New Mountain Finance Corporation meaningfully expanded its portfolio with net originations of $250.2 million, in a market with tighter credit spreads and what many consider to be a difficult deal environment.
The business development company, the credit arm of private equity firm New Mountain Capital, originated $349.3 million and saw repayments of $99.1 million. The firm’s largest investment for the quarter, a $105.2 million preferred equity investment in business services company HI Technology, made up more than 40 percent of the first quarter’s net origination.
The firm highlighted several large factors affecting the credit market, further highlighting the borrower-friendly market, which included declining spreads in the direct lending market and collateralised loan obligation market financing. Additionally “more lower quality companies” are getting access to maximum leverage levels, executives said on Tuesday morning’s earning call.
Additionally, the senior management of New York-based NMFC touted the HI Technology investment as a marquee example of how NMFC taps into New Mountain Capital’s private equity platform to generate proprietary dealflow.
HI Technology’s founder, who owned the company, was in discussions with the private equity team, noting he wanted to retain ownership and was concerned about dilution, essentially rendering a control buyout or minority investment moot, according to executives. Then, NMFC stepped in to finance the company with a preferred equity investment.
The second and third largest investments were a $56.8 million second lien debt investment with AmWINS business services company and a $35.6 million investment, split between first lien and second lien debt, in Exact software company.
The firm’s adjusted net investment income of 34 cents per share, or $23.4 million, covered its first-quarter dividend of 34 cents per share, a principle that executives said was “one of [the] primary drivers” of NMFC’s business. The firm waived $1.8 million in fees to help meet that figure.
The firm bumped up its net asset value per share to $13.56 from $13.46 at year-end 2016, which is also a year-on-year increase from $12.87 the same time last year. Its portfolio stood at $1.82 billion and listed total assets of $1.88 billion, after accounting for $37.7 million in cash and equivalents and $27.9 million in other assets, which included interest and dividend receivables.