16,464				16,562
		Second lien (8)		10.02% (L + 7.50%/M)		7/18/2018		4/17/2026		6,000				5,942				5,978
										45,124				44,800				44,956				4.47	%
Associations, Inc.
Consumer Services		First lien (2)(9)		9.40% (L + 4.00% + 3.00% PIK/Q)*		7/30/2018		7/30/2024		40,855				40,613				40,599
		First lien (3)(9)(10) - Drawn		9.40% (L + 4.00% + 3.00% PIK/Q)*		7/30/2018		7/30/2024		3,625				3,603				3,602
										44,480				44,216				44,201				4.39	%
Quest Software US Holdings Inc.
Software		Second lien (2)		10.78% (L + 8.25%/Q)		5/17/2018		5/18/2026		43,697				43,281				43,224				4.30	%
Tenawa Resource Holdings LLC (13)
Tenawa Resource Management LLC
Energy		First lien (3)(9)		10.90% (Base + 8.50%/Q)		5/12/2014		10/30/2024		39,500				39,442				39,500				3.93	%
Frontline Technologies Group Holdings, LLC
Education		First lien (4)(9)		9.02% (L + 6.50%/M)		9/18/2017		9/18/2023		22,387				22,248				22,387
		First lien (2)(9)		9.02% (L + 6.50%/M)		9/18/2017		9/18/2023		16,582				16,480				16,582
										38,969				38,728				38,969				3.87	%
Salient CRGT Inc.
Federal Services		First lien (2)		8.27% (L + 5.75%/M)		1/6/2015		2/28/2022		38,275				37,928				37,701				3.75	%
Trader Interactive, LLC
Business Services		First lien (2)(9)		9.02% (L + 6.50%/M)		6/15/2017		6/17/2024		37,259				37,044				37,259				3.70	%
Peraton Holding Corp. (fka MHVC Acquisition Corp.)
Federal Services		First lien (2)		8.06% (L + 5.25%/Q)		4/25/2017		4/29/2024		37,285				37,134				36,353				3.61	%
TDG Group Holding Company
Consumer Services		First lien (2)(9)		8.30% (L + 5.50%/Q)		5/22/2018		5/31/2024		30,112				29,974				29,962
		First lien (2)(9)		8.30% (L + 5.50%/Q)		5/22/2018		5/31/2024		3,354				3,338				3,337
		First lien (3)(9)(10) - Drawn		8.02% (L + 5.50%/M)		5/22/2018		5/31/2024		1,261				1,255				1,255
										34,727				34,567				34,554				3.43	%
Geo Parent Corporation
Business Services		First lien (2)		8.09% (L + 5.50%/M)		12/13/2018		12/19/2025		33,578				33,410				33,410				3.32	%
Finalsite Holdings, Inc.
Software		First lien (4)(9)		8.03% (L + 5.50%/Q)		9/28/2018		9/25/2024		22,444				22,281				22,275
		First lien (2)(9)		8.03% (L + 5.50%/Q)		9/28/2018		9/25/2024		11,085				11,005				11,002
										33,529				33,286				33,277				3.31	%
Navicure, Inc.
Healthcare Services		Second lien (2)		10.02% (L + 7.50%/M)		10/23/2017		10/31/2025		25,970				25,907				25,580
		Second lien (8)		10.02% (L + 7.50%/M)		10/23/2017		10/31/2025		6,000				5,985				5,910
										31,970				31,892				31,490				3.13	%
iCIMS, Inc.
Software		First lien (8)(9)		8.94% (L + 6.50%/M)		9/12/2018		9/12/2024		31,636				31,332				31,320				3.11	%

The accompanying notes are an integral part of these consolidated financial statements.

27

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Ansira Holdings, Inc.
Business Services		First lien (2)		8.27% (L + 5.75%/M)		12/19/2016		12/20/2022		$	28,744			$	28,645			$	28,615
		First lien (3)(10) - Drawn		8.27% (L + 5.75%/M)		12/19/2016		12/20/2022		1,791				1,784				1,782
										30,535				30,429				30,397				3.02	%
Keystone Acquisition Corp.
Healthcare Services		First lien (2)		8.05% (L + 5.25%/Q)		5/10/2017		5/1/2024		24,732				24,597				24,238
		Second lien (2)		12.05% (L + 9.25%/Q)		5/10/2017		5/1/2025		4,500				4,461				4,444
										29,232				29,058				28,682				2.85	%
Sovos Brands Intermediate, Inc.
Food & Beverage		First lien (2)		7.64% (L + 5.00%/M)		11/16/2018		11/20/2025		28,240				28,099				27,957				2.78	%
EN Engineering, LLC
Business Services		First lien (2)(9)		7.02% (L + 4.50%/M)		7/30/2015		6/30/2021		23,347				23,226				23,347
		First lien (2)(9)		7.02% (L + 4.50%/M)		7/30/2015		6/30/2021		1,350				1,343				1,350
										24,697				24,569				24,697				2.45	%
SW Holdings, LLC
Business Services		Second lien (4)(9)		11.55% (L + 8.75%/Q)		6/30/2015		12/30/2021		18,161				18,052				18,161
		Second lien (3)(9)		11.55% (L + 8.75%/Q)		4/16/2018		12/30/2021		6,181				6,130				6,181
										24,342				24,182				24,342				2.42	%
DCA Investment Holding, LLC
Healthcare Services		First lien (2)(9)		8.05% (L + 5.25%/Q)		7/2/2015		7/2/2021		17,274				17,194				17,274
		First lien (3)(9)(10) - Drawn		7.98% (L + 5.25%/Q)		12/20/2017		7/2/2021		6,702				6,647				6,702
		First lien (3)(9)(10) - Drawn		9.75% (P + 4.25%/Q)		7/2/2015		7/2/2021		144				142				144
										24,120				23,983				24,120				2.40	%
iPipeline, Inc. (Internet Pipeline, Inc.)
Software		First lien (4)(9)		7.28% (L + 4.75%/M)		8/4/2015		8/4/2022		17,415				17,314				17,415
		First lien (4)(9)		7.28% (L + 4.75%/M)		6/16/2017		8/4/2022		4,531				4,514				4,531
		First lien (2)(9)		7.28% (L + 4.75%/M)		9/25/2017		8/4/2022		1,149				1,145				1,149
		First lien (4)(9)		7.28% (L + 4.75%/M)		9/25/2017		8/4/2022		506				504				506
										23,601				23,477				23,601				2.35	%
CRCI Longhorn Holdings, Inc.
Business Services		Second lien (3)		9.64% (L + 7.25%/M)		8/2/2018		8/10/2026		14,349				14,296				14,295
		Second lien (8)		9.64% (L + 7.25%/M)		8/2/2018		8/10/2026		7,500				7,473				7,472
										21,849				21,769				21,767				2.16	%
AAC Holding Corp.
Education		First lien (2)(9)		10.60% (L + 8.25%/M)		9/30/2015		9/30/2020		22,403				22,269				21,578				2.14	%
Avatar Topco, Inc. (22)
EAB Global, Inc.
Education		Second lien (3)		10.16% (L + 7.50%/Q)		11/17/2017		11/17/2025		13,950				13,762				13,811
		Second lien (8)		10.16% (L + 7.50%/Q)		11/17/2017		11/17/2025		7,500				7,399				7,425
										21,450				21,161				21,236				2.11	%
Help/Systems Holdings, Inc.
Software		Second lien (5)		10.27% (L + 7.75%/M)		3/23/2018		3/27/2026		20,231				20,136				20,029				1.99	%
Symplr Software Intermediate Holdings, Inc. (23)
Caliper Software, Inc.
Healthcare Information Technology		First lien (4)(9)		8.02% (L + 5.50%/M)		11/30/2018		11/28/2025		15,000				14,888				14,888
		First lien (2)(9)		8.02% (L + 5.50%/M)		11/30/2018		11/28/2025		5,171				5,133				5,132
										20,171				20,021				20,020				1.99	%

The accompanying notes are an integral part of these consolidated financial statements.

28

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
SSH Group Holdings, Inc.
Education		Second lien (2)		10.77% (L + 8.25%/Q)		7/26/2018		7/30/2026		$	20,116			$	20,019			$	19,960			1.98	%
DiversiTech Holdings, Inc.
Distribution & Logistics		Second lien (3)		10.30% (L + 7.50%/Q)		5/18/2017		6/2/2025		12,000				11,897				11,580
		Second lien (8)		10.30% (L + 7.50%/Q)		5/18/2017		6/2/2025		7,500				7,436				7,238
										19,500				19,333				18,818				1.87	%
FR Arsenal Holdings II Corp.
Business Services		First lien (2)(9)		10.06% (L + 7.25%/Q)		9/29/2016		9/8/2022		18,545				18,404				18,545				1.84	%
Integral Ad Science, Inc.
Software		First lien (8)(9)		9.78% (L + 6.00% + 1.25% PIK/M)*		7/19/2018		7/19/2024		18,678				18,503				18,491				1.84	%
The Kleinfelder Group, Inc.
Business Services		First lien (4)		7.17% (L + 4.75%/M)		12/18/2018		11/29/2024		17,500				17,413				17,413				1.73	%
Navex Topco, Inc.
Software		Second lien (2)		9.53% (L + 7.00%/M)		8/9/2018		9/4/2026		16,807				16,725				16,218				1.61	%
TIBCO Software Inc.
Software		Subordinated (3)		11.38%/S		11/24/2014		12/1/2021		15,000				14,776				15,750				1.57	%
Hill International, Inc.**
Business Services		First lien (2)(9)		8.55% (L + 5.75%/Q)		6/21/2017		6/21/2023		15,563				15,502				15,563				1.55	%
QC McKissock Investment, LLC (14)
McKissock, LLC
Education		First lien (2)(9)		8.55% (L + 5.75%/Q)		8/6/2014		8/5/2021		6,351				6,330				6,351
		First lien (2)(9)		8.55% (L + 5.75%/Q)		8/24/2018		8/5/2021		3,649				3,616				3,649
		First lien (2)(9)		8.55% (L + 5.75%/Q)		8/6/2014		8/5/2021		3,028				3,019				3,028
		First lien (2)(9)		8.55% (L + 5.75%/Q)		8/6/2014		8/5/2021		977				974				977
		First lien (2)(9)		8.55% (L + 5.75%/Q)		8/3/2018		8/5/2021		842				835				842
		First lien (2)(9)		8.55% (L + 5.75%/Q)		5/23/2018		8/5/2021		572				564				572
										15,419				15,338				15,419				1.53	%
OEConnection LLC
Business Services		Second lien (3)		10.53% (L + 8.00%/M)		11/22/2017		11/22/2025		7,660				7,564				7,602
		Second lien (8)		10.53% (L + 8.00%/M)		11/22/2017		11/22/2025		7,500				7,407				7,443
										15,160				14,971				15,045				1.49	%
Netsmart Inc. / Netsmart Technologies, Inc.
Healthcare Information Technology		Second lien (2)		10.03% (L + 7.50%/Q)		4/18/2016		10/19/2023		15,000				14,727				14,925				1.48	%
Xactly Corporation
Software		First lien (4)(9)		9.78% (L + 7.25%/M)		7/31/2017		7/29/2022		14,690				14,577				14,690				1.46	%
Transcendia Holdings, Inc.
Packaging		Second lien (8)		10.52% (L + 8.00%/M)		6/28/2017		5/30/2025		7,500				7,411				7,385
		Second lien (3)		10.52% (L + 8.00%/M)		6/28/2017		5/30/2025		7,000				6,917				6,893
										14,500				14,328				14,278				1.42	%
Alegeus Technologies Holdings Corp.
Healthcare Services		First lien (2)(9)		8.66% (L + 6.25%/Q)		9/5/2018		9/5/2024		13,444				13,378				13,376				1.33	%
NorthStar Financial Services Group, LLC
Software		Second lien (5)		10.10% (L + 7.50%/M)		5/23/2018		5/25/2026		13,450				13,418				13,316				1.32	%
Project Accelerate Parent, LLC
Business Services		Second lien (8)(9)		10.89% (L + 8.50%/M)		1/2/2018		1/2/2026		7,500				7,414				7,406
		Second lien (3)(9)		10.89% (L + 8.50%/M)		1/2/2018		1/2/2026		5,973				5,905				5,898
										13,473				13,319				13,304				1.32	%

The accompanying notes are an integral part of these consolidated financial statements.

29

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Castle Management Borrower LLC
Business Services		First lien (2)(9)		8.87% (L + 6.25%/Q)		5/31/2018		2/15/2024		$	13,347			$	13,286			$	13,281			1.32	%
Ministry Brands, LLC
Software		First lien (2)		6.52% (L + 4.00%/M)		12/7/2016		12/2/2022		2,962				2,952				2,962
		Second lien (8)(9)		11.77% (L + 9.25%/M)		12/7/2016		6/2/2023		7,840				7,796				7,840
		Second lien (3)(9)		11.77% (L + 9.25%/M)		12/7/2016		6/2/2023		2,160				2,148				2,160
										12,962				12,896				12,962				1.29	%
BackOffice Associates Holdings, LLC
Business Services		First lien (2)(9)		13.03% (L + 10.50%/M)		8/25/2017		8/25/2023		13,262				13,169				12,477
		First lien (3)(9)(10) - Drawn		13.03% (L + 7.50% + 3.00% PIK/M)*		8/25/2017		8/25/2023		17				17				16
										13,279				13,186				12,493				1.24	%
Zywave, Inc.
Software		Second lien (4)(9)		11.65% (L + 9.00%/Q)		11/22/2016		11/17/2023		11,000				10,936				11,000
		First lien (3)(9)(10) - Drawn		7.52% (L + 5.00%/M)		11/22/2016		11/17/2022		1,200				1,191				1,200
										12,200				12,127				12,200				1.21	%
CHA Holdings, Inc.
Business Services		Second lien (4)		11.55% (L + 8.75%/Q)		4/3/2018		4/10/2026		7,012				6,946				7,103
		Second lien (3)		11.55% (L + 8.75%/Q)		4/3/2018		4/10/2026		4,453				4,411				4,511
										11,465				11,357				11,614				1.15	%
PPVA Black Elk (Equity) LLC
Business Services		Subordinated (3)(9)		—		5/3/2013		—		14,500				14,500				11,362				1.13	%
Amerijet Holdings, Inc.
Distribution & Logistics		First lien (4)(9)		10.52% (L + 8.00%/M)		7/15/2016		7/15/2021		8,972				8,935				8,972
		First lien (4)(9)		10.52% (L + 8.00%/M)		7/15/2016		7/15/2021		1,495				1,489				1,495
										10,467				10,424				10,467				1.04	%
Vectra Co.
Business Products		Second lien (8)		9.77% (L + 7.25%/M)		2/23/2018		3/8/2026		10,788				10,751				10,465				1.04	%
Masergy Holdings, Inc.
Business Services		Second lien (2)		10.31% (L + 7.50%/Q)		12/14/2016		12/16/2024		10,500				10,452				10,290				1.02	%
VT Topco, Inc.
Business Services		Second lien (4)		9.80% (L + 7.00%/Q)		8/14/2018		7/31/2026		10,000				9,976				9,987				0.99	%
Affinity Dental Management, Inc.
Healthcare Services		First lien (2)(9)		8.57% (L + 6.00%/S)		9/15/2017		9/15/2023		4,344				4,308				4,344
		First lien (3)(9)(10) - Drawn		8.61% (L + 6.00%/S)		9/15/2017		9/15/2023		5,277				5,240				5,277
										9,621				9,548				9,621				0.96	%
AgKnowledge Holdings Company, Inc.
Business Services		First Lien (4)		7.27% (L + 4.75%/Q)		11/30/2018		7/23/2023		9,450				9,403				9,426				0.94	%
WD Wolverine Holdings, LLC
Healthcare Services		First lien (2)		8.02% (L + 5.50%/M)		2/22/2017		8/16/2022		9,488				9,269				9,179				0.91	%
Wrike, Inc.
Software		First lien (8)		9.28% (L + 6.75%/M)		12/31/2018		12/31/2024		9,067				8,976				8,976				0.89	%
JAMF Holdings, Inc.
Software		First lien (8)(9)		10.61% (L + 8.00%/Q)		11/13/2017		11/11/2022		8,757				8,686				8,757				0.87	%
Idera, Inc.
Software		Second lien (4)		11.53% (L + 9.00%/M)		6/27/2017		6/27/2025		8,000				7,895				8,020				0.80	%

The accompanying notes are an integral part of these consolidated financial statements.

30

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
J.D. Power (fka J.D. Power and Associates)
Business Services		Second lien (3)		11.02% (L + 8.50%/M)		6/9/2016		9/7/2024		$	7,583			$	7,508			$	7,508			0.75	%
CP VI Bella Midco, LLC
Healthcare Services		Second lien (3)		9.27% (L + 6.75%/M)		1/25/2018		12/29/2025		6,732				6,701				6,631				0.66	%
DealerSocket, Inc.
Software		First lien (2)		7.27% (L + 4.75%/M)		4/16/2018		4/26/2023		6,678				6,633				6,597				0.66	%
MH Sub I, LLC (Micro Holding Corp.)
Software		Second lien (2)		10.00% (L + 7.50%/M)		8/16/2017		9/15/2025		7,000				6,938				6,545				0.65	%
Restaurant Technologies, Inc.
Business Services		Second lien (4)		8.90% (L + 6.50%/Q)		9/24/2018		10/1/2026		6,722				6,705				6,520				0.65	%
DG Investment Intermediate Holdings 2, Inc. (aka Convergint Technologies Holdings, LLC)
Business Services		Second lien (3)		9.27% (L + 6.75%/M)		1/29/2018		2/2/2026		6,732				6,702				6,429				0.64	%
First American Payment Systems, L.P.
Business Services		First lien (2)		7.29% (L + 4.75%/Q)		1/3/2017		1/5/2024		6,391				6,342				6,359				0.63	%
Solera LLC / Solera Finance, Inc.
Software		Subordinated (3)		10.50%/S		2/29/2016		3/1/2024		5,000				4,816				5,350				0.53	%
ADG, LLC
Healthcare Services		Second lien (3)(9)		11.88% (L + 9.00%/S)		10/3/2016		3/28/2024		5,000				4,942				4,578				0.45	%
York Risk Services Holding Corp.
Business Services		Subordinated (3)		8.50%/S		9/17/2014		10/1/2022		3,000				3,000				2,100				0.20	%
Ensemble S Merger Sub, Inc.
Software		Subordinated (3)		9.00%/S		9/21/2015		9/30/2023		2,000				1,953				2,010				0.20	%
Education Management Corporation (12)
Education Management II LLC		First Lien (2)		11.00% (P + 5.50%/Q) (24)		1/5/2015		7/2/2020		211				205				15
Education		First Lien (3)		11.00% (P + 5.50%/Q) (24)		1/5/2015		7/2/2020		119				116				8
		First Lien (2)		14.00% (P + 8.50%/Q) (24)		1/5/2015		7/2/2020		475				437				19
		First Lien (3)		14.00% (P + 8.50%/Q) (24)		1/5/2015		7/2/2020		268				246				11
										1,073				1,004				53				0.01	%
PPVA Fund, L.P.
Business Services		Collateralized Financing (25)		—		11/7/2014		—		—				—				—				—	%
Total Funded Debt Investments - United States										$	1,733,369			$	1,719,771			$	1,709,641			169.89	%
Total Funded Debt Investments										$	1,819,774			$	1,805,709			$	1,793,598			178.24	%
Equity - Hong Kong
Bach Special Limited (Bach Preference Limited)**
Education		Preferred shares (3)(9)(21)		—		9/1/2017		—		66,528				$	6,573			$	6,653			0.66	%
Total Shares - Hong Kong														$	6,573			$	6,653			0.66	%
Equity - United States
Avatar Topco, Inc.
Education		Preferred shares (3)(9)(22)		—		11/17/2017		—		35,750				$	40,247			$	39,890			3.96	%

The accompanying notes are an integral part of these consolidated financial statements.

31

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Tenawa Resource Holdings LLC (13)
QID NGL LLC		Preferred shares (6)(9)		—		10/30/2017		—		1,623,385				$	1,623			$	2,717
Energy		Ordinary shares (6)(9)		—		5/12/2014		—		5,290,997				5,291				8,412
														6,914				11,129				1.11	%
Symplr Software Intermediate Holdings, Inc.
Healthcare Information Technology		Preferred Shares (4)(9)(23)		—		11/30/2018		—		7,500				7,470				7,469
		Preferred Shares (3)(9)(23)		—		11/30/2018		—		2,586				2,575				2,575
														10,045				10,044				1.00	%
Education Management Corporation (12)
Education		Preferred shares (2)		—		1/5/2015		—		3,331				200				—
		Preferred shares (3)		—		1/5/2015		—		1,879				113				—
		Ordinary shares (2)		—		1/5/2015		—		2,994,065				100				—
		Ordinary shares (3)		—		1/5/2015		—		1,688,976				56				—
														469				—				—	%
Total Shares - United States														$	57,675			$	61,063			6.07	%
Total Shares														$	64,248			$	67,716			6.73	%
Warrants - United States
ASP LCG Holdings, Inc.
Education		Warrants (3)(9)		—		5/5/2014		5/5/2026		622				$	37			$	664			0.07	%
Total Warrants - United States														$	37			$	664			0.07	%
Total Funded Investments														$	1,869,994			$	1,861,978			185.04	%
Unfunded Debt Investments - Canada
Dentalcorp Perfect Smile ULC**
Healthcare Services		Second lien (3)(10) - Undrawn		—		6/1/2018		6/6/2020		$	2,110			$	2			$	(32	)		(0.00	)%
Total Unfunded Debt Investments - Canada										$	2,110			$	2			$	(32	)		(0.00	)%
Unfunded Debt Investments - United States
DCA Investment Holding, LLC
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		12/20/2017		12/20/2019		$	6,755			$	(59	)		$	—
		First lien (3)(9)(10) - Undrawn		—		7/2/2015		7/2/2021		1,956				(20		)		—
										8,711				(79		)		—				—	%
iPipeline, Inc. (Internet Pipeline, Inc.)
Software		First lien (3)(9)(10) - Undrawn		—		8/4/2015		8/4/2021		1,000				(10		)		—				—	%
Ministry Brands, LLC
Software		First lien (3)(10) - Undrawn		—		12/7/2016		12/2/2022		1,000				(5		)		—				—	%
Zywave, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		11/22/2016		11/17/2022		800				(6		)		—				—	%

The accompanying notes are an integral part of these consolidated financial statements.

32

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Trader Interactive, LLC
Business Services		First lien (3)(9)(10) - Undrawn		—		6/15/2017		6/15/2023		$	1,673			$	(13	)		$	—			—	%
Xactly Corporation
Software		First lien (3)(9)(10) - Undrawn		—		7/31/2017		7/29/2022		992				(10		)		—				—	%
Integro Parent Inc.
Business Services		First lien (3)(9)(10) - Undrawn		—		6/8/2018		10/30/2021		4,686				(23		)		—				—	%
Affinity Dental Management, Inc.
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		9/15/2017		3/15/2019		6,307				(16		)		—
		First lien (3)(9)(10) - Undrawn		—		9/15/2017		3/15/2023		1,738				(17		)		—
										8,045				(33		)		—				—	%
Frontline Technologies Group Holdings, LLC
Education		First lien (3)(9)(10) - Undrawn		—		9/18/2017		9/18/2019		7,738				(58		)		—				—	%
JAMF Holdings, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		11/13/2017		11/11/2022		750				(8		)		—				—	%
AgKnowledge Holdings Company, Inc.
Business Services		First lien (3)(10) - Undrawn		—		11/30/2018		7/21/2023		526				(3		)		(1		)		(0.00	)%
NM GRC Holdco, LLC
Business Services		First lien (2)(9)(10) - Undrawn		—		2/9/2018		2/9/2020		771				(2		)		(2		)		(0.00	)%
DealerSocket, Inc.
Software		First lien (3)(10) - Undrawn		—		4/16/2018		4/26/2023		560				(4		)		(7		)		(0.00	)%
Wrike, Inc.
Software		First lien (3)(10) - Undrawn		—		12/31/2018		12/31/2024		933				(9		)		(9		)		(0.00	)%
Integral Ad Science, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		7/19/2018		7/19/2023		1,429				(14		)		(14		)		(0.00	)%
Finalsite Holdings, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		9/25/2018		9/25/2024		2,521				(19		)		(19		)		(0.00	)%
TDG Group Holding Company
Consumer Services		First lien (3)(9)(10) - Undrawn		—		5/22/2018		5/31/2024		3,783				(19		)		(19		)		(0.00	)%
iCIMS, Inc.
Software		First lien (3)(9)(10) - Undrawn		—		9/12/2018		9/12/2024		1,977				(20		)		(20		)		(0.00	)%
Ansira Holdings, Inc.
Business Services		First lien (3)(10) - Undrawn		—		12/19/2016		4/16/2020		5,433				(14		)		(24		)		(0.00	)%
BackOffice Associates Holdings, LLC
Business Services		First lien (3)(9)(10) - Undrawn		—		8/25/2017		8/25/2023		862				(7		)		(51		)		(0.01	)%

The accompanying notes are an integral part of these consolidated financial statements.

33

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Associations, Inc.
Consumer Services		First lien (3)(9)(10) - Undrawn		—		7/30/2018		7/30/2021		$	6,557			$	(41	)		$	(41	)
		First lien (3)(9)(10) - Undrawn		—		7/30/2018		7/30/2024		2,033				(13		)		(13		)
										8,590				(54		)		(54		)		(0.01	)%
Diligent Corporation
Software		First lien (3)(9)(10) - Undrawn		—		12/19/2018		12/19/2020		13,431				(84		)		(84		)		(0.01	)%
Salient CRGT Inc.
Federal Services		First lien (3)(10) - Undrawn		—		6/26/2018		11/29/2021		6,125				(490		)		(92		)		(0.01	)%
PhyNet Dermatology LLC
Healthcare Services		First lien (3)(9)(10) - Undrawn		—		9/17/2018		8/16/2020		45,305				(227		)		(227		)		(0.02	)%
Total Unfunded Debt Investments - United States										$	127,641			$	(1,211	)		$	(623	)		(0.06	)%
Total Unfunded Debt Investments										$	129,751			$	(1,209	)		$	(655	)		(0.06	)%
Total Non-Controlled/Non-Affiliated Investments														$	1,868,785			$	1,861,323			184.98	%
Non-Controlled/Affiliated Investments(26)
Funded Debt Investments - United States
Permian Holdco 1, Inc.
Permian Holdco 2, Inc.
Permian Holdco 3, Inc.
Energy		First lien (3)(9)(10) - Drawn		8.87% (L + 6.50%/M)		6/14/2018		6/30/2022		$	17,750			$	17,750			$	17,750
		First lien (3)(9)		14.85% (L + 7.50% + 5.00% PIK/Q)*		6/14/2018		6/30/2022		10,101				10,101				10,101
		Subordinated (3)(9)		14.00% PIK/Q*		10/31/2016		10/15/2021		2,303				2,303				2,187
		Subordinated (3)(9)		18.00% PIK/Q*		12/26/2018		6/30/2022		2,054				2,054				2,054
		Subordinated (3)(9)		14.00% PIK/Q*		10/31/2016		10/15/2021		1,186				1,186				1,127
										33,394				33,394				33,219				3.30	%
Total Funded Debt Investments - United States										$	33,394			$	33,394			$	33,219			3.30	%
Equity - United States
NMFC Senior Loan Program I LLC**
Investment Fund		Membership interest (3)(9)		—		6/13/2014		—		—				$	23,000			$	23,000			2.29	%
Sierra Hamilton Holdings Corporation
Energy		Ordinary shares (2)(9)		—		7/31/2017		—		25,000,000				11,501				11,271
		Ordinary shares (3)(9)		—		7/31/2017		—		2,786,000				1,281				1,256
														12,782				12,527				1.24	%
Permian Holdco 1, Inc.
Energy		Preferred shares (3)(9)(16)		—		10/31/2016		—		1,766,177				7,912				8,257
		Ordinary shares (3)(9)		—		10/31/2016		—		1,366,452				1,350				490
														9,262				8,747				0.87	%
Total Shares - United States														$	45,044			$	44,274			4.40	%
Total Funded Investments														$	78,438			$	77,493			7.70	%

The accompanying notes are an integral part of these consolidated financial statements.

34

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Unfunded Debt Investments - United States
Permian Holdco 3, Inc.
Energy		First lien (3)(9)(10) - Undrawn		—		6/14/2018		6/30/2022		$	2,250			$	—			$	—			—	%
Total Unfunded Debt Investments - United States										$	2,250			$	—			$	—			—	%
Total Non-Controlled/Affiliated Investments														$	78,438			$	77,493			7.70	%
Controlled Investments(27)
Funded Debt Investments - United States
Edmentum Ultimate Holdings, LLC (15)
Edmentum, Inc. (fka Plato, Inc.) (Archipelago Learning, Inc.)
Education		First lien (2)		11.03% (L + 4.50% + 4.00% PIK/Q)*		8/6/2018		6/9/2021		$	8,490			$	7,245			$	7,004
		Second lien (3)(9)		7.00% PIK/Q*		2/23/2018		12/9/2021		11,184				10,569				10,346
		Second lien (3)(9)(10) - Drawn		5.00% PIK/Q*		6/9/2015		12/9/2021		1,671				1,671				1,671
		Subordinated (3)(9)		8.50% PIK/Q*		6/9/2015		6/9/2020		4,891				4,889				4,891
		Subordinated (2)(9)		10.00% PIK/Q*		6/9/2015		6/9/2020		18,525				18,525				14,820
		Subordinated (3)(9)		10.00% PIK/Q*		6/9/2015		6/9/2020		4,557				4,557				3,646
										49,318				47,456				42,378				4.21	%
NHME Holdings Corp. (20)
National HME, Inc.
Healthcare Services		Second lien (3)(9)		12.00% PIK/Q*		11/27/2018		5/27/2024		14,664				10,718				10,631
		Second lien (3)(9)		12.00% PIK/Q*		11/27/2018		5/27/2024		8,104				7,115				7,091
										22,768				17,833				17,722				1.76	%
UniTek Global Services, Inc.
Business Services		First lien (2)(9)		8.02% (L + 5.50%/M)		6/29/2018		8/20/2024		12,542				12,542				12,542
		First lien (2)(9)		7.96% (L + 5.50%/M)		6/29/2018		8/20/2024		2,508				2,508				2,508
										15,050				15,050				15,050				1.50	%
Total Funded Debt Investments - United States										$	87,136			$	80,339			$	75,150			7.47	%
Equity - Canada
NM APP Canada Corp.**
Net Lease		Membership interest (7)(9)		—		9/13/2016		—		—				$	7,345			$	9,727			0.97	%
Total Shares - Canada														$	7,345			$	9,727			0.97	%
Equity - United States
NMFC Senior Loan Program II LLC**
Investment Fund		Membership interest (3)(9)		—		5/3/2016		—		—				$	79,400			$	79,400			7.89	%
NMFC Senior Loan Program III LLC**
Investment Fund		Membership interest (3)(9)		—		5/4/2018		—		—				78,400				78,400				7.79	%

The accompanying notes are an integral part of these consolidated financial statements.

35

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
UniTek Global Services, Inc.
Business Services		Preferred shares (2)(9)(17)		—		1/13/2015		—		24,841,813				$	22,462			$	22,012
		Preferred shares (3)(9)(17)		—		1/13/2015		—		6,865,095				6,207				6,083
		Preferred shares (3)(9)(18)		—		6/30/2017		—		13,079,442				13,079				13,036
		Preferred shares (3)(9)(19)		—		8/17/2018		—		7,070,545				7,071				7,071
		Ordinary shares (2)(9)		—		1/13/2015		—		2,096,477				1,925				10,013
		Ordinary shares (3)(9)		—		1/13/2015		—		1,993,749				532				9,523
														51,276				67,738				6.73	%
NM NL Holdings, L.P.**
Net Lease		Membership interest (7)(9)		—		6/20/2018		—		—				32,575				33,392				3.32	%
NM GLCR LLC
Net Lease		Membership interest (7)(9)		—		2/1/2018		—		—				14,750				20,343				2.02	%
NM CLFX LP
Net Lease		Membership interest (7)(9)		—		10/6/2017		—		—				12,538				12,770				1.27	%
NM APP US LLC
Net Lease		Membership interest (7)(9)		—		9/13/2016		—		—				5,080				5,912				0.59	%
NM DRVT LLC
Net Lease		Membership interest (7)(9)		—		11/18/2016		—		—				5,152				5,619				0.56	%
NM KRLN LLC
Net Lease		Membership interest (7)(9)		—		11/15/2016		—		—				7,510				4,205				0.42	%
NHME Holdings Corp. (20)
Healthcare Services		Ordinary Shares (3)(9)		—		11/27/2018		—		640,000				4,000				4,000				0.40	%
NM JRA LLC
Net Lease		Membership interest (7)(9)		—		8/12/2016		—		—				2,043				2,537				0.25	%
Edmentum Ultimate Holdings, LLC (15)
Education		Ordinary shares (3)(9)		—		6/9/2015		—		123,968				11				238
		Ordinary shares (2)(9)		—		6/9/2015		—		107,143				9				205
														20				443				0.04	%
NM GP Holdco, LLC**
Net Lease		Membership interest (7)(9)		—		6/20/2018		—		—				306				311				0.03	%
Total Shares - United States														$	293,050			$	315,070			31.31	%
Total Shares														$	300,395			$	324,797			32.28	%
Warrants - United States
Edmentum Ultimate Holdings, LLC (15)
Education		Warrants (3)(9)		—		2/23/2018		5/5/2026		1,141,846				$	769			$	2,190			0.22	%
NHME Holdings Corp. (20)
Healthcare Services		Warrants (3)(9)		—		11/27/2018		—		160,000				1,000				1,000				0.10	%
Total Warrants - United States														$	1,769			$	3,190			0.32	%
Total Funded Investments														$	382,503			$	403,137			40.07	%

The accompanying notes are an integral part of these consolidated financial statements.

36

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

Portfolio Company, Location and Industry(1)		Type of Investment		Interest Rate (11)		Acquisition Date		Maturity/Expiration Date		Principal Amount, Par Value or Shares				Cost				Fair Value				Percent of Net Assets
Unfunded Debt Investments - United States
Edmentum Ultimate Holdings, LLC (15)
Edmentum, Inc. (fka Plato, Inc.) (Archipelago Learning, Inc.)
Education		Second lien (3)(9)(10) - Undrawn		—		6/9/2015		12/9/2021		$	5,945			$	—			$	—			—	%
Total Unfunded Debt Investments - United States										$	5,945			$	—			$	—			—	%
Total Controlled Investments														$	382,503			$	403,137			40.07	%
Total Investments														$	2,329,726			$	2,341,953			232.75	%

(1)	New Mountain Finance Corporation (the "Company") generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed to be "restricted securities" under the Securities Act.

(2)	Investment is pledged as collateral for the Holdings Credit Facility, a revolving credit facility among the Company, as the Collateral Manager, New Mountain Finance Holdings, L.L.C. ("NMF Holdings") as the Borrower and Wells Fargo Bank, National Association as the Administrative Agent and Collateral Custodian. See Note 7. Borrowings, for details.

(3)	Investment is pledged as collateral for the NMFC Credit Facility, a revolving credit facility among the Company as the Borrower and Goldman Sachs Bank USA as the Administrative Agent and the Collateral Agent and Goldman Sachs Bank USA, Morgan Stanley Bank, N.A. and Stifel Bank & Trust as Lenders. See Note 7. Borrowings, for details.

(4)	Investment is held in New Mountain Finance SBIC, L.P.

(5)	Investment is held in New Mountain Finance SBIC II, L.P.

(6)	Investment is held in NMF QID NGL Holdings, Inc.

(7)	Investment is held in New Mountain Net Lease Corporation.

(8)	Investment is pledged as collateral for the DB Credit Facility, a revolving credit facility among New Mountain Finance DB, L.L.C as the Borrower and Deutsche Bank AG, New York Branch as the Facility Agent. See Note 7. Borrowings, for details.

(9)	The fair value of the Company's investment is determined using unobservable inputs that are significant to the overall fair value measurement. See Note 4. Fair Value, for details.

(10)	Par Value amounts represent the drawn or undrawn (as indicated in type of investment) portion of revolving credit facilities or delayed draws. Cost amounts represent the cash received at settlement date net of the impact of paydowns and cash paid for drawn revolvers or delayed draws.

(11)

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 London Interbank Offered Rate (L), the Prime Rate (P) and the alternative base rate (Base) and which resets monthly (M), quarterly (Q), semi-annually (S) or annually (A). For each investment the current interest rate provided reflects the rate in effect as of December 31, 2018.

(12)

The Company holds investments in Education Management Corporation and one related entity of Education Management Corporation. The Company holds series A-1 convertible preferred stock and common stock in Education Management Corporation and holds a tranche A first lien term loan and a tranche B first lien term loan in Education Management II LLC, which is an indirect subsidiary of Education Management Corporation.

(13)

The Company holds investments in three related entities of Tenawa Resource Holdings LLC. The Company holds 4.77% of the common units in QID NGL LLC (which at closing represented 98.1% of the ownership in the common units in Tenawa Resource Holdings LLC), class A preferred units in QID NGL LLC and a first lien investment in Tenawa Resource Management LLC, a wholly-owned subsidiary of Tenawa Resource Holdings LLC.

(14)

The Company holds investments in QC McKissock Investment, LLC and one related entity of QC McKissock Investment, LLC. The Company holds a first lien term loan in QC McKissock Investment, LLC (which at closing represented 71.1% of the ownership in the Series A common units of McKissock Investment Holdings, LLC) and holds first lien term loans and a delayed draw term loan in McKissock, LLC, a wholly-owned subsidiary of McKissock Investment Holdings, LLC.

(15)	The Company holds investments in Edmentum Ultimate Holdings, LLC and its related entities. The Company holds subordinated notes, ordinary equity and warrants in Edmentum Ultimate Holdings, LLC and holds a first lien term loan, second lien revolver and a second lien term loan in Edmentum, Inc. and Archipelago Learning, Inc., which are wholly-owned subsidiaries of Edmentum Ultimate Holdings, LLC.

(16)	The Company holds preferred equity in Permian Holdco 1, Inc. that is entitled to receive cumulative preferential dividends at a rate of 12.0% per annum payable in additional shares.

The accompanying notes are an integral part of these consolidated financial statements.

37

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

(17)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 13.5% per annum payable in additional shares.

(18)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to receive cumulative preferential dividends at a rate of 19.0% per annum payable in additional shares.

(19)	The Company holds preferred equity in UniTek Global Services, Inc. that is entitled to received cumulative preferential dividends at a rate of 20.0% per annum payable in additional shares.

(20)	The Company holds ordinary shares and warrants in NHME Holdings Corp., as well as second lien term loans in National HME, Inc., a wholly-owned subsidiary of NHME Holdings Corp.

(21)	The Company holds preferred equity in Bach Special Limited (Bach Preference Limited) that is entitled to receive cumulative preferential dividends at a rate of 12.25% per annum payable in additional shares.

(22)	The Company holds preferred equity in Avatar Topco, Inc. and holds a second lien term loan investment in EAB Global, Inc., a wholly-owned subsidiary of Avatar Topco, Inc. The preferred equity is entitled to receive cumulative preferential dividends at a rate of L + 11.00% per annum.

(23)	The Company holds preferred equity in Symplr Software Intermediate Holdings, Inc. and holds a first lien term loan investment in Caliper Software, Inc., a wholly-owned subsidiary of Symplr Software Intermediate Holdings, Inc. The preferred equity is entitled to receive cumulative preferential dividends at a rate of L + 10.50% per annum.

(24)	Investment or a portion of the investment is on non-accrual status. See Note 3. Investments, for details.

(25)	The Company holds one security purchased under a collateralized agreement to resell on its Consolidated Statement of Assets and Liabilities with a cost basis of $30,000 and a fair value of $23,508 as of December 31, 2018. See Note 2. Summary of Significant Accounting Policies, for details.

(26)

Denotes investments in which the Company is an “Affiliated Person”, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), due to owning or holding the power to vote 5.0% or more of the outstanding voting securities of the investment but not controlling the company. Fair value as of December 31, 2018 and December 31, 2017 along with transactions during the year ended December 31, 2018 in which the issuer was a non-controlled/affiliated investment is as follows:

Portfolio Company		Fair Value at December 31, 2017				Gross Additions (A)				Gross Redemptions (B)				Net Realized Gains (Losses)				Net Change In Unrealized Appreciation (Depreciation)				Fair Value at December 31, 2018				Interest Income				Dividend Income				Other Income
Edmentum Ultimate Holdings, LLC/Edmentum Inc.		$	24,858			$	—			$	(24,858	)		$	—			$	—			$	—			$	—			$	—			$	—
HI Technology Corp.		105,155				—				(105,155		)		8,387				—				—				—				14,791				—
NMFC Senior Loan Program I LLC		23,000				—				—				—				—				23,000				—				3,173				1,179
Permian Holdco 1, Inc. / Permian Holdco 2, Inc. / Permian Holdco 3, Inc.		12,733				31,824				(50		)		—				(2,541		)		41,966				2,028				1,083				653
Sierra Hamilton Holdings Corporation		12,330				—				—				—				197				12,527				—				—				—
Total Non-Controlled/Affiliated Investments		$	178,076			$	31,824			$	(130,063	)		$	8,387			$	(2,344	)		$	77,493			$	2,028			$	19,047			$	1,832

(A)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, payment-in-kind (“PIK”) interest or dividends, the amortization of discounts, reorganizations or restructurings and the movement at fair value of an existing portfolio company into this category from a different category.

(B)	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, reorganizations or restructurings and the movement of an existing portfolio company out of this category into a different category.

The accompanying notes are an integral part of these consolidated financial statements.

38

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

(27)	Denotes investments in which the Company is in “Control”, as defined in the 1940 Act, due to owning or holding the power to vote 25.0% or more of the outstanding voting securities of the investment. Fair value as of December 31, 2018 and December 31, 2017 along with transactions during the year ended December 31, 2018 in which the issuer was a controlled investment, is as follows:

Portfolio Company		Fair Value at December 31, 2017				Gross Additions (A)				Gross Redemptions (B)				Net  Realized Gains (Losses)				Net Change In Unrealized Appreciation (Depreciation)				Fair Value at December 31, 2018				Interest Income				Dividend Income				Other Income
Edmentum Ultimate Holdings, LLC/Edmentum Inc.		$	—			$	51,478			$	(6,937	)		$	3			$	470			$	45,011			$	4,077			$	—			$	424
National HME, Inc./NHME Holdings Corp.		—				22,832				—				—				(110		)		22,722				306				—				—
NM APP CANADA CORP		7,962				—				—				—				1,765				9,727				—				841				—
NM APP US LLC		5,138				—				—				—				774				5,912				—				563				—
NM CLFX LP		12,538				—				—				—				232				12,770				—				1,507				—
NM DRVT LLC		5,385				—				—				—				234				5,619				—				519				—
NM JRA LLC		2,191				—				—				—				346				2,537				—				225				—
NM GLCR LLC		—				14,750				—				—				5,593				20,343				—				1,634				—
NM KRLN LLC		8,195				—				—				—				(3,990		)		4,205				—				761				—
NM NL Holdings, L.P.		—				32,575				—				—				817				33,392				—				1,506				—
NM GP Holdco, LLC		—				306				—				—				5				311				—				11				—
NMFC Senior Loan Program II LLC		79,400				—				—				—				—				79,400				—				11,124				—
NMFC Senior Loan Program III LLC		—				78,400				—				—				—				78,400				—				3,040				—
UniTek Global Services, Inc.		64,593				28,696				(15,261		)		—				4,760				82,788				1,843				6,648				1,312
Total Controlled Investments		$	185,402			$	229,037			$	(22,198	)		$	3			$	10,896			$	403,137			$	6,226			$	28,379			$	1,736

(A)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, reorganizations or restructurings and the movement of an existing portfolio company into this category from a different category.

(B)	Gross redemptions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, reorganizations or restructurings and the movement of an existing portfolio company out of this category into a different category.

*	All or a portion of interest contains PIK interest.

**	Indicates assets that the Company deems to be “non-qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70.0% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. As of December 31, 2018, 13.5% of the Company’s total investments were non-qualifying assets.

The accompanying notes are an integral part of these consolidated financial statements.

39

---

Table of Contents

New Mountain Finance Corporation

 

Consolidated Schedule of Investments (Continued)

 December 31, 2018

(in thousands, except shares)

		December 31, 2018
Investment Type		Percent of Total Investments at Fair Value
First lien		50.11	%
Second lien		28.29	%
Subordinated		2.79	%
Equity and other		18.81	%
Total investments		100.00	%

 

		December 31, 2018
Industry Type		Percent of Total Investments at Fair Value
Business Services		23.67	%
Software		20.41	%
Healthcare Services		14.80	%
Education		8.94	%
Investment Fund (includes investments in joint ventures)		7.72	%
Consumer Services		5.15	%
Energy		4.49	%
Net Lease		4.05	%
Distribution & Logistics		3.44	%
Federal Services		3.16	%
Healthcare Information Technology		1.92	%
Food & Beverage		1.19	%
Packaging		0.61	%
Business Products		0.45	%
Total investments		100.00	%

 

		December 31, 2018
Interest Rate Type		Percent of Total Investments at Fair Value
Floating rates		93.25	%
Fixed rates		6.75	%
Total investments		100.00	%

The accompanying notes are an integral part of these consolidated financial statements.

40

---

Table of Contents

Notes to the Consolidated Financial Statements of

New Mountain Finance Corporation

 

September 30, 2019

(in thousands, except share data)

(unaudited)

Note 1. Formation and Business Purpose

New Mountain Finance Corporation (“NMFC” or the “Company”) is a Delaware corporation that was originally incorporated on June 29, 2010 and completed its initial public offering ("IPO") on May 19, 2011. NMFC is 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”). NMFC has elected to be treated, and intends 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 NMFC’s IPO, and through September 30, 2019, NMFC raised approximately $768,063 in net proceeds from additional offerings of its common stock.

New Mountain Finance Advisers BDC, L.L.C. (the “Investment Adviser”) is a wholly-owned subsidiary of 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. 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, public equity and credit investment vehicles. The Investment Adviser manages the Company's day-to-day operations and provides it 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 the Company's. New Mountain Finance Administration, L.L.C. (the "Administrator”), a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct the Company's day-to-day operations.

The Company has established the following wholly-owned direct and indirect subsidiaries:

•	New Mountain Finance Holdings, L.L.C. ("NMF Holdings" or the "Predecessor Operating Company") and New Mountain Finance DB, L.L.C. ("NMFDB"), whose assets are used 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;

•	New Mountain Net Lease Corporation ("NMNLC"), which acquires commercial real 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;

•

NMF Ancora Holdings Inc. ("NMF Ancora"), NMF QID Holdings, Inc. ("NMF QID") and NMF YP Holdings Inc. ("NMF YP"), 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); the Company consolidates 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.

The Company’s 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 the Company to the risks associated with second lien and subordinated loans to the extent the Company invests in the “last out” tranche. In some cases, the Company’s investments may also include equity interests. The Company's 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 the Company, SBIC I's and SBIC II's investment objectives are to generate current income and capital appreciation under the

41

---

Table of Contents

investment criteria used by the Company. However, SBIC I and SBIC II investments must be in SBA eligible small businesses. The Company’s portfolio may be concentrated in a limited number of industries. As of September 30, 2019, the Company’s top five industry concentrations were software, business services, healthcare services, education and investment funds (which includes the Company's investments in its joint ventures).

Note 2. Summary of Significant Accounting Policies

Basis of accounting—The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The Company is an investment company following accounting and reporting guidance in Accounting Standards Codification Topic 946, Financial Services—Investment Companies, (“ASC 946”). NMFC consolidates its wholly-owned direct and indirect subsidiaries: NMF Holdings, NMFDB, NMF Servicing, NMNLC, SBIC I, SBIC I GP, SBIC II, SBIC II GP, NMF Ancora, NMF QID and NMF YP.

The Company’s consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of operations and financial condition for all periods presented. All intercompany transactions have been eliminated. Revenues are recognized when earned and expenses when incurred. The financial results of the Company’s portfolio investments are not consolidated in the financial statements.

The Company’s interim consolidated financial statements are prepared in accordance with GAAP and pursuant to the requirements for reporting on Form 10-Q and Article 6 or 10 of Regulation S-X. Accordingly, the Company’s interim consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2019.

Investments—The Company applies fair value accounting in accordance with GAAP. Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments are reflected on the Company’s Consolidated Statements of Assets and Liabilities at fair value, with changes in unrealized gains and losses resulting from changes in fair value reflected in the Company’s Consolidated Statements of Operations as “Net change in unrealized appreciation (depreciation) of investments” and realizations on portfolio investments reflected in the Company’s Consolidated Statements of Operations as “Net realized gains (losses) on investments”.

The Company values its assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, the Company’s board of directors is ultimately and solely responsible for determining the fair value of the 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 its portfolio investments require a fair value determination. Security transactions are accounted for on a trade date basis. The Company’s 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, the Company looks at the number of quotes readily available and performs 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.

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

42

---

Table of Contents

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 the Company’s 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 each portfolio investment for which the Company does not have a readily available market quotation will be reviewed by an independent valuation firm engaged by the Company’s board of directors; and

d.	When deemed appropriate by the Company’s 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 the Company’s investments may fluctuate from period to period and the fluctuations could be material.

See Note 3. Investments, for further discussion relating to investments.

New Mountain Net Lease Corporation

NMNLC was formed to acquire commercial real estate properties that are subject to "triple net" leases. NMNLC's investments are disclosed on the Company's Consolidated Schedule of Investments as of September 30, 2019.

Below is certain summarized property information for NMNLC as of September 30, 2019:

Lease

Total

Fair Value as of

Portfolio Company

Tenant

Expiration Date

Location

Square Feet

September 30, 2019

NM NL Holdings LP / NM GP Holdco LLC

Various

Various

Various

Various

$

36,183

NM GLCR LP

Arctic Glacier U.S.A.

2/28/2038

CA

214

23,113

NM YI LLC

Young Innovations, Inc.

10/31/2039

IL / MO

212

17,265

NM CLFX LP

Victor Equipment Company

8/31/2033

TX

423

12,714

NM APP Canada Corp.

A.P. Plasman, Inc.

9/30/2031

Canada

436

10,147

NM APP US LLC

Plasman Corp, LLC / A-Brite LP

9/30/2033

AL / OH

261

6,415

NM DRVT LLC

FMH Conveyors, LLC

10/31/2031

AR

195

5,785

NM JRA LLC

J.R. Automation Technologies, LLC

1/31/2031

MI

88

3,667

NM KRLN LLC

Kirlin Group, LLC

6/30/2029

MD

95

2,292

$

117,581

Collateralized agreements or repurchase financings—The Company follows the guidance in Accounting Standards Codification Topic 860, Transfers and Servicing—Secured Borrowing and Collateral (“ASC 860”), when accounting for transactions involving the purchases of securities under collateralized agreements to resell (resale agreements). These transactions are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase

43

---

Table of Contents

amounts, as specified in the respective agreements. Interest on collateralized agreements is accrued and recognized over the life of the transaction and included in interest income. As of September 30, 2019 and December 31, 2018, the Company held one collateralized agreement to resell with a cost basis of $30,000 and $30,000, respectively, and a fair value of $22,176 and $23,508, respectively. The collateralized agreement to resell is guaranteed by a private hedge fund. The private hedge fund is currently in liquidation under the laws of the Cayman Islands. Pursuant to the terms of the collateralized agreement, the private hedge fund was obligated to repurchase the collateral from the Company at the par value of the collateralized agreement. The private hedge fund has breached its agreement to repurchase the collateral under the collateralized agreement. The default by the private hedge fund did not release the collateral to the Company, and therefore, the Company does not have full rights and title to the collateral. A claim has been filed with the Cayman Islands joint official liquidators to resolve this matter. The joint official liquidators have recognized the Company’s contractual rights under the collateralized agreement. The Company continues to exercise its rights under the collateralized agreement and continues to monitor the liquidation process of the private hedge fund. The fair value of the collateralized agreement to resell is reflective of the increased risk of the position.

Cash and cash equivalents—Cash and cash equivalents include cash and short-term, highly liquid investments. The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near maturity that there is insignificant risk of changes in value. These securities have original maturities of three months or less. The Company did not hold any cash equivalents as of September 30, 2019 and December 31, 2018.

Revenue recognition

Sales and paydowns of investments:  Realized gains and losses on investments are determined on the specific identification method.

Interest and dividend income:  Interest income, including amortization of premium and discount using the effective interest method, is recorded on the accrual basis and periodically assessed for collectability. Interest income also includes interest earned from cash on hand. Upon the prepayment of a loan or debt security, any prepayment penalties are recorded as part of interest income. The Company has loans and certain preferred equity investments in the portfolio that contain a payment-in-kind (“PIK”) interest or dividend provision. PIK interest and dividends are accrued and recorded as income at the contractual rates, if deemed collectible.  The PIK interest and dividends are added to the principal or share balances on the capitalization dates and are generally due at maturity or when redeemed by the issuer. For the three and nine months ended September 30, 2019, the Company recognized PIK and non-cash interest from investments of $3,745 and $9,875, respectively, and PIK and non-cash dividends from investments of $4,821 and $13,629, respectively. For the three and nine months ended September 30, 2018, the Company recognized PIK and non-cash interest from investments of $2,462 and $6,074, respectively, and PIK and non-cash dividends from investments of $7,236 and $20,987, respectively.

Dividend income on common equity is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Dividend income on preferred securities is recorded as dividend income on an accrual basis to the extent that such amounts are deemed collectible.

Non-accrual income:  Investments are placed on non-accrual status when principal or interest payments are past due for 30 days or more and when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest or dividends are reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest or dividends are not reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment of the ultimate collectibility. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.

Other income:  Other income represents delayed compensation, consent or amendment fees, revolver fees, structuring fees, upfront fees, management fees from a non-controlled/affiliated investment and other miscellaneous fees received and are typically non-recurring in nature. Delayed compensation is income earned from counterparties on trades that do not settle within a set number of business days after trade date. Other income may also include fees from bridge loans. The Company may from time to time enter into bridge financing commitments, an obligation to provide interim financing to a counterparty until permanent credit can be obtained. These commitments are short-term in nature and may expire unfunded. A fee is received by the Company for providing such commitments. Structuring fees and upfront fees are recognized as income when earned, usually when paid at the closing of the investment, and are non-refundable.

Interest and other financing expenses—Interest and other financing fees are recorded on an accrual basis by the Company. See Note 7. Borrowings, for details.

Deferred financing costs—The deferred financing costs of the Company consist of capitalized expenses related to the origination and amending of the Company’s borrowings. The Company amortizes these costs into expense over the stated life of the related borrowing. See Note 7. Borrowings, for details.

44

---

Table of Contents

Deferred offering costs—The Company's deferred offering costs consist of fees and expenses incurred in connection with equity offerings and the filing of shelf registration statements. Upon the issuance of shares, offering costs are charged as a direct reduction to net assets. Deferred offering costs are included in other assets on the Company's Consolidated Statements of Assets and Liabilities.

Income taxes—The Company has elected to be treated, and intends to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, the Company is not subject to U.S. federal income tax on the portion of taxable income and gains timely distributed to its stockholders.

To continue to qualify and be subject to tax as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of its investment company taxable income, as defined by the Code. Since U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes.

Differences between taxable income and the results of operations for financial reporting purposes may be permanent or temporary in nature. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

For U.S. federal income tax purposes, distributions paid to stockholders of the Company are reported as ordinary income, return of capital, long term capital gains or a combination thereof.

The Company will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless the Company distributes, in a timely manner as required by the Code, an amount at least equal to the sum of (1) 98.0% of its respective net ordinary income earned for the calendar year and (2) 98.2% of its respective capital gain net income for the one-year period ending October 31 in the calendar year.

Certain consolidated subsidiaries of the Company are subject to U.S. federal and state income taxes. These taxable entities are not consolidated for income tax purposes and may generate income tax liabilities or assets from permanent and temporary differences in the recognition of items for financial reporting and income tax purposes.

For the three and nine months ended September 30, 2019, the Company recognized a total income tax benefit of approximately $281 and $108, respectively, for the Company’s consolidated subsidiaries. For the three and nine months ended September 30, 2019, the Company recorded current income tax expense of approximately $0 and $13, respectively, and deferred income tax benefit of approximately $281 and $121, respectively. For the three and nine months ended September 30, 2018, the Company recognized a total income tax provision of approximately $227 and $1,272, respectively, for the Company’s consolidated subsidiaries. For the three and nine months ended September 30, 2018, the Company recorded current income tax expense of approximately $225 and $286, respectively, and deferred income tax provision of approximately $2 and $986, respectively.

As of September 30, 2019 and December 31, 2018, the Company had $885 and $1,006, respectively, of deferred tax liabilities primarily relating to deferred taxes attributable to certain differences between the computation of income for U.S. federal income tax purposes as compared to GAAP.

Based on its analysis, the Company has determined that there were no uncertain income tax positions that do not meet the more likely than not threshold as defined by Accounting Standards Codification Topic 740 ("ASC 740") through December 31, 2018. The 2016 through 2018 tax years remain subject to examination by the U.S. federal, state, and local tax authorities.

Distributions—Distributions to common stockholders of the Company are recorded on the record date as set by the board of directors. The Company intends to make distributions to its stockholders that will be sufficient to enable the Company to maintain its status as a RIC. The Company intends to distribute approximately all of its net investment income on a quarterly basis and substantially all of its taxable income on an annual basis, except that the Company may retain certain net capital gains for reinvestment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions declared on behalf of its stockholders, unless a stockholder elects to receive cash.

The Company applies the following in implementing the dividend reinvestment plan. If the price at which newly issued shares are to be credited to stockholders’ accounts is equal to or greater than 110.0% of the last determined net asset value of the shares, the Company will use only newly issued shares to implement its dividend reinvestment plan. Under such circumstances, the number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the distribution payable to such stockholder by the market price per share of the Company’s common stock on the New York Stock

45

---

Table of Contents

Exchange (“NYSE”) on the distribution payment date. Market price per share on that date will be the closing price for such shares on the NYSE or, if no sale is reported for such day, the average of their electronically reported bid and ask prices.

If the price at which newly issued shares are to be credited to stockholders’ accounts is less than 110.0% of the last determined net asset value of the shares, the Company will either issue new shares or instruct the plan administrator to purchase shares in the open market to satisfy the additional shares required. Shares purchased in open market transactions by the plan administrator will be allocated to a stockholder based on the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased in the open market. The number of shares of the Company’s common stock to be outstanding after giving effect to payment of the distribution cannot be established until the value per share at which additional shares will be issued has been determined and elections of the Company’s stockholders have been tabulated.

Share repurchase program—On February 4, 2016, the Company's board of directors authorized a program for the purpose of repurchasing up to $50,000 worth of the Company's common stock. Under the repurchase program, the Company was permitted, but was not obligated, to repurchase its outstanding common stock in the open market from time to time provided that it complied with the Company's code of ethics and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including certain price, market volume and timing constraints. In addition, any repurchases were conducted in accordance with the 1940 Act. On December 31, 2018, the Company's board of directors extended the Company's repurchase program and the Company expects the repurchase program to be in place until the earlier of December 31, 2019 or until $50,000 of its outstanding shares of common stock have been repurchased. During the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not repurchase any shares of the Company's common stock. The Company previously repurchased $2,948 of its common stock under the share repurchase program.

Earnings per share—The Company’s earnings per share (“EPS”) amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Basic EPS is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted average number of shares of common stock outstanding during the period of computation. Diluted EPS is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted average number of shares of common stock assuming all potential shares had been issued, and its related net impact to net assets accounted for, and the additional shares of common stock were dilutive. Diluted EPS reflects the potential dilution, using the as-if-converted method for convertible debt, which could occur if all potentially dilutive securities were exercised.

Foreign securities—The accounting records of the Company are maintained in U.S. dollars. Investment securities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies on the respective dates of the transactions. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with “Net change in unrealized appreciation (depreciation) of investments” and “Net realized gains (losses) on investments” in the Company’s Consolidated Statements of Operations.

Investments denominated in foreign currencies may be negatively affected by movements in the rate of exchange between the U.S. dollar and such foreign currencies. This movement is beyond the control of the Company and cannot be predicted.

Use of estimates—The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Company’s consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Changes in the economic environment, financial markets, and other metrics used in determining these estimates could cause actual results to differ from the estimates used, and the differences could be material.

Dividend income recorded related to distributions received from flow-through investments is an accounting estimate based on the most recent estimate of the tax treatment of the distribution.

46

---

Table of Contents

Note 3. Investments

At September 30, 2019, the Company’s investments consisted of the following:

Investment Cost and Fair Value by Type

	Cost				Fair Value
First lien	$	1,675,225			$	1,675,408
Second lien	756,111				750,741
Subordinated	75,831				71,608
Equity and other	473,481				500,423
Total investments	$	2,980,648			$	2,998,180

Investment Cost and Fair Value by Industry

	Cost				Fair Value
Software	$	656,125			$	654,788
Business Services	661,667				653,224
Healthcare Services	567,774				568,411
Education	267,208				281,494
Investment Fund (includes investments in joint ventures)	202,400				202,400
Net Lease	104,789				117,581
Energy	105,047				105,625
Healthcare Information Technology	99,216				99,300
Distribution & Logistics	95,928				96,901
Federal Services	90,811				90,353
Consumer Services	76,688				75,642
Food & Beverage	27,900				27,888
Packaging	14,342				14,108
Business Products	10,753				10,465
Total investments	$	2,980,648			$	2,998,180

47

---

Table of Contents

At December 31, 2018, the Company’s investments consisted of the following:

Investment Cost and Fair Value by Type

	Cost				Fair Value
First lien	$	1,179,129			$	1,173,459
Second lien	666,545				662,556
Subordinated	72,559				65,297
Equity and other	411,493				440,641
Total investments	$	2,329,726			$	2,341,953

Investment Cost and Fair Value by Industry

	Cost				Fair Value
Business Services	$	541,901			$	554,404
Software	476,473				478,063
Healthcare Services	350,357				346,521
Education	214,032				209,433
Investment Fund (includes investments in joint ventures)	180,800				180,800
Consumer Services	122,326				120,562
Energy	101,794				105,122
Net Lease	87,299				94,816
Distribution & Logistics	82,201				80,581
Federal Services	74,572				73,962
Healthcare Information Technology	44,793				44,989
Food & Beverage	28,099				27,957
Packaging	14,328				14,278
Business Products	10,751				10,465
Total investments	$	2,329,726			$	2,341,953

During the first quarter of 2018, the Company placed its first lien positions in Education Management II LLC ("EDMC") on non-accrual status as EDMC announced its intention to wind down and liquidate the business. As of September 30, 2019, the Company's investment in EDMC placed on non-accrual status represented an aggregate cost basis of $970, an aggregate fair value of $13 and total unearned interest income of $15 and $98, respectively, for the three and nine months then ended.

As of September 30, 2019, the Company had unfunded commitments on revolving credit facilities and bridge facilities of $55,337 and $0, respectively. As of September 30, 2019, the Company had unfunded commitments in the form of delayed draws or other future funding commitments of $115,863. The unfunded commitments on revolving credit facilities and delayed draws are disclosed on the Company’s Consolidated Schedule of Investments as of September 30, 2019.

As of December 31, 2018, the Company had unfunded commitments on revolving credit facilities and bridge facilities of $43,539 and $0, respectively. As of December 31, 2018, the Company had unfunded commitments in the form of delayed draws or other future funding commitments of $94,407. The unfunded commitments on revolving credit facilities and delayed draws are disclosed on the Company’s Consolidated Schedule of Investments as of December 31, 2018.

PPVA Black Elk (Equity) LLC

On May 3, 2013, the Company entered into a collateralized securities purchase and put agreement (the “SPP Agreement”) with a private hedge fund. Under the SPP Agreement, the Company purchased twenty million Class E Preferred Units of Black Elk Energy Offshore Operations, LLC (“Black Elk”) for $20,000 with a corresponding obligation of the private hedge fund to repurchase the preferred units for $20,000 plus other amounts due under the SPP Agreement. The majority owner of Black Elk was the private hedge fund. In August 2014, the Company received a payment of $20,540, the full amount due under the SPP Agreement.

In August 2017, a trustee (the “Trustee”) for Black Elk informed the Company that the Trustee intended to assert a fraudulent conveyance claim (the “Claim”) against the Company and one of its affiliates seeking the return of the $20,540 repayment. Black Elk filed a Chapter 11 bankruptcy petition pursuant to the United States Bankruptcy Code in August 2015.

48

---

Table of Contents

The Trustee alleges that individuals affiliated with the private hedge fund conspired with Black Elk and others to improperly use proceeds from the sale of certain Black Elk assets to repay, in August 2014, the private hedge fund’s obligation to the Company under the SPP Agreement. The Company was unaware of these claims at the time the repayment was received. The private hedge fund is currently in liquidation under the laws of the Cayman Islands.

On December 22, 2017, the Company settled the Trustee’s $20,540 Claim for $16,000 and filed a claim with the Cayman Islands joint official liquidators of the private hedge fund for $16,000 that is owed to the Company under the SPP Agreement. The SPP Agreement was restored and is in effect since repayment has not been made. The Company continues to exercise its rights under the SPP Agreement and continues to monitor the liquidation process of the private hedge fund. As of September 30, 2019 and December 31, 2018, the SPP Agreement has a cost basis of $14,500 and $14,500, respectively, and a fair value of $10,718 and $11,362, respectively, which is reflective of the higher inherent risk in this transaction.

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 is a portfolio company held by the Company. SLP I is structured as a private investment fund, in which all of the investors are qualified purchasers, as such term is defined under the 1940 Act. Transfer of interests in SLP I are subject to restrictions and, as a result, interests are not readily marketable. SLP I operates under a limited liability company agreement (the “SLP I Agreement”) and will continue in existence until August 31, 2022, subject to earlier termination pursuant to certain terms of the SLP I Agreement. The term may be extended pursuant to certain terms of the SLP I Agreement. SLP I's re-investment period is currently until August 31, 2020. SLP I invests in senior secured loans issued by companies within the Company’s core industry verticals. These investments are typically broadly syndicated first lien loans.

SLP I is capitalized with $93,000 of capital commitments and $265,000 of debt from a revolving credit facility and is managed by the Company. The Company’s capital commitment is $23,000, representing less than 25.0% ownership, with third party investors representing the remaining capital commitments. As of September 30, 2019, SLP I had total investments with an aggregate fair value of approximately $327,221, debt outstanding of $231,367 and capital that had been called and funded of $93,000. As of December 31, 2018, SLP I had total investments with an aggregate fair value of approximately $327,240, debt outstanding of $242,567 and capital that had been called and funded of $93,000. The Company’s investment in SLP I is disclosed on the Company’s Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

The Company, as an investment adviser registered under the Advisers Act, acts as the collateral manager to SLP I and is entitled to receive a management fee for its investment management services provided to SLP I. As a result, SLP I is classified as an affiliate of the Company. No management fee is charged on the Company's investment in SLP I in connection with the administrative services provided to SLP I. For the three and nine months ended September 30, 2019, the Company earned approximately $291 and $865, respectively, in management fees related to SLP I, which is included in other income. For the three and nine months ended September 30, 2018, the Company earned approximately $295 and $891, respectively, in management fees related to SLP I, which is included in other income. As of September 30, 2019 and December 31, 2018, approximately $581 and $288, respectively, of management fees related to SLP I was included in receivable from affiliates. For the three and nine months ended September 30, 2019, the Company earned approximately $788 and $2,326, respectively, of dividend income related to SLP I, which is included in dividend income. For the three and nine months ended September 30, 2018, the Company earned approximately $787 and $2,423, respectively, of dividend income related to SLP I, which is included in dividend income. As of September 30, 2019 and December 31, 2018, approximately $883 and $750, respectively, of dividend income related to SLP I was included in interest and dividend receivable.

NMFC Senior Loan Program II LLC

NMFC Senior Loan Program II LLC ("SLP II") was formed as a Delaware limited liability company on March 9, 2016 and commenced operations on April 12, 2016. SLP II is structured as a private joint venture investment fund between the Company and SkyKnight Income, LLC (“SkyKnight”) and operates under a limited liability company agreement (the "SLP II Agreement"). The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within the Company's core industry verticals. These investments are typically broadly syndicated first lien loans. All investment decisions must be unanimously approved by the board of managers of SLP II, which has equal representation from the Company and SkyKnight. SLP II's investment period is currently until April 12, 2020 and SLP II will continue in existence until April 12, 2022. The term may be extended for up to one year pursuant to certain terms of the SLP II Agreement.

SLP II is capitalized with equity contributions which are called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by SLP II to call down on capital commitments requires approval by the board of managers of SLP II. As of September 30, 2019, the Company and SkyKnight have committed and contributed $79,400 and $20,600, respectively, of equity to SLP II. The Company’s investment in SLP II is disclosed on the Company’s Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

49

---

Table of Contents

On April 12, 2016, SLP II closed its $275,000 revolving credit facility with Wells Fargo Bank, National Association, which matures on April 12, 2022 and bears interest at a rate of the London Interbank Offered Rate ("LIBOR") plus 1.60% per annum. As of September 30, 2019 and December 31, 2018, SLP II had total investments with an aggregate fair value of approximately $347,995 and $336,869, respectively, and debt outstanding under its credit facility of $247,370 and $243,170, respectively. As of September 30, 2019 and December 31, 2018, none of SLP II's investments were on non-accrual. Additionally, as of September 30, 2019 and December 31, 2018, SLP II had unfunded commitments in the form of delayed draws of $3,806 and $5,858, respectively. Below is a summary of SLP II's portfolio, along with a listing of the individual investments in SLP II's portfolio as of September 30, 2019 and December 31, 2018:

		September 30, 2019				December 31, 2018
First lien investments (1)		$	359,144			$	348,577
Weighted average interest rate on first lien investments (2)		6.48		%		6.84		%
Number of portfolio companies in SLP II		34				31
Largest portfolio company investment (1)		$	17,019			$	17,150
Total of five largest portfolio company investments (1)		$	79,530			$	80,766

(1)	Reflects principal amount or par value of investment.

(2)	Computed as the all in interest rate in effect on accruing investments divided by the total principal amount of investments.

50

---

Table of Contents

The following table is a listing of the individual investments in SLP II's portfolio as of September 30, 2019:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien:
Access CIG, LLC		Business Services		6.07% (L + 3.75%)		2/27/2025		$	9,858			$	9,818			$	9,747
ADG, LLC		Healthcare Services		7.45% (L + 4.75% + 0.50% PIK)		9/28/2023		16,053				15,954				15,612
Advisor Group Holdings, Inc.		Consumer Services		7.04% (L + 5.00%)		7/31/2026		5,000				4,951				4,906
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		1,382				1,375				1,375
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		91				90				90
Brave Parent Holdings, Inc.		Software		6.26% (L + 4.00%)		4/18/2025		15,305				15,258				14,726
CentralSquare Technologies, LLC		Software		5.79% (L + 3.75%)		8/29/2025		14,888				14,855				13,994
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		10,724				10,684				10,710
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		2,052				2,042				2,049
CommerceHub, Inc.		Software		5.54% (L + 3.50%)		5/21/2025		2,469				2,458				2,439
Drilling Info Holdings, Inc.		Business Services		6.29% (L + 4.25%)		7/30/2025		14,795				14,738				14,721
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		6,364				6,307				6,349
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		151				150				151
Fastlane Parent Company, Inc.		Distribution & Logistics		6.60% (L + 4.50%)		2/4/2026		3,483				3,418				3,404
Greenway Health, LLC		Software		5.85% (L + 3.75%)		2/16/2024		14,662				14,612				12,830
Idera, Inc.		Software		6.55% (L + 4.50%)		6/28/2024		14,890				14,788				14,933
Institutional Shareholder Services Inc.		Business Services		6.60% (L + 4.50%)		3/5/2026		13,930				13,799				13,791
Keystone Acquisition Corp.		Healthcare Services		7.35% (L + 5.25%)		5/1/2024		5,292				5,254				5,173
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		7,316				7,308				7,280
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		1,889				1,887				1,879
Market Track, LLC		Business Services		6.29% (L + 4.25%)		6/5/2024		11,730				11,688				10,674
Medical Solutions Holdings, Inc.		Healthcare Services		5.79% (L + 3.75%)		6/14/2024		2,802				2,792				2,781
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		12,191				12,153				12,191
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		2,100				2,094				2,100
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		882				879				882
NorthStar Financial Services Group, LLC		Software		5.54% (L + 3.50%)		5/25/2025		5,885				5,860				5,738
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		7.30% (L + 5.25%)		4/29/2024		10,264				10,227				10,238
Poseidon Intermediate, LLC		Software		6.30% (L + 4.25%)		8/15/2022		11,830				11,828				11,919
Premise Health Holding Corp.		Healthcare Services		5.60% (L + 3.50%)		7/10/2025		1,376				1,370				1,363
Project Accelerate Parent, LLC		Business Services		6.28% (L + 4.25%)		1/2/2025		14,775				14,716				14,720
PSC Industrial Holdings Corp.		Industrial Services		5.78% (L + 3.75%)		10/11/2024		7,324				7,268				7,310
Quest Software US Holdings Inc.		Software		6.51% (L + 4.25%)		5/16/2025		14,887				14,824				14,735
Salient CRGT Inc.		Federal Services		8.05% (L + 6.00%)		2/28/2022		13,228				13,158				12,831
Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)		Education		6.29% (L + 4.25%)		7/30/2025		8,910				8,891				8,927
Wirepath LLC		Distribution & Logistics		6.10% (L + 4.00%)		8/5/2024		14,850				14,850				13,959
WP CityMD Bidco LLC		Healthcare Services		6.60% (L + 4.50%)		8/13/2026		15,000				14,851				14,875
Wrench Group LLC		Consumer Services		6.45% (L + 4.25%)		4/30/2026		4,489				4,446				4,494
YI, LLC		Healthcare Services		6.10% (L + 4.00%)		11/7/2024		14,839				14,829				14,783
Zelis Healthcare Corporation		Healthcare I.T.		6.77% (L + 4.75%)		9/30/2026		10,363				10,259				10,298
Zywave, Inc.		Software		7.26% (L + 5.00%)		11/17/2022		17,019				16,970				17,019
Total Funded Investments								$	355,338			$	353,699			$	347,996
Unfunded Investments - First lien:
Bearcat Buyer, Inc.		Healthcare Services		—		7/9/2021		$	194			$	(1	)		$	(1	)
CHA Holdings, Inc.		Business Services		—		10/10/2019		86				—				—
Edgewood Partners Holdings LLC		Business Services		—		7/31/2019		936				(9		)		(2		)
Ministry Brands, LLC		Software		—		10/18/2019		980				(5		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		110				—				—
Wrench Group LLC		Consumer Services		—		4/30/2021		1,500				—				2
Total Unfunded Investments								$	3,806			$	(15	)		$	(1	)
Total Investments								$	359,144			$	353,684			$	347,995

51

---

Table of Contents

(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). For each investment, the current interest rate provided reflects the rate in effect as of September 30, 2019.

(2)	Represents the fair value in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). The Company's board of directors does not determine the fair value of the investments held by SLP II.

The following table is a listing of the individual investments in SLP II's portfolio as of December 31, 2018:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien
Access CIG, LLC		Business Services		6.46% (L + 3.75%)		2/27/2025		$	8,825			$	8,785			$	8,605
ADG, LLC		Healthcare Services		7.63% (L + 4.75%)		9/28/2023		16,862				16,740				16,609
Beaver-Visitec International Holdings, Inc.		Healthcare Products		6.62% (L + 4.00%)		8/21/2023		14,664				14,492				14,517
Brave Parent Holdings, Inc.		Software		6.52% (L + 4.00%)		4/18/2025		15,422				15,369				14,902
CentralSquare Technologies, LLC		Software		6.27% (L + 3.75%)		8/29/2025		15,000				14,964				14,648
CHA Holdings, Inc.		Business Services		7.30% (L + 4.50%)		4/10/2025		10,805				10,760				10,774
CommerceHub, Inc.		Software		6.27% (L + 3.75%)		5/21/2025		2,488				2,476				2,419
Drilling Info Holdings, Inc.		Business Services		6.77% (L + 4.25%)		7/30/2025		12,242				12,190				12,196
Greenway Health, LLC		Software		6.56% (L + 3.75%)		2/16/2024		14,775				14,718				14,406
GOBP Holdings, Inc.		Retail		6.55% (L + 3.75%)		10/22/2025		2,500				2,494				2,438
Idera, Inc.		Software		7.03% (L + 4.50%)		6/28/2024		12,492				12,388				12,242
J.D. Power (fka J.D. Power and Associates)		Business Services		6.27% (L + 3.75%)		9/7/2023		14,962				14,920				14,588
Keystone Acquisition Corp.		Healthcare Services		8.05% (L + 5.25%)		5/1/2024		5,332				5,289				5,226
LSCS Holdings, Inc.		Healthcare Services		6.86% (L + 4.25%)		3/17/2025		5,321				5,312				5,294
LSCS Holdings, Inc.		Healthcare Services		6.89% (L + 4.25%)		3/17/2025		1,374				1,371				1,367
Market Track, LLC		Business Services		6.87% (L + 4.25%)		6/5/2024		11,820				11,772				11,347
Medical Solutions Holdings, Inc.		Healthcare Services		6.27% (L + 3.75%)		6/14/2024		4,432				4,413				4,343
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		2,116				2,109				2,116
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		600				597				600
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		12,285				12,238				12,285
NorthStar Financial Services Group, LLC		Software		6.10% (L + 3.50%)		5/25/2025		7,463				7,428				7,313
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		8.06% (L + 5.25%)		4/29/2024		10,342				10,301				10,084
Poseidon Intermediate, LLC		Software		6.78% (L + 4.25%)		8/15/2022		14,729				14,727				14,644
Premise Health Holding Corp.		Healthcare Services		6.55% (L + 3.75%)		7/10/2025		1,386				1,380				1,369
Project Accelerate Parent, LLC		Business Services		6.64% (L + 4.25%)		1/2/2025		14,887				14,821				14,663
PSC Industrial Holdings Corp.		Industrial Services		6.21% (L + 3.75%)		10/11/2024		10,395				10,307				10,161
Quest Software US Holdings Inc.		Software		6.78% (L + 4.25%)		5/16/2025		15,000				14,930				14,535
Salient CRGT Inc.		Federal Services		8.27% (L + 5.75%)		2/28/2022		13,509				13,418				13,306
Sierra Acquisition, Inc.		Food & Beverage		6.02% (L + 3.50%)		11/11/2024		3,713				3,696				3,685
SSH Group Holdings, Inc.		Education		6.77% (L + 4.25%)		7/30/2025		8,978				8,956				8,753
Wirepath LLC		Distribution & Logistics		6.71% (L + 4.00%)		8/5/2024		14,963				14,963				14,738
WP CityMD Bidco LLC		Healthcare Services		6.30% (L + 3.50%)		6/7/2024		10,823				10,801				10,620
YI, LLC		Healthcare Services		6.80% (L + 4.00%)		11/7/2024		15,064				15,053				14,971
Zywave, Inc.		Software		7.52% (L + 5.00%)		11/17/2022		17,150				17,091				17,150
Total Funded Investments								$	342,719			$	341,269			$	336,914
Unfunded Investments - First lien
Access CIG, LLC		Business Services		—		2/27/2019		$	1,108			$	—			$	(28	)
CHA Holdings, Inc.		Business Services		—		10/10/2019		2,143				(11		)		(6		)
Drilling Info Holdings, Inc.		Business Services		—		7/30/2020		1,230				(5		)		(10		)
Ministry Brands, LLC		Software		—		10/18/2019		1,267				(6		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		110				—				(1		)
Total Unfunded Investments								$	5,858			$	(22	)		$	(45	)
Total Investments								$	348,577			$	341,247			$	336,869

(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). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

52

---

Table of Contents

(2)	Represents the fair value in accordance with ASC 820. The Company's board of directors does not determine the fair value of the investments held by SLP II.

Below is certain summarized financial information for SLP II as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and September 30, 2018:

Selected Balance Sheet Information:	September 30, 2019				December 31, 2018
Investments at fair value (cost of $353,684 and $341,247, respectively)	$	347,995			$	336,869
Cash and other assets	8,702				7,620
Total assets	$	356,697			$	344,489
Credit facility	$	247,370			$	243,170
Deferred financing costs	(1,630		)		(1,374		)
Payable for unsettled securities purchased	10,259				—
Distribution payable	3,250				3,250
Other liabilities	2,761				2,869
Total liabilities	262,010				247,915
Members' capital	$	94,687			$	96,574
Total liabilities and members' capital	$	356,697			$	344,489

Selected Statement of Operations	Three Months Ended								Nine Months Ended
Information:	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest income	$	6,013			$	6,358			$	18,581			$	18,122
Other income	31				39				89				97
Total investment income	6,044				6,397				18,670				18,219
Interest and other financing expenses	2,745				2,686				8,484				7,667
Other expenses	129				140				408				504
Total expenses	2,874				2,826				8,892				8,171
Less: expenses waived and reimbursed	—				—				(20		)		—
Net expenses	2,874				2,826				8,872				8,171
Net investment income	3,170				3,571				9,798				10,048
Net realized gains on investments	116				125				377				758
Net change in unrealized (depreciation) appreciation of investments	(2,371		)		(75		)		(1,311		)		(355		)
Net increase in members' capital	$	915			$	3,621			$	8,864			$	10,451

For the three and nine months ended September 30, 2019, the Company earned approximately $2,581 and $8,536, respectively, of dividend income related to SLP II, which is included in dividend income. For the three and nine months ended September 30, 2018, the Company earned approximately $2,779 and $8,543, respectively, of dividend income related to SLP II, which is included in dividend income. As of September 30, 2019 and December 31, 2018, approximately $2,581 and $2,581, respectively, of dividend income related to SLP II was included in interest and dividend receivable.

The Company has determined that SLP II is an investment company under ASC 946; however, in accordance with such guidance the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary. Furthermore, Accounting Standards Codification Topic 810, Consolidation ("ASC 810"), concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, the Company does not consolidate SLP II.

53

---

Table of Contents

NMFC Senior Loan Program III LLC

NMFC Senior Loan Program III LLC ("SLP III") was formed as a Delaware limited liability company and commenced operations on April 25, 2018. SLP III is structured as a private joint venture investment fund between the Company and SkyKnight Income II, LLC (“SkyKnight II”) and operates under a limited liability company agreement (the "SLP III Agreement"). The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within the Company's core industry verticals. These investments are typically broadly syndicated first lien loans. All investment decisions must be unanimously approved by the board of managers of SLP III, which has equal representation from the Company and SkyKnight II. SLP III has a five year investment period and will continue in existence until April 25, 2025. The investment period may be extended for up to one year pursuant to certain terms of the SLP III Agreement.

SLP III is capitalized with equity contributions which are called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by SLP III to call down on capital commitments requires approval by the board of managers of SLP III. As of September 30, 2019, the Company and SkyKnight II have committed and contributed $100,000 and $25,000, respectively, of equity to SLP III. The Company’s investment in SLP III is disclosed on the Company’s Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

On May 2, 2018, SLP III closed its revolving credit facility with Citibank, N.A., which matures on May 2, 2023 and bears interest at a rate of LIBOR plus 1.70% per annum. Effective June 24, 2019, SLP III's revolving credit facility has a maximum borrowing capacity of $375,000. As of September 30, 2019 and December 31, 2018, SLP III had total investments with an aggregate fair value of approximately $493,475 and $365,357, respectively, and debt outstanding under its credit facility of $356,900 and $280,300, respectively. As of September 30, 2019 and December 31, 2018, none of SLP III's investments were on non-accrual. Additionally, as of September 30, 2019 and December 31, 2018, SLP III had unfunded commitments in the form of delayed draws of $12,632 and $8,811, respectively. Below is a summary of SLP III's portfolio, along with a listing of the individual investments in SLP III's portfolio as of September 30, 2019 and December 31, 2018:

		September 30, 2019				December 31, 2018
First lien investments (1)		$	514,848			$	383,289
Weighted average interest rate on first lien investments (2)		6.16		%		6.50		%
Number of portfolio companies in SLP III		48				39
Largest portfolio company investment (1)		$	23,999			$	18,958
Total of five largest portfolio company investments (1)		$	100,100			$	85,938

(1)	Reflects principal amount or par value of investment.

(2)	Computed as the all in interest rate in effect on accruing investments divided by the total principal amount of investments.

54

---

Table of Contents

The following table is a listing of the individual investments in SLP III's portfolio as of September 30, 2019:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien
Access CIG, LLC		Business Services		6.07% (L + 3.75%)		2/27/2025		$	1,207			$	1,207			$	1,193
Advisor Group Holdings, Inc.		Consumer Services		7.04% (L + 5.00%)		7/31/2026		5,000				4,951				4,906
Affordable Care Holding Corp.		Healthcare Services		6.84% (L + 4.75%)		10/24/2022		5,979				5,893				5,784
AG Parent Holdings, LLC		Healthcare Services		7.26% (L + 5.00%)		7/31/2026		12,500				12,438				12,461
Air Newco LLC		Software		6.27%(L + 4.25%)		10/9/2026		6,000				5,940				5,974
Ascensus Specialties LLC		Business Services		6.77%(L + 4.75%)		9/24/2026		10,000				9,950				9,975
BCPE Empire Holdings, Inc.		Distribution & Logistics		6.04% (L + 4.00%)		6/11/2026		9,190				9,100				9,098
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		19,902				19,805				19,803
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		1,305				1,299				1,299
Bluefin Holding, LLC		Software		6.36% (L + 4.25%)		9/4/2026		10,000				9,850				9,900
Bracket Intermediate Holding Corp.		Healthcare Services		6.29% (L + 4.25%)		9/5/2025		14,850				14,785				14,822
Brave Parent Holdings, Inc.		Software		6.26% (L + 4.00%)		4/18/2025		14,812				14,767				14,251
CentralSquare Technologies, LLC		Software		5.79% (L + 3.75%)		8/29/2025		14,887				14,855				13,994
Certara Holdco, Inc.		Healthcare I.T.		5.54% (L + 3.50%)		8/15/2024		1,265				1,269				1,261
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		990				990				989
CommerceHub, Inc.		Software		5.54% (L + 3.50%)		5/21/2025		14,813				14,750				14,637
Covenant Surgical Partners, Inc.		Healthcare Services		6.10% (L + 4.00%)		7/1/2026		10,000				9,903				9,875
CRCI Longhorn Holdings, Inc.		Business Services		5.56% (L + 3.50%)		8/8/2025		14,850				14,786				14,488
Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)		Healthcare Services		5.79% (L + 3.75%)		6/6/2025		14,823				14,792				14,606
Drilling Info Holdings, Inc.		Business Services		6.29% (L + 4.25%)		7/30/2025		18,814				18,732				18,720
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		6,364				6,307				6,349
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		151				150				151
Fastlane Parent Company, Inc.		Distribution & Logistics		6.60% (L + 4.50%)		2/4/2026		3,483				3,418				3,404
Greenway Health, LLC		Software		5.85% (L + 3.75%)		2/16/2024		14,708				14,717				12,869
Heartland Dental, LLC		Healthcare Services		5.79% (L + 3.75%)		4/30/2025		18,364				18,287				18,016
Idera, Inc.		Software		6.55% (L + 4.50%)		6/28/2024		11,154				11,102				11,185
Institutional Shareholder Services Inc.		Business Services		6.60% (L + 4.50%)		3/5/2026		995				986				985
KAMC Holdings, Inc.		Business Services		6.18% (L + 4.00%)		8/14/2026		10,000				9,950				10,000
Kestra Advisor Services Holdings A, Inc.		Business Services		6.36% (L + 4.25%)		6/3/2026		9,500				9,423				9,298
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		2,660				2,641				2,647
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		687				682				683
Market Track, LLC		Business Services		6.29% (L + 4.25%)		6/5/2024		4,790				4,785				4,359
MED Parentco, LP		Healthcare Services		6.29% (L + 4.25%)		8/31/2026		10,402				10,305				10,329
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		4,561				4,544				4,561
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		882				879				882
National Intergovernmental Purchasing Alliance Company		Business Services		5.85% (L + 3.75%)		5/23/2025		14,813				14,801				14,627
Navex Topco, Inc.		Software		5.38% (L + 3.25%)		9/5/2025		18,441				18,277				18,291
Netsmart Technologies, Inc.		Healthcare I.T.		5.79% (L + 3.75%)		4/19/2023		10,357				10,357				10,279
Newport Group Holdings II, Inc.		Business Services		5.90% (L + 3.75%)		9/12/2025		4,950				4,928				4,925
NorthStar Financial Services Group, LLC		Software		5.54% (L + 3.50%)		5/25/2025		11,770				11,721				11,476
Outcomes Group Holdings, Inc.		Healthcare Services		5.62% (L + 3.50%)		10/24/2025		6,451				6,437				6,381
Pelican Products, Inc.		Business Products		5.54% (L + 3.50%)		5/1/2025		4,938				4,927				4,746
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		7.30% (L + 5.25%)		4/29/2024		15,470				15,407				15,431
Premise Health Holding Corp.		Healthcare Services		5.60% (L + 3.50%)		7/10/2025		13,758				13,698				13,632
Project Accelerate Parent, LLC		Business Services		6.28% (L + 4.25%)		1/2/2025		9,949				9,902				9,912
Quest Software US Holdings Inc.		Software		6.51% (L + 4.25%)		5/16/2025		14,888				14,825				14,735
Sierra Enterprises, LLC		Food & Beverage		6.04% (L + 4.00%)		11/11/2024		2,462				2,460				2,444
Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)		Education		6.29% (L + 4.25%)		7/30/2025		14,850				14,818				14,878
Sunshine Luxembourg VII SARL		Consumer Products		6.27%(L + 4.25%)		9/23/2026		12,000				11,940				12,066
Wirepath LLC		Distribution & Logistics		6.10% (L + 4.00%)		8/5/2024		17,346				17,346				16,305
WP CityMD Bidco LLC		Healthcare Services		6.60% (L + 4.50%)		8/13/2026		20,069				19,869				19,902
YI, LLC		Healthcare Services		6.10% (L + 4.00%)		11/7/2024		9,816				9,809				9,779
Total Funded Investments								$	502,216			$	499,760			$	493,563

55

---

Table of Contents

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Unfunded Investments - First lien
BCPE Empire Holdings, Inc.		Distribution & Logistics		—		6/11/2021		$	1,810			$	—			$	(18	)
Bearcat Buyer, Inc.		Healthcare Services		—		7/9/2021		2,792				(14		)		(14		)
Covenant Surgical Partners, Inc.		Healthcare Services		—		7/1/2021		2,000				(20		)		(25		)
Edgewood Partners Holdings LLC		Business Services		—		12/31/2019		936				(9		)		(2		)
Heartland Dental, LLC		Healthcare Services		—		4/30/2020		413				—				(8		)
MED Parentco, LP		Healthcare Services		—		8/27/2021		2,598				(24		)		(18		)
Ministry Brands, LLC		Software		—		10/18/2019		980				(5		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		1,103				(3		)		(3		)
Total Unfunded Investments								$	12,632			$	(75	)		$	(88	)
Total Investments								$	514,848			$	499,685			$	493,475

(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). For each investment, the current interest rate provided reflects the rate in effect as of September 30, 2019.

(2)	Represents the fair value in accordance with ASC 820. The Company's board of directors does not determine the fair value of the investments held by SLP III.

56

---

Table of Contents

The following table is a listing of the individual investments in SLP III's portfolio as of December 31, 2018:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien
Access CIG, LLC		Business Services		6.46% (L + 3.75%)		2/27/2025		$	1,216			$	1,216			$	1,185
Affordable Care Holding Corp.		Healthcare Services		7.25% (L + 4.75%)		10/24/2022		1,025				1,030				1,005
Bracket Intermediate Holding Corp.		Healthcare Services		7.00% (L + 4.25%)		9/5/2025		14,963				14,890				14,813
Brave Parent Holdings, Inc.		Software		6.52% (L + 4.00%)		4/18/2025		14,925				14,874				14,421
CentralSquare Technologies, LLC		Software		6.27% (L + 3.75%)		8/29/2025		15,000				14,964				14,648
Certara Holdco, Inc.		Healthcare I.T.		6.30% (L + 3.50%)		8/15/2024		1,275				1,280				1,255
CHA Holdings, Inc.		Business Services		7.30% (L + 4.50%)		4/10/2025		997				997				995
CommerceHub, Inc.		Software		6.27% (L + 3.75%)		5/21/2025		14,925				14,856				14,515
CRCI Longhorn Holdings, Inc.		Business Services		5.89% (L + 3.50%)		8/8/2025		14,963				14,891				14,588
Dentalcorp Perfect Smile ULC		Healthcare Services		6.27% (L + 3.75%)		6/6/2025		11,940				11,912				11,701
Dentalcorp Perfect Smile ULC		Healthcare Services		6.27% (L + 3.75%)		6/6/2025		1,686				1,685				1,652
Drilling Info Holdings, Inc.		Business Services		6.77% (L + 4.25%)		7/30/2025		17,591				17,507				17,525
Financial & Risk US Holdings, Inc.		Business Services		6.27% (L + 3.75%)		10/1/2025		8,000				7,980				7,512
GOBP Holdings, Inc.		Retail		6.55% (L + 3.75%)		10/22/2025		15,000				14,963				14,625
Greenway Health, LLC		Software		6.56% (L + 3.75%)		2/16/2024		14,821				14,831				14,450
Heartland Dental, LLC		Healthcare Services		6.27% (L + 3.75%)		4/30/2025		17,329				17,249				16,593
HIG Finance 2 Limited		Business Services		6.06% (L + 3.50%)		12/20/2024		1,995				1,985				1,939
Idera, Inc.		Software		7.03% (L + 4.50%)		6/28/2024		2,294				2,289				2,248
J.D. Power (fka J.D. Power and Associates)		Business Services		6.27% (L + 3.75%)		9/7/2023		5,985				5,985				5,835
Market Track, LLC		Business Services		6.87% (L + 4.25%)		6/5/2024		4,827				4,821				4,633
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		4,596				4,576				4,596
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		600				597				600
National Intergovernmental Purchasing Alliance Company		Business Services		6.55% (L + 3.75%)		5/23/2025		14,925				14,912				14,552
Navex Topco, Inc.		Software		5.78% (L + 3.25%)		9/5/2025		14,963				14,890				14,102
Navicure, Inc.		Healthcare Services		6.27% (L + 3.75%)		11/1/2024		2,985				2,985				2,925
Netsmart Technologies, Inc.		Healthcare I.T.		6.27% (L + 3.75%)		4/19/2023		10,437				10,437				10,307
Newport Group Holdings II, Inc.		Business Services		6.54% (L + 3.75%)		9/12/2025		4,988				4,963				4,875
NorthStar Financial Services Group, LLC		Software		6.10% (L + 3.50%)		5/25/2025		14,925				14,856				14,628
OEConnection LLC		Business Services		6.53% (L + 4.00%)		11/22/2024		1,830				1,843				1,789
Outcomes Group Holdings, Inc.		Healthcare Services		6.28% (L + 3.50%)		10/24/2025		6,500				6,484				6,394
Pelican Products, Inc.		Business Products		5.88% (L + 3.50%)		5/1/2025		4,975				4,963				4,726
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		8.06% (L + 5.25%)		4/29/2024		15,588				15,517				15,199
Premise Health Holding Corp.		Healthcare Services		6.55% (L + 3.75%)		7/10/2025		13,862				13,796				13,689
Quest Software US Holdings Inc.		Software		6.78% (L + 4.25%)		5/16/2025		15,000				14,930				14,535
Sierra Enterprises, LLC		Food & Beverage		6.02% (L + 3.50%)		11/11/2024		2,481				2,478				2,463
SSH Group Holdings, Inc.		Education		6.77% (L + 4.25%)		7/30/2025		14,963				14,927				14,588
University Support Services LLC (St. George's University Scholastic Services LLC)		Education		6.03% (L + 3.50%)		7/17/2025		3,790				3,772				3,759
VT Topco, Inc.		Business Services		6.55% (L + 3.75%)		8/1/2025		7,980				7,961				7,882
VT Topco, Inc.		Business Services		6.55% (L + 3.75%)		8/1/2025		1,004				1,004				992
Wirepath LLC		Distribution & Logistics		6.71% (L + 4.00%)		8/5/2024		17,477				17,477				17,215
WP CityMD Bidco LLC		Healthcare Services		6.30% (L + 3.50%)		6/7/2024		14,887				14,887				14,608
YI, LLC		Healthcare Services		6.80% (L + 4.00%)		11/7/2024		4,965				4,983				4,935
Total Funded Investments								$	374,478			$	373,443			$	365,497
Unfunded Investments - First lien
Dentalcorp Perfect Smile ULC		Healthcare Services		—		6/6/2020		$	1,308			$	(3	)		$	(26	)
Drilling Info Holdings, Inc.		Business Services		—		7/30/2020		1,367				(7		)		(11		)
Heartland Dental, LLC		Healthcare Services		—		4/30/2020		1,586				—				(67		)
Ministry Brands, LLC		Software		—		10/18/2019		1,267				(6		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		1,103				(3		)		(14		)
University Support Services LLC (St. George's University Scholastic Services LLC)		Education		—		7/17/2019		1,187				—				(10		)
VT Topco, Inc.		Business Services		—		8/1/2020		993				(2		)		(12		)
Total Unfunded Investments								$	8,811			$	(21	)		$	(140	)
Total Investments								$	383,289			$	373,422			$	365,357

57

---

Table of Contents

(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). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

(2)	Represents the fair value in accordance with ASC 820. Our board of directors does not determine the fair value of the investments held by SLP III.

Below is certain summarized financial information for SLP III as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and September 30, 2018:

Selected Balance Sheet Information:	September 30, 2019				December 31, 2018
Investments at fair value (cost of $499,685 and $373,422)	$	493,475			$	365,357
Receivable from unsettled securities sold	15,276				—
Cash and other assets	3,125				9,138
Total assets	$	511,876			$	374,495
Credit facility	$	356,900			$	280,300
Deferred financing costs	(2,553		)		(2,831		)
Payable for unsettled securities purchased	31,591				—
Distribution payable	3,350				2,600
Other liabilities	3,953				4,456
Total liabilities	393,241				284,525
Members' capital	$	118,635			$	89,970
Total liabilities and members' capital	$	511,876			$	374,495

Selected Statement of Operations Information:	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018(1)
Interest income	$	7,268			$	3,170			$	19,828			$	3,960
Other income	122				80				270				102
Total investment income	7,390				3,250				20,098				4,062
Interest and other financing expenses	3,770				1,853				10,511				2,427
Other expenses	166				123				469				349
Total expenses	3,936				1,976				10,980				2,776
Less: expenses waived and reimbursed	—				—				(22		)		—
Net expenses	3,936				1,976				10,958				2,776
Net investment income	3,454				1,274				9,140				1,286
Net realized gains on investments	100				1				170				1
Net change in unrealized (depreciation) appreciation of investments	(1,800		)		1,438				1,855				2,056
Net increase in members' capital	$	1,754			$	2,713			$	11,165			$	3,343

(1)	SLP III commenced operations on April 25, 2018.

For the three and nine months ended September 30, 2019, the Company earned approximately $2,680 and $7,600 of dividend income related to SLP III, which is included in dividend income. For the three and nine months ended September 30, 2018, the Company earned approximately $960 and $960, respectively, of dividend income related to SLP III. As of September 30, 2019 and December 31, 2018 approximately $2,680 and $2,080, respectively, of dividend income related to SLP III was included in interest and dividend receivable.

The Company has determined that SLP III is an investment company under ASC 946; however, in accordance with such guidance the Company will generally not consolidate its investment in a company other than a wholly-owned investment

58

---

Table of Contents

company subsidiary. Furthermore, ASC 810 concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, the Company does not consolidate SLP III.

Unconsolidated Significant Subsidiaries

In accordance with Regulation S-X Rule 10-01(b)(1), the Company evaluates its unconsolidated controlled portfolio companies as significant subsidiaries under this rule. As of September 30, 2019, Edmentum Ultimate Holdings, LLC ("Edmentum") is considered a significant unconsolidated subsidiary under Regulation S-X Rule 10-01(b)(1). Based on the requirements under Regulation S-X 10-01(b)(1), the summarized consolidated financial information of Edmentum is shown below.

Edmentum Ultimate Holdings, LLC

Edmentum owns 100% of the equity of Edmentum, Inc. Edmentum is one of the largest all subscription-based, software as a service provider of online curriculum and assessments to the U.S. education market. Edmentum provides high-value, comprehensive online solutions that support educators to successfully transition learners from one stage to the next. Edmentum's fiscal year end is January 31.

Below is certain summarized financial information for Edmentum for the three and six month periods ending July 31, 2019 and July 31, 2018.

	Three Months Ended								Six Months Ended
Summary of Operations (1)	July 31, 2019				July 31, 2018				July 31, 2019				July 31, 2018
Revenue	$	28,595			$	25,355			$	56,911			$	52,090
Cost of revenue	9,572				8,351				18,644				16,615
Gross Profit	19,023				17,004				38,267				35,475
Operating and other expenses	34,750				33,323				68,166				63,912
Net income (loss)	$	(15,727	)		$	(16,319	)		$	(29,899	)		$	(28,437	)

(1) Due to Edmentum's January 31 fiscal year end, September 30, 2019 financial statements are not available. As such, the most recent comparable period is presented.

Investment Risk Factors

First and second lien debt that the Company invests in is almost entirely rated below investment grade or may be unrated. Debt investments rated below investment grade are often referred to as “leveraged loans”, “high yield” or “junk” debt investments, and may be considered “high risk” compared to debt investments that are rated investment grade. These debt investments are considered speculative because of the credit risk of the issuers. Such issuers are considered more likely than investment grade issuers to default on their payments of interest and principal, and such risk of default could reduce the net asset value and income distributions of the Company. In addition, some of the Company’s debt investments will not fully amortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due upon maturity. First and second lien debt may also lose significant market value before a default occurs. Furthermore, an active trading market may not exist for these first and second lien debt investments. This illiquidity may make it more difficult to value the debt.

Subordinated debt is generally subject to similar risks as those associated with first and second lien debt, except that such debt is subordinated in payment and/or lower in lien priority. Subordinated debt is subject to the additional risk that the cash flow of the borrower and the property securing the debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior secured and unsecured obligations of the borrower.

The Company may directly invest in the equity of private companies or, in some cases, equity investments could be made in connection with a debt investment. Equity investments may or may not fluctuate in value, resulting in recognized realized gains or losses upon disposition.

Note 4. Fair Value

Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes and ranks the

59

---

Table of Contents

inputs to valuation techniques used in measuring investments at fair value. The hierarchy 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 the Company has 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 ASC 820, the Company, to the extent that it holds such investments, does not adjust the quoted price for these investments, even in situations where the Company holds 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.

The following table summarizes the levels in the fair value hierarchy that the Company’s portfolio investments fall into as of September 30, 2019:

	Total				Level I				Level II				Level III
First lien	$	1,675,408			$	—			$	223,781			$	1,451,627
Second lien	750,741				—				366,199				384,542
Subordinated	71,608				—				26,093				45,515
Equity and other	500,423				—				—				500,423
Total investments	$	2,998,180			$	—			$	616,073			$	2,382,107

The following table summarizes the levels in the fair value hierarchy that the Company’s portfolio investments fall into as of December 31, 2018:

	Total				Level I				Level II				Level III
First lien	$	1,173,459			$	—			$	185,931			$	987,528
Second lien	662,556				—				355,741				306,815
Subordinated	65,297				—				25,210				40,087
Equity and other	440,641				—				—				440,641
Total investments	$	2,341,953			$	—			$	566,882			$	1,775,071

    

60

---

Table of Contents

The following table summarizes the changes in fair value of Level III portfolio investments for the three months ended September 30, 2019, as well as the portion of appreciation (depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Company at September 30, 2019:

	Total				First Lien				Second Lien				Subordinated				Equity and other
Fair value, June 30, 2019	$	2,028,442			$	1,198,153			$	330,396			$	43,585			$	456,308
Total gains or losses included in earnings:
Net realized gains on investments	15				15				—				—				—
Net change in unrealized (depreciation) appreciation	(3,165		)		2,540				(4,108		)		950				(2,547		)
Purchases, including capitalized PIK and revolver fundings	410,626				271,086				91,898				980				46,662
Proceeds from sales and paydowns of investments	(94,158		)		(54,648		)		(39,510		)		—				—
Transfers into Level III(1)	175,725				51,662				124,063				—				—
Transfers out of Level III(1)	(135,378		)		(17,181		)		(118,197		)		—				—
Fair Value, September 30, 2019	$	2,382,107			$	1,451,627			$	384,542			$	45,515			$	500,423
Unrealized (depreciation) appreciation for the period relating to those Level III assets that were still held by the Company at the end of the period:	$	(3,317	)		$	2,540			$	(4,260	)		$	950			$	(2,547	)

(1)	As of September 30, 2019, portfolio investments were transferred into Level III from Level II and out of Level III into Level II at fair value as of the beginning of the period in which the reclassification occurred.

61

---

Table of Contents

The following table summarizes the changes in fair value of Level III portfolio investments for the three months ended September 30, 2018, as well as the portion of appreciation (depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Company at September 30, 2018:

	Total				First Lien				Second Lien				Subordinated				Equity and other
Fair value, June 30, 2018	$	1,621,911			$	711,078			$	381,865			$	41,126			$	487,842
Total gains or losses included in earnings:
Net realized gains (losses) on investments	3,259				157				39				—				3,063
Net change in unrealized (depreciation) appreciation	(635		)		59				1,392				(111		)		(1,975		)
Purchases, including capitalized PIK and revolver fundings	411,774				291,004				85,525				908				34,337
Proceeds from sales and paydowns of investments	(242,085		)		(122,624		)		(110,819		)		(3,579		)		(5,063		)
Transfers into Level III (1)	6,880				6,880				—				—				—
Transfers out of Level III (1)	(34,819		)		—				(34,819		)		—				—
Fair Value, September 30, 2018	$	1,766,285			$	886,554			$	323,183			$	38,344			$	518,204
Unrealized appreciation (depreciation) for the period relating to those Level III assets that were still held by the Company at the end of the period:	$	2,694			$	213			$	2,058			$	(111	)		$	534

(1)	As of September 30, 2018, portfolio investments were transferred into Level III from Level II and out of Level III into Level II at fair value as of the beginning of the period in which the reclassification occurred.

The following table summarizes the changes in fair value of Level III portfolio investments for the nine months ended September 30, 2019, as well as the portion of appreciation (depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Company at September 30, 2019:

	Total				First Lien				Second Lien				Subordinated				Equity and other
Fair value, December 31, 2018	$	1,775,071			$	987,528			$	306,815			$	40,087			$	440,641
Total gains or losses included in earnings:
Net realized gains on investments	202				81				121				—				—
Net change in unrealized appreciation (depreciation)	3,897				4,067				(202		)		2,234				(2,202		)
Purchases, including capitalized PIK and revolver fundings	720,433				504,983				150,272				3,194				61,984
Proceeds from sales and paydowns of investments	(174,984		)		(83,747		)		(91,237		)		—				—
Transfers into Level III(1)	202,728				90,606				112,122				—				—
Transfers out of Level III(1)	(145,240		)		(51,891		)		(93,349		)		—				—
Fair Value, September 30, 2019	$	2,382,107			$	1,451,627			$	384,542			$	45,515			$	500,423
Unrealized appreciation (depreciation) for the period relating to those Level III assets that were still held by the Company at the end of the period:	$	3,220			$	4,069			$	(881	)		$	2,234			$	(2,202	)

(1)	As of September 30, 2019, portfolio investments were transferred into Level III from Level II and out of Level III into Level II at fair value as of the beginning of the period in which the reclassification occurred.

    

62

---

Table of Contents

The following table summarizes the changes in fair value of Level III portfolio investments for the nine months ended September 30, 2018, as well as the portion of appreciation (depreciation) included in income attributable to unrealized appreciation (depreciation) related to those assets and liabilities still held by the Company at September 30, 2018:

	Total				First Lien				Second Lien				Subordinated				Equity and other
Fair value, December 31, 2017	$	1,405,754			$	556,697			$	443,082			$	27,101			$	378,874
Total gains or losses included in earnings:
Net realized gains (losses) on investments	2,242				269				(1,090		)		—				3,063
Net change in unrealized appreciation (depreciation)	5,486				(1,324		)		(12,189		)		(2,644		)		21,643
Purchases, including capitalized PIK and revolver fundings	838,984				533,735				166,596				18,966				119,687
Proceeds from sales and paydowns of investments	(420,781		)		(239,187		)		(171,452		)		(5,079		)		(5,063		)
Transfers into Level III(1)	92,429				92,429				—				—				—
Transfers out of Level III(1)	(157,829		)		(56,065		)		(101,764		)		—				—
Fair Value, September 30, 2018	$	1,766,285			$	886,554			$	323,183			$	38,344			$	518,204
Unrealized appreciation (depreciation) for the period relating to those Level III assets that were still held by the Company at the end of the period:	$	9,346			$	(471	)		$	(11,691	)		$	(2,644	)		$	24,152

(1)	As of September 30, 2018, portfolio investments were transferred into Level III from Level II and out of Level III into Level II at fair value as of the beginning of the period in which the reclassification occurred.

Except as noted in the tables above, there were no other transfers in or out of Level I, II, or III during the three and nine months ended September 30, 2019 and September 30, 2018. Transfers into Level III occur as quotations obtained through pricing services are deemed not representative of fair value as of the balance sheet date and such assets are internally valued. As quotations obtained through pricing services are substantiated through additional market sources, investments are transferred out of Level III. In addition, transfers out of Level III and transfers into Level III occur based on the increase or decrease in the availability of certain observable inputs.

The Company invests in revolving credit facilities. These investments are categorized as Level III investments as these assets are not actively traded and their fair values are often implied by the term loans of the respective portfolio companies.

The Company generally uses the following framework when determining the fair value of investments where there are little, if any, market activity or observable pricing inputs. The Company typically determines the fair value of its 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 its due diligence process, the Company evaluates the overall performance and financial stability of the portfolio company. Post investment, the Company analyzes 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. The Company also attempts 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 its original investment thesis. This analysis is specific to each portfolio company. The Company leverages the knowledge gained from its original due diligence process, augmented by this subsequent monitoring, to continually refine its outlook for each of its portfolio companies and ultimately form the valuation of its investment in each portfolio company. When an external event such as a purchase transaction, public offering or subsequent sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private valuation.

For debt investments, the Company 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 the Company’s debt investment. For equity investments or in cases where the Market Based Approach implies a lack of enterprise value coverage for the debt investment, the Company 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 the Company’s 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.

63

---

Table of Contents

Market Based Approach:  The Company may estimate the total enterprise value of each portfolio company by utilizing market value cash flow (EBITDA) multiples of publicly traded comparable companies and comparable transactions. The Company considers numerous factors when selecting the appropriate companies whose trading multiples are used to value its 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. The Company may apply an average of various relevant comparable company EBITDA multiples to the portfolio company’s latest twelve month (“LTM”) EBITDA or projected EBITDA to calculate the enterprise value of the portfolio company. Significant increases or decreases in the EBITDA multiple 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, 2019 and December 31, 2018, the Company used the relevant EBITDA multiple ranges set forth in the table below to determine the enterprise value of its portfolio companies. The Company believes these were reasonable ranges in light of current comparable company trading levels and the specific portfolio companies involved.

Income Based Approach: The Company 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 yield calibration approach, which 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. 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, 2019 and December 31, 2018, the Company used the discount ranges set forth in the table below to value investments in its portfolio companies.

The unobservable inputs used in the fair value measurement of the Company's Level III investments as of September 30, 2019 were as follows:

									Range
Type	Fair Value as of September 30, 2019				Approach		Unobservable Input		Low			High			Weighted Average
First lien	$	1,113,079			Market & income approach		EBITDA multiple		2.0x			35.0x			13.5x
							Revenue multiple		2.4x			11.0x			6.2x
							Discount rate		6.3	%		15.3	%		8.7	%
	285,379				Market quote		Broker quote		N/A			N/A			N/A
	53,169				Other		N/A(1)		N/A			N/A			N/A
Second lien	119,683				Market & income approach		EBITDA multiple		8.5x			17.2x			12.0x
							Revenue multiple		2.4x			3.0x			2.6x
							Discount rate		9.4	%		20.3	%		12.2	%
	233,580				Market quote		Broker quote		N/A			N/A			N/A
	31,279				Other		N/A(1)		N/A			N/A			N/A
Subordinated	45,515				Market & income approach		EBITDA multiple		5.5x			17.2x			12.6x
							Revenue multiple		2.4x			3.0x			2.6x
							Discount rate		11.7	%		35.0	%		16.4	%
Equity and other	499,596				Market & income approach		EBITDA multiple		5.5x			19.5x			12.6x
							Revenue multiple		2.4x			3.0x			2.6x
							Discount rate		6.3	%		28.1	%		13.1	%
	827				Black Scholes analysis		Expected life in years		6.5			6.5			6.5
							Volatility		24.4	%		24.4	%		24.4	%
							Discount rate		1.5	%		1.5	%		1.5	%
	$	2,382,107

 

(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.

64

---

Table of Contents

The unobservable inputs used in the fair value measurement of the Company's Level III investments as of December 31, 2018 were as follows:

									Range
Type	Fair Value as of December 31, 2018				Approach		Unobservable Input		Low			High			Weighted Average
First lien	$	797,985			Market & income approach		EBITDA multiple		2.0x			32.0x			12.1x
							Revenue multiple		3.5x			6.5x			5.8x
							Discount rate		7.0	%		15.3	%		9.6	%
	129,837				Market quote		Broker quote		N/A			N/A			N/A
	59,706				Other		N/A(1)		N/A			N/A			N/A
Second lien	102,963				Market & income approach		EBITDA multiple		8.5x			15.0x			11.1x
							Discount rate		10.0	%		19.7	%		12.8	%
	203,852				Market quote		Broker quote		N/A			N/A			N/A
Subordinated	40,087				Market & income approach		EBITDA multiple		5.0x			13.0x			10.2x
							Discount rate		10.9	%		21.4	%		16.3	%
Equity and other	439,977				Market & income approach		EBITDA multiple		0.4x			18.0x			10.3x
							Discount rate		6.5	%		25.8	%		13.5	%
	664				Black Scholes analysis		Expected life in years		7.3			7.3			7.3
							Volatility		37.9	%		37.9	%		37.9	%
							Discount rate		2.9	%		2.9	%		2.9	%
	$	1,775,071

 

(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.

Based on a comparison to similar BDC credit facilities, the terms and conditions of the Holdings Credit Facility, the NMFC Credit Facility and the DB Credit Facility (as defined in Note 7. Borrowings) are representative of market. The carrying values of the Holdings Credit Facility, NMFC Credit Facility and DB Credit Facility approximate fair value as of September 30, 2019, as the facilities are continually monitored and examined by both the borrower and the lender and are considered Level III. The carrying value of the SBA-guaranteed debentures, the 2016 Unsecured Notes, the 2017A Unsecured Notes, the 2018A Unsecured Notes, the 2018B Unsecured Notes and the 2019A Unsecured Notes (as defined in Note 7. Borrowings) approximate fair value as of September 30, 2019 based on a comparison of market interest rates for the Company’s borrowings and similar entities and are considered Level III. The fair value of the 2018 Convertible Notes and the 5.75% Unsecured Notes (as defined in Note 7. Borrowings) as of September 30, 2019 was $211,360 and $53,240, respectively, which was based on quoted prices and considered Level II. See Note 7. Borrowings, for details. The carrying value of the collateralized agreement approximates fair value as of September 30, 2019 and is considered Level III. The fair value of other financial assets and liabilities approximates their carrying value based on the short-term nature of these items.

Fair value risk factors—The Company seeks investment opportunities that offer the possibility of attaining substantial capital appreciation. Certain events particular to each industry in which the Company’s portfolio companies conduct their operations, as well as general economic and political conditions, may have a significant negative impact on the operations and profitability of the Company’s investments and/or on the fair value of the Company’s investments. The Company’s investments are subject to the risk of non-payment of scheduled interest or principal, resulting in a reduction in income to the Company and their corresponding fair valuations. Also, there may be risk associated with the concentration of investments in one geographic region or in certain industries. These events are beyond the control of the Company and cannot be predicted. Furthermore, the ability to liquidate investments and realize value is subject to uncertainties.

Note 5. Agreements

The Company entered into an investment advisory and management agreement (the “Investment Management Agreement”) with the Investment Adviser which was most recently re-approved by the Company's board of directors on February 6, 2019. Under the Investment Management Agreement, the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, the Company. For providing these services, the Investment Adviser receives a fee from the Company, consisting of two components—a base management fee and an incentive fee.

65

---

Table of Contents

Pursuant to the Investment Management Agreement, the base management fee is calculated at an annual rate of 1.75% of the Company’s gross assets, which equals the Company’s total assets on the Consolidated Statements of Assets and Liabilities, less (i) the borrowings under the New Mountain Finance SPV Funding, L.L.C. Loan and Security Agreement, as amended and restated, dated October 27, 2010 (the "SLF Credit Facility") and (ii) cash and cash equivalents. The base management fee is payable quarterly in arrears, and is calculated based on the average value of the Company’s gross assets, which equals the Company’s total assets, as determined in accordance with GAAP, less the borrowings under the SLF Credit Facility and cash and cash equivalents at the end of each of the two most recently completed calendar quarters, and appropriately adjusted on a pro rata basis for any equity capital raises or repurchases during the current calendar quarter. The Company has not invested, and currently is not invested, in derivatives. To the extent the Company invests in derivatives in the future, the Company will use the actual value of the derivatives, as reported on the Consolidated Statements of Assets and Liabilities, for purposes of calculating its base management fee.

Since the IPO, the base management fee calculation has deducted the borrowings under the SLF Credit Facility. The SLF Credit Facility had historically consisted of primarily lower yielding assets at higher advance rates. As part of an amendment to the Company’s existing credit facilities with Wells Fargo Bank, National Association, the SLF Credit Facility merged with the NMF Holdings Loan and Security Agreement, as amended and restated, dated May 19, 2011, and formed the Holdings Credit Facility on December 18, 2014 (as defined in Note 7. Borrowings). The amendment merged the credit facilities and combined the amount of borrowings previously available. Post credit facility merger and to be consistent with the methodology since the IPO, the Investment Adviser will continue to waive management fees on the leverage associated with those assets held under revolving credit facilities that share the same underlying yield characteristics with investments leveraged under the legacy SLF Credit Facility, which as of September 30, 2019 and September 30, 2018 was approximately $777,563 and $446,587, respectively. The Investment Adviser cannot recoup management fees that the Investment Adviser has previously waived. For the three and nine months ended September 30, 2019, management fees waived were approximately $3,141 and $8,497, respectively. For the three and nine months ended September 30, 2018, management fees waived were approximately $1,766 and $4,583, respectively.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20.0% of the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter, subject to a “preferred return”, or “hurdle”, and a “catch-up” feature. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, upfront, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under an administration agreement, as amended and restated (the “Administration Agreement”), with the Administrator, and any interest expense and distributions paid on any issued and outstanding preferred stock (of which there are none as of September 30, 2019), but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, will be compared to a “hurdle rate” of 2.0% per quarter (8.0% annualized), subject to a “catch-up” provision measured as of the end of each calendar quarter. The hurdle rate is appropriately pro-rated for any partial periods. The calculation of the Company’s incentive fee with respect to the Pre-Incentive Fee Net Investment Income for each quarter is as follows:

•	No incentive fee is payable to the Investment Adviser in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 2.0% (the “preferred return” or “hurdle”).

•

100.0% of the Company’s Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than or equal to 2.5% in any calendar quarter (10.0% annualized) is payable to the Investment Adviser. This portion of the Company’s Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than or equal to 2.5%) is referred to as the “catch-up”. The catch-up provision is intended to provide the Investment Adviser with an incentive fee of 20.0% on all of the Company’s Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when the Company’s Pre-Incentive Fee Net Investment Income exceeds 2.5% in any calendar quarter.

•	20.0% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any calendar quarter (10.0% annualized) is payable to the Investment Adviser once the hurdle is reached and the catch-up is achieved.

66

---

Table of Contents

The second part of the incentive fee will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement) and will equal 20.0% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee.

In accordance with GAAP, the Company accrues a hypothetical capital gains incentive fee based upon the cumulative net realized capital gains and realized capital losses and the cumulative net unrealized capital appreciation and unrealized capital depreciation on investments held at the end of each period. Actual amounts paid to the Investment Adviser are consistent with the Investment Management Agreement and are based only on actual realized capital gains computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from inception through the end of each calendar year as if the entire portfolio was sold at fair value.

The following table summarizes the management fees and incentive fees incurred by the Company for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Management fee	$	12,687			$	10,018			$	35,302			$	28,011
Less: management fee waiver	(3,141		)		(1,766		)		(8,497		)		(4,583		)
Total management fee	9,546				8,252				26,805				23,428
Incentive fee, excluding accrued capital gains incentive fees	$	7,792			$	6,780			$	21,642			$	19,644
Accrued capital gains incentive fees(1)	$	—			$	—			$	—			$	—

(1)	As of September 30, 2019 and September 30, 2018, no actual capital gains incentive fee was owed under the Investment Management Agreement by the Company, as cumulative net realized capital gains did not exceed cumulative unrealized capital depreciation.

The Company has entered into the Administration Agreement with the Administrator under which the Administrator provides administrative services. The Administrator maintains, or oversees the maintenance of, the Company’s consolidated financial records, prepares reports filed with the United States Securities and Exchange Commission (the "SEC"), generally monitors the payment of the Company’s expenses and oversees the performance of administrative and professional services rendered by others. The Company will reimburse the Administrator for the Company’s allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to the Company under the Administration Agreement. Pursuant to the Administration Agreement and further restricted by the Company, the Administrator may, in its own discretion, submit to the Company for reimbursement some or all of the expenses that the Administrator has incurred on behalf of the Company during any quarterly period. As a result, the amount of expenses for which the Company will have to reimburse the Administrator may fluctuate in future quarterly periods and there can be no assurance given as to when, or if, the Administrator may determine to limit the expenses that the Administrator submits to the Company for reimbursement in the future. However, it is expected that the Administrator will continue to support part of the expense burden of the Company in the near future and may decide to not calculate and charge through certain overhead related amounts as well as continue to cover some of the indirect costs. The Administrator cannot recoup any expenses that the Administrator has previously waived. For the three and nine months ended September 30, 2019, approximately $599 and $1,993, respectively, of indirect administrative expenses were included in administrative expenses of which $0 and $335, respectively, were waived by the Administrator. For the three and nine months ended September 30, 2018, approximately $515 and $1,725, respectively, of indirect administrative expenses were included in administrative expenses of which $0 and $276, respectively, were waived by the Administrator. As of September 30, 2019 and December 31, 2018, approximately $960 and $681, respectively, of indirect administrative expenses were included in payable to affiliates.

The Company, the Investment Adviser and the Administrator have also entered into a Trademark License Agreement, as amended, with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant the Company, the Investment Adviser and the Administrator a non-exclusive, royalty-free license to use the “New Mountain” and the “New Mountain Finance” names. Under the Trademark License Agreement, as amended, subject to certain conditions, the Company, the Investment Adviser and the Administrator will have a right to use the “New Mountain” and “New Mountain Finance” names, for so long as the Investment Adviser or one of its affiliates remains the investment adviser of the Company. Other than with respect to this limited license, the Company, the Investment Adviser and the Administrator will have no legal right to the “New Mountain” or the “New Mountain Finance” names.

67

---

Table of Contents

Note 6. Related Parties

The Company has entered into a number of business relationships with affiliated or related parties.

The Company has entered into the Investment Management Agreement with the Investment Adviser, a wholly-owned subsidiary of New Mountain Capital. Therefore, New Mountain Capital is entitled to any profits earned by the Investment Adviser, which includes any fees payable to the Investment Adviser under the terms of the Investment Management Agreement, less expenses incurred by the Investment Adviser in performing its services under the Investment Management Agreement.

The Company has entered into the Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Administrator arranges office space for the Company and provides office equipment and administrative services necessary to conduct their respective day-to-day operations pursuant to the Administration Agreement. The Company reimburses the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to the Company under the Administration Agreement, which includes the fees and expenses associated with performing administrative, finance and compliance functions, and the compensation of the Company’s chief financial officer and chief compliance officer and their respective staffs.

The Company, the Investment Adviser and the Administrator have entered into a royalty-free Trademark License Agreement, as amended, with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant the Company, the Investment Adviser and the Administrator a non-exclusive, royalty-free license to use the name “New Mountain” and “New Mountain Finance”.

The Company has adopted a formal code of ethics that governs the conduct of its officers and directors. These officers and directors also remain subject to the duties imposed by the 1940 Act, the Delaware General Corporation Law and the Delaware Limited Liability Company Act.

The Investment Adviser and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole or in part, to the Company’s investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for the Company or for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that the Company should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff and consistent with the Investment Adviser’s allocation procedures. On December 18, 2017, the SEC issued an exemptive order (the “Exemptive Order”), which superseded a prior order issued on June 5, 2017, which permits the Company to co-invest in portfolio companies with certain funds or entities managed by the Investment Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of the Company's stockholders and is consistent with its then-current investment objective and strategies.

Note 7. Borrowings

As permitted by the Small Business Credit Availability Act (the “SBCA”) on June 8, 2018 the Company's shareholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCA, which resulted in the reduction from 200.0% to 150.0% of the minimum asset coverage ratio applicable to the Company as of June 9, 2018 (which means the Company can borrow $2 for every $1 of its equity). As a result of the Company's exemptive relief received on November 5, 2014, the Company is permitted to exclude its SBA-guaranteed debentures from the 150.0% asset coverage ratio that the Company is required to maintain under the 1940 Act. The agreements governing the NMFC Credit Facility, the 2018 Convertible Notes and the Unsecured Notes (as defined below) contain certain covenants and terms, including a requirement that the Company not exceed a debt-to-equity ratio of 1.65 to 1.00 at the time of incurring additional indebtedness and a requirement that the Company not exceed a secured debt ratio of 0.70 to 1.00 at any time. As of September 30, 2019, the Company’s asset coverage ratio was 171.1%.

Holdings Credit Facility—On December 18, 2014, the Company entered into the Second Amended and Restated Loan and Security Agreement among the Company, as the Collateral Manager, NMF Holdings, as the Borrower, Wells Fargo Securities, LLC, as the Administrative Agent and Wells Fargo Bank, National Association, as the Lender and Collateral Custodian (as amended from time to time, the "Holdings Credit Facility"). As of the most recent amendment on September 6, 2019, the maturity date of the Holdings Credit Facility is October 24, 2022, and the maximum facility amount is the lesser of $800,000 and the actual commitments of the lenders to make advances as of such date.

68

---

Table of Contents

As of September 30, 2019, the maximum amount of revolving borrowings available under the Holdings Credit Facility is $800,000. Under the Holdings Credit Facility, NMF Holdings is permitted to borrow up to 25.0%, 45.0% or 70.0% of the purchase price of pledged assets, subject to approval by Wells Fargo Bank, National Association. The Holdings Credit Facility is non-recourse to the Company and is collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with the origination or upsizing of the Holdings Credit Facility are capitalized on the Company’s Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the Holdings Credit Facility. The Holdings Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the Holdings Credit Facility requires the Company to maintain a minimum asset coverage ratio of 150.0%. The covenants are generally not tied to mark to market fluctuations in the prices of NMF Holdings investments, but rather to the performance of the underlying portfolio companies.

As of the amendment entered into on April 1, 2018, the Holdings Credit Facility bears interest at a rate of LIBOR plus 1.75% per annum for Broadly Syndicated Loans (as defined in the Loan and Security Agreement) and LIBOR plus 2.25% per annum for all other investments. The Holdings Credit Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Holdings Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	6,528			$	4,002			$	19,218			$	10,719
Non-usage fee	$	163			$	146			$	449			$	537
Amortization of financing costs	$	722			$	630			$	2,103			$	1,870
Weighted average interest rate	4.2		%		4.2		%		4.4		%		4.1		%
Effective interest rate	4.8		%		5.0		%		5.0		%		5.0		%
Average debt outstanding	$	612,851			$	379,235			$	581,881			$	351,421

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Holdings Credit Facility was $637,563 and $512,563, respectively, and NMF Holdings was in compliance with the applicable covenants in the Holdings Credit Facility on such dates.

NMFC Credit Facility—The Senior Secured Revolving Credit Agreement, (as amended from time to time, and together with the related guarantee and security agreement, the "NMFC Credit Facility"), dated June 4, 2014, among the Company, as the Borrower, Goldman Sachs Bank USA, as the Administrative Agent and Collateral Agent, and Goldman Sachs Bank USA, Morgan Stanley Bank, N.A. and Stifel Bank & Trust, as Lenders, is structured as a senior secured revolving credit facility. The NMFC Credit Facility is guaranteed by certain of the Company's domestic subsidiaries and proceeds from the NMFC Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. As of the most recent amendment on December 12, 2018, the maturity date of the NMFC Credit Facility is June 4, 2022 and the NMFC Credit Facility includes the financial covenants related to the asset coverage discussed above.

As of September 30, 2019, the maximum amount of revolving borrowings available under the NMFC Credit Facility was $138,500. The Company is permitted to borrow at various advance rates depending on the type of portfolio investment, as outlined in the Senior Secured Revolving Credit Agreement. All fees associated with the origination of the NMFC Credit Facility are capitalized on the Company’s Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the NMFC Credit Facility. The NMFC Credit Facility contains certain customary affirmative and negative covenants and events of default, including certain financial covenants related to asset coverage and liquidity and other maintenance covenants.

The NMFC Credit Facility generally bears interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.375% per annum (as defined in the Senior Secured Revolving Credit Agreement).

69

---

Table of Contents

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the NMFC Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	1,499			$	1,431			$	3,677			$	3,802
Non-usage fee	$	13			$	18			$	103			$	89
Amortization of financing costs	$	31			$	123			$	250			$	356
Weighted average interest rate	4.8		%		4.7		%		4.9		%		4.5		%
Effective interest rate	4.9		%		5.1		%		5.4		%		5.0		%
Average debt outstanding	$	123,777			$	121,902			$	99,405			$	113,269

As of September 30, 2019 and December 31, 2018, the outstanding balance on the NMFC Credit Facility was $138,500 and $60,000, respectively, and NMFC was in compliance with the applicable covenants in the NMFC Credit Facility on such dates.

DB Credit Facility—The Loan Financing and Servicing Agreement (the "DB Credit Facility") dated December 14, 2018 and as amended from time to time, among NMFDB as the borrower, Deutsche Bank AG, New York Branch ("Deutsche Bank") as the facility agent, Lender and other agent from time to time party thereto and U.S. Bank National Association, as collateral agent and collateral custodian, is structured as a secured revolving credit facility and as of the most recent amendment on August 12, 2019, the maturity date is December 14, 2023.

As of September 30, 2019, the maximum amount of revolving borrowings available under the DB Credit Facility was $210,000. The Company is permitted to borrow at various advance rates depending on the type of portfolio investment, as outlined in the Loan Financing and Servicing Agreement. The DB Credit Facility is non-recourse to the Company and is collateralized by all of the investments of NMFDB on an investment by investment basis. All fees associated with the origination of the DB Credit Facility are capitalized on the Company's Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the DB Credit Facility. The DB Credit Facility contains certain customary affirmative and negative covenants and events of default. The covenants are generally not tied to mark to market fluctuations in the prices of NMFDB investments, but rather to the performance of the underlying portfolio companies.

The advances under the DB Credit Facility accrue interest at a per annum rate equal to the Applicable Margin plus the lender's Cost of Funds Rate. Prior to June 28, 2019, the "Applicable Margin" was equal to 2.85% during the Revolving Period and then increases by 0.20% during an Event of Default. Effective June 28, 2019, the Applicable Margin is equal to 2.60% during the Revolving Period and then increases by 0.20% during an Event of Default. The "Cost of Funds Rate" for a conduit lender is the lower of its commercial paper rate and the Base Rate plus 0.50%, and for any other lender is the Base Rate. The "Base Rate" is the three-months LIBOR Rate but may become an alternative base rate based on Deutsche Bank's base lending rate if certain LIBOR disruption events occur. The Company is also charged a non-usage fee, based on the unused facility amount multiplied by the Undrawn Fee Rate (as defined in the Loan Financing and Servicing Agreement) and a facility agent fee of 0.25% per annum on the total facility amount.

70

---

Table of Contents

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the DB Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018(1)				September 30, 2019				September 30, 2018(1)
Interest expense(2)	$	1,730			$	—			$	3,177			$	—
Non-usage fee(2)	$	62			$	—			$	183			$	—
Amortization of financing costs	$	100			$	—			$	256			$	—
Weighted average interest rate	5.1		%		—		%		5.3		%		—		%
Effective interest rate	5.6		%		—		%		6.0		%		—		%
Average debt outstanding	$	133,913			$	—			$	80,095			$	—

(1)	Not applicable as the DB Credit Facility commenced on December 14, 2018.

(2)	Interest expense includes the portion of the facility agent fee applicable to the drawn portion of the DB Credit Facility and non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the DB Credit Facility.

As of September 30, 2019 and December 31, 2018, the outstanding balance on the DB Credit Facility was $202,000 and $57,000, respectively, and NMFDB was in compliance with the applicable covenants in the DB Credit Facility on such dates.

NMNLC Credit Facility—The Revolving Credit Agreement (together with the related guarantee and security agreement, the “NMNLC Credit Facility”), dated September 21, 2018, among NMNLC, as the Borrower, and KeyBank National Association, as the Administrative Agent and Lender, is structured as a senior secured revolving credit facility and matures on September 23, 2020. The NMNLC Credit Facility is guaranteed by the Company and proceeds from the NMNLC Credit Facility may be used for funding of additional acquisition properties.

The NMNLC Credit Facility generally bears interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.15% per annum (as defined in the Revolving Credit Agreement).

As of September 30, 2019, the maximum amount of revolving borrowings available under the NMNLC Credit Facility was $30,000. For the three months ended September 30, 2019, interest expense, non-usage fees and amortization of financing costs were $1, $11 and $28, respectively. For the nine months ended September 30, 2019, interest expense, non-usage fees and amortization of financing costs were $1, $34 and $84, respectively. As of September 30, 2019 and December 31, 2018, the outstanding balance on the NMNLC Credit Facility was $10,600 and $0, respectively, and NMNLC was in compliance with the applicable covenants in the NMNLC Credit Facility on such dates.

Convertible Notes

2014 Convertible Notes—On June 3, 2014, the Company closed a private offering of $115,000 aggregate principal amount of unsecured convertible notes (the “2014 Convertible Notes”), pursuant to an indenture, dated June 3, 2014 (the “2014 Indenture”). The 2014 Convertible Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). As of June 3, 2015, the restrictions under Rule 144A under the Securities Act were removed, allowing the 2014 Convertible Notes to be eligible and freely tradable without restrictions for resale pursuant to Rule 144(b)(1) under the Securities Act. On September 30, 2016, the Company closed a public offering of an additional $40,250 aggregate principal amount of the 2014 Convertible Notes. These additional 2014 Convertible Notes constituted a further issuance of, ranked equally in right of payment with, and formed a single series with the $115,000 aggregate principal amount of 2014 Convertible Notes that the Company issued on June 3, 2014.

The 2014 Convertible Notes bore interest at an annual rate of 5.0%, payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2014.

On June 15, 2019, the Company's $155,250 aggregate principal amount of 2014 Convertible Notes matured and the Company repaid the outstanding principal and accrued but unpaid interest in cash.

2018 Convertible Notes—On August 20, 2018, the Company closed a registered public offering of $100,000 aggregate principal amount of unsecured convertible notes (the “2018 Convertible Notes”, and together with the 2014 Convertible Notes, the "Convertible Notes"), pursuant to an indenture, dated August 20, 2018, as supplemented by a first supplemental indenture thereto, dated August 20, 2018 (together the “2018A Indenture”). On August 30, 2018, in connection

71

---

Table of Contents

with the registered public offering, the Company issued an additional $15,000 aggregate principal amount of the 2018 Convertible Notes pursuant to the exercise of an overallotment option by the underwriter of the 2018 Convertible Notes. On June 7, 2019, the Company closed a registered public offering of an additional $86,250 aggregate principal amount of the 2018 Convertible Notes. These additional 2018 Convertible Notes constitute a further issuance of, rank equally in right of payment with, and form a single series with the $115,000 aggregate principal amount of 2018 Convertible Notes that the Company issued in August 2018.

The 2018 Convertible Notes bear interest at an annual rate of 5.75%, payable semi-annually in arrears on February 15 and August 15 of each year, which commenced on February 15, 2019. The 2018 Convertible Notes will mature on August 15, 2023 unless earlier converted, repurchased or redeemed pursuant to the terms of the 2018A Indenture. The Company may not redeem the 2018 Convertible Notes prior to May 15, 2023. On or after May 15, 2023, the Company may redeem the 2018 Convertible Notes for cash, in whole or from time to time in part, at its option at a redemption price, subject to an exception for redemption dates occurring after a record date but on or prior to the interest payment date, equal to the sum of (i) 100% of the principal amount of the 2018 Convertible Notes to be redeemed, (ii) accrued and unpaid interest thereon to, but excluding, the redemption date and (iii) a make-whole premium.

No sinking fund is provided for the 2018 Convertible Notes. Holders of 2018 Convertible Notes may, at their option, convert their 2018 Convertible Notes into shares of the Company’s common stock at any time on or prior to the close of business on the business day immediately preceding the maturity date of the 2018 Convertible Notes. In addition, if certain corporate events occur, holders of the 2018 Convertible Notes may require the Company to repurchase for cash all or part of their 2018 Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the 2018 Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date.

The 2018A Indenture contains certain covenants, including covenants requiring the Company to provide certain financial information to the holders of the 2018 Convertible Notes and the trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. The 2018A Indenture also includes additional financial covenants related to asset coverage. These covenants are subject to limitations and exceptions that are described in the 2018A Indenture.

The following table summarizes certain key terms related to the convertible features of the Company’s 2018 Convertible Notes as of September 30, 2019.

	2018 Convertible Notes
Initial conversion premium	10.0		%
Initial conversion rate(1)	65.8762
Initial conversion price	$	15.18
Conversion premium at September 30, 2019	10.0		%
Conversion rate at September 30, 2019(1)(2)	65.8762
Conversion price at September 30, 2019(2)(3)	$	15.18
Last conversion price calculation date	August 20, 2019

(1)	Conversion rates denominated in shares of common stock per $1 principal amount of the 2018 Convertible Notes converted.

(2)	Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.

(3)	The conversion price in effect at September 30, 2019 was calculated on the last anniversary of the issuance and will be calculated again on the next anniversary, unless the exercise price shall have changed by more than 1.0% before the anniversary.

The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs, increases in dividends in excess of $0.34 per share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in dividends, are subject to a conversion price floor of $13.80 per share. In no event will the total number of shares of common stock issuable upon conversion exceed 72.4637 per $1 principal amount. The Company has determined that the embedded conversion option in the 2018 Convertible Notes is not required to be separately accounted for as a derivative under GAAP.

The 2018 Convertible Notes are unsecured obligations and rank senior in right of payment to the Company’s existing and future indebtedness, if any, that is expressly subordinated in right of payment to the 2018 Convertible Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness (including existing unsecured indebtedness that the Company later

72

---

Table of Contents

secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries and financing vehicles. As reflected in Note 11. Earnings Per Share, the issuance is considered part of the if-converted method for calculation of diluted earnings per share.

The following table summarizes the interest expense, amortization of financing costs and amortization of premium incurred on the Convertible Notes for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	2,893			$	2,712			$	10,066			$	6,593
Amortization of financing costs	$	99			$	324			$	696			$	914
Amortization of premium	$	(26	)		$	(28	)		$	(83	)		$	(83	)
Weighted average interest rate	5.7		%		5.2		%		5.5		%		5.1		%
Effective interest rate	5.8		%		5.7		%		5.8		%		5.7		%
Average debt outstanding	$	201,250			$	207,750			$	245,481			$	172,942

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Convertible Notes was $201,250 and $270,250, respectively, and NMFC was in compliance with the terms of the 2018A Indenture on such date.

Unsecured Notes

On May 6, 2016, the Company issued $50,000 in aggregate principal amount of five-year unsecured notes that mature on May 15, 2021 (the “2016 Unsecured Notes”), pursuant to a note purchase agreement, dated May 4, 2016, to an institutional investor in a private placement. On September 30, 2016, the Company entered into an amended and restated note purchase agreement (the "NPA") and issued an additional $40,000 in aggregate principal amount of 2016 Unsecured Notes to institutional investors in a private placement. On June 30, 2017, the Company issued $55,000 in aggregate principal amount of five-year unsecured notes that mature on July 15, 2022 (the "2017A Unsecured Notes"), pursuant to the NPA and a supplement to the NPA. On January 30, 2018, the Company issued $90,000 in aggregate principal amount of five year unsecured notes that mature on January 30, 2023 (the "2018A Unsecured Notes") pursuant to the NPA and a second supplement to the NPA. On July 5, 2018, the Company issued $50,000 in aggregate principal amount of five year unsecured notes that mature on June 28, 2023 (the "2018B Unsecured Notes") pursuant to the NPA and a third supplement to the NPA (the "Third Supplement"). On April 30, 2019, the Company issued $116,500 in aggregate principal amount of five year unsecured notes that mature on April 30, 2024 (the "2019A Unsecured Notes") pursuant to the NPA and a fourth supplement to the NPA. The NPA provides for future issuances of unsecured notes in separate series or tranches.

The 2016 Unsecured Notes bear interest at an annual rate of 5.313%, payable semi-annually on May 15 and November 15 of each year, which commenced on November 15, 2016. The 2017A Unsecured Notes bear interest at an annual rate of 4.760%, payable semi-annually on January 15 and July 15 of each year, which commenced on January 15, 2018. The 2018A Unsecured Notes bear interest at an annual rate of 4.870%, payable semi-annually on February 15 and August 15 of each year, which commenced on August 15, 2018. The 2018B Unsecured Notes bear interest at an annual rate of 5.360%, payable semi-annually on January 15 and July 15 of each year, which commenced on January 15, 2019. The 2019A Unsecured Notes bear interest at an annual rate of 5.494%, payable semi-annually on April 15 and October 15 of each year, commencing on October 15, 2019. These interest rates are subject to increase in the event that: (i) subject to certain exceptions, the underlying unsecured notes or the Company ceases to have an investment grade rating or (ii) the aggregate amount of the Company’s unsecured debt falls below $150,000.  In each such event, the Company has the option to offer to prepay the underlying unsecured notes at par, in which case holders of the underlying unsecured notes who accept the offer would not receive the increased interest rate. In addition, the Company is obligated to offer to prepay the underlying unsecured notes at par if the Investment Adviser, or an affiliate thereof, ceases to be the Company’s investment adviser or if certain change in control events occur with respect to the Investment Adviser. 

The NPA contains customary terms and conditions for unsecured notes issued in a private placement, including, without limitation, an option to offer to prepay all or a portion of the unsecured notes under its governance at par (plus a make-whole amount, if applicable), affirmative and negative covenants such as information reporting, maintenance of the Company’s status as a BDC under the 1940 Act and a RIC under the Code, minimum stockholders’ equity, minimum asset coverage ratio, and prohibitions on certain fundamental changes at the Company or any subsidiary guarantor, as well as customary events of default with customary cure and notice, including, without limitation, nonpayment, misrepresentation in a material respect, breach of covenant, cross-default under other indebtedness of the Company or certain significant subsidiaries, certain judgments and orders, and certain events of bankruptcy. The Third Supplement includes additional financial covenants related to asset coverage as well as other terms.

73

---

Table of Contents

On September 25, 2018, the Company closed a registered public offering of $50,000 in aggregate principal amount of five-year unsecured notes that mature on October 1, 2023 (the "5.75% Unsecured Notes" and together with the 2016 Unsecured Notes, 2017A Unsecured Notes, 2018A Unsecured Notes, 2018B Unsecured Notes and 2019A Unsecured Notes, the "Unsecured Notes") pursuant to an indenture, dated August 20, 2018, as supplemented by a second supplemental indenture thereto, dated September 25, 2018 (together, the "2018B Indenture"). On October 17, 2018, in connection with the registered public offering, the Company issued an additional $1,750 aggregate principal amount of the 5.75% Unsecured Notes pursuant to the exercise of an overallotment option by the underwriters of the 5.75% Unsecured Notes.

The 5.75% Unsecured Notes bear interest at an annual rate of 5.75%, payable quarterly on January 1, April 1, July 1 and October 1 of each year, which commenced on January 1, 2019. The 5.75% Unsecured Notes will mature on October 1, 2023 unless earlier redeemed. The 5.75% Unsecured Notes are listed on the New York Stock Exchange and trade under the trading symbol “NMFX.”

The Company may redeem the 5.75% Unsecured Notes, in whole or in part, at any time, or from time to time, at its option on or after October 1, 2020, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

No sinking fund is provided for the 5.75% Unsecured Notes and holders of the 5.75% Unsecured Notes have no option to have their 5.75% Unsecured Notes repaid prior to the stated maturity date.

The 2018B Indenture contains certain covenants, including covenants requiring the Company to (i) comply with the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act as may be applicable to the Company from time to time or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to the Company by the SEC and (ii) provide certain financial information to the holders of the 5.75% Unsecured Notes and the trustee if the Company ceases to be subject to the reporting requirements of the Exchange Act. The 2018B Indenture also includes additional financial covenants related to asset coverage. These covenants are subject to limitations and exceptions that are described in the 2018B Indenture.

The 2018B Indenture provides for customary events of default and further provides that the trustee or the holders of 25% in aggregate principal amount of the outstanding 5.75% Unsecured Notes may declare such 5.75% Unsecured Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period.

The Unsecured Notes are unsecured obligations and rank senior in right of payment to the Company’s existing and future indebtedness, if any, that is expressly subordinated in right of payment to the Unsecured Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries and financing vehicles.

The following table summarizes the interest expense and amortization of financing costs incurred on the Unsecured Notes for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019(1)				September 30, 2018(2)
Interest expense	$	5,959			$	3,643			$	15,763			$	9,181
Amortization of financing costs	$	320			$	201			$	886			$	537
Weighted average interest rate	5.2		%		5.1		%		5.2		%		5.1		%
Effective interest rate	5.5		%		5.3		%		5.5		%		5.4		%
Average debt outstanding	$	453,250			$	286,087			$	402,041			$	242,656

(1)	For the nine months ended September 30, 2019, amounts reported include interest and amortization of financing costs related to the 2019A Unsecured Notes for the period from April 30, 2019 (issuance date of the 2019A Unsecured Notes) to September 30, 2019.

(2)	For the nine months ended September 30, 2018, amounts reported include interest and amortization of financing costs related to the 2018A Unsecured Notes for the period from January 30, 2018 (issuance date of the 2018A Unsecured Notes) to September 30, 2018.

74

---

Table of Contents

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Unsecured Notes was $453,250 and $336,750, respectively, and the Company was in compliance with the terms of the NPA and the 2018B Indenture as of such dates, as applicable.

SBA-guaranteed debentures—On August 1, 2014 and August 25, 2017, respectively, SBIC I and SBIC II received licenses from the SBA to operate as SBICs.

The SBIC licenses allow SBICs to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse to the Company, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with ten year maturities. The SBA, as a creditor, will have a superior claim to the assets of SBIC I and SBIC II over the Company’s stockholders in the event SBIC I and SBIC II are liquidated or the SBA exercises remedies upon an event of default.

The maximum amount of borrowings available under current SBA regulations for a single licensee is $150,000 as long as the licensee has at least $75,000 in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. In June 2018, legislation amended the 1958 Act by increasing the individual leverage limit from $150,000 to $175,000, subject to SBA approvals.

As of September 30, 2019 and December 31, 2018, SBIC I had regulatory capital of $75,000 and $75,000, respectively, and SBA-guaranteed debentures outstanding of $150,000 and $150,000, respectively. As of September 30, 2019 and December 31, 2018, SBIC II had regulatory capital of $42,500 and $42,500, respectively, and $34,000 and $15,000, respectively, of SBA-guaranteed debentures outstanding. The SBA-guaranteed debentures incur upfront fees of 3.425%, which consists of a 1.00% commitment fee and a 2.425% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. The following table summarizes the Company’s SBA-guaranteed debentures as of September 30, 2019.

Issuance Date		Maturity Date		Debenture Amount				Interest Rate			SBA Annual Charge
Fixed SBA-guaranteed debentures(1):
March 25, 2015		March 1, 2025		$	37,500			2.517	%		0.355	%
September 23, 2015		September 1, 2025		37,500				2.829	%		0.355	%
September 23, 2015		September 1, 2025		28,795				2.829	%		0.742	%
March 23, 2016		March 1, 2026		13,950				2.507	%		0.742	%
September 21, 2016		September 1, 2026		4,000				2.051	%		0.742	%
September 20, 2017		September 1, 2027		13,000				2.518	%		0.742	%
March 21, 2018		March 1, 2028		15,255				3.187	%		0.742	%
Fixed SBA-guaranteed debentures(2):
September 19, 2018		September 1, 2028		15,000				3.548	%		0.222	%
September 25, 2019		September 1, 2029		19,000				2.283	%		0.222	%
Total SBA-guaranteed debentures				$	184,000

(1)	SBA-guaranteed debentures are held in SBIC I.

(2)	SBA-guaranteed debentures are held in SBIC II.

Prior to pooling, the SBA-guaranteed debentures bear interest at an interim floating rate of LIBOR plus 0.30%. Once pooled, which occurs in March and September each year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10-year treasury rate plus a spread at each pooling date.

75

---

Table of Contents

The following table summarizes the interest expense and amortization of financing costs incurred on the SBA-guaranteed debentures for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	1,455			$	1,341			$	4,159			$	3,750
Amortization of financing costs	$	149			$	139			$	423			$	391
Weighted average interest rate	3.3		%		3.2		%		3.3		%		3.2		%
Effective interest rate	3.6		%		3.6		%		3.6		%		3.5		%
Average debt outstanding	$	176,565			$	164,370			$	168,897			$	156,271

The SBIC program is designed to stimulate the flow of private investor capital into eligible smaller businesses, as defined by the SBA. Under SBA regulations, SBICs are subject to regulatory requirements, including making investments in SBA-eligible businesses, investing at least 25.0% of its investment capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, regulating the types of financing, prohibiting investments in smaller businesses with certain characteristics or in certain industries and requiring capitalization thresholds that limit distributions to the Company. SBICs are subject to an annual periodic examination by an SBA examiner to determine the SBIC’s compliance with the relevant SBA regulations and an annual financial audit of its financial statements that are prepared on a basis of accounting other than GAAP (such as ASC 820) by an independent auditor. As of September 30, 2019 and December 31, 2018, SBIC I and SBIC II were in compliance with SBA regulatory requirements.

Leverage risk factors—The Company utilizes and may utilize leverage to the maximum extent permitted by the law for investment and other general business purposes. The Company's lenders will have fixed dollar claims on certain assets that are superior to the claims of the Company's common stockholders, and the Company would expect such lenders to seek recovery against these assets in the event of a default. The use of leverage also magnifies the potential for gain or loss on amounts invested. Leverage may magnify interest rate risk (particularly on the Company's fixed-rate investments), which is the risk that the prices of portfolio investments will fall or rise if market interest rates for those types of securities rise or fall. As a result, leverage may cause greater changes in the Company's net asset value. Similarly, leverage may cause a sharper decline in the Company's income than if the Company had not borrowed. Such a decline could negatively affect the Company's ability to make distributions to its stockholders. Leverage is generally considered a speculative investment technique. The Company's ability to service any debt incurred will depend largely on financial performance and will be subject to prevailing economic conditions and competitive pressures.

Note 8. Regulation

The Company has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a RIC under Subchapter M of the Code. In order to continue to qualify and be subject to tax as a RIC, among other things, the Company is required to timely distribute to its stockholders at least 90.0% of investment company taxable income, as defined by the Code, for each year. The Company, among other things, intends to make and will continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal, state, and local income taxes (excluding excise taxes which may be imposed under the Code).

Additionally, as a BDC, the Company must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70.0% of its total assets are qualifying assets (with certain limited exceptions). In addition, the Company must offer to make available to all eligible portfolio companies managerial assistance.

Note 9. Commitments and Contingencies

In the normal course of business, the Company may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company may also enter into future funding commitments such as revolving credit facilities, bridge financing commitments or delayed draw commitments. As of September 30, 2019, the Company had unfunded commitments on revolving credit facilities of $55,337, no outstanding bridge financing commitments and other future funding commitments of $115,863. As of December 31, 2018, the Company had unfunded commitments on revolving credit facilities of $43,539, no outstanding bridge financing commitments and other future funding commitments of $94,407. The unfunded commitments on revolving credit facilities and delayed draws are disclosed on the Company’s Consolidated Schedule of Investments.

The Company also has revolving borrowings available under the Holdings Credit Facility, the DB Credit Facility and the NMNLC Credit Facility as of September 30, 2019 and December 31, 2018. See Note 7. Borrowings, for details.

76

---

Table of Contents

The Company may from time to time enter into financing commitment letters. As of September 30, 2019 and December 31, 2018, the Company had commitment letters to purchase investments in the aggregate par amount of $36,093 and $27,536, respectively, which could require funding in the future.

As of September 30, 2019 and December 31, 2018, the Company owed $3,000 and $6,000, respectively, related to a settlement agreement with a trustee of Black Elk Energy Offshore Operations, LLC. The Company began to make semi-annual payments of $3,000 in June 2018 with the final payment due in December 2019.

Note 10. Net Assets

The table below illustrates the effect of certain transactions on the net asset accounts of the Company during the nine months ended September 30, 2019:

												Accumulated Overdistributed Earnings
	Common Stock							Paid in Capital in				Accumulated Net Investment				Accumulated  Net Realized				Net  Unrealized Appreciation				Total
	Shares			Par Amount				Excess of Par				Income				(Losses) Gains				(Depreciation)				Net Assets
Net assets at December 31, 2018	76,106,372			$	761			$	1,035,629			$	61,975			$	(86,338	)		$	(5,758	)		$	1,006,269
Issuances of common stock	4,413,058			44				60,617				—				—				—				60,661
Deferred offering costs	—			—				(229		)		—				—				—				(229		)
Distributions declared	—			—				—				(27,342		)		—				—				(27,342		)
Net increase (decrease) in net assets resulting from operations	—			—				—				27,450				46				16,424				43,920
Net assets at March 31, 2019	80,519,430			$	805			$	1,096,017			$	62,083			$	(86,292	)		$	10,666			$	1,083,279
Issuances of common stock	90,872			1				1,269				—				—				—				1,270
Distributions declared	—			—				—				(27,377		)		—				—				(27,377		)
Net increase (decrease) in net assets resulting from operations	—			—				—				27,948				52				(4,255		)		23,745
Net assets at June 30, 2019	80,610,302			$	806			$	1,097,286			$	62,654			$	(86,240	)		$	6,411			$	1,080,917
Issuances of common stock	6,958,393			70				94,910				—				—				—				94,980
Deferred offering costs	—			—				(315		)		—				—				—				(315		)
Distributions declared	—			—				—				(29,753		)		—				—				(29,753		)
Net increase (decrease) in net assets resulting from operations	—			—				—				31,170				355				(8,075		)		23,450
Net assets at September 30, 2019	87,568,695			$	876			$	1,191,881			$	64,071			$	(85,885	)		$	(1,664	)		$	1,169,279

77

---

Table of Contents

The table below illustrates the effect of certain transactions on the net asset accounts of the Company during the nine months ended September 30, 2018:

												Accumulated Overdistributed Earnings
	Common Stock							Paid in Capital in				Accumulated Net Investment				Accumulated Net Realized				Net  Unrealized Appreciation				Total
	Shares			Par Amount				Excess of Par				Income				(Losses) Gains				(Depreciation)				Net Assets
Net assets at December 31, 2017	75,935,093			$	759			$	1,053,468			$	39,165			$	(76,681	)		$	18,264			$	1,034,975
Distributions declared	—			—				—				(25,818		)		—				—				(25,818		)
Net increase (decrease) in net assets resulting from operations	—			—				—				25,736				206				(2,098		)		23,844
Net assets at March 31, 2018	75,935,093			$	759			$	1,053,468			$	39,083			$	(76,475	)		$	16,166			$	1,033,001
Issuances of common stock	171,279			2				2,328				—				—				—				2,330
Distributions declared	—			—				—				(25,818		)		—				—				(25,818		)
Net increase (decrease) in net assets resulting from operations	—			—				—				25,721				(6,609		)		4,021				23,133
Net assets at June 30, 2018	76,106,372			$	761			$	1,055,796			$	38,986			$	(83,084	)		$	20,187			$	1,032,646
Distributions declared	—			—				—				(25,876		)		—				—				(25,876		)
Net increase (decrease) in net assets resulting from operations	—			—				—				27,117				3,254				(3,611		)		26,760
Net assets at September 30, 2018	76,106,372			$	761			$	1,055,796			$	40,227			$	(79,830	)		$	16,576			$	1,033,530

78

---

Table of Contents

Note 11. Earnings Per Share

The following information sets forth the computation of basic and diluted net increase in the Company’s net assets per share resulting from operations for the three and nine months ended September 30, 2019 and September 30, 2018:

	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Earnings per share—basic
Numerator for basic earnings per share:	$	23,450			$	26,760			$	91,115			$	73,737
Denominator for basic weighted average share:	86,987,841				76,106,372				82,020,549				75,994,068
Basic earnings per share:	$	0.27			$	0.35			$	1.11			$	0.97
Earnings per share—diluted(1)
Numerator for increase in net assets per share	$	23,450			$	26,760			$	91,115			$	73,737
Adjustment for interest on Convertible Notes and incentive fees, net	2,314				2,170				8,053				5,275
Numerator for diluted earnings per share:	$	25,764			$	28,930			$	99,168			$	79,012
Denominator for basic weighted average share	86,987,841				76,106,372				82,020,549				75,994,068
Adjustment for dilutive effect of Convertible Notes	13,257,585				13,282,627				15,927,676				10,989,629
Denominator for diluted weighted average share	100,245,426				89,388,999				97,948,225				86,983,697
Diluted earnings per share	$	0.26			$	0.32			$	1.01			$	0.91

(1)	In applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive.

79

---

Table of Contents

Note 12. Financial Highlights

The following information sets forth the Company's financial highlights for the nine months ended September 30, 2019 and September 30, 2018.

	Nine Months Ended
	September 30, 2019				September 30, 2018
Per share data(1):
Net asset value, January 1, 2019 and January 1, 2018, respectively	$	13.22			$	13.63
Net investment income	1.06				1.03
Net realized and unrealized gains (losses)(2)	0.09				(0.06		)
Total net increase	1.15				0.97
Distributions declared to stockholders from net investment income	(1.02		)		(1.02		)
Net asset value, September 30, 2019 and September 30, 2018, respectively	$	13.35			$	13.58
Per share market value, September 30, 2019 and September 30, 2018, respectively	$	13.63			$	13.50
Total return based on market value(3)	16.60		%		7.38		%
Total return based on net asset value(4)	8.86		%		7.30		%
Shares outstanding at end of period	87,568,695				76,106,372
Average weighted shares outstanding for the period	82,020,549				75,994,068
Average net assets for the period	$	1,111,191			$	1,033,068
Ratio to average net assets:
Net investment income	10.42		%		10.17		%
Total expenses, before waivers/reimbursements	15.10		%		12.20		%
Total expenses, net of waivers/reimbursements	14.04		%		11.57		%
Average debt outstanding—Holdings Credit Facility	$	581,881			$	351,421
Average debt outstanding—Unsecured Notes	402,041				242,656
Average debt outstanding—Convertible Notes	245,481				172,942
Average debt outstanding—SBA-guaranteed debentures	168,897				156,271
Average debt outstanding—NMFC Credit Facility	99,405				113,269
Average debt outstanding—DB Credit Facility	80,095				—
Average debt outstanding—NMNLC Credit Facility	39				—
Asset coverage ratio(5)	171.14		%		185.68		%
Portfolio turnover	7.63		%		28.21		%

(1)	Per share data is based on weighted average shares outstanding for the respective period (except for distributions declared to stockholders, which is based on actual rate per share).

(2)	Includes the accretive effect of common stock issuances per share, which for the nine months ended September 30, 2019 and September 30, 2018 were $0.03 and $0.00, respectively.

(3)	Total return is calculated assuming a purchase of common stock at the opening of the first day of the year and a sale on the closing of the last business day of the period. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Company’s dividend reinvestment plan.

(4)	Total return is calculated assuming a purchase at net asset value on the opening of the first day of the year and a sale at net asset value on the last day of the period. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at the net asset value on the last day of the respective quarter.

(5)	On November 5, 2014, the Company received exemptive relief from the SEC allowing the Company to modify the asset coverage requirement to exclude the SBA-guaranteed debentures from this calculation.

80

---

Table of Contents

Note 13. Recent Accounting Standards Updates

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The standard will modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The Company is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company has elected to early adopt ASU 2018-13 as of December 31, 2018.

Note 14. Subsequent Events

    

On October 8, 2019, the SEC issued an exemptive order (the "New Order") permitting the Company and certain of the Company's affiliates to co-invest together in portfolio companies subject to certain conditions included therein. The New Order supersedes the Company's existing co-investment exemptive order, which was granted by the SEC on December 18, 2017, and expands on the Company's ability to co-invest with certain affiliates.

On October 16, 2019, the Company entered into a Joinder Agreement pursuant to which Hitachi Capital America Corp. was added as a lender under the DB Credit Facility for an aggregate commitment of $20,000 thereby increasing the aggregate commitments under the DB Credit Facility from $210,000 to $230,000.

On October 25, 2019, the Company completed a public offering of 9,200,000 shares of the Company's common stock (including 1,200,000 shares of common stock that were issued pursuant to the full exercise of the option granted to the underwriters to purchase additional shares) at a public offering price of $13.25 per share. Certain of the Company's officers and interested directors purchased an aggregate 400,000 shares in this offering at the public offering price. The Investment Adviser paid the underwriters' sales load of $0.41 per share (other than the 400,000 shares purchased by certain officers and interested directors for which no sales load was payable to the underwriters). In addition, the Investment Adviser paid the underwriters an additional supplemental payment of $0.35 per share, which reflects the difference between the actual public offering price of $13.25 per share and the net proceeds of $13.60 per share received by the Company in this offering. All payments made by the Investment Adviser are not subject to reimbursement by the Company. The Company received total net proceeds of approximately $125,120 in connection with this offering.

On November 4, 2019, the Company’s board of directors declared a fourth quarter 2019 distribution of $0.34 per share payable on December 27, 2019 to holders of record as of December 13, 2019.

81

---

Table of Contents

	Deloitte & Touche LLP   30 Rockefeller Plaza New York, NY 10112 USA   Tel:    212 492 4000 Fax:   212 489 1687 www.deloitte.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of New Mountain Finance Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated statement of assets and liabilities of New Mountain Finance Corporation and subsidiaries (the “Company”), including the consolidated schedule of investments, as of September 30, 2019, and the related consolidated statements of operations and changes in net assets for the three-month and nine-month periods ended September 30, 2019 and 2018, and cash flows for the nine-month periods ended September 30, 2019 and 2018, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of December 31, 2018, and the related consolidated statements of operations, changes in net assets and cash flows for the year then ended (not presented herein); and in our report dated February 27, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

November 6, 2019

82

---

Table of Contents

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 its impact on the industries in which we invest;

•	our future operating results, our business prospects and the adequacy of our cash resources and working capital;

•	the ability of our portfolio companies to achieve their objectives;

•	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, 2018 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, 2018 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 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, 2019, we raised approximately $768.1 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, public equity and credit investment vehicles. The Investment Adviser manages our day-to-day operations 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,

83

---

Table of Contents

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" or the "Predecessor Operating Company") and New Mountain Finance DB, L.L.C. ("NMFDB"), whose assets are used 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;

•	New Mountain Net Lease Corporation ("NMNLC"), which acquires commercial real 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;

•

NMF Ancora Holdings Inc. ("NMF Ancora"), NMF QID Holdings, Inc. ("NMF QID") and NMF YP Holdings Inc. ("NMF YP"), 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.

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, 2019, our top five industry concentrations were software, business services, healthcare services, education and investment funds (which includes our investments in our joint ventures).

As of September 30, 2019, our net asset value was approximately $1,169.3 million and our portfolio had a fair value of approximately $2,998.2 million in 112 portfolio companies, with a weighted average yield to maturity at cost for income producing investments ("YTM at Cost") of approximately 9.3% and a weighted average yield to maturity at cost for all investments ("YTM at Cost for Investments") of approximately 9.3%. 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.

Recent Developments

On October 8, 2019, the SEC issued an exemptive order (the "New Order") permitting us and certain of our affiliates to co-invest together in portfolio companies subject to certain conditions included therein. The New Order supersedes our existing co-investment exemptive order, which was granted by the SEC on December 18, 2017, and expands on our ability to co-invest with certain affiliates.

84

---

Table of Contents

On October 16, 2019, we entered into a Joinder Agreement pursuant to which Hitachi Capital America Corp. was added as a lender under the DB Credit Facility for an aggregate commitment of $20.0 million thereby increasing the aggregate commitments under the DB Credit Facility from $210.0 million to $230.0 million.

On October 25, 2019, we completed a public offering of 9,200,000 shares of our common stock (including 1,200,000 shares of common stock that were issued pursuant to the full exercise of the option granted to the underwriters to purchase additional shares) at a public offering price of $13.25 per share. Certain of our officers and interested directors purchased an aggregate 400,000 shares in this offering at the public offering price. Our Investment Adviser paid the underwriters' sales load of $0.41 per share (other than the 400,000 shares purchased by certain officers and interested directors for which no sales load was payable to the underwriters). In addition, our Investment Adviser paid the underwriters an additional supplemental payment of $0.35 per share, which reflects the difference between the actual public offering price of $13.25 per share and the net proceeds of $13.60 per share received by us in this offering. All payments made by the Investment Adviser are not subject to reimbursement by us. We received total net proceeds of approximately $125.1 million in connection with this offering.

On November 4, 2019, our board of directors declared a fourth quarter 2019 distribution of $0.34 per share payable on December 27, 2019 to holders of record as of December 13, 2019.

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, NMNLC, NMFDB, SBIC I, SBIC I GP, SBIC II, SBIC II GP, NMF Ancora, NMF QID and NMF YP. 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

85

---

Table of Contents

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;

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 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.

86

---

Table of Contents

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.

The following table summarizes the levels in the fair value hierarchy that our portfolio investments fall into as of September 30, 2019:

(in thousands)		Total				Level I				Level II				Level III
First lien		$	1,675,408			$	—			$	223,781			$	1,451,627
Second lien		750,741				—				366,199				384,542
Subordinated		71,608				—				26,093				45,515
Equity and other		500,423				—				—				500,423
Total investments		$	2,998,180			$	—			$	616,073			$	2,382,107

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) 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 multiples to the portfolio company's latest twelve month ("LTM") EBITDA or projected EBITDA to calculate the enterprise value of the portfolio company. Significant increases or decreases in the EBITDA multiple 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, 2019, we used the relevant EBITDA multiple ranges

87

---

Table of Contents

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 yield calibration approach, which 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. 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, 2019, we used the discount ranges set forth in the table below to value investments in our portfolio companies.

The unobservable inputs used in the fair value measurement of our Level III investments as of September 30, 2019 were as follows:

(in thousands)

Range

Type

Fair Value as of September 30, 2019

Approach

Unobservable Input

Low

High

Weighted Average

First lien

$

1,113,079

Market & income approach

EBITDA multiple

2.0x

35.0x

13.5x

Revenue multiple

2.4x

11.0x

6.2x

Discount rate

6.3

%

15.3

%

8.7

%

285,379

Market quote

Broker quote

N/A

N/A

N/A

53,169

Other

N/A(1)

N/A

N/A

N/A

Second lien

119,683

Market & income approach

EBITDA multiple

8.5x

17.2x

12.0x

Revenue multiple

2.4x

3.0x

2.6x

Discount rate

9.4

%

20.3

%

12.2

%

233,580

Market quote

Broker quote

N/A

N/A

N/A

31,279

Other

N/A(1)

N/A

N/A

N/A

Subordinated

45,515

Market & income approach

EBITDA multiple

5.5x

17.2x

12.6x

Revenue multiple

2.4x

3.0x

2.6x

Discount rate

11.7

%

35.0

%

16.4

%

Equity and other

499,596

Market & income approach

EBITDA multiple

5.5x

19.5x

12.6x

Revenue multiple

2.4x

3.0x

2.6x

Discount rate

6.3

%

28.1

%

13.1

%

827

Black Scholes analysis

Expected life in years

6.5

6.5

6.5

Volatility

24.4

%

24.4

%

24.4

%

Discount rate

1.5

%

1.5

%

1.5

%

$

2,382,107

 

(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 is a portfolio company held by us. SLP I is structured as a private investment fund, in which all of the investors are qualified purchasers, as such term is defined under the 1940 Act. Transfer of interests in SLP I is subject to restrictions and, as a result, such interests are not readily marketable. SLP I operates under a limited liability company agreement (the "SLP I Agreement") and will continue in existence until August 31, 2022, subject to earlier termination pursuant to certain terms of the SLP I Agreement. The term may be extended pursuant to certain terms of the SLP I Agreement. SLP I's re-investment period is currently until August 31, 2020. SLP I invests in senior secured loans issued by companies within our core industry verticals. These investments are typically broadly syndicated first lien loans.

SLP I is capitalized with $93.0 million of capital commitments and $265.0 million of debt from a revolving credit facility and is managed by us. Our capital commitment is $23.0 million, representing less than 25.0% ownership, with third

88

---

Table of Contents

party investors representing the remaining capital commitments. As of September 30, 2019, SLP I had total investments with an aggregate fair value of approximately $327.2 million, debt outstanding of $231.4 million and capital that had been called and funded of $93.0 million. As of December 31, 2018, SLP I had total investments with an aggregate fair value of approximately $327.2 million, debt outstanding of $242.6 million and capital that had been called and funded of $93.0 million. Our investment in SLP I is disclosed on our Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

We, as an investment adviser registered under the Advisers Act, act as the collateral manager to SLP I and are entitled to receive a management fee for our investment management services provided to SLP I. As a result, SLP I is classified as our affiliate. No management fee is charged on our investment in SLP I in connection with the administrative services provided to SLP I. For the three and nine months ended September 30, 2019, we earned approximately $0.3 million and $0.9 million, respectively, in management fees related to SLP I, which is included in other income. For the three and nine months ended September 30, 2018, we earned approximately $0.3 million and $0.9 million, respectively, in management fees related to SLP I, which is included in other income. As of September 30, 2019 and December 31, 2018, approximately $0.6 million and $0.3 million, respectively, of management fees related to SLP I was included in receivable from affiliates. For the three and nine months ended September 30, 2019, we earned approximately $0.8 million and $2.3 million, respectively, of dividend income related to SLP I, which is included in dividend income. For the three and nine months ended September 30, 2018, we earned approximately $0.8 million and $2.4 million, respectively, of dividend income related to SLP I, which is included in dividend income. As of September 30, 2019 and December 31, 2018, approximately $0.9 million and $0.8 million, respectively, of dividend income related to SLP I was included in interest and dividend receivable.

NMFC Senior Loan Program II LLC

NMFC Senior Loan Program II LLC ("SLP II") was formed as a Delaware limited liability company on March 9, 2016 and commenced operations on April 12, 2016. SLP II is structured as a private joint venture investment fund between us and SkyKnight Income, LLC (“SkyKnight”) and operates under a limited liability company agreement (the "SLP II Agreement"). The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within our core industry verticals. These investments are typically broadly syndicated first lien loans. All investment decisions must be unanimously approved by the board of managers of SLP II, which has equal representation from us and SkyKnight. SLP II's investment period is currently until April 12, 2020 and SLP II will continue in existence until April 12, 2022. The term may be extended for up to one year pursuant to certain terms of the SLP II Agreement.

SLP II is capitalized with equity contributions which were called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by SLP II to call down on capital commitments requires approval by the board of managers of SLP II. As of September 30, 2019, we and SkyKnight have committed and contributed $79.4 million and $20.6 million, respectively, of equity to SLP II. Our investment in SLP II is disclosed on our Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

On April 12, 2016, SLP II closed its $275.0 million revolving credit facility with Wells Fargo Bank, National Association, which matures on April 12, 2022 and bears interest at a rate of LIBOR plus 1.60% per annum. As of September 30, 2019 and December 31, 2018, SLP II had total investments with an aggregate fair value of approximately $348.0 million and $336.9 million, respectively, and debt outstanding under its credit facility of $247.4 million and $243.2 million, respectively. As of September 30, 2019 and December 31, 2018, none of SLP II's investments were on non-accrual. Additionally, as of September 30, 2019 and December 31, 2018, SLP II had unfunded commitments in the form of delayed draws of $3.8 million and $5.9 million, respectively. Below is a summary of SLP II's portfolio, along with a listing of the individual investments in SLP II's portfolio as of September 30, 2019 and December 31, 2018:

(in thousands)		September 30, 2019				December 31, 2018
First lien investments (1)		$	359,144			$	348,577
Weighted average interest rate on first lien investments (2)		6.48		%		6.84		%
Number of portfolio companies in SLP II		34				31
Largest portfolio company investment (1)		$	17,019			$	17,150
Total of five largest portfolio company investments (1)		$	79,530			$	80,766

(1)	Reflects principal amount or par value of investments.

(2)	Computed as the all in interest rate in effect on accruing investments divided by the total principal amount of investments.

89

---

Table of Contents

The following table is a listing of the individual investments in SLP II's portfolio as of September 30, 2019:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien:								(in thousands)				(in thousands)				(in thousands)
Access CIG, LLC		Business Services		6.07% (L + 3.75%)		2/27/2025		$	9,858			$	9,818			$	9,747
ADG, LLC		Healthcare Services		7.45% (L + 4.75% + 0.50% PIK)		9/28/2023		16,053				15,954				15,612
Advisor Group Holdings, Inc.		Consumer Services		7.04% (L + 5.00%)		7/31/2026		5,000				4,951				4,906
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		1,382				1,375				1,375
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		91				90				90
Brave Parent Holdings, Inc.		Software		6.26% (L + 4.00%)		4/18/2025		15,305				15,258				14,726
CentralSquare Technologies, LLC		Software		5.79% (L + 3.75%)		8/29/2025		14,888				14,855				13,994
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		10,724				10,684				10,710
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		2,052				2,042				2,049
CommerceHub, Inc.		Software		5.54% (L + 3.50%)		5/21/2025		2,469				2,458				2,439
Drilling Info Holdings, Inc.		Business Services		6.29% (L + 4.25%)		7/30/2025		14,795				14,738				14,721
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		6,364				6,307				6,349
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		151				150				151
Fastlane Parent Company, Inc.		Distribution & Logistics		6.60% (L + 4.50%)		2/4/2026		3,483				3,418				3,404
Greenway Health, LLC		Software		5.85% (L + 3.75%)		2/16/2024		14,662				14,612				12,830
Idera, Inc.		Software		6.55% (L + 4.50%)		6/28/2024		14,890				14,788				14,933
Institutional Shareholder Services Inc.		Business Services		6.60% (L + 4.50%)		3/5/2026		13,930				13,799				13,791
Keystone Acquisition Corp.		Healthcare Services		7.35% (L + 5.25%)		5/1/2024		5,292				5,254				5,173
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		7,316				7,308				7,280
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		1,889				1,887				1,879
Market Track, LLC		Business Services		6.29% (L + 4.25%)		6/5/2024		11,730				11,688				10,674
Medical Solutions Holdings, Inc.		Healthcare Services		5.79% (L + 3.75%)		6/14/2024		2,802				2,792				2,781
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		12,191				12,153				12,191
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		2,100				2,094				2,100
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		882				879				882
NorthStar Financial Services Group, LLC		Software		5.54% (L + 3.50%)		5/25/2025		5,885				5,860				5,738
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		7.30% (L + 5.25%)		4/29/2024		10,264				10,227				10,238
Poseidon Intermediate, LLC		Software		6.30% (L + 4.25%)		8/15/2022		11,830				11,828				11,919
Premise Health Holding Corp.		Healthcare Services		5.60% (L + 3.50%)		7/10/2025		1,376				1,370				1,363
Project Accelerate Parent, LLC		Business Services		6.28% (L + 4.25%)		1/2/2025		14,775				14,716				14,720
PSC Industrial Holdings Corp.		Industrial Services		5.78% (L + 3.75%)		10/11/2024		7,324				7,268				7,310
Quest Software US Holdings Inc.		Software		6.51% (L + 4.25%)		5/16/2025		14,887				14,824				14,735
Salient CRGT Inc.		Federal Services		8.05% (L + 6.00%)		2/28/2022		13,228				13,158				12,831
Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)		Education		6.29% (L + 4.25%)		7/30/2025		8,910				8,891				8,927
Wirepath LLC		Distribution & Logistics		6.10% (L + 4.00%)		8/5/2024		14,850				14,850				13,959
WP CityMD Bidco LLC		Healthcare Services		6.60% (L + 4.50%)		8/13/2026		15,000				14,851				14,875
Wrench Group LLC		Consumer Services		6.45% (L + 4.25%)		4/30/2026		4,489				4,446				4,494
YI, LLC		Healthcare Services		6.10% (L + 4.00%)		11/7/2024		14,839				14,829				14,783
Zelis Healthcare Corporation		Healthcare I.T.		6.77% (L + 4.75%)		9/30/2026		10,363				10,259				10,298
Zywave, Inc.		Software		7.26% (L + 5.00%)		11/17/2022		17,019				16,970				17,019
Total Funded Investments								$	355,338			$	353,699			$	347,996
Unfunded Investments - First lien:
Bearcat Buyer, Inc.		Healthcare Services		—		7/9/2021		$	194			$	(1	)		$	(1	)
CHA Holdings, Inc.		Business Services		—		10/10/2019		86				—				—
Edgewood Partners Holdings LLC		Business Services		—		7/31/2019		936				(9		)		(2		)
Ministry Brands, LLC		Software		—		10/18/2019		980				(5		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		110				—				—
Wrench Group LLC		Consumer Services		—		4/30/2021		1,500				—				2
Total Unfunded Investments								$	3,806			$	(15	)		$	(1	)
Total Investments								$	359,144			$	353,684			$	347,995

90

---

Table of Contents

(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). For each investment, the current interest rate provided reflects the rate in effect as of September 30, 2019.

(2)	Represents the fair value in accordance with ASC 820. Our board of directors does not determine the fair value of the investments held by SLP II.

        

The following table is a listing of the individual investments in SLP II's portfolio as of December 31, 2018:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien								(in thousands)				(in thousands)				(in thousands)
Access CIG, LLC		Business Services		6.46% (L + 3.75%)		2/27/2025		$	8,825			$	8,785			$	8,605
ADG, LLC		Healthcare Services		7.63% (L + 4.75%)		9/28/2023		16,862				16,740				16,609
Beaver-Visitec International Holdings, Inc.		Healthcare Products		6.62% (L + 4.00%)		8/21/2023		14,664				14,492				14,517
Brave Parent Holdings, Inc.		Software		6.52% (L + 4.00%)		4/18/2025		15,422				15,369				14,902
CentralSquare Technologies, LLC		Software		6.27% (L + 3.75%)		8/29/2025		15,000				14,964				14,648
CHA Holdings, Inc.		Business Services		7.30% (L + 4.50%)		4/10/2025		10,805				10,760				10,774
CommerceHub, Inc.		Software		6.27% (L + 3.75%)		5/21/2025		2,488				2,476				2,419
Drilling Info Holdings, Inc.		Business Services		6.77% (L + 4.25%)		7/30/2025		12,242				12,190				12,196
Greenway Health, LLC		Software		6.56% (L + 3.75%)		2/16/2024		14,775				14,718				14,406
GOBP Holdings, Inc.		Retail		6.55% (L + 3.75%)		10/22/2025		2,500				2,494				2,438
Idera, Inc.		Software		7.03% (L + 4.50%)		6/28/2024		12,492				12,388				12,242
J.D. Power (fka J.D. Power and Associates)		Business Services		6.27% (L + 3.75%)		9/7/2023		14,962				14,920				14,588
Keystone Acquisition Corp.		Healthcare Services		8.05% (L + 5.25%)		5/1/2024		5,332				5,289				5,226
LSCS Holdings, Inc.		Healthcare Services		6.86% (L + 4.25%)		3/17/2025		5,321				5,312				5,294
LSCS Holdings, Inc.		Healthcare Services		6.89% (L + 4.25%)		3/17/2025		1,374				1,371				1,367
Market Track, LLC		Business Services		6.87% (L + 4.25%)		6/5/2024		11,820				11,772				11,347
Medical Solutions Holdings, Inc.		Healthcare Services		6.27% (L + 3.75%)		6/14/2024		4,432				4,413				4,343
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		2,116				2,109				2,116
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		600				597				600
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		12,285				12,238				12,285
NorthStar Financial Services Group, LLC		Software		6.10% (L + 3.50%)		5/25/2025		7,463				7,428				7,313
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		8.06% (L + 5.25%)		4/29/2024		10,342				10,301				10,084
Poseidon Intermediate, LLC		Software		6.78% (L + 4.25%)		8/15/2022		14,729				14,727				14,644
Premise Health Holding Corp.		Healthcare Services		6.55% (L + 3.75%)		7/10/2025		1,386				1,380				1,369
Project Accelerate Parent, LLC		Business Services		6.64% (L + 4.25%)		1/2/2025		14,887				14,821				14,663
PSC Industrial Holdings Corp.		Industrial Services		6.21% (L + 3.75%)		10/11/2024		10,395				10,307				10,161
Quest Software US Holdings Inc.		Software		6.78% (L + 4.25%)		5/16/2025		15,000				14,930				14,535
Salient CRGT Inc.		Federal Services		8.27% (L + 5.75%)		2/28/2022		13,509				13,418				13,306
Sierra Acquisition, Inc.		Food & Beverage		6.02% (L + 3.50%)		11/11/2024		3,713				3,696				3,685
SSH Group Holdings, Inc.		Education		6.77% (L + 4.25%)		7/30/2025		8,978				8,956				8,753
Wirepath LLC		Distribution & Logistics		6.71% (L + 4.00%)		8/5/2024		14,963				14,963				14,738
WP CityMD Bidco LLC		Healthcare Services		6.30% (L + 3.50%)		6/7/2024		10,823				10,801				10,620
YI, LLC		Healthcare Services		6.80% (L + 4.00%)		11/7/2024		15,064				15,053				14,971
Zywave, Inc.		Software		7.52% (L + 5.00%)		11/17/2022		17,150				17,091				17,150
Total Funded Investments								$	342,719			$	341,269			$	336,914
Unfunded Investments - First lien
Access CIG, LLC		Business Services		—		2/27/2019		$	1,108			$	—			$	(28	)
CHA Holdings, Inc.		Business Services		—		10/10/2019		2,143				(11		)		(6		)
Drilling Info Holdings, Inc.		Business Services		—		7/30/2020		1,230				(5		)		(10		)
Ministry Brands, LLC		Software		—		10/18/2019		1,267				(6		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		110				—				(1		)
Total Unfunded Investments								5,858				(22		)		(45		)
Total Investments								$	348,577			$	341,247			$	336,869

91

---

Table of Contents

(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). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

(2)	Represents the fair value in accordance with ASC 820. Our board of directors does not determine the fair value of the investments held by SLP II.

Below is certain summarized financial information for SLP II as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and September 30, 2018:

Selected Balance Sheet Information:	September 30, 2019				December 31, 2018
	(in thousands)				(in thousands)
Investments at fair value (cost of $353,684 and $341,247, respectively)	$	347,995			$	336,869
Cash and other assets	8,702				7,620
Total assets	$	356,697			$	344,489
Credit facility	$	247,370			$	243,170
Deferred financing costs	(1,630		)		(1,374		)
Payable for unsettled securities purchased	10,259				—
Distribution payable	3,250				3,250
Other liabilities	2,761				2,869
Total liabilities	262,010				247,915
Members' capital	$	94,687			$	96,574
Total liabilities and members' capital	$	356,697			$	344,489

Selected Statement of Operations Information:	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Interest income	$	6,013			$	6,358			$	18,581			$	18,122
Other income	31				39				89				97
Total investment income	6,044				6,397				18,670				18,219
Interest and other financing expenses	2,745				2,686				8,484				7,667
Other expenses	129				140				408				504
Total expenses	2,874				2,826				8,892				8,171
Less: expenses waived and reimbursed	—				—				(20		)		—
Net expenses	2,874				2,826				8,872				8,171
Net investment income	3,170				3,571				9,798				10,048
Net realized gains on investments	116				125				377				758
Net change in unrealized (depreciation) appreciation of investments	(2,371		)		(75		)		(1,311		)		(355		)
Net increase in members' capital	$	915			$	3,621			$	8,864			$	10,451

For the three and nine months ended September 30, 2019, we earned approximately $2.5 million and $8.5 million, respectively, of dividend income related to SLP II, which is included in dividend income. For the three and nine months ended September 30, 2018, we earned approximately $2.7 million and $8.5 million, respectively, of dividend income related to SLP II, which is included in dividend income. As of September 30, 2019 and December 31, 2018, approximately $2.5 million and $2.6 million, respectively, of dividend income related to SLP II was included in interest and dividend receivable.

We have determined that SLP II is an investment company under ASC 946; however, in accordance with such guidance we will generally not consolidate our investment in a company other than a wholly-owned investment company subsidiary. Furthermore, Accounting Standards Codification Topic 810, Consolidation ("ASC 810"), concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, we do not consolidate SLP II.

92

---

Table of Contents

NMFC Senior Loan Program III LLC

NMFC Senior Loan Program III LLC ("SLP III") was formed as a Delaware limited liability company and commenced operations on April 25, 2018. SLP III is structured as a private joint venture investment fund between us and SkyKnight Income II, LLC (“SkyKnight II”) and operates under a limited liability company agreement (the "SLP III Agreement"). The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within our core industry verticals. These investments are typically broadly syndicated first lien loans. All investment decisions must be unanimously approved by the board of managers of SLP III, which has equal representation from us and SkyKnight II. SLP III has a five year investment period and will continue in existence until April 25, 2025. The investment period may be extended for up to one year pursuant to certain terms of the SLP III Agreement.

SLP III is capitalized with equity contributions which are called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by SLP III to call down on capital commitments requires approval by the board of managers of SLP III. As of September 30, 2019, we and SkyKnight II have committed and contributed $100.0 million and $25.0 million, respectively, of equity to SLP III. Our investment in SLP III is disclosed on our Consolidated Schedule of Investments as of September 30, 2019 and December 31, 2018.

On May 2, 2018, SLP III closed its revolving credit facility with Citibank, N.A., which matures on May 2, 2023 and bears interest at a rate of LIBOR plus 1.70% per annum. Effective June 24, 2019, SLP III's revolving credit facility has a maximum borrowing capacity of $375.0 million. As of September 30, 2019 and December 31, 2018, SLP III had total investments with an aggregate fair value of approximately $493.5 million and $365.4 million, respectively, and debt outstanding under its credit facility of $356.9 million and $280.3 million, respectively. As of September 30, 2019 and December 31, 2018, none of SLP III's investments were on non-accrual. Additionally, as of September 30, 2019 and December 31, 2018, SLP III had unfunded commitments in the form of delayed draws of $12.6 million and $8.8 million, respectively. Below is a summary of SLP III's portfolio, along with a listing of the individual investments in SLP III's portfolio as of September 30, 2019 and December 31, 2018:    

(in thousands)		September 30, 2019				December 31, 2018
First lien investments (1)		$	514,848			$	383,289
Weighted average interest rate on first lien investments (2)		6.16		%		6.50		%
Number of portfolio companies in SLP III		48				39
Largest portfolio company investment (1)		$	23,999			$	18,958
Total of five largest portfolio company investments (1)		$	100,100			$	85,938

(1)	Reflects principal amount or par value of investment.

(2)	Computed as the all in interest rate in effect on accruing investments divided by the total principal amount of investments.

93

---

Table of Contents

The following table is a listing of the individual investments in SLP III's portfolio as of September 30, 2019:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien								( in thousands)				( in thousands)				( in thousands)
Access CIG, LLC		Business Services		6.07% (L + 3.75%)		2/27/2025		$	1,207			$	1,207			$	1,193
Advisor Group Holdings, Inc.		Consumer Services		7.04% (L + 5.00%)		7/31/2026		5,000				4,951				4,906
Affordable Care Holding Corp.		Healthcare Services		6.84% (L + 4.75%)		10/24/2022		5,979				5,893				5,784
AG Parent Holdings, LLC		Healthcare Services		7.26% (L + 5.00%)		7/31/2026		12,500				12,438				12,461
Air Newco LLC		Software		6.27%(L + 4.25%)		10/9/2026		6,000				5,940				5,974
Ascensus Specialties LLC		Business Services		6.77%(L + 4.75%)		9/24/2026		10,000				9,950				9,975
BCPE Empire Holdings, Inc.		Distribution & Logistics		6.04% (L + 4.00%)		6/11/2026		9,190				9,100				9,098
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		19,902				19,805				19,803
Bearcat Buyer, Inc.		Healthcare Services		6.35% (L + 4.25%)		7/9/2026		1,305				1,299				1,299
Bluefin Holding, LLC		Software		6.36% (L + 4.25%)		9/4/2026		10,000				9,850				9,900
Bracket Intermediate Holding Corp.		Healthcare Services		6.29% (L + 4.25%)		9/5/2025		14,850				14,785				14,822
Brave Parent Holdings, Inc.		Software		6.26% (L + 4.00%)		4/18/2025		14,812				14,767				14,251
CentralSquare Technologies, LLC		Software		5.79% (L + 3.75%)		8/29/2025		14,887				14,855				13,994
Certara Holdco, Inc.		Healthcare I.T.		5.54% (L + 3.50%)		8/15/2024		1,265				1,269				1,261
CHA Holdings, Inc.		Business Services		6.60% (L + 4.50%)		4/10/2025		990				990				989
CommerceHub, Inc.		Software		5.54% (L + 3.50%)		5/21/2025		14,813				14,750				14,637
Covenant Surgical Partners, Inc.		Healthcare Services		6.10% (L + 4.00%)		7/1/2026		10,000				9,903				9,875
CRCI Longhorn Holdings, Inc.		Business Services		5.56% (L + 3.50%)		8/8/2025		14,850				14,786				14,488
Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)		Healthcare Services		5.79% (L + 3.75%)		6/6/2025		14,823				14,792				14,606
Drilling Info Holdings, Inc.		Business Services		6.29% (L + 4.25%)		7/30/2025		18,814				18,732				18,720
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		6,364				6,307				6,349
Edgewood Partners Holdings LLC		Business Services		6.29% (L + 4.25%)		9/6/2024		151				150				151
Fastlane Parent Company, Inc.		Distribution & Logistics		6.60% (L + 4.50%)		2/4/2026		3,483				3,418				3,404
Greenway Health, LLC		Software		5.85% (L + 3.75%)		2/16/2024		14,708				14,717				12,869
Heartland Dental, LLC		Healthcare Services		5.79% (L + 3.75%)		4/30/2025		18,364				18,287				18,016
Idera, Inc.		Software		6.55% (L + 4.50%)		6/28/2024		11,154				11,102				11,185
Institutional Shareholder Services Inc.		Business Services		6.60% (L + 4.50%)		3/5/2026		995				986				985
KAMC Holdings, Inc.		Business Services		6.18% (L + 4.00%)		8/14/2026		10,000				9,950				10,000
Kestra Advisor Services Holdings A, Inc.		Business Services		6.36% (L + 4.25%)		6/3/2026		9,500				9,423				9,298
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		2,660				2,641				2,647
LSCS Holdings, Inc.		Healthcare Services		6.31% (L + 4.25%)		3/17/2025		687				682				683
Market Track, LLC		Business Services		6.29% (L + 4.25%)		6/5/2024		4,790				4,785				4,359
MED Parentco, LP		Healthcare Services		6.29% (L + 4.25%)		8/31/2026		10,402				10,305				10,329
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		4,561				4,544				4,561
Ministry Brands, LLC		Software		6.04% (L + 4.00%)		12/2/2022		882				879				882
National Intergovernmental Purchasing Alliance Company		Business Services		5.85% (L + 3.75%)		5/23/2025		14,813				14,801				14,627
Navex Topco, Inc.		Software		5.38% (L + 3.25%)		9/5/2025		18,441				18,277				18,291
Netsmart Technologies, Inc.		Healthcare I.T.		5.79% (L + 3.75%)		4/19/2023		10,357				10,357				10,279
Newport Group Holdings II, Inc.		Business Services		5.90% (L + 3.75%)		9/12/2025		4,950				4,928				4,925
NorthStar Financial Services Group, LLC		Software		5.54% (L + 3.50%)		5/25/2025		11,770				11,721				11,476
Outcomes Group Holdings, Inc.		Healthcare Services		5.62% (L + 3.50%)		10/24/2025		6,451				6,437				6,381
Pelican Products, Inc.		Business Products		5.54% (L + 3.50%)		5/1/2025		4,938				4,927				4,746
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		7.30% (L + 5.25%)		4/29/2024		15,470				15,407				15,431
Premise Health Holding Corp.		Healthcare Services		5.60% (L + 3.50%)		7/10/2025		13,758				13,698				13,632
Project Accelerate Parent, LLC		Business Services		6.28% (L + 4.25%)		1/2/2025		9,949				9,902				9,912
Quest Software US Holdings Inc.		Software		6.51% (L + 4.25%)		5/16/2025		14,888				14,825				14,735
Sierra Enterprises, LLC		Food & Beverage		6.04% (L + 4.00%)		11/11/2024		2,462				2,460				2,444
Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)		Education		6.29% (L + 4.25%)		7/30/2025		14,850				14,818				14,878
Sunshine Luxembourg VII SARL		Consumer Products		6.27%(L + 4.25%)		9/23/2026		12,000				11,940				12,066
Wirepath LLC		Distribution & Logistics		6.10% (L + 4.00%)		8/5/2024		17,346				17,346				16,305
WP CityMD Bidco LLC		Healthcare Services		6.60% (L + 4.50%)		8/13/2026		20,069				19,869				19,902
YI, LLC		Healthcare Services		6.10% (L + 4.00%)		11/7/2024		9,816				9,809				9,779
Total Funded Investments								$	502,216			$	499,760			$	493,563

94

---

Table of Contents

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Unfunded Investments - First lien
BCPE Empire Holdings, Inc.		Distribution & Logistics		—		6/11/2021		$	1,810			$	—			$	(18	)
Bearcat Buyer, Inc.		Healthcare Services		—		7/9/2021		2,792				(14		)		(14		)
Covenant Surgical Partners, Inc.		Healthcare Services		—		7/1/2021		2,000				(20		)		(25		)
Edgewood Partners Holdings LLC		Business Services		—		12/31/2019		936				(9		)		(2		)
Heartland Dental, LLC		Healthcare Services		—		4/30/2020		413				—				(8		)
MED Parentco, LP		Healthcare Services		—		8/27/2021		2,598				(24		)		(18		)
Ministry Brands, LLC		Software		—		10/18/2019		980				(5		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		1,103				(3		)		(3		)
Total Unfunded Investments								$	12,632			$	(75	)		$	(88	)
Total Investments								$	514,848			$	499,685			$	493,475

(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). For each investment, the current interest rate provided reflects the rate in effect as of September 30, 2019.

(2)	Represents the fair value in accordance with ASC 820. Our board of directors does not determine the fair value of the investments held by SLP III.

95

---

Table of Contents

The following table is a listing of the individual investments in SLP III's portfolio as of December 31, 2018:

Portfolio Company and Type of Investment		Industry		Interest Rate (1)		Maturity Date		Principal Amount or Par Value				Cost				Fair Value (2)
Funded Investments - First lien								(in thousands)				(in thousands)				(in thousands)
Access CIG, LLC		Business Services		6.46% (L + 3.75%)		2/27/2025		$	1,216			$	1,216			$	1,185
Affordable Care Holding Corp.		Healthcare Services		7.25% (L + 4.75%)		10/24/2022		1,025				1,030				1,005
Bracket Intermediate Holding Corp.		Healthcare Services		7.00% (L + 4.25%)		9/5/2025		14,963				14,890				14,813
Brave Parent Holdings, Inc.		Software		6.52% (L + 4.00%)		4/18/2025		14,925				14,874				14,421
CentralSquare Technologies, LLC		Software		6.27% (L + 3.75%)		8/29/2025		15,000				14,964				14,648
Certara Holdco, Inc.		Healthcare I.T.		6.30% (L + 3.50%)		8/15/2024		1,275				1,280				1,255
CHA Holdings, Inc.		Business Services		7.30% (L + 4.50%)		4/10/2025		997				997				995
CommerceHub, Inc.		Software		6.27% (L + 3.75%)		5/21/2025		14,925				14,856				14,515
CRCI Longhorn Holdings, Inc.		Business Services		5.89% (L + 3.50%)		8/8/2025		14,963				14,891				14,588
Dentalcorp Perfect Smile ULC		Healthcare Services		6.27% (L + 3.75%)		6/6/2025		11,940				11,912				11,701
Dentalcorp Perfect Smile ULC		Healthcare Services		6.27% (L + 3.75%)		6/6/2025		1,686				1,685				1,652
Drilling Info Holdings, Inc.		Business Services		6.77% (L + 4.25%)		7/30/2025		17,591				17,507				17,525
Financial & Risk US Holdings, Inc.		Business Services		6.27% (L + 3.75%)		10/1/2025		8,000				7,980				7,512
GOBP Holdings, Inc.		Retail		6.55% (L + 3.75%)		10/22/2025		15,000				14,963				14,625
Greenway Health, LLC		Software		6.56% (L + 3.75%)		2/16/2024		14,821				14,831				14,450
Heartland Dental, LLC		Healthcare Services		6.27% (L + 3.75%)		4/30/2025		17,329				17,249				16,593
HIG Finance 2 Limited		Business Services		6.06% (L + 3.50%)		12/20/2024		1,995				1,985				1,939
Idera, Inc.		Software		7.03% (L + 4.50%)		6/28/2024		2,294				2,289				2,248
J.D. Power (fka J.D. Power and Associates)		Business Services		6.27% (L + 3.75%)		9/7/2023		5,985				5,985				5,835
Market Track, LLC		Business Services		6.87% (L + 4.25%)		6/5/2024		4,827				4,821				4,633
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		4,596				4,576				4,596
Ministry Brands, LLC		Software		6.52% (L + 4.00%)		12/2/2022		600				597				600
National Intergovernmental Purchasing Alliance Company		Business Services		6.55% (L + 3.75%)		5/23/2025		14,925				14,912				14,552
Navex Topco, Inc.		Software		5.78% (L + 3.25%)		9/5/2025		14,963				14,890				14,102
Navicure, Inc.		Healthcare Services		6.27% (L + 3.75%)		11/1/2024		2,985				2,985				2,925
Netsmart Technologies, Inc.		Healthcare I.T.		6.27% (L + 3.75%)		4/19/2023		10,437				10,437				10,307
Newport Group Holdings II, Inc.		Business Services		6.54% (L + 3.75%)		9/12/2025		4,988				4,963				4,875
NorthStar Financial Services Group, LLC		Software		6.10% (L + 3.50%)		5/25/2025		14,925				14,856				14,628
OEConnection LLC		Business Services		6.53% (L + 4.00%)		11/22/2024		1,830				1,843				1,789
Outcomes Group Holdings, Inc.		Healthcare Services		6.28% (L + 3.50%)		10/24/2025		6,500				6,484				6,394
Pelican Products, Inc.		Business Products		5.88% (L + 3.50%)		5/1/2025		4,975				4,963				4,726
Peraton Corp. (fka MHVC Acquisition Corp.)		Federal Services		8.06% (L + 5.25%)		4/29/2024		15,588				15,517				15,199
Premise Health Holding Corp.		Healthcare Services		6.55% (L + 3.75%)		7/10/2025		13,862				13,796				13,689
Quest Software US Holdings Inc.		Software		6.78% (L + 4.25%)		5/16/2025		15,000				14,930				14,535
Sierra Enterprises, LLC		Food & Beverage		6.02% (L + 3.50%)		11/11/2024		2,481				2,478				2,463
SSH Group Holdings, Inc.		Education		6.77% (L + 4.25%)		7/30/2025		14,963				14,927				14,588
University Support Services LLC (St. George's University Scholastic Services LLC)		Education		6.03% (L + 3.50%)		7/17/2025		3,790				3,772				3,759
VT Topco, Inc.		Business Services		6.55% (L + 3.75%)		8/1/2025		7,980				7,961				7,882
VT Topco, Inc.		Business Services		6.55% (L + 3.75%)		8/1/2025		1,004				1,004				992
Wirepath LLC		Distribution & Logistics		6.71% (L + 4.00%)		8/5/2024		17,477				17,477				17,215
WP CityMD Bidco LLC		Healthcare Services		6.30% (L + 3.50%)		6/7/2024		14,887				14,887				14,608
YI, LLC		Healthcare Services		6.80% (L + 4.00%)		11/7/2024		4,965				4,983				4,935
Total Funded Investments								$	374,478			$	373,443			$	365,497
Unfunded Investments - First lien
Dentalcorp Perfect Smile ULC		Healthcare Services		—		6/6/2020		$	1,308			$	(3	)		$	(26	)
Drilling Info Holdings, Inc.		Business Services		—		7/30/2020		1,367				(7		)		(11		)
Heartland Dental, LLC		Healthcare Services		—		4/30/2020		1,586				—				(67		)
Ministry Brands, LLC		Software		—		10/18/2019		1,267				(6		)		—
Premise Health Holding Corp.		Healthcare Services		—		7/10/2020		1,103				(3		)		(14		)
University Support Services LLC (St. George's University Scholastic Services LLC)		Education		—		7/17/2019		1,187				—				(10		)
VT Topco, Inc.		Business Services		—		8/1/2020		993				(2		)		(12		)
Total Unfunded Investments								$	8,811			$	(21	)		$	(140	)
Total Investments								$	383,289			$	373,422			$	365,357

96

---

Table of Contents

(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). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

(2)	Represents the fair value in accordance with ASC 820. Our board of directors does not determine the fair value of the investments held by SLP III.

Below is certain summarized financial information for SLP III as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and September 30, 2018:

Selected Balance Sheet Information:	September 30, 2019				December 31, 2018
	(in thousands)				(in thousands)
Investments at fair value (cost of $499,685 and $373,422)	$	493,475			$	365,357
Receivable from unsettled securities sold	15,276				—
Cash and other assets	3,125				9,138
Total assets	$	511,876			$	374,495
Credit facility	$	356,900			$	280,300
Deferred financing costs	(2,553		)		(2,831		)
Payable for unsettled securities purchased	31,591				—
Distribution payable	3,350				2,600
Other liabilities	3,953				4,456
Total liabilities	393,241				284,525
Members' capital	$	118,635			$	89,970
Total liabilities and members' capital	$	511,876			$	374,495

Selected Statement of Operations Information:	Three Months Ended								Nine Months Ended
	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Interest income	$	7,268			$	3,170			$	19,828			$	3,960
Other income	122				80				270				102
Total investment income	7,390				3,250				20,098				4,062
Interest and other financing expenses	3,770				1,853				10,511				2,427
Other expenses	166				123				469				349
Total expenses	3,936				1,976				10,980				2,776
Less: expenses waived and reimbursed	—				—				(22		)		—
Net expenses	3,936				1,976				10,958				2,776
Net investment income	3,454				1,274				9,140				1,286
Net realized gains on investments	100				1				170				1
Net change in unrealized (depreciation) appreciation of investments	(1,800		)		1,438				1,855				2,056
Net increase in members' capital	$	1,754			$	2,713			$	11,165			$	3,343

(1)	SLP III commenced operations on April 25, 2018.

For the three and nine months ended September 30, 2019, we earned approximately $2.7 million and $7.6 million of dividend income related to SLP III, which is included in dividend income. For the three and nine months ended September 30, 2018, we earned approximately $1.0 million and $1.0 million, respectively, of dividend income related to SLP III. As of September 30, 2019 and December 31, 2018 approximately $2.7 million and $2.1 million, respectively, of dividend income related to SLP III was included in interest and dividend receivable.

97

---

Table of Contents

We have determined that SLP III is an investment company under ASC 946; however, in accordance with such guidance we will generally not consolidate our investment in a company other than a wholly-owned investment company subsidiary. Furthermore, ASC 810 concludes that in a joint venture where both members have equal decision making authority, it is not appropriate for one member to consolidate the joint venture since neither has control. Accordingly, we do not consolidate SLP III.

New Mountain Net Lease Corporation

     NMNLC was formed to acquire commercial real estate properties that are subject to "triple net" leases. NMNLC's investments are disclosed on our Consolidated Schedule of Investments as of September 30, 2019.

Below is certain summarized property information for NMNLC as of September 30, 2019:

Lease

Total

Fair Value as of

Portfolio Company

Tenant

Expiration Date

Location

Square Feet

September 30, 2019

(in thousands)

(in thousands)

NM NL Holdings LP / NM GP Holdco LLC

Various

Various

Various

Various

$

36,183

NM GLCR LP

Arctic Glacier U.S.A.

2/28/2038

CA

214

23,113

NM YI LLC

Young Innovations, Inc.

10/31/2039

IL / MO

212

17,265

NM CLFX LP

Victor Equipment Company

8/31/2033

TX

423

12,714

NM APP Canada Corp.

A.P. Plasman, Inc.

9/30/2031

Canada

436

10,147

NM APP US LLC

Plasman Corp, LLC / A-Brite LP

9/30/2033

AL / OH

261

6,415

NM DRVT LLC

FMH Conveyors, LLC

10/31/2031

AR

195

5,785

NM JRA LLC

J.R. Automation Technologies, LLC

1/31/2031

MI

88

3,667

NM KRLN LLC

Kirlin Group, LLC

6/30/2029

MD

95

2,292

$

117,581

Collateralized agreements or repurchase financings

We follow the guidance in Accounting Standards Codification Topic 860, Transfers and Servicing—Secured Borrowing and Collateral, (“ASC 860”) when accounting for transactions involving the purchases of securities under collateralized agreements to resell (resale agreements). These transactions are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts, as specified in the respective agreements. Interest on collateralized agreements is accrued and recognized over the life of the transaction and included in interest income. As of September 30, 2019 and December 31, 2018, we held one collateralized agreement to resell with a cost basis of $30.0 million and $30.0 million, respectively, and a fair value of $22.2 million and $23.5 million, respectively. The collateralized agreement to resell is guaranteed by a private hedge fund. The private hedge fund is currently in liquidation under the laws of the Cayman Islands. Pursuant to the terms of the collateralized agreement, the private hedge fund was obligated to repurchase the collateral from us at the par value of the collateralized agreement. The private hedge fund has breached its agreement to repurchase the collateral under the collateralized agreement. The default by the private hedge fund did not release the collateral to us, therefore, we do not have full rights and title to the collateral. A claim has been filed with the Cayman Islands joint official liquidators to resolve this matter. The joint official liquidators have recognized our contractual rights under the collateralized agreement. We continue to exercise our rights under the collateralized agreement and continue to monitor the liquidation process of the private hedge fund. The fair value of the collateralized agreement to resell is reflective of the increased risk of the position.

PPVA Black Elk (Equity) LLC

On May 3, 2013, we entered into a collateralized securities purchase and put agreement (the “SPP Agreement”) with a private hedge fund. Under the SPP Agreement, we purchased twenty million Class E Preferred Units of Black Elk Energy Offshore Operations, LLC (“Black Elk”) for $20.0 million with a corresponding obligation of the private hedge fund to repurchase the preferred units for $20.0 million plus other amounts due under the SPP Agreement. The majority owner of Black Elk was the private hedge fund. In August 2014, we received a payment of $20.5 million, the full amount due under the SPP Agreement.

In August 2017, a trustee (the “Trustee”) for Black Elk informed us that the Trustee intended to assert a fraudulent conveyance claim (the “Claim”) against us and one of its affiliates seeking the return of the $20.5 million repayment. Black Elk

98

---

Table of Contents

filed a Chapter 11 bankruptcy petition pursuant to the United States Bankruptcy Code in August 2015. The Trustee alleges that individuals affiliated with the private hedge fund conspired with Black Elk and others to improperly use proceeds from the sale of certain Black Elk assets to repay, in August 2014, the private hedge fund’s obligation to us under the SPP Agreement. We were unaware of these claims at the time the repayment was received. The private hedge fund is currently in liquidation under the laws of the Cayman Islands.

On December 22, 2017, we settled the Trustee’s $20.5 million Claim for $16.0 million and filed a claim with the Cayman Islands joint official liquidators of the private hedge fund for $16.0 million that is owed to us under the SPP Agreement. The SPP Agreement was restored and is in effect since repayment has not been made. We continue to exercise our rights under the SPP Agreement and continue to monitor the liquidation process of the private hedge fund. As of September 30, 2019 and December 31, 2018, the SPP Agreement had a cost basis of $14.5 million and $14.5 million, respectively, and a fair value of $10.7 million and $11.4 million, respectively, which is reflective of the higher inherent risk in this transaction.

Revenue Recognition

Sales and paydowns of investments:  Realized gains and losses on investments are determined on the specific identification method.

Interest and dividend income:  Interest income, including amortization of premium and discount using the effective interest method, is recorded on the accrual basis and periodically assessed for collectability. Interest income also includes interest earned from cash on hand. Upon the prepayment of a loan or debt security, any prepayment penalties are recorded as part of interest income. We have loans and certain preferred equity investments in the portfolio that contain a payment-in-kind (“PIK”) interest or dividend provision. PIK interest and dividends are accrued and recorded as income at the contractual rates, if deemed collectible. The PIK interest and dividends are added to the principal or share balances on the capitalization dates and are generally due at maturity or when redeemed by the issuer. For the three and nine months ended September 30, 2019, we recognized PIK and non-cash interest from investments of approximately $3.8 million and $9.9 million, respectively, and PIK and non-cash dividends from investments of approximately $4.8 million and $13.6 million, respectively. For the three and nine months ended September 30, 2018,we recognized PIK and non-cash interest from investments of approximately $2.5 million and $6.1 million, respectively, and PIK and non-cash dividends from investments of approximately $7.2 million and $21.0 million, respectively.

Dividend income on common equity is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Dividend income on preferred securities is recorded as dividend income on an accrual basis to the extent that such amounts are deemed collectible.

Non-accrual income:  Investments are placed on non-accrual status when principal or interest payments are past due for 30 days or more and when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest or dividends are reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest or dividends are not reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment of the ultimate collectibility. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current.

Other income:  Other income represents delayed compensation, consent or amendment fees, revolver fees, structuring fees, upfront fees, management fees from a non-controlled/affiliated investment and other miscellaneous fees received and are typically non-recurring in nature. Delayed compensation is income earned from counterparties on trades that do not settle within a set number of business days after trade date. Other income may also include fees from bridge loans. We may from time to time enter into bridge financing commitments, an obligation to provide interim financing to a counterparty until permanent credit can be obtained. These commitments are short-term in nature and may expire unfunded. A fee is received for providing such commitments. Structuring fees and upfront fees are recognized as income when earned, usually when paid at the closing of the investment, and are non-refundable.

Monitoring of Portfolio Investments

We monitor the performance and financial trends of our portfolio companies on at least a quarterly basis. We attempt to identify any developments within the portfolio company, the industry or the macroeconomic environment that may alter any material element of our original investment strategy.

We use an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio. We use a four-level numeric rating scale as follows:

•	Investment Rating 1—Investment is performing materially above expectations;

•	Investment Rating 2—Investment is performing materially in-line with expectations. All new loans are rated 2 at initial purchase;

99

---

Table of Contents

•	Investment Rating 3—Investment is performing materially below expectations, where the risk of loss has materially increased since the original investment; and

•	Investment Rating 4—Investment is performing substantially below expectations and risks have increased substantially since the original investment. Payments may be delinquent. There is meaningful possibility that we will not recoup our original cost basis in the investment and may realize a substantial loss upon exit.

The following table shows the distribution of our investments and securities purchased under collateralized agreements to resell on the 1 to 4 investment rating scale at fair value as of September 30, 2019:

(in millions)	As of September 30, 2019
Investment Rating		Cost				Percent			Fair Value				Percent
Investment Rating 1		$	134.6			4.5	%		$	136.2			4.5	%
Investment Rating 2		2,822.6				93.8	%		2,849.0				94.3	%
Investment Rating 3		52.0				1.7	%		35.2				1.2	%
Investment Rating 4		1.4				0.0	%		0.0				0.0	%
		$	3,010.6			100.0	%		$	3,020.4			100.0	%

As of September 30, 2019, all investments in our portfolio had an Investment Rating of 1 or 2 with the exception of three portfolio companies that had an Investment Rating of 3 and one portfolio company that had an Investment Rating of 4.

During the first quarter of 2018, we placed our first lien positions in Education Management II LLC on non-accrual status as the portfolio company announced its intention to wind down and liquidate the business. Our first lien positions and our preferred and common shares in Education Management Corporation ("EDMC") have an investment rating of 4. As of September 30, 2019, our investments in EDMC with an Investment Rating of 4 had an aggregate cost basis of approximately $1.4 million, an aggregate fair value of approximately less than $0.1 million and total unearned interest income of approximately less than $0.1 million and approximately $0.1 million, respectively, for the three and nine months then ended.

Portfolio and Investment Activity

The fair value of our investments was approximately $2,998.2 million in 112 portfolio companies at September 30, 2019 and approximately $2,342.0 million in 92 portfolio companies at December 31, 2018.

The following table shows our portfolio and investment activity for the nine months ended September 30, 2019 and September 30, 2018:

		Nine Months Ended
(in millions)		September 30, 2019				September 30, 2018
New investments in 52 and 57 portfolio companies, respectively		$	827.6			$	1,056.7
Debt repayments in existing portfolio companies		141.6				516.2
Sales of securities in 7 and 10 portfolio companies, respectively		66.2				83.0
Change in unrealized appreciation on 46 and 43 portfolio companies, respectively		41.7				33.8
Change in unrealized depreciation on 66 and 61 portfolio companies, respectively		(36.4		)		(34.5		)

Recent Accounting Standards Updates

See Item 1.—Financial Statements—Note 13. Recent Accounting Standards for details on recent accounting standards updates.

Results of Operations for the Three Months Ended September 30, 2019 and September 30, 2018

Revenue

		Three Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Interest income		$	55,220			$	40,920
Total dividend income		13,270				13,948
Other income		4,104				5,601
Total investment income		$	72,594			$	60,469

100

---

Table of Contents

Our total investment income increased by approximately $12.1 million, or 20%, for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. For the three months ended September 30, 2019, total investment income of approximately $72.6 million consisted of approximately $49.8 million in cash interest from investments, approximately $3.8 million in PIK and non-cash interest from investments, approximately $0.1 million in prepayment fees, net amortization of purchase premiums and discounts of approximately $1.5 million, approximately $8.4 million in cash dividends from investments, approximately $4.8 million in PIK and non-cash dividends from investments and approximately $4.2 million in other income. The increase in interest income of approximately $14.3 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 was primarily due to increased interest income which is attributable to larger invested balances. Our larger invested balances were driven by the proceeds from our August 2018 and June 2019 convertible notes issuances, proceeds from our September 2018 and April 2019 unsecured notes issuances, higher drawn balances on our Holdings Credit Facility (as defined below), borrowings from our DB Credit Facility (as defined below) and proceeds from the February 2019 and July 2019 public offerings of our common stock, all of which contributed to the origination of new investments. Dividend income for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 remained relatively flat. Other income during the three months ended September 30, 2019, which represents fees that are generally non-recurring in nature, was primarily attributable to upfront and amendment fees received from 21 different portfolio companies and management fees from a non-controlled affiliated portfolio company.

Operating Expenses

		Three Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Management fee		$	12,687			$	10,018
Less: management fee waiver		(3,141		)		(1,495		)
Total management fee		9,546				8,252
Incentive fee		7,792				6,780
Interest and other financing expenses		21,830				14,759
Professional fees		834				2,053
Administrative expenses		930				846
Other general and administrative expenses		492				437
Net expenses before income taxes		41,424				33,127
Income tax expense		—				225
Net expenses after income taxes		$	41,424			$	33,352

Our total net operating expenses increased by approximately $8.1 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. Our management fee increased by approximately $1.3 million, net of a management fee waiver, and our incentive fee increased by approximately $1.0 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The increase in management and incentive fees was attributable to larger invested balances, driven by the proceeds from our convertible notes issuances, our unsecured notes issuances, our February 2019 and July 2019 public offering of common stock and our use of leverage from our revolving credit facilities and SBA-guaranteed debentures used to originate new investments.

Interest and other financing expenses increased by approximately $7.1 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018, primarily due to our issuances of convertible and unsecured notes and higher drawn balances on our SBA-guaranteed debentures, Holdings Credit Facility and DB Credit Facility. Our total professional fees, administrative expenses and total other general and administrative expenses for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 were lower as professional fees for the three months ended September 30, 2018 included higher professional fees that were incurred relating to evaluating and making investments.

101

---

Table of Contents

Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation)

		Three Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Net realized gains on investments		$	355			$	3,254
Net change in unrealized (depreciation) appreciation of investments		(7,024		)		(3,609		)
Net change in unrealized depreciation securities purchased under collateralized agreements to resell		(1,332		)		—
Benefit (provision) for taxes		281				(2		)
Net realized and unrealized losses		$	(7,720	)		$	(357	)

Our net realized gains and unrealized losses resulted in a net loss of approximately $7.7 million for the three months ended September 30, 2019 compared to net realized gains and unrealized losses resulting in a net loss of approximately $0.4 million for the same period in 2018. As movement in unrealized appreciation or depreciation can be the result of realizations, we look at net realized and unrealized gains or losses together. The net loss for the three months ended September 30, 2019 was primarily driven by the overall decrease in market prices of our investments during the period. The provision for income taxes was attributable to equity investments that are held as of September 30, 2019 in three of our corporate subsidiaries. The net loss for the three months ended September 30, 2018 was primarily driven by the overall decrease in the market prices of our investments during the period, which was partially offset by a realized gain on the sale of our investment in TWDiamondback Holdings Corp.

Results of Operations for the Nine Months Ended September 30, 2019 and September 30, 2018

Revenue

		Nine Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Interest income		$	154,779			$	117,749
Total dividend income		39,338				38,651
Other income		9,133				11,556
Total investment income		$	203,250			$	167,956

Our total investment income increased by approximately $35.3 million, or 21%, for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. For the nine months ended September 30, 2019, total investment income of approximately $203.3 million consisted of approximately $140.9 million in cash interest from investments, approximately $9.9 million in PIK and non-cash interest from investments, approximately $0.3 million in prepayment fees, net amortization of purchase premiums and discounts of approximately $3.7 million, approximately $25.7 million in cash dividends from investments, approximately $13.6 million in PIK and non-cash dividends from investments and approximately $9.2 million in other income. The increase in interest income of approximately $37.0 million during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was primarily due to increased interest income which is attributable to larger invested balances and higher LIBOR rates. Our larger invested balances were driven by the proceeds from our August 2018 and June 2019 convertible notes issuances, proceeds from our September 2018 and April 2019 unsecured notes issuances, higher drawn balances on our Holdings Credit Facility (as defined below), borrowings from our DB Credit Facility (as defined below) and proceeds from our February 2019 and July 2019 public offering of our common stock, all of which contributed to the origination of new investments. Dividend income for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 remained relatively flat. Other income during the nine months ended September 30, 2019, which represents fees that are generally non-recurring in nature, was primarily attributable to upfront, commitment, consent and amendment fees received from thirty-four different portfolio companies and management fees from a non-controlled affiliated portfolio company.

102

---

Table of Contents

 

Operating Expenses

		Nine Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Management fee		$	35,302			$	28,011
Less: management fee waiver		(8,497		)		(4,583		)
Total management fee		26,805				23,428
Incentive fee		21,642				19,644
Interest and other financing expenses		61,695				38,873
Professional fees		2,486				3,455
Administrative expenses		3,074				2,607
Other general and administrative expenses		1,302				1,365
Total expenses		117,004				89,372
Less: expenses waived and reimbursed		(335		)		(276		)
Net expenses before income taxes		116,669				89,096
Income tax expense		13				286
Net expenses after income taxes		$	116,682			$	89,382

Our total net operating expenses increased by approximately $27.3 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. Our management fee increased by approximately $3.4 million, net of a management fee waiver, and our incentive fee increased by approximately $2.0 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. The increase in management and incentive fees was attributable to larger invested balances, driven by the proceeds from our convertible notes issuances, our unsecured notes issuances, our February 2019 and July 2019 public offering of common stock and our use of leverage from our revolving credit facilities and SBA-guaranteed debentures used to originate new investments.

Interest and other financing expenses increased by approximately $22.8 million during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018, primarily due to our issuances of convertible and unsecured notes, higher drawn balances on our SBA-guaranteed debentures, Holdings Credit Facility and DB Credit Facility and higher LIBOR rates. Our total professional fees, administrative expenses and total other general and administrative expenses for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 remained relatively flat.

Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation)

		Nine Months Ended
(in thousands)		September 30, 2019				September 30, 2018
Net realized gains (losses) on investments		$	453			$	(3,149	)
Net change in unrealized appreciation (depreciation) of investments		5,305				(690		)
Net change in unrealized depreciation securities purchased under collateralized agreements to resell		(1,332		)		(12		)
Benefit (provision) for taxes		121				(986		)
Net realized and unrealized gains (losses)		$	4,547			$	(4,837	)

Our net realized and unrealized gains resulted in a net gain of approximately $4.5 million for the nine months ended September 30, 2019 compared to net realized and unrealized losses resulting in a net loss of approximately $4.8 million for the same period in 2018. As movement in unrealized appreciation or depreciation can be the result of realizations, we look at net realized and unrealized gains or losses together. The net gain for the nine months ended September 30, 2019 was primarily driven by the overall increase in market prices of our investments during the period. The provision for income taxes was attributable to equity investments that are held as of September 30, 2019 in three of our corporate subsidiaries. The net loss for the nine months ended September 30, 2018 was primarily driven by the realized loss on our investment in American Tire Distributors, Inc. ("ATD"), which was sold during the quarter ended June 30, 2018 due to ATD's reported loss of its largest supplier.

103

---

Table of Contents

Liquidity and Capital Resources

The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.

On February 14, 2019, we completed a public offering of 4,312,500 shares of our common stock (including 562,500 shares of common stock that were issued pursuant to the full exercise of the overallotment option granted to the underwriters to purchase additional shares) at a public offering price of $13.57 per share. The Investment Adviser paid all of the underwriters' sales load of $0.42 per share and an additional supplemental payment of $0.18 per share to the underwriters, which reflects the difference between the public offering price of $13.57 per share and the net proceeds of $13.75 per share received by us in this offering. All payments made by the Investment Adviser are not subject to reimbursement by us. We received total net proceeds of approximately $59.3 million in connection with this offering.

On July 11, 2019, we completed a public offering of 6,900,000 shares of our common stock at a public offering price of $13.68 per share. Our Investment Adviser paid a $0.39 per share portion of the $0.42 per share underwriters’ sales load such that we received net proceeds of $13.65 per share in this offering. All payments made by our Investment Adviser are not subject to reimbursement by us. We received total net proceeds of approximately $94.2 million in connection with this offering.

Since our IPO, and through September 30, 2019, we raised approximately $768.1 million in net proceeds from additional offerings of our common stock.

Our liquidity is generated and generally available through advances from the revolving credit facilities, from cash flows from operations, and, we expect, through periodic follow-on equity offerings. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including unsecured debt and/or debt securities convertible into common stock. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. As permitted by the Small Business Credit Availability Act (the “SBCA”) on June 8, 2018 our shareholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCA, which resulted in the reduction from 200.0% to 150.0% of the minimum asset coverage ratio applicable to us as of June 9, 2018. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, is at least 150.0% after such borrowing (which means we can borrow $2 for every $1 of our equity). As a result of our exemptive relief received on November 5, 2014, we are permitted to exclude our SBA-guaranteed debentures from the 150.0% asset coverage ratio that the we are required to maintain under the 1940 Act. The agreements governing the NMFC Credit Facility, the 2018 Convertible Notes and the Unsecured Notes (as defined below) contain certain covenants and terms, including a requirement that we not exceed a debt-to-equity ratio of 1.65 to 1.00 at the time of incurring additional indebtedness and a requirement that we not exceed a secured debt ratio of 0.70 to 1.00 at any time. As of September 30, 2019, our asset coverage ratio was 171.1%.

At September 30, 2019 and December 31, 2018, we had cash and cash equivalents of approximately $69.8 million and $49.7 million, respectively. Our cash used in operating activities during the nine months ended September 30, 2019 and September 30, 2018 was approximately $473.6 million and $294.7 million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.

Borrowings

Holdings Credit Facility—On December 18, 2014, we entered into the Second Amended and Restated Loan and Security Agreement among us, as the Collateral Manager, NMF Holdings, as the Borrower, Wells Fargo Securities, LLC, as the Administrative Agent and Wells Fargo Bank, National Association, as the Lender and Collateral Custodian (as amended from time to time, the "Holdings Credit Facility"). As of the most recent amendment on September 6, 2019, the maturity date of the Holdings Credit Facility is October 24, 2022, and the maximum facility amount is the lesser of $800.0 million and the actual commitments of the lenders to make advances as of such date.

As of September 30, 2019, the maximum amount of revolving borrowings available under the Holdings Credit Facility is $800.0 million. Under the Holdings Credit Facility, NMF Holdings is permitted to borrow up to 25.0%, 45.0% or 70.0% of the purchase price of pledged assets, subject to approval by Wells Fargo Bank, National Association. The Holdings Credit Facility is non-recourse to us and is collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with the origination or upsizing of the Holdings Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the Holdings Credit Facility. The Holdings Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the Holdings Credit Facility requires us to maintain a minimum asset coverage ratio of 150.0%. The covenants are generally not tied to mark to market fluctuations in the prices of NMF Holdings investments, but rather to the performance of the underlying portfolio companies.

104

---

Table of Contents

As of the amendment entered into on April 1, 2018, the Holdings Credit Facility bears interest at a rate of LIBOR plus 1.75% per annum for Broadly Syndicated Loans (as defined in the Loan and Security Agreement) and LIBOR plus 2.25% per annum for all other investments. The Holdings Credit Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Holdings Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	6.5			$	4.0			$	19.2			$	10.7
Non-usage fee	$	0.1			$	0.1			$	0.4			$	0.5
Amortization of financing costs	$	0.7			$	0.7			$	2.1			$	1.9
Weighted average interest rate	4.2		%		4.2		%		4.4		%		4.1		%
Effective interest rate	4.8		%		5.0		%		5.0		%		5.0		%
Average debt outstanding	$	612.9			$	379.2			$	581.9			$	351.4

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Holdings Credit Facility was $637.6 million and $512.6 million, respectively, and NMF Holdings was in compliance with the applicable covenants in the Holdings Credit Facility on such dates.

NMFC Credit Facility—The Senior Secured Revolving Credit Agreement, (as amended from time to time, and together with the related guarantee and security agreement, the "NMFC Credit Facility"), dated June 4, 2014, among us, as the Borrower, Goldman Sachs Bank USA, as the Administrative Agent and Collateral Agent, and Goldman Sachs Bank USA, Morgan Stanley Bank, N.A. and Stifel Bank & Trust, as Lenders, is structured as a senior secured revolving credit facility. The NMFC Credit Facility is guaranteed by certain of our domestic subsidiaries and proceeds from the NMFC Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. As of the most recent amendment on December 12, 2018, the maturity date of the NMFC Credit Facility is June 4, 2022 and the NMFC Credit Facility includes the financial covenants related to the asset coverage discussed above.

As of September 30, 2019, the maximum amount of revolving borrowings available under the NMFC Credit Facility was $138.5 million. We are permitted to borrow at various advance rates depending on the type of portfolio investment as outlined in the related Senior Secured Revolving Credit Agreement. All fees associated with the origination of the NMFC Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the NMFC Credit Facility. The NMFC Credit Facility contains certain customary affirmative and negative covenants and events of default, including certain financial covenants related to the asset coverage and liquidity and other maintenance covenants.

The NMFC Credit Facility generally bears interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.375% per annum (as defined in the Senior Secured Revolving Credit Agreement).

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the NMFC Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	1.5			$	1.4			$	3.7			$	3.8
Non-usage fee	$	—		(1)	$	—		(1)	$	0.1			$	0.1
Amortization of financing costs	$	0.1			$	0.1			$	0.3			$	0.3
Weighted average interest rate	4.8		%		4.7		%		4.9		%		4.5		%
Effective interest rate	4.9		%		5.1		%		5.4		%		5.0		%
Average debt outstanding	$	123.8			$	121.9			$	99.4			$	113.3

(1)	For the three months ended September 30, 2019 and September 30, 2018, the total non-usage fees were less than $50 thousand.

105

---

Table of Contents

As of September 30, 2019 and December 31, 2018, the outstanding balance on the NMFC Credit Facility was $138.5 million and $60.0 million, respectively, and NMFC was in compliance with the applicable covenants in the NMFC Credit Facility on such dates.

DB Credit Facility—The Loan Financing and Servicing Agreement (the "DB Credit Facility") dated December 14, 2018 and as amended from time to time, among NMFDB as the borrower, Deutsche Bank AG, New York Branch ("Deutsche Bank") as the facility agent, Lender and other agent from time to time party thereto and U.S. Bank National Association, as collateral agent and collateral custodian, is structured as a secured revolving credit facility and, as of the the most recent amendment on August 12, 2019, matures on December 14, 2023.

As of September 30, 2019, the maximum amount of revolving borrowings available under the DB Credit Facility was $210.0 million. We are permitted to borrow at various advance rates depending on the type of portfolio investment, as outlined in the Loan Financing and Servicing Agreement. The DB Credit Facility is non-recourse to us and is collateralized by all of the investments of NMFDB on an investment by investment basis. All fees associated with the origination of the DB Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the DB Credit Facility. The DB Credit Facility contains certain customary affirmative and negative covenants and events of default. The covenants are generally not tied to mark to market fluctuations in the prices of NMFDB investments, but rather to the performance of the underlying portfolio companies.

The advances under the DB Credit Facility accrue interest at a per annum rate equal to the Applicable Margin plus the lender's Cost of Funds Rate. Prior to June 28, 2019, the "Applicable Margin" was equal to 2.85% during the Revolving Period and then increases by 0.20% during an Event of Default. Effective June 28, 2019, the Applicable Margin is equal to 2.60% during the Revolving Period and then increases by 0.20% during an Event of Default. The "Cost of Funds Rate" for a conduit lender is the lower of its commercial paper rate and the Base Rate plus 0.50%, and for any other lender is the Base Rate. The "Base Rate" is the three-months LIBOR Rate but may become an alternative base rate based on Deutsche Bank's base lending rate if certain LIBOR disruption events occur. We are also charged a non-usage fee, based on the unused facility amount multiplied by the Undrawn Fee Rate (as defined in the Loan Financing and Servicing Agreement) and a facility agent fee of 0.25% per annum on the total facility amount.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the DB Credit Facility for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018(1)				September 30, 2019				September 30, 2018(1)
Interest expense(2)	$	1.8			$	—			$	3.2			$	—
Non-usage fee(2)	$	0.1			$	—			$	0.2			$	—
Amortization of financing costs	$	0.1			$	—			$	0.3			$	—
Weighted average interest rate	5.1		%		—		%		5.3		%		—		%
Effective interest rate	5.6		%		—		%		6.0		%		—		%
Average debt outstanding	$	133.9			$	—			$	80.1			$	—

(1)	Not applicable as the DB Credit Facility commenced on December 14, 2018.

(2)	Interest expense includes the portion of the facility agent fee applicable to the drawn portion of the DB Credit Facility and non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the DB Credit Facility.

As of September 30, 2019 and December 31, 2018, the outstanding balance on the DB Credit Facility was $202.0 million and $57.0 million, respectively, and NMFDB was in compliance with the applicable covenants in the DB Credit Facility on such dates.

NMNLC Credit Facility—The Revolving Credit Agreement (together with the related guarantee and security agreement, the “NMNLC Credit Facility”), dated September 21, 2018, among NMNLC, as the Borrower, and KeyBank National Association, as the Administrative Agent and Lender, is structured as a senior secured revolving credit facility and matures on September 23, 2020. The NMNLC Credit Facility is guaranteed by us and proceeds from the NMNLC Credit Facility may be used for funding of additional acquisition properties.

106

---

Table of Contents

The NMNLC Credit Facility generally bears interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.15% per annum (as defined in the Revolving Credit Agreement).

As of September 30, 2019, the maximum amount of revolving borrowings available under the NMNLC Credit Facility was $30.0 million. For the three months ended September 30, 2019, interest expense, non-usage fees and amortization of financing costs were each less than $50 thousand. For the nine months ended September 30, 2019, interest expense and non-usage fees were each less than $50 thousand and amortization of financing costs were $0.1 million. As of September 30, 2019 and December 31, 2018, the outstanding balance on the NMNLC Credit Facility was $10.6 million and $0, respectively, and NMNLC was in compliance with the applicable covenants in the NMNLC Credit Facility on such dates.

Convertible Notes

2014 Convertible Notes—On June 3, 2014, we closed a private offering of $115.0 million aggregate principal amount of unsecured convertible notes (the “2014 Convertible Notes”), pursuant to an indenture, dated June 3, 2014 (the “2014 Indenture”). The 2014 Convertible Notes were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). As of June 3, 2015, the restrictions under Rule 144A under the Securities Act were removed, allowing the 2014 Convertible Notes to be eligible and freely tradable without restrictions for resale pursuant to Rule 144(b)(1) under the Securities Act. On September 30, 2016, we closed a public offering of an additional $40.3 million aggregate principal amount of the 2014 Convertible Notes. These additional 2014 Convertible Notes constituted a further issuance of, ranked equally in right of payment with, and formed a single series with the $115.0 million aggregate principal amount of 2014 Convertible Notes that we issued on June 3, 2014.

The 2014 Convertible Notes bore interest at an annual rate of 5.0%, payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2014.

On June 15, 2019, our $155.3 million aggregate principal amount of 2014 Convertible Notes matured and we repaid the outstanding principal and accrued but unpaid interest in cash.

2018 Convertible Notes—On August 20, 2018, we closed a registered public offering of $100.0 million aggregate principal amount of unsecured convertible notes (the “2018 Convertible Notes” and together with the 2014 Convertible Notes, the "Convertible Notes"), pursuant to an indenture, dated August 20, 2018, as supplemented by a first supplemental indenture thereto, dated August 20, 2018 (together the “2018A Indenture”). On August 30, 2018, in connection with the registered public offering, we issued an additional $15.0 million aggregate principal amount of the 2018 Convertible Notes pursuant to the exercise of an overallotment option by the underwriter of the 2018 Convertible Notes. On June 7, 2019, we closed a registered public offering of an additional $86.3 million aggregate principal amount of the 2018 Convertible Notes. These additional 2018 Convertible Notes constitute a further issuance of, rank equally in right of payment with, and form a single series with the $115.0 million aggregate principal amount of 2018 Convertible Notes that we issued in August 2018.

The 2018 Convertible Notes bear interest at an annual rate of 5.75%, payable semi-annually in arrears on February 15 and August 15 of each year, which commenced on February 15, 2019. The 2018 Convertible Notes will mature on August 15, 2023 unless earlier converted, repurchased or redeemed pursuant to the terms of the 2018A Indenture. We may not redeem the 2018 Convertible Notes prior to May 15, 2023. On or after May 15, 2023, we may redeem the 2018 Convertible Notes for cash, in whole or from time to time in part, at our option at a redemption price, subject to an exception for redemption dates occurring after a record date but on or prior to the interest payment date, equal to the sum of (i) 100% of the principal amount of the 2018 Convertible Notes to be redeemed, (ii) accrued and unpaid interest thereon to, but excluding, the redemption date and (iii) a make-whole premium.

No sinking fund is provided for the 2018 Convertible Notes. Holders of 2018 Convertible Notes may, at their option, convert their 2018 Convertible Notes into shares of our common stock at any time on or prior to the close of business on the business day immediately preceding the maturity date of the 2018 Convertible Notes. In addition, if certain corporate events occur, holders of the 2018 Convertible Notes may require us to repurchase for cash all or part of their 2018 Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the 2018 Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date.

The 2018A Indenture contains certain covenants, including covenants requiring us to provide certain financial information to the holders of the 2018 Convertible Notes and the trustee if we cease to be subject to the reporting requirements of the Exchange Act. The 2018A Indenture also includes additional financial covenants related to our asset coverage ratio. These covenants are subject to limitations and exceptions that are described in the 2018A Indenture.

107

---

Table of Contents

The following table summarizes certain key terms related to the convertible features of our 2018 Convertible Notes as of September 30, 2019.

	2018 Convertible Notes
Initial conversion premium	10.0		%
Initial conversion rate(1)	65.8762
Initial conversion price	$	15.18
Conversion premium at September 30, 2019	10.0		%
Conversion rate at September 30, 2019(1)(2)	65.8762
Conversion price at September 30, 2019(2)(3)	$	15.18
Last conversion price calculation date	August 20, 2019

(1)	Conversion rates denominated in shares of common stock per $1.0 thousand principal amount of the 2018 Convertible Notes converted.

(2)	Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.

(3)	The conversion price in effect at September 30, 2019 was calculated on the last anniversary of the issuance and will be calculated again on the next anniversary, unless the exercise price shall have changed by more than 1.0% before the anniversary.

The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs, increases in distributions in excess of $0.34 per share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in distributions, are subject to a conversion price floor of $13.80 per share. In no event will the total number of shares of common stock issuable upon conversion exceed 72.4637 per $1.0 thousand principal amount. We have determined that the embedded conversion option in the 2018 Convertible Notes is not required to be separately accounted for as a derivative under GAAP.

The 2018 Convertible Notes are unsecured obligations and rank senior in right of payment to our existing and future indebtedness, if any, that is expressly subordinated in right of payment to the 2018 Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries and financing vehicles. The issuance is considered part of the if-converted method for calculation of diluted earnings per share.

The following table summarizes the interest expense, amortization of financing costs and amortization of premium incurred on the Convertible Notes for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	2.9			$	2.7			$	10.1			$	6.6
Amortization of financing costs	$	0.1			$	0.3			$	0.7			$	0.9
Amortization of premium	$	—		(1)	$	—		(1)	$	(0.1	)		$	(0.1	)
Weighted average interest rate	5.7		%		5.2		%		5.5		%		5.1		%
Effective interest rate	5.8		%		5.7		%		5.8		%		5.7		%
Average debt outstanding	$	201.3			$	207.8			$	245.5			$	172.9

(1)	For the three months ended September 30, 2019 and September 30, 2018, the amortization of premium was less than $50 thousand.

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Convertible Notes was $201.2 million and $270.3 million, respectively, and NMFC was in compliance with the terms of the 2018A Indenture on such date.

Unsecured Notes

On May 6, 2016, we issued $50.0 million in aggregate principal amount of five-year unsecured notes that mature on May 15, 2021 (the “2016 Unsecured Notes”), pursuant to a note purchase agreement, dated May 4, 2016, to an institutional

108

---

Table of Contents

investor in a private placement. On September 30, 2016, we entered into an amended and restated note purchase agreement (the "NPA") and issued an additional $40.0 million in aggregate principal amount of 2016 Unsecured Notes to institutional investors in a private placement. On June 30, 2017, we issued $55.0 million in aggregate principal amount of five-year unsecured notes that mature on July 15, 2022 (the "2017A Unsecured Notes"), pursuant to the NPA and a supplement to the NPA. On January 30, 2018, we issued $90.0 million in aggregate principal amount of five year unsecured notes that mature on January 30, 2023 (the "2018A Unsecured Notes") pursuant to the NPA and a second supplement to the NPA. On July 5, 2018, we issued $50.0 million in aggregate principal amount of five year unsecured notes that mature on June 28, 2023 (the "2018B Unsecured Notes") pursuant to the NPA and a third supplement to the NPA (the "Third Supplement"). On April 30, 2019, we issued $116.5 million in aggregate principal amount of five year unsecured notes that mature on April 30, 2024 (the "2019A Unsecured Notes") pursuant to the NPA and a fourth supplement to the NPA. The NPA provides for future issuances of unsecured notes in separate series or tranches.

The 2016 Unsecured Notes bear interest at an annual rate of 5.313%, payable semi-annually on May 15 and November 15 of each year, which commenced on November 15, 2016. The 2017A Unsecured Notes bear interest at an annual rate of 4.760%, payable semi-annually on January 15 and July 15 of each year, which commenced on January 15, 2018. The 2018A Unsecured Notes bear interest at an annual rate of 4.870%, payable semi-annually on February 15 and August 15 of each year, which commenced on August 15, 2018. The 2018B Unsecured Notes bear interest at an annual rate of 5.360%, payable semi-annually on January 15 and July 15 of each year, which commenced on January 15, 2019. The 2019A Unsecured Notes bear interest at an annual rate of 5.494%, payable semi-annually on April 15 and October 15 of each year, commencing on October 15, 2019. These interest rates are subject to increase in the event that: (i) subject to certain exceptions, the underlying unsecured notes or we cease to have an investment grade rating or (ii) the aggregate amount of our unsecured debt falls below $150.0 million.  In each such event, we have the option to offer to prepay the underlying unsecured notes at par, in which case holders of the underlying unsecured notes who accept the offer would not receive the increased interest rate. In addition, we are obligated to offer to prepay the underlying unsecured notes at par if the Investment Adviser, or an affiliate thereof, ceases to be our investment adviser or if certain change in control events occur with respect to the Investment Adviser. 

The NPA contains customary terms and conditions for unsecured notes issued, including, without limitation, an option to offer to prepay all or a portion of the unsecured notes under its governance at par (plus a make-whole amount if applicable), affirmative and negative covenants such as information reporting, maintenance of our status as a BDC under the 1940 Act and a RIC under the Code, minimum stockholders’ equity, minimum asset coverage ratio, and prohibitions on certain fundamental changes at NMFC or any subsidiary guarantor, as well as customary events of default with customary cure and notice, including, without limitation, nonpayment, misrepresentation in a material respect, breach of covenant, cross-default under other indebtedness of NMFC or certain significant subsidiaries, certain judgments and orders, and certain events of bankruptcy. The Third Supplement includes additional financial covenants related to asset coverage as well as other terms.

On September 25, 2018, we closed a registered public offering of $50.0 million in aggregate principal amount of five-year 5.75% unsecured Notes (the "5.75% Unsecured Notes" and together with the 2016 Unsecured Notes, 2017A Unsecured Notes, 2018A Unsecured Notes, 2018B Unsecured Notes and 2019A Unsecured Notes, the "Unsecured Notes"), pursuant to an indenture, dated August 20, 2018, as supplemented by a second supplemental indenture thereto, dated September 25, 2018 (together, the "2018B Indenture"). On October 17, 2018, in connection with the registered public offering, we issued an additional $1.8 million aggregate principal amount of the 5.75% Unsecured Notes pursuant to the exercise of an overallotment option by the underwriters of the 5.75% Unsecured Notes.

The 5.75% Unsecured Notes bear interest at an annual rate of 5.75%, payable quarterly on January 1, April 1, July 1 and October 1 of each year, which commenced on January 1, 2019. The 5.75% Unsecured Notes will mature on October 1, 2023 unless earlier redeemed. The 5.75% Unsecured Notes are listed on the New York Stock Exchange and trade under the trading symbol “NMFX.”

We may redeem the 5.75% Unsecured Notes, in whole or in part, at any time, or from time to time, at our option on or after October 1, 2020, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

No sinking fund is provided for the 5.75% Unsecured Notes and holders of the 5.75% Unsecured Notes have no option to have their 5.75% Unsecured Notes repaid prior to the stated maturity date.

The 2018B Indenture contains certain covenants, including covenants requiring us to (i) comply with the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC and (ii) provide certain financial information to the holders of the 5.75% Unsecured Notes and the trustee if we cease to be subject to the reporting requirements

109

---

Table of Contents

of the Exchange Act. The 2018B Indenture also includes additional financial covenants related to asset coverage. These covenants are subject to limitations and exceptions that are described in the 2018B Indenture.

The 2018B Indenture provides for customary events of default and further provides that the trustee or the holders of 25% in aggregate principal amount of the outstanding 5.75% Unsecured Notes may declare such 5.75% Unsecured Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period.

The Unsecured Notes are unsecured obligations and rank senior in right of payment to our existing and future indebtedness, if any, that is expressly subordinated in right of payment to the Unsecured Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries and financing vehicles.

The following table summarizes the interest expense and amortization of financing costs incurred on the Unsecured Notes for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018				September 30, 2019(1)				September 30, 2018(2)
Interest expense	$	6.0			$	3.7			$	15.8			$	9.2
Amortization of financing costs	$	0.3			$	0.2			$	0.9			$	0.5
Weighted average interest rate	5.2		%		5.1		%		5.2		%		5.1		%
Effective interest rate	5.5		%		5.3		%		5.5		%		5.4		%
Average debt outstanding	$	453.3			$	286.1			$	402.0			$	242.7

(1)	For the nine months ended September 30, 2019, amounts reported include interest and amortization of financing costs related to the 2019A Unsecured Notes for the period from April 30, 2019 (issuance date of the 2019A Unsecured Notes) to September 30, 2019.

(2)	For the nine months ended September 30, 2018, amounts reported include interest and amortization of financing costs related to the 2018A Unsecured Notes for the period from January 30, 2018 (issuance date of the 2018A Unsecured Notes) to September 30, 2018.

As of September 30, 2019 and December 31, 2018, the outstanding balance on the Unsecured Notes was $453.3 million and $336.8 million, respectively, and we were in compliance with the terms of the NPA and the 2018B Indenture as of such dates, as applicable.

SBA-guaranteed debentures—On August 1, 2014 and August 25, 2017, respectively, SBIC I and SBIC II received SBIC licenses from the SBA to operate as SBICs.

The SBIC license allows SBICs to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse to us, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with ten year maturities. The SBA, as a creditor, will have a superior claim to the assets of SBIC I and SBIC II over our stockholders in the event SBIC I and SBIC II are liquidated or the SBA exercises remedies upon an event of default.

The maximum amount of borrowings available under current SBA regulations for a single licensee is $150.0 million as long as the licensee has at least $75.0 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. In June 2018, legislation amended the 1958 Act by increasing the individual leverage limit from $150.0 million to $175.0 million, subject to SBA approvals.

110

---

Table of Contents

As of September 30, 2019 and December 31, 2018, SBIC I had regulatory capital of $75.0 million and $75.0 million, respectively, and SBA-guaranteed debentures outstanding of $150.0 million and $150.0 million, respectively. As of September 30, 2019 and December 31, 2018, SBIC II had regulatory capital of $42.5 million and $42.5 million, respectively, and $34.0 million and $15.0 million, respectively, of SBA-guaranteed debentures outstanding. The SBA-guaranteed debentures incur upfront fees of 3.425%, which consists of a 1.00% commitment fee and a 2.425% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. The following table summarizes our SBA-guaranteed debentures as of September 30, 2019.

(in millions)
Issuance Date		Maturity Date		Debenture Amount				Interest Rate			SBA Annual Charge
Fixed SBA-guaranteed debentures(1):
March 25, 2015		March 1, 2025		$	37.5			2.517	%		0.355	%
September 23, 2015		September 1, 2025		37.5				2.829	%		0.355	%
September 23, 2015		September 1, 2025		28.8				2.829	%		0.742	%
March 23, 2016		March 1, 2026		13.9				2.507	%		0.742	%
September 21, 2016		September 1, 2026		4.0				2.051	%		0.742	%
September 20, 2017		September 1, 2027		13.0				2.518	%		0.742	%
March 21, 2018		March 1, 2028		15.3				3.187	%		0.742	%
Fixed SBA-guaranteed debentures(2):
September 19, 2018		September 1, 2028		15.0				3.548	%		0.222	%
September 25, 2019		September 1, 2029		19.0				2.283	%		0.222	%
Total SBA-guaranteed debentures				$	184.0

(1)	SBA-guaranteed debentures are held in SBIC I.

(2)	SBA-guaranteed debentures are held in SBIC II.

Prior to pooling, the SBA-guaranteed debentures bear interest at an interim floating rate of LIBOR plus 0.30%. Once pooled, which occurs in March and September each year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10-year treasury rate plus a spread at each pooling date.

The following table summarizes the interest expense and amortization of financing costs incurred on the SBA-guaranteed debentures for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months Ended								Nine Months Ended
(in millions)	September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
Interest expense	$	1.5			$	1.3			$	4.2			$	3.7
Amortization of financing costs	$	0.1			$	0.1			$	0.4			$	0.4
Weighted average interest rate	3.3		%		3.2		%		3.3		%		3.2		%
Effective interest rate	3.6		%		3.6		%		3.6		%		3.5		%
Average debt outstanding	$	176.6			$	164.4			$	168.9			$	156.3

The SBIC program is designed to stimulate the flow of private investor capital into eligible smaller businesses, as defined by the SBA. Under SBA regulations, SBICs are subject to regulatory requirements, including making investments in SBA-eligible businesses, investing at least 25.0% of its investment capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, regulating the types of financing, prohibiting investments in small businesses with certain characteristics or in certain industries and requiring capitalization thresholds that limit distributions to us. SBICs are subject to an annual periodic examination by an SBA examiner to determine the SBIC's compliance with the relevant SBA regulations and an annual financial audit of its financial statements that are prepared on a basis of accounting other than GAAP (such as ASC 820) by an independent auditor. As of September 30, 2019 and December 31, 2018, SBIC I and SBIC II were in compliance with SBA regulatory requirements.

Off-Balance Sheet Arrangements

We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of September 30, 2019 and December 31, 2018, we had outstanding commitments to third parties to fund investments totaling

111

---

Table of Contents

$171.2 million and $137.9 million, respectively, under various undrawn revolving credit facilities, delayed draw commitments or other future funding commitments.

We may from time to time enter into financing commitment letters or bridge financing commitments, which could require funding in the future. As of September 30, 2019 and December 31, 2018, we had commitment letters to purchase investments in an aggregate par amount of $36.1 million and $27.5 million, respectively. As of September 30, 2019 and December 31, 2018, we had not entered into any bridge financing commitments which could require funding in the future.

Contractual Obligations

A summary of our significant contractual payment obligations as of September 30, 2019 is as follows:

		Contractual Obligations Payments Due by Period
(in millions)		Total				Less than 1 Year				1 - 3 Years				3 - 5 Years				More than 5 Years
Holdings Credit Facility(1)		$	637.6			$	—			$	—			$	637.6			$	—
Unsecured Notes(2)		453.3				—				145.0				308.3				—
SBA-guaranteed debentures(3)		184.0				—				—				—				184.0
Convertible Notes(4)		201.2				—				—				201.2				—
NMFC Credit Facility(5)		138.5				—				138.5				—				—
DB Credit Facility(6)		202.0				—				—				202.0				—
NMNLC Credit Facility(7)		10.6				10.6				—				—				—
Total Contractual Obligations		$	1,827.2			$	10.6			$	283.5			$	1,349.1			$	184.0

(1)	Under the terms of the $800.0 million Holdings Credit Facility, all outstanding borrowings under that facility ($637.6 million as of September 30, 2019) must be repaid on or before October 24, 2022. As of September 30, 2019, there was approximately $162.4 million of possible capacity remaining under the Holdings Credit Facility.

(2)

$90.0 million of the 2016 Unsecured Notes will mature on May 15, 2021 unless earlier repurchased, $55.0 million of the 2017A Unsecured Notes will mature on July 15, 2022 unless earlier repurchased, $90.0 million of the 2018A Unsecured Notes will mature on January 30, 2023 unless earlier repurchased, $50.0 million of the 2018B Unsecured Notes will mature on June 28, 2023 unless earlier repurchased, $51.8 million of the 5.75% Unsecured Notes will mature on October 1, 2023 unless earlier repurchased and $116.5 million of the 2019A Unsecured Notes will mature on April 30, 2024 unless earlier repurchased.

(3)	Our SBA-guaranteed debentures will begin to mature on March 1, 2025.

(4)	The 2018 Convertible Notes will mature on August 15, 2023 unless earlier converted or repurchased at the holder's option or redeemed by us.

(5)	Under the terms of the $138.5 million NMFC Credit Facility, all outstanding borrowings under that facility ($138.5 million as of September 30, 2019) must be repaid on or before June 4, 2022. As of September 30, 2019, there was no capacity remaining under the NMFC Credit Facility.

(6)	Under the terms of the $210.0 million DB Credit Facility, all outstanding borrowings under that facility ($202.0 million as of September 30, 2019) must be repaid on or before December 14, 2023. As of September 30, 2019, there was $8.0 million of possible capacity remaining under the DB Credit Facility.

(7)	Under the terms of the $30.0 million NMNLC Credit Facility, all outstanding borrowings under that facility ($10.6 million as of September 30, 2019) must be repaid on or before September 23, 2020. As of September 30, 2019, there was $19.4 million of possible capacity remaining under the NMNLC Credit Facility.

We have entered into the investment advisory and management agreement (the "Investment Management Agreement") with the Investment Adviser in accordance with the 1940 Act. Under the Investment Management Agreement, the Investment Adviser has agreed to provide us with investment advisory and management services. We have agreed to pay for these services (1) a management fee and (2) an incentive fee based on our performance.

We have also entered into an administration agreement, as amended and restated (the "Administration Agreement") with the Administrator. Under the Administration Agreement, the Administrator has agreed to arrange office space for us and provide office equipment and clerical, bookkeeping and record keeping services and other administrative services necessary to conduct our respective day-to-day operations. The Administrator has also agreed to maintain, or oversee the maintenance of, our financial records, our reports to stockholders and reports filed with the SEC.

112

---

Table of Contents

If any of the contractual obligations discussed above are terminated, our costs under any new agreements that are entered into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Management Agreement and the Administration Agreement.

Distributions and Dividends

Distributions declared and paid to stockholders for the nine months ended September 30, 2019 totaled approximately $84.5 million.

The following table reflects cash distributions, including dividends and returns of capital, if any, per share that have been declared by our board of directors for the two most recent fiscal years and the current fiscal year to date:

Fiscal Year Ended		Date Declared		Record Date		Payment Date		Per Share Amount (1)
December 31, 2019
Third Quarter		August 1, 2019		September 13, 2019		September 27, 2019		$	0.34
Second Quarter		May 1, 2019		June 14, 2019		June 28, 2019		0.34
First Quarter		February 22, 2019		March 15, 2019		March 29, 2019		0.34
								$	1.02
December 31, 2018
Fourth Quarter		November 1, 2018		December 14, 2018		December 28, 2018		$	0.34
Third Quarter		August 1, 2018		September 14, 2018		September 28, 2018		0.34
Second Quarter		May 2, 2018		June 15, 2018		June 29, 2018		0.34
First Quarter		February 21, 2018		March 15, 2018		March 29, 2018		0.34
								$	1.36
December 31, 2017
Fourth Quarter		November 2, 2017		December 15, 2017		December 28, 2017		$	0.34
Third Quarter		August 4, 2017		September 15, 2017		September 29, 2017		0.34
Second Quarter		May 4, 2017		June 16, 2017		June 30, 2017		0.34
First Quarter		February 23, 2017		March 17, 2017		March 31, 2017		0.34
								$	1.36

(1)

Tax characteristics of all distributions paid are reported to stockholders on Form 1099 after the end of the calendar year. For the years ended December 31, 2018 and December 31, 2017, total distributions were $103.4 million and $100.9 million, respectively, of which the distributions were comprised of approximately 83.74% and 71.50%, respectively, of ordinary income, 0.00% and 0.00%, respectively, of long-term capital gains and approximately 16.26% and 28.50%, respectively, of a return of capital. Future quarterly distributions, if any, will be determined by our board of directors.

We intend to pay quarterly distributions to our stockholders in amounts sufficient to maintain our status as a RIC. We intend to distribute approximately all of our net investment income on a quarterly basis and substantially all of our taxable income on an annual basis, except that we may retain certain net capital gains for reinvestment.

We maintain an "opt out" dividend reinvestment plan on behalf of our common stockholders, pursuant to which each of our stockholders' cash distributions will be automatically reinvested in additional shares of common stock, unless the stockholder elects to receive cash. See Item 1— Financial Statements—Note 2. Summary of Significant Accounting Policies for additional details regarding our dividend reinvestment plan.

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

•

We have entered into the Investment Management Agreement with the Investment Adviser, a wholly-owned subsidiary of New Mountain Capital. Therefore, New Mountain Capital is entitled to any profits earned by the Investment Adviser, which includes any fees payable to the Investment Adviser under the terms of the Investment Management Agreement, less expenses incurred by the Investment Adviser in performing its services under the Investment Management Agreement.

•	We have entered into the Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Administrator arranges our office space and provides office equipment and administrative

113

---

Table of Contents

services necessary to conduct our respective day-to-day operations pursuant to the Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to us under the Administration Agreement, which includes the fees and expenses associated with performing administrative, finance, and compliance functions, and the compensation of our chief financial officer and chief compliance officer and their respective staffs. Pursuant to the Administration Agreement and further restricted by us, the Administrator may, in its own discretion, submit to us for reimbursement some or all of the expenses that the Administrator has incurred on our behalf during any quarterly period. As a result, the amount of expenses for which we will have to reimburse the Administrator may fluctuate in future quarterly periods and there can be no assurance given as to when, or if, the Administrator may determine to limit the expenses that the Administrator submits to us for reimbursement in the future. However, it is expected that the Administrator will continue to support part of our expense burden in the near future and may decide to not calculate and charge through certain overhead related amounts as well as continue to cover some of the indirect costs. The Administrator cannot recoup any expenses that the Administrator has previously waived. For the three and nine months ended September 30, 2019 approximately $0.6 million and $2.0 million, respectively, of indirect administrative expenses were included in administrative expenses, of which approximately $0.0 million and $0.3 million, respectively, were waived by the Administrator. As of September 30, 2019, approximately $1.0 million of indirect administrative expenses were included in payable to affiliates.

•	We, the Investment Adviser and the Administrator have entered into a royalty-free Trademark License Agreement, as amended, with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant us, the Investment Adviser and the Administrator a non-exclusive, royalty-free license to use the name "New Mountain" and "New Mountain Finance".

In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. These officers and directors also remain subject to the duties imposed by the 1940 Act, the Delaware General Corporation Law and the Delaware Limited Liability Company Act.

The Investment Adviser and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole or in part, to our investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser's allocation procedures. On December 18, 2017, the SEC issued an exemptive order (the “Exemptive Order”), which superseded a prior order issued on June 5, 2017, which permits us to co-invest in portfolio companies with certain funds or entities managed by the Investment Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our stockholders and is consistent with our then-current investment objective and strategies.

114

---

Table of Contents

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We are subject to certain financial market risks, such as interest rate fluctuations. During the nine months ended September 30, 2019, certain of the loans held in our portfolio had floating interest rates. As of September 30, 2019, approximately 93.15% of investments at fair value (excluding investments on non-accrual, unfunded debt investments and non-interest bearing equity investments) represent floating-rate investments with a LIBOR floor (includes investments bearing prime interest rate contracts) and approximately 6.85% of investments at fair value represent fixed-rate investments. Additionally, our senior secured revolving credit facilities are also subject to floating interest rates and are currently paid based on floating LIBOR rates.

The following table estimates the potential changes in net cash flow generated from interest income and expenses, should interest rates increase by 100, 200 or 300 basis points, or decrease by 25 basis points. Interest income is calculated as revenue from interest generated from our portfolio of investments held on September 30, 2019. Interest expense is calculated based on the terms of our outstanding revolving credit facilities, convertible notes and unsecured notes. For our floating rate credit facilities, we use the outstanding balance as of September 30, 2019. Interest expense on our floating rate credit facilities is calculated using the interest rate as of September 30, 2019, adjusted for the hypothetical changes in rates, as shown below. The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of September 30, 2019. These hypothetical calculations are based on a model of the investments in our portfolio, held as of September 30, 2019, and are only adjusted for assumed changes in the underlying base interest rates.

Actual results could differ significantly from those estimated in the table.

Change in Interest Rates		Estimated Percentage Change in Interest Income Net of Interest Expense (unaudited)
-25 Basis Points		(2.13	)%
Base Interest Rate		—	%
+100 Basis Points		8.52	%
+200 Basis Points		17.03	%
+300 Basis Points		25.55	%

115

---

Table of Contents

Item 4.	Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures

As of September 30, 2019 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic United States Securities and Exchange Commission filings is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

(b)	Changes in Internal Controls Over Financial Reporting

Management has not identified any change in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

116

---

Table of Contents

PART II. OTHER INFORMATION

The terms “we”, “us”, “our” and the “Company” refers to New Mountain Finance Corporation and its consolidated subsidiaries.

Item 1.	Legal Proceedings

We, and our consolidated subsidiaries, the Investment Adviser and the Administrator are not currently subject to any material pending legal proceedings threatened against us as of September 30, 2019. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which could materially affect our business, financial condition and/or operating results, including the Risk Factor titled "Recent legislation allows us to incur additional leverage, which could increase the risk of investing in our securities". The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. Other than as set forth below, there have been no material changes during the nine months ended September 30, 2019 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

Concerns have been publicized that some of the member banks surveyed by the British Bankers’ Association, or the ‘‘BBA,’’ in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large US financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate (“SOFR”). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and future of LIBOR at this time is uncertain. In addition, on July 12, 2019, the Staff from the SEC's Division of Corporation Finance, Division of Investment Management, Division of Trading and Markets, and Office of the Chief Accountant issued a statement about the potentially significant effects on financial markets and market participants when LIBOR is discontinued in 2021 and no longer available as a reference benchmark rate. The Staff encouraged all market participants to identify contracts that reference LIBOR and begin transitions to alternative rates.

If LIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established, which may have an adverse effect on our results of operations. In addition, if LIBOR ceases to exist, we may need to renegotiate any LIBOR based revolving credit facilities to replace LIBOR with the new standard that is established in its place. If we are unable to do so, amounts drawn under the revolving credit facility may bear interest at a higher rate, which would increase the cost of our borrowings and, in turn, affect our results of operations. However, because the future of LIBOR at this time is uncertain, the specific effects of a transition away from LIBOR, including any effect on our net investment income, cannot be determined as of the date of this report.

117

---

Table of Contents

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

We did not engage in unregistered sales of equity securities during the quarter ended September 30, 2019.

Issuer Purchases of Equity Securities

Dividend Reinvestment Plan

During the quarter ended September 30, 2019, we did not purchase any of our common stock in the open market in connection with our dividend reinvestment plan.

Stock Repurchase Program

On February 4, 2016, our board of directors authorized a program for the purpose of repurchasing up to $50.0 million worth of our common stock. Under the repurchase program, we were permitted, but were not obligated to, repurchase our outstanding common stock in the open market from time to time, provided that we complied with our code of ethics and the guidelines specified in Rule 10b-18 of the Exchange Act, including certain price, market volume and timing constraints. In addition, any repurchases were conducted in accordance with the 1940 Act. On December 31, 2018, our board of directors extended our repurchase program and we expect the repurchase program to be in place until the earlier of December 31, 2019 or until $50.0 million of outstanding shares of common stock have been repurchased. We did not repurchase any shares of our common stock under the repurchase program during the quarter ended September 30, 2019.

Item 3.	Defaults Upon Senior Securities

None.

Item 4.	Mine Safety Disclosures

Not applicable.

Item 5.	Other Information

None.

118

---

Table of Contents

Item 6.	Exhibits

(a)	Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the United States Securities and Exchange Commission:

Exhibit Number			Description
3.1(a)			Amended and Restated Certificate of Incorporation of New Mountain Finance Corporation(2)
3.1(b)			Certificate of Change of Registered Agent and/or Registered Office of New Mountain Finance Corporation(3)
3.2			Amended and Restated Bylaws of New Mountain Finance Corporation(2)
3.3			Certificate of Amendment to the Amended and Restated Certificate of Incorporation New Mountain Finance Corporation(4)
4.1			Form of Stock Certificate of New Mountain Finance Corporation(1)
10.1			Form of Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of August 12, 2019, by and among New Mountain Finance Corporation, as the equityholder, New Mountain Finance DB, L.L.C., as the borrower, U.S. Bank National Association, as the collateral Agent and collateral custodian, and Deutsche Bank AG, New York Branch, as the facility agent, an agent and a lender, and the other agents and lenders party thereto(5)
10.2			Commitment Increase Agreement, dated August 27, 2019 to the Senior Secured Revolving Credit Agreement dated June 4, 2014, by and among New Mountain Finance Corporation, as Borrower, and Goldman Sachs Bank USA, as Administrative Agent and Syndication Agent.(6)
10.3			Incremental Commitment Supplement, dated as of September 6, 2019, to the Third Amended and Restated Loan and Security Agreement, dated October 24, 2017, as amended, by and among New Mountain Finance Corporation, as the collateral manager, New Mountain Finance Holdings, L.L.C., as the borrower, Wells Fargo Bank, National Association, as the administrative agent, the lenders party thereto and Wells Fargo Bank, National Association, as the collateral custodian.(6)
10.4			Form of Joinder Supplement, dated as of September 6, 2019, by and among Old Second National Bank, New Mountain Finance Holdings, L.L.C., as the borrower and Wells Fargo Bank, National Association, as the administrative agent.(6)
10.5			Form of Joinder Supplement, dated as of September 6, 2019, by and among Raymond James, N.A., New Mountain Finance Holdings, L.L.C., as the borrower and Wells Fargo Bank, National Association, as the administrative agent.(6)
10.6			Facility Increase Agreement, dated as of September 6, 2019, by and among State Street Bank and Trust Company, New Mountain Finance Holdings, L.L.C., as the borrower and Wells Fargo Bank, National Association, as the Administrative Agent.(6)
10.7			Form of Joinder Supplement, dated as of October 16, 2019, by and among Hitachi Capital America Corporation, New Mountain Finance DB, L.L.C., as the borrower and Deutsche Bank AG, New York Branch, as facility agent.(6)
31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1			Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32.2			Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

(1)	Previously filed in connection with New Mountain Finance Holdings, L.L.C.’s registration statement on Form N-2 Pre-Effective Amendment No. 3 (File Nos. 333-168280 and 333-172503) filed on May 9, 2011.

(2)	Previously filed in connection with New Mountain Finance Corporation’s quarterly report on Form 10-Q filed on August 11, 2011.

119

---

Table of Contents

(3)	Previously filed in connection with New Mountain Finance Corporation and New Mountain Finance AIV Holdings Corporation report on Form 8-K filed on August 25, 2011.

(4)	Previously filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on April 3, 2019.

(5)	Previously filed in connection with New Mountain Finance Corporation's report on Form 8-K filed on August 16, 2019.

(6)	Previously filed in connection with New Mountain Finance Corporation's registration statement on Form N-2 Post-Effective Amendment No.3 (File No. 333-230326) filed on October 25, 2019.

120

---

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 6, 2019.

	NEW MOUNTAIN FINANCE CORPORATION
	By:	/s/ ROBERT A. HAMWEE
		Robert A. Hamwee
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ SHIRAZ Y. KAJEE
		Shiraz Y. Kajee
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

121