New Mountain seeks $750m for credit fund – exclusive

The firm, originally an equity investor, established a mid-market lending strategy in 2008. 

New Mountain Capital is raising a private debt fund that would run alongside its existing credit vehicle, a publicly listed business development company.

The New York-based firm is seeking $750 million for New Mountain Guardian Partners II, according to a source familiar with the situation. A first close has yet to occur, this person said.

The fund will invest primarily in first and second lien loans, which would include unitranche loans, a US Securities and Exchange regulatory filing showed. Guardian II could also put capital into subordinated debt as well as equity warrants and preferred shares.

New Mountain, which couldn't be reached for comment on the new vehicle, joins an array of other private equity firms adding private debt funds to their investment product offering, but many equity shops do not have existing credit operations on which to draw.

New Mountain currently operates a debt strategy through New Mountain Finance Corporation BDC, which trades on the New York Stock Exchange. The firm targets mid-market companies with an annual EBITDA of between $20 million and $200 million, with the BDC’s investment size being between $10 million and $50 million, according to its website.

Though founded in 2008, it wasn’t until In July 2010 that NMFC filed a notice with the SEC that the firm planned to be regulated as a BDC.

The vehicle initially branded itself New Mountain Guardian Partners but changed its name to the current NMFC moniker before its May 2011 initial public offering. Its stock debuted at $13.75 per share and issued 7.27 million shares for $100 million in total proceeds. Its maximum offering had been $200 million, according to SEC filings at the time, and the firm initially anticipated the IPO to price between $14 and $15 a share.

NMFC currently trades above book value: its latest reported net asset value per share was $13.46 as of 31 December and, as of 30 December, a Friday, its shares closed at $14.10. On Tuesday (22 March), the stock closed at $14.55.

Early on, NMFC received back from Adams Street Partners, according to data from Private Debt Investor sister publication Private Equity International. The Adams Street 2008 Direct Fund invested $263 million, while Adams Street Direct Co-Investment Fund II put $250 million into the BDC. Adams Street 2009 Direct Fund put $186 million into the BDC.

Adams Street itself started a credit arm last year; the alternative asset manager brought on Bill Sacher and Shahab Rashid, formerly of Oaktree Capital Management, to lead a mid-market lending strategy The firm is currently raising a $500 million to $700 million fund, as PDI exclusively reported last summer.

Founded in 1999, New Mountain manages $15 billion of assets. Of that total, $11.5 billion is private equity capital raised across four funds. New Mountain launched its last private equity fund, New Mountain Partners IV, in 2013 and raised $4.13 billion for a vehicle that had a $3 billion target.